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Class-ActionThe New York Legislature is now considering a bill, A.679/S.2407, that would make major changes to the state’s chief consumer-protection statute, General Business Law §349. One change in particular should terrify all companies that do business in the state. It would raise the guaranteed minimum recovery forty-fold, to $2,000, and it would expressly make this minimum award recoverable thousands or even millions of times over in class actions. True, §349’s damages scheme is badly broken and in dire need of a legislative fix—but this bill would make the problem exponentially worse. Instead of passing it, the Legislature should eliminate statutory damages altogether in consumer-protection suits—or, at minimum, clarify that they are available only in non-class actions.

Massively Multiplied Statutory Damages: A Long-Recognized Problem. Often, damages for individual consumer-protection violations are too modest to justify an attorney’s time and effort. The Legislature recognized this and provided two mechanisms to incentivize private suits. First, in drafting Gen. Bus. Law §349 and its companion statute, §350, it provided for minimum “statutory damages” of $50 and $500, respectively. Second, it made suits under these statutes eligible for class-action status, so that consumers with modest damages could band together. Crucially, however, the Legislature never intended for these two incentive mechanisms to be combined. In other words, it did not intend for class actions in which potentially millions of consumers were each awarded the $500 statutory minimum, even though their actual losses might have amounted to a few dollars or even pennies apiece—resulting in a gargantuan class-wide award vastly out of proportion to any actual harm that the defendant caused.

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