Opinion
No. 160972/13.
06-25-2015
Roy Den HOLLANDER on behalf of himself and all others similarly situated, Plaintiffs, v. METROPOLITAN TRANSPORTATION AUTHORITY, Defendant.
McCullough Ginsberg Montano & Partners LLP by Simon Ginsberg, Esq ., New York, for plaintiff Roy Den Hollander. New York City Transit Authority by Hal Blanchard, Esq., Brooklyn, for defendant Metropolitan Transportation Authority.
McCullough Ginsberg Montano & Partners LLP by Simon Ginsberg, Esq ., New York, for plaintiff Roy Den Hollander.
New York City Transit Authority by Hal Blanchard, Esq., Brooklyn, for defendant Metropolitan Transportation Authority.
ROBERT R. REED, J.
This is a purported class action brought by plaintiff Roy Den Hollander against the Metropolitan Transportation Authority (MTA) on behalf of purchasers of 7–Day and 30–Day MetroCards. Plaintiff alleges that he and other purchasers of these time-based cards have been misled by the MTA's allegedly deceptive practice of falsely advertising these unlimited ride cards, because such cards are valid for less than a full seven or 30 days. Alleging that the essential facts are not in dispute, plaintiff moves, pursuant to CPLR 3212, for partial summary judgment on liability on his claims for violations of sections 349 and 350 of the New York General Business Law, breach of contract and unjust enrichment. Defendant cross-moves for summary judgment dismissing the complaint.
FACTUAL ALLEGATIONS
There are two general types of MetroCards: the value-based pass, which is assigned a dollar value, and the time-based pass, which may be used for an unlimited number of rides during a specified time period. As of November 25, 2013, when this lawsuit was commenced, the MTA sold "7–Day Unlimited Pass" and "30–Day Unlimited Ride" MetroCards for $30 and $112 respectively. On the MTA's website, it states that the 7–Day MetroCard is "[g]ood for unlimited subway and local bus rides until midnight, 7 days from day of first use" (complaint, & 2). The verified complaint alleges that such statement is not accurate, and that the 7–Day MetroCard is actually valid for six days from first use, plus a variable number of hours up until midnight on that sixth day. Thus, a 7–Day MetroCard purchased and swiped, for example, on Thursday, January 1, 2015 at 11:00 p.m. would expire on Wednesday, January 7, 2015 at 11:59 p.m. This occurs because the MTA counts January 1st as "Day 1 ."
The fares charged by the New York City Transit Authority (N.Y.CTA) are set forth in a tariff. The tariff applicable on November 25, 2013, when the complaint was filed, had been in effect since March 3, 2013, upon its approval by the MTA Board (see Blanchard affirmation, Ex. P).
The MTA likewise advertises the 30–Day MetroCard as "[g]ood for unlimited subway and local bus rides until midnight, 30 days from day of first use" (complaint, & 3). Plaintiff maintains that this statement is also inaccurate, because the 30–Day MetroCard is actually valid 29 days from first use, plus a variable number of hours up until midnight on that sixth day. Thus, a 30–Day MetroCard purchased and swiped on Thursday, January 1, 2015 at 11:00 p.m. would expire on Friday, January 30, 2015 at midnight. Again, January 1st is counted as "Day 1."
Unlike the MTA's present advertising of its MetroCards, plaintiff alleges that an older MTA brochure from 1998 actually gives an example to alert consumers that the 7–Day MetroCard expires six days from first use. While maintaining the "[g]ood until Midnight, 7 days from the day you first use the card, not from the day it was purchased," language, this older brochure then adds: "If you start using your card on Monday morning, it will run out at Midnight on Sunday" (plaintiff's Ex. B at MTA070).
Plaintiff submits an affidavit in support of his motion, wherein he avers that he is Aa frequent purchaser of unlimited MetroCards" (plaintiff's Ex. F: Hollander affidavit, & 3). He claims that, between October 27, 2013 and April 27, 2014, he purchased seven 30–Day MetroCards. In each instance, he claims to have received just 29 days of use, instead of the 30 days that the MTA advertises on its website and at the kiosk where he purchased the cards.
