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PETITIONERS WERE ENTITLED TO SUMMARY DETERMINATION IN THIS EXECUTIVE LAW 63 SPECIAL PROCEEDING SOUNDING IN FRAUD STEMMING FROM UNCONSCIONABLE EQUIPMENT FINANCE LEASES AND OPPRESSIVE DEBT COLLECTION PRACTICES; RESPONDENTS’ REQUEST FOR FURTHER DISCOVERY, WHICH IS DISFAVORED IN SPECIAL PROCEEDINGS, WAS PROPERLY DENIED (FIRST DEPT).

The First Department, in a full-fledged opinion by Justice Webber, determined the respondents in this Executive Law 63 special proceeding were not entitled to additional discovery, including depositions, and petitioners were entitled to summary determination in this fraud and deceptive business practices action. The petition, brought by the NYS Attorney General, alleged respondents engaged in fraud and deception in having small businesses sign unconscionable equipment finance leases (EFLs) for credit card processing equipment leading to oppressive debt collection practices. The court noted that discovery in a special proceeding is disfavored and is permitted only on leave of court upon a showing of “ample need:”

Supreme Court correctly found that petitioners demonstrated respondents’ liability under Executive Law § 63(12). Under Executive Law § 63(12), “the test for fraud is whether the targeted act has the capacity or tendency to deceive or creates [*5]an atmosphere conducive to fraud” … . “Executive Law § 63(12) was meant to protect not only the average consumer, but also the ignorant, the unthinking, and the credulous” … . “[P]ublic reports and lawsuits of alleged fraud are sufficient to put a plaintiff on inquiry notice of fraud” … . * * *

We held in our prior decision that allegations that the [respondents] created legal obligations through misrepresentations and fraud and then attempted to enforce those obligations through abusive pre-litigation and litigation practices sufficiently demonstrated that the [respondents’] debt collection activities and procuring of default judgments were “objectively baseless” … . Matter of People of the State of New York v Northern Leasing Sys., Inc., 2021 NY Slip Op 00914, First Dept 2-11-21

 

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CERTAIN TRANSFERS AND LOANS SHOULD NOT HAVE BEEN INCLUDED IN THE CALCULATION... PETITIONE