Menachem J. Kastner and Ally Hack
Menachem J. Kastner and Ally Hack ()

Recently, in Cruz v. T.D. Bank,1 the Court of Appeals was again confronted with what was thought to be a settled issue: When does a statute give rise to a private cause of action? In concluding that no private cause of action existed under the Exempt Income Protection Act (EIPA), the court restated the applicable three-prong test:

(1) Is plaintiff one of the class for whose benefit the statute was enacted?

(2) Would a private right of action promote the legislative purpose?

(3) Would a private right of action be consistent with the legislative scheme?

This article endeavors to capsulize the current state of the law, including its application in real estate cases, and to simplify the formula to be applied as to when individuals can and cannot institute private causes of action based on legislation passed, ostensibly, for the public benefit. After surveying relevant legal precedent, we formulate a conclusion that we hope will assist in determining when legislation can be used to remedy private wrongs, and when it cannot.


Naturally, the best course is for the Legislature to specify in the legislation itself whether litigants are allowed to bring private causes of action against violators of the legislation’s provisions.2 However, “[a]bsent explicit legislative direction,…it is for the courts to determine, in light of those provisions…and of existing common-law and statutory remedies…what the Legislature intended.”3

In the seminal case of Sheehy v. Big Flats Community Day,4 the Court of Appeals formulated the three-prong test—reconfirmed in Cruz—to guide litigants and courts alike in determining legislative intent. Because parties seeking to bring a private cause of action will usually be able to meet the first two prongs, the court identified the third prong as “the most critical inquiry in determining whether to recognize a private cause of action.”5 In other words, parties seeking to bring a private cause of action will generally be part of the class that the statute was enacted to protect (prong number 1)—after all, the plaintiff is suing because he was allegedly wronged under the plain terms of the statute in question; and private causes of action will normally deter conduct proscribed by the legislation thus promoting the legislative purpose (prong number 2)—after all, litigation by its very nature acts as a deterrent. That leaves the third prong.

Third Prong Under ‘Sheehy’

The third prong (consistency with the legislative scheme) is where the proverbial rubber meets the road. It is that prong that requires courts to examine the heart and soul of the legislation in question, and draw conclusions as to how the Legislature intended to give it traction and to whom to provide the enforcement obligations or remedial benefits. The four issues to be probed in analyzing Sheehy’s third prong are discussed in the questions below.

Was the legislation passed solely to benefit the general public? As many statutes contain sections titled “Legislative Intent,” this, naturally, must be the first place to which one turns in analyzing the Sheehy third prong. Simply stated, statutes passed solely and explicitly to benefit the general public “do not import intention to protect the interests of any individual except as they secure to all members of the community the enjoyment of rights and privileges to which they are entitled as members of the public.”6 As such, a violation of these statutes “creates no civil liability to individuals.”7

Was a governmental body or person singled out to oversee enforcement? Many times, legislation will explicitly and exclusively designate an agency or official to be the enforcer of its provisions. Where the Legislature makes such a designation, a private cause of action is likely not available. An example of this can be found in New York’s Environmental Conservation Law (ECL), which appoints the attorney general to enforce the regulations promulgated thereunder.8 In Wilson v. Newfane, the Fourth Department concluded that because the ECL “specifically authorizes the Attorney-General” to enforce its provisions, “the statute does not confer a private cause of action” to private litigants.9

Were any penalties specified by the Legislature and to whom are those penalties payable? A third indicator of legislative intent is the penalties that the Legislature chose to include (or not to include) in the statute, and to whom those penalties (if monetary) are to be paid. Where the legislation details specific penalties for the enforcement of the statute in question, and where private causes of action are not enumerated in connection with such penalties, the logical (and legal) inference is that what the Legislature chose to exclude was intentionally excluded—or unius est exclusion alterius—an inference that is strengthened where the statutory penalties (if monetary) are payable to a municipality. Simply stated, if the Legislature intended to afford litigants a private cause of action under a particular statute, it would have said so in the “Penalties” section of the statute.

Does the wrongful conduct In question relate to any direct injuries potentially to be suffered by the litigants? Even where the legislative intent, enforcement mechanisms, and penalties militate against a finding that a private cause of action exists, courts may nevertheless imply a private cause of action into a statute—but only where the statute in question creates rights that inure directly and personally to an individual, and that individual suffered a direct harm and damages as a result of the statute being violated.