Plaintiff alleges that the MTA is short-dating purchasers of unlimited-ride MetroCards by one day less than advertised, and that purchasers are not getting a full seven days (168 hours) of unlimited use for 7–Day MetroCards or 30 days (720 hours) for 30–Day MetroCards. This practice allegedly constitutes a deceptive practice in violation of General Business Law § 349, false advertising in violation of General Business Law § 350, a breach of contract and unjust enrichment by the MTA. On each cause of action, plaintiff seeks an award of damages, costs, attorney's fees, pre- and post-judgment interest, and "such other and further legal and equitable relief as the Court deems necessary, just and proper" (complaint, at 9).
In opposition to plaintiff's motion and in support of its cross motion, the MTA explains the history and use of its unlimited ride MetroCards. In January 1994, the MetroCard electronic fare system was introduced as a means to cut back on the operating expenses required for the recovery, transportation, and sorting of tokens and to minimize the risk of counterfeits. On July 4, 1998, the MTA introduced the 7–Day and 30–Day unlimited ride MetroCards, at a cost of $17 and $63, respectively. For the convenience of passengers, the system is designed to show the "end of use," or expiration date, in an LED display each and every time the card is swiped at any subway turnstile, bus farebox or MetroCard reader. Indeed, plaintiff testified that he has been using unlimited ride MetroCards since as early as 2000, and he himself admits that he had been put on repeated notice as to the actual duration of these cards (see Blanchard affirmation, Ex. J: Hollander transcript at 26, 55; see also complaint, & 33 [a "brief flash on the turnstile" indicates "the short dating practice"] ). Despite this, plaintiff no longer purchases or uses pay-per-ride MetroCards (Blanchard affirmation, Ex. J: Hollander transcript at 26).
The MTA alleges that the unlimited ride cards were one of several fare incentives designed to address consumer advocacy group complaints about the lack of travel discounts while improving the penetration rate of MetroCards and phasing out tokens. There is no disputing that straphangers get better deals with these cards when they ride the subways and buses more frequently, and consequently, the MTA earns less per ride. A section of the MTA's current website explains exactly how much the cost per ride can be reduced based on the number of rides taken over seven and 30–day periods. For example, the basic $2.50 fare (applicable when this action commenced) is reduced to $1.50 if the holder of a 7–Day MetroCard takes 20 trips per week. The MTA submits an affidavit from Robert Hickey, the Unit Chief of Revenue Analysis in the NYCTA's Office of Management and Budget, who avers that the base fare of $2.50 is significantly less than the actual cost of service, a shortfall that is made up almost entirely by government subsidies (see Blanchard affirmation, Ex. O: Hickey affidavit & 11). According to Hickey, the total average cost per passenger on the subways and buses is $3.15, only about 50% of which is accounted for by revenue collected from unlimited ride MetroCards (id. ). The MTA also submits an internal draft memorandum, dated December 8, 1997, regarding revenue loss estimates from 1–Day, 7–Day and 30–Day Unlimited Ride MetroCards (see Blanchard affirmation, Ex. Q). As reflected in this document, the weekly and monthly passes, then "priced at $17 and $63, respectively, are estimated to reduce fare revenue by 5% to 8%, assuming no other passes and no change in behavior" (id. ).
The MTA further claims that users of unlimited ride cards are overwhelmingly satisfied, with the leading reason for choosing them over pay-per-ride cards being the cost savings and the security of knowing the card will not run out of value. The MTA submits an affidavit from Cross Siclare, an Assistant Vice President of Customer Relations in Corporate Communications for the NYCTA, whose duties and responsibilities include the investigation and timely resolution of MetroCard customer complaints (see Blanchard affirmation, Ex.M). According to Siclare, the majority of customer complaints over the use of the unlimited ride cards stem from problems with swiping. Notably, Siclare avers, of the tens of thousands of complaints processed since the inception of the program, there has not been a single claim concerning the short dating practice alleged by plaintiff in this action.
