Trump’s $355 Million Fine Fits With New York Law
The verdict feels proper, but will we come to regret stretching Executive Law 63 (12)?

WSJ
Judge Arthur F. Engoron’s order last week that Donald Trump pay a penalty of hundreds of millions of dollars shouldn’t be a surprise. The civil case, brought by New York state’s Attorney General Letitia James, had largely been decided on Sept. 26, when Judge Engoron concluded that many of Mr. Trump’s dealings were fraudulent. As a political matter, the decision also lends little to the current debate. Democrats and Trump detractors will find vindication in the ruling, and the MAGA world will have another example of a Democratic judge and prosecutor in a blue-state ruling against Mr. Trump to feed the perception that the justice system is corrupt.

What the public is likely to miss in all this is the role of a little-known and largely misunderstood New York statute, Executive Law 63(12). The civil statute empowers the New York attorney general to pursue cases involving “repeated fraudulent or illegal acts or . . . persistent fraud or illegality in the carrying on, conducting or transaction of business.” In such cases, the attorney general can petition the court to prohibit the continuance of the fraudulent practices, to order restitution as well as damages and, where appropriate, to cancel any New York state certificate of incorporation. In this case, Ms. James obtained all this and more. Relying on equitable principles, she won an order requiring Mr. Trump and the Trump Organization to disgorge all ill-gotten gains, to the tune of $355 million.

The judge’s rulings and Mr. Trump’s protestations have made the oddities of this law clear: Judge Engoron has specifically stated that “materiality”—the notion that Mr. Trump’s statements mattered and were relied on—isn’t an element of this law. This notion may be well-settled in prior rulings involving this law, but it is at odds with the general rule in fraud cases. Under this law, as Judge Engoron explained, the conduct at issue must merely have “the capacity or tendency to deceive.”

That means that it doesn’t matter whether Mr. Trump’s bankers were actually misled by him—strange, to say the least. If Mr. Trump acted in a way that had a “tendency to deceive”—even if there was no deception—that’s good enough to find that he violated the law. The rationale makes sense only if it is understood that this law is essentially a consumer-fraud statute looking to protect the public from “persistent fraud or illegality.” But here the conduct being targeted was between sophisticated business entities.

Equally strange is that under this law there is no need to prove loss. This isn’t about recovering money bilked from a deceived third party or group of unwitting consumers. Instead, the court is granting Ms. James an order of disgorgement because banks and insurance companies accepted Mr. Trump’s inflated appraisals and valuations and provided larger loans and coverage at better rates than was warranted. Again, this is a somewhat odd proposition given that there seems to be no victim in this case. As Mr. Trump argued, his so-called victims—banks and insurance companies—weren’t victims at all. They dealt with him for years, understood his hyperbolic nature and chose to do business with him anyway. The court’s answer: Under Executive Law 63(12), that isn’t relevant.

Many of us are delighted to see Mr. Trump get his comeuppance. We believe that his “art of the deal” is a version of the long con. Now Ms. James has proven it. She should be credited with a novel and effective use of an existing statute that others overlooked to obtain a result that feels right. But it is worth considering whether, in the quest to get Mr. Trump, many of our public officials may be pressing the law in ways that will outlive the cases against the former president.

I don’t believe that the attorney general’s case is at odds with the law as it exists in New York. But I do question whether there is a compelling policy rationale that supports using a consumer-fraud statute in situations in which there was no loss and where materiality is deemed irrelevant.

Shouldn’t we consider whether this is the appropriate statute and proper proceeding to prove that case? And shouldn’t we be concerned that the further expansion of this law is something we may regret? The Trump maelstrom continues to contort, if not wreak havoc on, the institutions that seek to tame it.





Mr. Cohen is founder of Blue Raven LLP and adjunct professor at New York Law School. He served as an assistant U.S. attorney (1991-98) and chief of staff to New York state Attorney General Andrew Cuomo (2007-10).

