(The Center Square) – A bill recently filed in the New York Legislature could put more businesses in the state at risk for class-action lawsuits, according to a research group’s analysis of the proposed legislation.
The New York Civil Justice Institute called the Consumer and Small Business Protection Act “deceptively marketed” as the bill would target businesses of all sizes. The legislation, A.2495A/S.6414, is sponsored by Assemblymember Yuh-Line Niou (D-Manhattan) and state Sen. Leroy Comrie (D-Queens).
The bill increases the damages businesses face from a minimum of $50 to $1,000. It would also make paying attorney fees mandatory.
In addition, in class-action cases, courts would be allowed to award damages “not to exceed the lesser of” $1 million or 2 percent of the net worth of the business.
It also would allow for third-party groups to serve as plaintiffs, meaning lawyers would no longer need to find individuals for cases. Lawyers could also bring claims even if the alleged violation has no public impact.
“In other words,” wrote Cary Silverman, author of the report for the institute, “the legislation would turn New York’s consumer protection law, including its relaxed standard for liability and generous damage provisions, into an all-purpose plaintiffs’ lawyer bonanza.”
Messages to Niou and Comrie were not immediately returned Thursday afternoon.
In the sponsors’ memo for the bill, the lawmakers claim New York’s consumer protection laws do not adequately protect the public and that nearly 40 states have stronger laws on the books.
“Individual consumers and consumer attorneys are often reluctant to bring actions against violators due to the prohibitive costs and time required to bring litigation against perpetrators; essentially creating an environment where, in practice, bad actors are free to engage in disreputable conduct,” the lawmakers wrote. “Making attorney’s fees mandatory will increase access to justice for persons seeking legal - action against violators.”
A similar bill failed to clear a third reading in the 2019-20 session.
The new proposal comes as the institute notes a marked increase in the number of class-action cases filed in New York’s federal courts.
In 2017, there were 60 such class action cases filed, and that number shot up to 183 last year.
As of May 6, there were already 100 class action cases filed this year alone, meaning the federal courts in the state were on pace to receive nearly 300 such cases for the year.
Greg Biryla, the New York senior state director for NFIB, said that the state’s legal environment essentially creates a tax for businesses in the state.
“Especially small employers who can’t afford to combat costly lawsuits or handle the increased cost of goods and insurance premiums,” he said. “Any legislative proposals to expand liability will harm both consumers and small business at a time when they can afford it least.”
The report said that food-related claims serve as the majority of class action cases, but COVID-19 has led to several cases as well.
“These lawsuits typically provide no benefit to consumers,” the report states. “The targeted businesses often settle the lawsuits to avoid the cost of litigation or the risk of substantial liability if a court certifies the case as a class action.”
Silverman said the class action issue is “costly and often ridiculous,” but fixable.
Besides rejected the current bill in Albany, Silverman said the class action issue can be fixed by amending the state’s consumer protection law to keep lawyers from seeking exorbitant damages.