As for its marketing practices, the MTA claims its approach has evolved over time, based on the assumption that subway and bus riders have grown accustomed to how these cards work and that, as a result, lengthy and detailed explanations are no longer required. Thus, in addition to the explanatory language cited by plaintiff in the 1998 brochure, a brochure published in 1999, which was specifically directed at tourists, explained: "Your seven days start when you use your card the first time, so if you use it for the first time on a Monday morning, it'll run out on the following Sunday at midnight" (Blanchard affirmation, Ex. N at MTA076). Although these types of explanations are no longer found in the MTA's current website and marketing materials, the MTA denies that there is anything in the current website description, i.e., "[g]ood for unlimited subway and local bus rides until midnight, 7 [or 30] days from day of first use," that is in the least bit confusing or misleading to consumers. The MTA's website, moreover, does explicitly state that the use of unlimited ride MetroCards is subject to the MTA New York City Transit tariff, and similar language to such effect appears on the back of every MetroCard. The current tariff contains the following description of the 7–Day MetroCard:
"Valid for unlimited rides on NYCTA subway or NYCTA/MaBSTOA/MTABC local bus or SIRTOA, taken within 7 days of initial swipe or dip of pass. Pass valid until 11:59 pm on 7th day."
(Blanchard affirmation, Ex. P at MTA068). The MTA contends that, under any standard of common usage, this language is clear and unambiguous.
DISCUSSION
General Business Law § § 349 and 350
" General Business Law §§ 349 and 350 are consumer protection statutes that prohibit deceptive acts and practices and false advertising, respectively, in the conduct of any business, trade or commerce or in the furnishing of any service in this state ..." (Scott v. Bell Atl. Corp., 282 A.D.2d 180, 183 [1st Dept 2001], affd as mod sub nom Goshen v. Mutual Life Ins. Co. of NY, 98 N.Y.2d 314 [2002] [internal quotation marks and citations omitted] ).
To plead a claim under either General Business Law §§ 349 or 350, a plaintiff must allege: (1) consumer-oriented conduct; (2) that is materially misleading; and (3) that plaintiff suffered injury as a result of the allegedly deceptive act, practice or advertising (Stutman v. Chemical Bank, 95 N.Y.2d 24, 29 [2000] ; see also Lucker v. Bayside Cemetery, 114 AD3d 162, 174 [1st Dept 2013] ). Justifiable reliance is not an element of a claim under either section; a plaintiff need only show that the defendant's materially deceptive act, practice or advertisement caused actual injury, though not necessarily pecuniary harm (Koch v. Acker, Merrall & Condit Co., 18 NY3d 940, 941B42 [2012]; Stutman v. Chemical Bank, 95 N.Y.2d at 29 ). However, the deceptive conduct must "mislead a reasonable consumer acting reasonably under the circumstances" (Oswego Laborers' Local 214 Pension Fund v. Marine Midland Bank, 85 N.Y.2d 20, 26 [1995] ; see also Gaidon v. Mutual Life Ins. Co. of Am., 94 N.Y.2d 330, 353 [1999] ; Lucker v. Bayside Cemetery, 114 AD3d at 174 ).
Although not explicitly overruled, the Court of Appeals appears to have retreated from its earlier pronouncement in Guggenheimer v.. Ginzburg (43 N.Y.2d 268, 273 [1977] ) that: "In weighing a statement's capacity, tendency or effect in deceiving or misleading customers, we do not look to the average customer but to the vast multitude which the statutes were enacted to safeguard—including the ignorant, the unthinking and the credulous who, in making purchases, do not stop to analyze but are governed by appearances and general impressions [citations omitted]" (see Card v. Chase Manhattan Bank (USA), 175 Misc.2d 389, 395 (Civ Ct, Kings County 1996] ).
In this case, there is no dispute that the challenged practices are consumer-oriented (see defs. mem. of law at 12–13). What the parties disagree on is whether the MTA's website and related marketing materials are deceptive or misleading to a reasonable transit customer and whether there is any actual injury to plaintiff or members of the purported class. The MTA also argues that plaintiff's claims are precluded by the "filed rate doctrine," which bars judicial challenges to common carrier rates approved by regulatory authorities.