Baron v Pfizer, Inc.
Annotate this Case
Baron v Pfizer, Inc. 2007 NY Slip Op 05813 [42 AD3d 627] July 5, 2007 Appellate Division, Third Department Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. As corrected through Wednesday, September 12, 2007

Stephanie Baron, on Behalf of Herself and All Others Similarly Situated, Appellant, v Pfizer, Inc., Respondent.
—[*1] James, Hoyer, Newcomer & Smiljanich, P.A., Tampa, Florida (John M. Dillon of Dillon & Dillon, L.L.C., Mamaroneck, of counsel), for appellant.

Whiteman, Osterman & Hanna, L.L.P., Albany (Neal A. Potischman of Davis, Polk & Wardwell, New York City, of counsel), for respondent.

Mercure, J. Appeal from an order of the Supreme Court (McCarthy, J.), entered May 2, 2006 in Albany County, which granted defendant's motion to dismiss the complaint.

Plaintiff commenced this action seeking certification of a statewide class of all individuals who purchased the drug Neurontin for "off-label" uses, i.e., uses for which the drug was not approved by the Food and Drug Administration (hereinafter FDA). The Parke-Davis Division of Warner-Lambert Company, which was acquired by defendant in 2000, received approval from the FDA to market and sell Neurontin for the treatment of epilepsy. From June 1995 to April 2000, however, Warner-Lambert also engaged in a broad campaign to promote Neurontin for a variety of pain uses, psychiatric conditions such as bipolar disorder and anxiety, and for certain other unapproved uses. Following a six-year investigation of these activities, the United States Department of Justice prosecuted Warner-Lambert, which ultimately agreed to plead guilty to (1) introducing into interstate commerce a misbranded drug that did not have adequate directions on the label for the intended uses of the drug and (2) introducing an unapproved new drug into interstate commerce. Pursuant to the plea agreement and a civil settlement agreement, Warner-Lambert consented to a criminal fine of $240 million and, [*2]primarily to reimburse state and federal Medicaid programs, civil fines of $190 million.

In this action, plaintiff asserts claims sounding in fraud, violation of General Business Law § 349 and unjust enrichment based upon the fact that she was prescribed and used Neurontin for neck pain, an off-label use. Following joinder of issue but prior to class certification, defendant moved to dismiss the proposed class action complaint in its entirety pursuant to CPLR 3211 (a) (7) and 3016 (b). Supreme Court granted defendant's motion and dismissed the complaint. In addition, the court dismissed as academic plaintiff's pending motions to compel discovery and for class certification. Plaintiff appeals[FN*] and we now affirm.

In determining a motion to dismiss for failure to state a claim, a "court must afford the pleadings a liberal construction, take the allegations of the complaint as true and provide plaintiff the benefit of every possible inference" (EBC I, Inc. v Goldman, Sachs & Co., 5 NY3d 11, 19 [2005]; see Skibinsky v State Farm Fire & Cas. Co., 6 AD3d 975, 976 [2004]; 1455 Washington Ave. Assoc. v Rose & Kiernan, 260 AD2d 770, 771 [1999]). Moreover, "a court may freely consider affidavits submitted by the plaintiff to remedy any defects in the complaint" (Leon v Martinez, 84 NY2d 83, 88 [1994]). With respect to plaintiff's claims herein, we note that to state a cause of action under General Business Law § 349, a plaintiff must allege that the defendant has engaged in consumer-oriented acts or practices that are " 'deceptive or misleading in a material way and that plaintiff has been injured by reason thereof' " (Small v Lorillard Tobacco Co., 94 NY2d 43, 55 [1999], quoting Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, 85 NY2d 20, 25 [1995] [emphasis added]; see Stutman v Chemical Bank, 95 NY2d 24, 29 [2000]). That is, while an assertion of justifiable reliance is not necessary, a plaintiff must allege that defendant's consumer-oriented, deceptive acts or practices "caused actual, although not necessarily pecuniary, harm" directly to plaintiff (Oswego Laborers' Local 214 Pension Fund v Marine Midland Bank, supra at 26; see Blue Cross & Blue Shield of N.J., Inc. v Philip Morris USA Inc., 3 NY3d 200, 207-208 [2004]; Stutman v Chemical Bank, supra at 29-30; Small v Lorillard Tobacco Co., supra at 56).

