In Pludeman v. Northern Leasing Sys., Inc. , small business owners from the states of Missouri, Texas, Washington, and New York, sued Northern Leasing after realizing they had been tricked into signing lease agreements for credit card terminals and other business equipment.
Kevin Pludeman, and others, alleged Northern had presented them with what they thought was a single page contract resting on a clip board when, in actuality, it was concealing three other pages.
While the first page seemingly covered all the pertinent contract terms, the other three pages contained "a no-cancellation clause, and no warranties clause, absolute liability for insurance obligations, a late charge clause, a provisions for attorney's fees and New York as the chosen forum."
Pludeman acknowledged that the initial page noted "page 1 of 4," but countered that "microprint" deprived customers of the ability to knowingly consent to the transaction's terms.
After Northern moved to dismiss the case, the New York County Supreme Court found the complaint sufficiently stated a fraud claim against the sales representatives responsible for the alleged fraud. On appeal, the Appellate Division, First Department, affirmed.
When the case reached the New York State Court of Appeals, our state's highest court agreed that Pludeman and the other business owners offered enough details about the alleged scam to state a "fraud" claim. While a state law -- CPLR 3016(b) -- requires specificity in such cases, the Court noted that the standard should not be "so strictly interpreted" when there is a great risk that a viable cause of action may be lost.
Since many of the disputed facts were "peculiarly within the knowledge" of Northern, the governing pleading requirement was satisfied "when the facts [were] sufficient to permit a reasonable inference" of fraud. As this was a long-term, "nation-wide scheme," the Court of Appeals found such an inference was warranted here.
A lone dissenter -- Judge Smith -- thought the business owners didn't meet the law's specificity requirement as they failed to raise "allegations specific to individual defendants." Additionally, since the individual salespeople were not Northern employees, Smith believed that company's officers couldn't be "blamed for any trickery in which the salespeople engaged."
Were these business owners trying to back-out of a bad deal?
Judge Smith certainly thought so.
Gotta give them credit for trying.
To download a copy of the Court of Appeals' decision, please use this link: Pludeman v. Northern Leasing Sys., Inc.