The crux of plaintiff's case is that transit customers purchasing 7–Day or 30–Day MetroCards are entitled to a full seven or 30 days of use, because the MTA's website and marketing materials advertise the cards as "[g]ood for unlimited subway and local bus rides until midnight, 7 [or 30] days from day of first use" (plaintiff's Ex. A at MTA082, MTA102). Focusing exclusively on the word "from" in this sentence, plaintiff counts "Day 1" as the day after first use. However, due to the clearly-stated midnight deadline, the first day of use must be counted; otherwise, as plaintiff admitted at his deposition, a 7–Day MetroCard could last longer than 7 full days or 168 hours (see Blanchard Affirm., Ex. J: Hollander transcript at 99–100). For example, if a 7–Day MetroCard was first swiped at 7:00 a.m. on January 1, 2015, under plaintiff's method of counting, the card would expire at midnight on January 8th, and the consumer would get an extra 16 hours of use over and above seven full days. Indeed, due to the midnight expiration, the average consumer of reasonable intelligence should realize that cards first swiped later on the first day of use will cut down on the amount of overall hours in which the card can be used. Notably, nothing in the MTA's website explicitly references seven or 30 "full" days of use. And purchasers are put on notice every time they swipe an unlimited ride card of the card's expiration date. That plaintiff is straining the interpretation of everyday English usage is evidenced by the absence of any customer complaints of short dating since the inception of the unlimited ride MetroCards more than eight years ago (see Blanchard affirmation, Ex. M: Siclare affidavit, & 7).
Even if the MTA's description of how the cards work is unclear, the MTA's website and marketing materials also state that "[u]se of Unlimited Ride MetroCard is subject to MTA New York City Transit tariff and additional conditions" (see Plaintiff's Ex. A at MTA083). In addition, all MetroCards contain a similar phrase. The language of the applicable tariff is not misleading, because, rather than use the word "from," it states "[v]alid for unlimited rides ... within 7 [or 30] days of initial swipe or dip of pass [emphasis added]" (Blanchard affirmation, Ex. P at MTA068). This language leaves no room for any inference that the first day of use would somehow be free.
The plaintiff and other member of the public are "conclusively presumed to know" the terms and conditions of legal tariffs (Porr v. NYNEX Corp., 230 A.D.2d 564, 575–576 [2d Dept 1997] ). Indeed, the NYCTA tariff is approved only after extensive public hearings and is a document required by law to be filed with the Commissioner of the Department of Transportation and kept open to the public (Transportation Law '98 ). Section 1266(3) of the Public Authorities Law grants the MTA Board full discretion in establishing all "fares, tolls, rentals, rates, charges or other fees for the transportation of passengers" on its transportation facilities. What is known as "the filed rate doctrine" bars judicial actions against federal-and state-regulated entities that are "grounded on the allegation that the rates charged by [those entities] are unreasonable" (Wegoland Ltd. v. NYNEX Corp., 27 F3d 17, 18 [2d Cir1994] ). "Simply stated, the doctrine holds that any ‘filed rate’—that is, one approved by the governing regulatory agency [here, the Insurance Department]—is per se reasonable and unassailable in judicial proceedings brought by ratepayers" (Wegoland Ltd. v. NYNEX Corp., 27 F3d at 18 ; see also W. Park Assoc., Inc. v. Everest Natl. Ins. Co., 113 AD3d 38, 46 [2d Dept 2013] ). Thus, "a consumer's claim, however disguised, seeking relief for an injury allegedly caused by the payment of a rate on file with a regulatory commission, is viewed as an attack upon the rate approved by the regulatory commission" and, therefore, barred by the doctrine (Porr v. NYNEX Corp., 230 A.D.2d at 568 ).
The relief sought in the complaint, namely, an award of compensatory damages for not having the use of unlimited ride MetroCards for a full seven or 30 days, "would enmesh the court in the rate-making process, which the Legislature has committed to the [MTA Board], and would have the potential to result in discrimination against ratepayers not included in the putative class" (City of New York v. Aetna Cas. & Sur. Co., 264 A.D.2d 304, 305 [1st Dept 1999] ).