Here, the parties' dispute centers on whether plaintiff adequately alleged that she suffered an injury as a result of defendant's deceptive acts. Plaintiff argues that Supreme Court erred in holding that she failed to sufficiently allege a cognizable injury when it is undisputed that she paid for Neurontin, which was prescribed by her doctor for an off-label use. Essentially, plaintiff seeks a refund of the purchase price of Neurontin on the ground that she would not have purchased the drug absent defendant's deceptive practices. The Court of Appeals, however, has rejected this very argument, i.e., "that consumers who buy a product that they would not have purchased, absent a manufacturer's deceptive commercial practices, have suffered an injury under General Business Law § 349" (Small v Lorillard Tobacco Co., supra at 56). Without further allegations that, for example, the price of the product was inflated as a result of defendant's deception or that use of the product adversely affected plaintiff's health, plaintiff's claim "sets forth deception as both act and injury" and, thus, "contains no manifestation of either pecuniary or 'actual' harm" (id.). Indeed, we note that plaintiff failed even to allege—either in her complaint or supporting affidavit—that Neurontin was ineffective to treat her neck pain, and her claim that any off-label prescription of Neurontin was potentially dangerous both asserts a harm [*3]that is merely speculative and is belied in any event by the fact that off-label use is a widespread and accepted medical practice (see Buckman Co. v Plaintiffs' Legal Comm., 531 US 341, 350 [2001]; Washington Legal Found. v Henney, 202 F3d 331, 333 [2000]). In short, because plaintiff failed to allege actual harm or that she sustained a pecuniary injury, Supreme Court properly determined that she failed to state a claim under General Business Law § 349 (see Small v Lorillard Tobacco Co., supra at 56; Donahue v Ferolito, Vultaggio & Sons, 13 AD3d 77, 78 [2004], lv denied 4 NY3d 706 [2005]; Rice v Penguin Putnam, 289 AD2d 318, 319 [2001], appeal dismissed and lv denied 98 NY2d 635 [2002]).

We similarly conclude that plaintiff's unjust enrichment claim was properly dismissed. A claim for unjust enrichment will lie when "(1) the defendant was enriched, (2) at the expense of the plaintiff, and (3) . . . it would be inequitable to permit the defendant to retain that which is claimed by the plaintiff" (Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, 31 AD3d 983, 988 [2006]; see Paramount Film Distrib. Corp. v State of New York, 30 NY2d 415, 421 [1972], cert denied 414 US 829 [1973]; Citibank, N.A. v Walker, 12 AD3d 480, 481 [2004]). Inasmuch as plaintiff makes only conclusory allegations that defendant's deceptive acts played a role in her use of Neurontin, without alleging that her physician's decision to prescribe the drug was influenced by defendant or that the drug was ineffective to treat her, she has failed to allege that defendant is in possession of money belonging to plaintiff and her claim was properly dismissed (see Clifford R. Gray, Inc. v LeChase Constr. Servs., LLC, supra at 988).

Finally, inasmuch as plaintiff failed to expressly request leave to amend her complaint, Supreme Court did not err in refusing to sua sponte grant such relief (see Anderson Props. v Sawhill Tubular Div., Cyclops Corp., 149 AD2d 950, 950-951 [1989]; see also Yavorski v Dewell, 288 AD2d 545, 548 [2001]). The parties' remaining arguments are rendered academic by our decision.

Cardona, P.J., Crew III, Peters and Carpinello, JJ., concur. Ordered that the order is affirmed, with costs. Footnotes

Footnote *: Plaintiff has expressly abandoned her appeal with respect to the dismissal of her common-law fraud claim.

That's a bull-chit class-action lawsuit about a drug's popular off-label uses. It's about a pre-trial Motion to Dismiss that has nothing at all to do factually or legally with the same issues or even the same law.