The Kings County Supreme Court, in Maimonides Medical Center v. First United American Life Ins.,10 explained the subtle distinction between statutes that are strictly remedial in nature (protecting the public at large), and statutes that afford rights to individuals and impose an affirmative duty to perform (conferring benefits that inure directly to the individual):

For the purpose of determining whether a private right of action is consistent with the legislative scheme, the Second Department has distinguished between statutes that are simply remedial in nature and those that afford rights to individuals and impose an affirmative duty to perform with respect to such rights. While the former, like the Martin Act…, create an enforcement mechanism that is aimed toward protecting the general public, the latter, like the Social Services Law…confer benefits that inure directly and personally to individuals. For statutes that create rights to the individual, a private right of action to seek redress for injury is not inconsistent with the legislative scheme, but would actually augment the existing enforcement devices and enhance a legislative scheme which…imposes affirmative duties for the protection of those very individuals.11

Thus, private rights of action may be permitted: (i) where the statute creates rights with a class of individuals in mind (like G.O.L. 7-105 [which ensures that grantees of real property receive the security deposits made by tenants to the grantor], and unlike the Martin Act [which protects the general public from fraudulent practices with respect to securities]), and (ii) where such an individual has suffered the personal harm specifically proscribed by the statute—”since a private right of action imposes affirmative duties for the protection of those very individuals.”12

Case Studies

The Southampton Town Code: No Private Cause of Action. A prime example of a legislative act that satisfies the third prong of the Sheehy three-prong test, and therefore does not provide for any private right of action, is §270 of the Southampton Town Code, which was enacted in response to “non-owner occupied residential dwelling units that are (i) overcrowded and dangerous, (ii) in violation of various state and town laws, (iii) inadequate in size to accommodate the number of occupants, and (iv) substandard.” Under §270, an owner of a residential dwelling must obtain a permit from the town in order to be eligible to rent his dwelling to tenants, whether for seasonal use or all year round.

The issue whether or not §270 provides litigants with a private cause of action was litigated in the Supreme Court, New York County, in Liu v. Asselbergs (Index No. 157499/12 (Sup. Ct. N.Y. Co.). (The authors represented the defendants in this case. The case has been settled and discontinued.)

In dismissing so much of the plaintiff’s complaint as was based on §270, the court held that §270 meets all of the indicia of legislation that do not allow for private causes of action, and that the plaintiff therefore did not state a private cause of action based on the code.

The court’s analysis of the Sheehy third prong went through all of the issues discussed above. First, §270 contains a “Legislative Intent” section that makes clear that §270 was passed to benefit the town of Southampton, generally. Second, §270-10 leaves no doubt about who is authorized to enforce its terms—i.e., “[t]he Chief Building Inspector and Town personnel.” Third, §270-19 details the corrective action to be taken where its terms are violated—i.e., upon “resolution of the Town Board,” the “Town Attorney” shall, in “the name of the Town,” seek to “permanently enjoin” individuals causing the violation, which is in addition to the imposition of penalties and fines. Finally, since the express focus of §270 is to benefit the town of Southampton generally, and not any individual specifically, it is unlikely that an individual will be able to allege a direct harm and damages as a result of the statute being violated.

The Martin Act: Statute and Common Law Overlapping. Like many legislative acts, the Martin Act does not expressly state whether or not a private right of action exists under its provisions. Courts initially allowed private litigants to bring claims thereunder,13 that is, until 1987 when the New York Court of Appeals held that only the New York Attorney General is allowed to sue under the Act.14 It would not be until almost three decades later, however, that the court would decide the issue of whether or not the Martin Act precluded private causes of action based on the common law, where the underlying fact pattern would have otherwise been within the purview of the Martin Act.

The Court of Appeals addressed this issue in Kerusa v. W10Z/515 Real Estate—sort of.15 In Kerusa, although the court dismissed the cause of action because it was based entirely on the disclosure requirements imposed by the Martin Act, the court left the door open on the question of whether plaintiffs could bring a common law cause of action based on facts that the attorney general would normally use to bring a claim under the Martin Act.

Then, in 2011, the Court of Appeals in Assured Guar. (UK) Ltd. v. J.P. Morgan,16 unanimously concluded that the Martin Act does not preempt such common law claims. The court read CPC and Kerusa together, and held that those cases:

stand for the proposition that a private litigant may not pursue a common-law cause of action where the claim is predicated solely on a violation of the Martin Act or its implementing regulations and would not exist but for the statute. But, an injured investor may bring a common-law claim (for fraud or otherwise) that is not entirely dependent on the Martin Act for its viability. Mere overlap between the common law and the Martin Act is not enough to extinguish common-law remedies.