Plaintiff argues that the filed rate doctrine is not applicable, because he is not challenging the reasonableness of the tariff, but is only challenging the actions of the MTA in the way it markets the unlimited ride MetroCards. However, as discussed above, all of the MTA's marketing materials clearly state that they are subject to the tariff. While plaintiff contends that he is not challenging the cost of the unlimited ride MetroCards, he is, in fact, challenging their conditions of use. The filed rate doctrine applies not only to charges, but to the "classifications, practices, and regulations affecting such charges," since rates and charges "do not exist in isolation" (American Tel. & Tel. Co. v. Central Off. Tel., Inc., 524 U.S. 214, 223 [1998] [internal quotation marks omitted] [holding that the plaintiff's claim that it was entitled to certain services and billing methods, by virtue of representations made by the defendant's representatives and sales brochures, was barred by the filed rate doctrine]; see also Porr v. NYNEX Corp., 230 A.D.2d at 568 [rejecting telephone customer's attempt to avoid the doctrine by couching their complaint about NYNEX's policy of billing in whole minute increments in terms of "false advertising"] ). The filed rate doctrine encompasses plaintiff's consumer protections claims asserted herein (accord W. Park Assoc., Inc. v. Everest Natl. Ins. Co., 113 AD3d at 47 ).
Plaintiff relies on Gelb v. American Tel. & Tel. Co. (813 F Supp 1022 [SD N.Y.1993] ), where the court permitted a telephone customer to maintain a cause of action under the Racketeer Influenced and Corrupt Organizations Act (18 USC § 1961 ), alleging that AT & T had fraudulently misrepresented the costs of using a much-advertised calling card. However, the court reserved decision on whether money damages were collectible, "in light of the Court's view that the filed rate doctrine may prohibit retroactive rate setting as part of the remedy" (813 F Supp at 1032 ). Since the Gelb case ultimately settled, the question was never resolved, and thus Gelb does not support the plaintiff's claim for monetary damages (see Marcus v. AT & T Corp., 938 F Supp 1158, 1171 [SD N.Y.1996], affd 138 F3d 46 [2d Cir1998] ).
Even if the MTA were engaging in deceptive or misleading advertising of its unlimited ride MetroCards, plaintiff cannot show that he suffered any actual injury. The verified complaint alleges only that "[p]laintiff and class members were financially damaged by this deceptive practice" (complaint, & 28), and plaintiff fails to expand on his alleged damages in his supporting affidavit. For example, he does not allege that he would not have purchased 30–Day MetroCards had he understood their actual duration, or that he was forced to pay more in transportation costs as a result of being short-changed. On reply, plaintiff's counsel argues that "[t]he injury lies in receiving one (1) day less than paid for" (plaintiff's reply mem. of law at 11–12). Presumably, when plaintiff's counsel uses the word "day" here, he is referring to a full day of 24 hours. However, as stated above, nothing in the MTA's marketing materials explicitly references seven or 30 "full" days of use. Indeed, according to the usage chart in his moving affidavit, plaintiff was never shortchanged by a full 24 hours. To the contrary, the 30–Day MetroCards he purchased were first swiped at various times during the day, mostly in the morning, and resulted in a usage equaling 29 full days, and a differing number of additional hours.
Whatever plaintiff's theory of damages may be, it must necessarily be illusory for two reasons. First, plaintiff paid the rate set forth in the tariff for 30–Day MetroCards, and thus plaintiff received all of the services promised pursuant to the tariff. " ‘Any subscriber who pays the filed rate has suffered no legally cognizable injury’ " (Porr v. NYNEX Corp., 230 A.D.2d at 576, quoting Marcus v. AT & T Corp., 938 F Supp at 1170 ). Second, it is undisputed that unlimited ride MetroCards offer a discounted fare for transit customers such as the plaintiff, who ride the subways and buses on a regular basis. As plaintiff testified at his deposition, he continues to purchase 30–Day MetroCards, rather than pay-per-ride cards, "[b]ecause I believe it gives me a better price on a per ride basis, given the amount of time I have for it, and the convenience" (Blanchard affirmation, Ex. J: Hollander transcript at 27–29). Thus, plaintiff is hardly the victim of a "bait and switch scheme" (see plaintiff's reply mem. of law at 6). The amount of money plaintiff would have spent if he had used pay-per-ride cards over any given seven or 30–day period would be considerably more than the amount he actually has spent over the relevant period. Thus, as plaintiff cannot show how he "suffered a detriment" by purchasing a 30–Day MetroCard, he fails to establish a prima facie claim under General Busioness Law § " 349 or 350 (Samiento v. World Yacht Inc., 10 NY3d 70, 81 [2008] ).