Steps in proper legal analysis:

1. Facts
2. Issue(s)
3. Reasoning
4. Holding

Shark Tank star Kevin O’Leary said Monday he will no longer invest in New York in response to a $355 million judgment issued against former president Donald Trump in a state court last week.

New York judge Arthur Engoron ordered Trump to pay the massive sum for conspiring, the court ruled, to alter his net worth to receive tax and insurance benefits. The order also prevents Trump from doing business in New York for three years. The decision was the conclusion of a months-long civil fraud trial that New York attorney general Letitia James brought against the former president, the Trump organization, and his executives.

During an appearance on Fox Business, O’Leary said he was “shocked” by the ruling. “This award, I mean, just leaving the whole Trump thing out of it and seeing what occurred here. . . . And I’m no different than any other investor, I’m shocked at this. I can’t even understand or fathom the decision at all. There’s no rationale for it.”

“It was already on the top of the list of being a loser state, I would never invest in New York now,” he added. “And I’m not the only person saying that.”

He suggested that businesses will flee New York to go to more business-friendly states such as Texas and Florida, and he brushed off New York Governor Kathy Hochul’s attempt to reassure business owners after the landmark ruling.

“I think that this is really an extraordinary, unusual circumstance that the law-abiding and rule-following New Yorkers who are business people have nothing to worry about, because they’re very different than Donald Trump and his behavior,” Hochul said.

“We’re very worried, every investor is worried because where is the victim? Who lost the money? This is some arbitrary decision a judge made,” O’Leary said. “This policy . . . what does this say about the bar? About the legal bar in New York? Aren’t they going to question this judge? What is this?”

“I’m sorry her words fall on deaf ears to everybody,” he added. “There’s nothing she can say to justify this decision. And this has nothing to do with Trump, nothing to do with Trump. Forget about Trump, this is not a Trump situation, this is a New York problem.”

Trump, for his part, praised O’Leary in a post on Truth Social.

“Kevin O’Leary is so great, and tells it like it is. Businesses will flee NYC & State after the Corrupt Judge’s ruling!” he wrote.

^Businesses were already fleeing NY and CA. It will continue.

The people who stay in those God Forsaken states will eventually reap what they have sown. My sister still lives on Long Island. Her husband still owns a business there, but they've already bought a house and property in FL.

“Honest John” prolly won’t pay the bill anyway. It’s one of his super powers….
What’s the biggie?

If there were “repeated fraudulent or illegal acts or . . . persistent fraud or illegality in the carrying on, conducting or transaction of business.”:

Show me the victim(s) making the complaint.
Show me the financial loss that the victim(s) realized.
If you can't, then the real frauds are Letitia James and Judge Engoron

Yessir... Nobody complained. No victims.

No financial loss was realized... which is why nobody complained, which is why the whole fkn thing is a sham. A political stunt, perpetrated by Joe fkn Biden and his lackeys to persecute their political opponent.

What's different from that and Putin killing his rival in prison? Russia is a communist country. They have that excuse.

The lesson should be learned that civil asset forfeiture will be used against the political opposition. It would be best to not oppose.

I look forward to four more years of President Biden building back better. I need to get one of those hats.

Oh they'll keep using this technique, however it will almost always be overturned on appeal.

Yup, every other president left office much wealthier than when they were elected, but the Donald won’t. All a part of the “Build, Back, Better” campaign run by the guy who said he’d unify the country.

Elon Musk and Donald Trump Cases Imperil the Rule of Law
American prosperity rests on equal justice. Delaware and New York judges have called it into question.


Jeb Bush and Joe Lonsdale/WSJ


The U.S. is the business capital of the world in large part because of its robust constitutional system and impartial judiciary. But two unprecedented legal decisions, against Donald Trump in New York and Elon Musk in Delaware, call that into question. In both cases, judges have ordered massive punitive judgments on behalf of dubious or nonexistent “victims.”

Every American has a right to be critical of Mr. Trump’s politics—one of us ran against him in 2016—or Mr. Musk’s public persona. But equality before the law is precious, and these rulings represent a crisis not only for the soundness of our courts, but for the business environment that has allowed the U.S. to prosper. If these rulings stand, the damage could cascade through the economy, creating fear of arbitrary enforcement against entrepreneurs who seek public office or raise their voices as citizens in a way that politicians dislike.

