NY has jurisdiction over out-of-state processor for alleged magazine scammer

People v. Orbital Pub’g Gp., Inc., 21 N.Y.S.3d 573 (Supreme
Ct. 2015)
The AG alleged violations of NY state consumer protection
law, including a law specific to magazine subscription sales, involved here.  Respondents send official-looking
solicitations that allegedly misled consumers into thinking they came from the
publications themselves.  On the left
side, they contain four boxes, containing numbers, labeled: “Control Number,”
“Please Return By,” “Installment” and “Total Amount.” Near the four boxes are
(1) a publication’s name and (2) a phrase suggestive of billing, such as
“Magazine Payment Services,” “Publishers Billing Exchange,” “Publishers Billing
Center,” “United Publishers Service,” “Magazine Billing Network,” “Publishers
Billing Association,” “Subscription Billing Service,” “Publishers Billing
Center,” or “Subscription Billing Service.” The right side of the solicitations
typically contain the same four boxes under a heading of “Notice of Renewal,”
and again with the publication’s name printed underneath the boxes.  Here is an example of at least a similar
invoice I found at the URL http://ift.tt/1JZZ74E:

“Respondents, which typically do not have authorization to
act as agent for the various publications, charge significantly more for the
subscription than the publications themselves charge and retain the difference.”
In addition, the State alleged that that respondents, when soliciting for
renewal subscriptions, failed to disclose the date that existing subscriptions
end, as required by New York law.
Respondents argued that any confusion about whether the
solicitation was made by the publication itself was not their fault.  The back of the solicitations said: “We offer
over 600 magazines as an independent subscription agent between magazine
publishers and clearinghouses in order to facilitate sales and service. As an
agent we do not necessarily have a direct relationship with publishers or
publications that we offer. . . ..”
Respondents also argued that the court lacked
jurisdiction over the individual respondents and respondent Adept.  The state argued that Adept’s exclusive
business was providing support to the other corporate respondents: bookkeeping,
data management, consumer mail processing, and consumer refund processing. Adept
denied any involvement in consumer complaint handling or control over the
content of the solicitations, though Adept made some suggestions after an
investigation by the Oregon AG.  (Adept
is located in Oregon.)
The court found jurisdiction over Adept and its principal:
From a technical view, Adept has
been careful not to project itself into New York or to transact business here.
From a practical view, it is hard to deny that Adept, albeit indirectly, has
availed itself of the benefit of New York consumers, as the record shows that
Adept’s reason for being is to support and facilitate the solicitations that
are the subject of this proceeding. The record also shows that all of Adept’s
profits flow from these same solicitations.
Although Adept’s contacts with New York were through the
mail and sent by sister entities, together the respondents formed a single
business model.  The sister entities were
owned by a New York LLC, and thus Adept availed itself of New York law.  Further, the record showed that Adept processed
the mailing addresses, payments, and refunds of New York consumers, and also
has some role in the content of the solicitations sent to New York consumers.
There was no constitutional problem with asserting
jurisdiction because these acts constituted minimum contacts with New York, and
Adept received its revenue from a company organized under New York law. Adept could
reasonably expect to be brought before a New York court if those solicitations
violate New York law.
General Business Law § 335–a[4] provides, in relevant part,
Any person, firm, association or
corporation engaged in business, the principal purpose of which is to regularly
solicit magazine subscription orders for delivery in this state through the
mail for profit shall, in any direct written communication to a magazine
subscriber inviting the subscriber to renew a subscription, clearly,
conspicuously, understandably and readably: a. disclose the month and year in
which the subscription expires …
There’s an exception for good faith errors made despite the
existence of procedures designed to avoid such error. Respondents challenged
the law as a violation of substantive due process.  (Not the First Amendment?)  But the law had a rational basis, even as
applied to independent subscription agents with no relationship with the
publishers (if not more so!).  Excluding
non-profits from the regulation was rational. 
Nor did the state instead have to rely on publishers printing an
expiration date clearly on all publications sent to subscribers, allowing
consumers to cross-reference those publications when they received
solicitations.  The state’s consumer
protection purpose was legitimate and rationally related to the
regulation.  That it might preclude
respondents from sending solicitations to New York was not of constitutional
moment.  “The Legislature has made an
implicit judgment that if a subscription agent does not know when a consumer’s
current subscription ends, it cannot solicit that consumer for a renewal.
Making that judgment is within the Legislature’s authority.”
General Business Law §§ 349 and 350: Deceptive acts or
practices/false advertising.  The
solicitations were clearly consumer-oriented, as required, and at least raised
a fact question about misleadingness.  On
their faces, the solicitations looked like they were sent directly from
publishers, which could cause consumers to believe that they were being offered
a standard price from the publishers, rather than a substantial premium
(sometimes nearly twice the publisher’s rate). Nonetheless, the disclaimer on
the back raised a fact question about whether a reasonable consumer “would have
taken the time to read it and learn that the solicitations were not being sent
by publishers and that the cancellation policy may be more draconian than the
ones offered by publishers.”

from Blogger http://ift.tt/1OJbSNR

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