Breach of Contract
Plaintiff also alleges that he and members of the purported class entered into a contract of adhesion each time they paid for an unlimited ride MetroCard, and that such contract was breached when the MTA failed to provide unlimited rides for a full seven or 30 days. Even assuming an implied contract exists, the actual terms and conditions of use for unlimited ride MetroCards are set forth in the NYCTA tariff, which would form the basis of any implied contract with subway and bus passengers (see Stathakos v. Metropolitan Tr. Auth. Long Is. R.R., 109 AD3d 979 [2d Dept 2013] [holding that tariff schedules created a complete defense to claim for breach of contract for the MTA's failure to issue credits or refunds for delays or cancellations]; W.R. Grace & Co. v. Railway Express Agency, 9 A.D.2d 425, 429 [1st Dept 1959] ["[t]ariffs filed and published become a part of the contract of carriage"], affd 8 N.Y.2d 103, cert denied 364 U.S. 830 [1960] ). As stated above, the MTA is not in breach, because it has fully satisfied its obligations under the tariff.
In Leeds v. Metropolitan Transp. Auth. (117 Misc.2d 329 [App Term, 1st Dept 1983] ), the court dismissed a subway user's claim that the MTA was in breach of an implied contract to transport passengers arising from the sale and purchase of a token, because the MTA "provided persistently late train service and permitted unsanitary, unsafe, and overcrowded conditions on its trains."
Unjust Enrichment
An unjust enrichment claim is rooted in "the equitable principle that a person shall not be allowed to enrich himself unjustly at the expense of another" (Miller v. Schloss, 218 N.Y. 400, 407 [1916] ). To plead such a claim, plaintiff must allege "that (1) the other party was enriched, (2) at that party's expense, and (3) that it is against equity and good conscience to permit the other party to retain what is sought to be recovered" (Mandarin Trading Ltd. v. Wildenstein, 16 NY3d 173, 182 [2011] [brackets and internal quotation marks omitted] ). Such a claim "is undoubtedly equitable and depends upon broad considerations of equity and justice" (Paramount Film Distrib. Corp. v. State of New York, 30 N.Y.2d 415, 421 [1972], cert denied 414 U.S. 829 [1973] ).
Plaintiff argues that "[i]n not giving consumers what they are paying for, Defendant receives an enormous financial windfall every time a person buys one of these MetroCards" (plaintiff's mem. of law at 9). The record is devoid of any evidence that could lead the court to conclude that the MTA is being unjustly enriched at the expense of plaintiff or other purchasers of unlimited ride MetroCards or that, in equity and good conscience, restitution should be awarded. Significantly, plaintiff does not challenge the MTA's evidence that the transportation services provided by the MTA are heavily subsidized by the State of New York, with transit customers paying only a portion of the actual cost of transportation (see Blancard affirmation, Ex. O: Hickey affidavit, & 11; id., Ex. Q). Indeed, there is nothing to prevent the MTA from discontinuing the use of unlimited ride cards altogether as part of some future tariff.
CONCLUSION AND ORDER
For the foregoing reasons, it is hereby
ORDERED that plaintiff's motion for partial summary judgment on liability is denied; and it is further
ORDERED that defendant's cross motion for summary judgment dismissing the complaint is granted and the complaint is dismissed in its entirety as against defendant, with costs and disbursements to said defendant as taxed by the Clerk of the Court, and the Clerk is directed to enter judgment accordingly.