Thus, the options available to litigants have been broadened. Where a statute may seem to close a door to a private cause of action, litigants may be able to find a “window” of opportunity if the cause of action can be brought under a common law theory.


When deciding whether to bring a private cause of action pursuant to statute, a litigant must take into account the overall statutory scheme in order to ascertain what the Legislature intended. The Sheehy three-prong test was formulated for the purpose of determining this legislative intent. If the legislative intent was not to allow private causes of action, the undaunted litigant may nevertheless be able to recover if he can demonstrate that the statute in question was enacted specifically to protect individuals just like him from the very acts proscribed by the statute, and that he was injured as a result. Finally, if that undaunted litigant is also a creative litigant, he will be able to formulate a legal theory based on the common law in order to increase his chances at recovery.

Menachem J. Kastner is a member of Cozen O’Connor and heads the real estate litigation division of the commercial litigation department. Ally Hack is a member of the firm in that department.


1. 22 N.Y.3d 61.

2. For statutes authorizing private causes of action, see, e.g., Social Services Law §420 (2); General Obligations Law §11-100 (1). .

3. Burns Jackson Miller Summit & Spitzer v. Lindner, 59 N.Y.2d 314 (1983).

4. 73 N.Y.2d 629 (1989).

5. Brian Hoxie’s Painting v. Cato-Meridian Cent. School Dist., 76 N.Y.2d 207 (1990).

6. Steitz v. City of Beacon, 295 N.Y.2d 51 (1945).

7. Id.

8. See ECL §71-2727.

9. 181 A.D.2d 1045 (4th Dept. 1992). See also Mark G. v. Sabol, 93 N.Y.2d 710 (1999) (no private right of action where the Legislature expressly provided for enforcement mechanisms in the statute itself); Carrier v. Salvation Army, 88 N.Y.2d 298 (1996) (holding that where enforcement provision vests enforcement authority solely with the legislatively appointed agency, it is “inappropriate to imply a private cause of action.”).

10. 35 Misc.3d 570 (Sup. Ct. Kings Co. 2012) affm’d 2014 N.Y. Slip Op. 01441 (March 5, 2014) (holding on appeal that, notwithstanding the statute’s express pronouncement that enforcement was delegated to the Superintendent of Insurance, the Prompt Pay Law was more than remedial and impliedly gave providers and patients certain rights while imposing affirmative duties on insurers, a view the court determined was supported by the law’s legislative history).

11. 35 Misc.3d at 575 (indicating that the Second Department more readily than the First Department permits private causes of action and, in this regard, declining to follow Group Health Inc. v. Kofinas, 2008 N.Y. Slip Op. 32251[U], 2008 N.Y. Misc. Lexis 9179 [Sup. Ct. N.Y. Co.]. On appeal, the Second Department determined that Kofinas “had been undermined by later case law.”); Jackson v. Bank of America, NA., 2013 N.Y. Slip Op. 23192, 2013 WL 2933213 (Sup. Ct. Kings Co. 2013) (Second Department holding that a private cause of action is available to litigants under New York’s EIPA, the same statute that Cruz found did not afford litigants a private right of action). In light of Cruz’s statement that “we have therefore declined to recognize a private right of action in instances where ‘[t]he legislature specifically considered and expressly provided for enforcement mechanisms’ in the statute itself,” the question left open is whether Maimonides’ holding is consistent with Cruz.

12. See, e.g., Gerel Corp. v. Prime Eastside Holdings, 12 A.D.3d 86 (1st Dept. 2004) (private cause of action exists because “[a]s successor landlords, plaintiffs were directly injured by defendants’ refusal to turn over the tenants’ security deposits and have standing to enforce their rights under [GOL 7-105]“); Lino v. City of New York, 101 A.D.3d 552 (1st Dept. 2012) (finding “standing to claim that defendants’ failure to seal their records relating to ‘stop and frisk’ arrests or summonses violates CPL 160.50 and 160″ where plaintiffs suffered injury in fact); compare NYC Local Law 71 of 2013 (providing for a private right of action and specifically delineated remedies for those adversely affected by improper policing).

13. See Lupardo v. I.N.M. Indus., 36 F.R.D. 438 (S.D.N.Y. 1965).

14. CPC International v. McKesson, 70 N.Y.2d 268 (1987).

15. 12 N.Y.3d 236 (2009).

16. 18 N.Y.3d 341 (2011).