In Delaware, Chancellor Kathaleen McCormick of the Court of Chancery ordered the unwinding of five years of Mr. Musk’s incentive-based compensation at Tesla, which had been approved by 80% of the company’s shareholders. The plaintiff, Richard Tornetta, held nine shares in 2018—worth about $200 then and $2,000 today, after the execution of the compensation plan that supposedly injured him.

Mr. Musk’s compensation plan awarded him stock bonuses tied to earnings and stock-value benchmarks, which many critics thought he could never meet. When he did, he received $56 billion, enriching shareholders like Mr. Tornetta along the way. Judge McCormick has yet to say how she wants the pay package unwound, but Mr. Tornetta’s lawyers could petition her for a percentage of the $56 billion as a fee for having succeeded in their challenge. Mr. Musk’s performance at Tesla enriched all shareholders, but Judge McCormick’s ruling may primarily enrich Delaware trial lawyers.

In New York, Judge Arthur Engoron ordered Mr. Trump to pay more than $350 million in a civil fraud judgment for inflating the value of his real-estate holdings. That case was brought by Attorney General Letitia James, who ran for office in 2018 on a promise to target the man she called “an illegitimate president.”

The unusual New York law Ms. James used to investigate and sue Mr. Trump didn’t require her to prove that he had intended to defraud anyone, or even that anyone lost money. The Associated Press found that of the 12 cases brought under that law since its adoption in 1956 in which significant penalties were imposed, the case against Mr. Trump was the only instance without an alleged victim or financial loss. Bankers from Deutsche Bank, which lent money to Mr. Trump, testified that they were satisfied with having done so, given they were paid back on time and with interest. They also testified that they were uncertain whether the alleged exaggerations would have affected the terms of the loans to Mr. Trump—a key part of Ms. James’s case. Since there were no victims, the state will collect the damages.

New York and Delaware have played an outsize role in business in the U.S. Many major companies are incorporated in Delaware owing to the state’s body of corporate legal precedents; and a significant number of banks operate in New York, the world financial capital. The appellate courts in those states now have a chance to review these dangerous judicial rulings and try to stop further damage to the reputations of their respective judiciaries.

If they don’t, blue-state politicians may have the satisfaction of “sticking it” to Messrs. Trump and Musk, but the loss to those states will be significant. The damage to the legal fabric of the country will be even worse. A dispassionate justice system is at the heart of American exceptionalism, and the country will be poorer if we lose it.




Mr. Bush served as governor of Florida, 1999-2007. Mr. Lonsdale is a founder of Palantir and managing partner of 8VC.

This could very well be the impetus for Wall Street to finally call it a day and move to Miami.

Other businesses will follow.

Remington is pulling chocks and moving to Georgia.

Nothing to see here, move along...

That's exactly what some of us have been saying... and the part where it says "since there were no victims, the State will collect the damages" tells you ALL you need to know.

Well...the state must be the victim so they deserve to get all the money they can seize by force.:-s
That's the way it works in a bananas republic.

Looks like NY just found the funding to cover the exorbitant hotel and room service costs as well as free debit card$ for the illegals they’ve been accommodating. Scary to think some people accept these cases as fair and/or just; if throwing one obscure BS case after the next at somebody isn’t enough to bury them in legal fees defending themself, they’ll just come up with judgments like this to drain it even quicker.

Yes, it is uncommon for there to be illegal conduct without a person or entity being harmed, but that is what the law is. Indisputably.

And, many, many convictions do not require proof of actual damages- such as certain types of defamation (civil law) and all attempted crimes (criminal law). For example: attempted murder where one person shoots at another and misses. No victim...

Devils Advocate: What about **how** you are not allowed to do business in the sole business/financial capital of the world and whether there is strong public policy for the law? That is the real issue to grapple with here.

Overturned on appeal...

Will the state of NY pay all his money back with interest?