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January 26, 2005

2nd Circuit weighs in

The Second Circuit Court of Appeals yesterday reinstated the infamous obesity suit against McDonalds. The court ruled that in dismissing the action, U.S. District Judge Robert Sweet improperly interpreted section 349 of New York's Consumer Protection Act. N.Y. Gen. Bus. L. 349(a)("Deceptive acts or practices in the conduct of any business, trade or commerce or in the furnishing of any service in this state are hereby declared unlawful."); (h)(enabling private rights of action).

According to the panel, the New York law "extends well beyond common-law fraud to cover a broad range of deceptive practices" and "does not require proof of the same essential elements (such as reliance) as common-law fraud." Instead, the court determined that a plaintiff under section 349 need only meet the "bare-bones notice-pleading requirements of [Federal Rule of Civil Procedure] 8(a)," rather than "pleading-with-particularity" as required by FRCP 9(b). The questions raised by Sweet in dismissing the case -- such as the plaintiffs' overall diet, exercise patterns, and family history -- did not need to be raised at the pleadings stage but rather "is the sort of information that is appropriately the subject of discovery."

The court, then, essentially interpreted the New York law to mean that any allegations of business fraud could survive a 12(b)(6) motion to dismiss -- and compel onerous and expensive discovery on a defendant -- even if the plaintiff failed even to suggest a link between the alleged fraud and the alleged harm. Is this the new version of California's recently deposed section 17200 (see here, here, and here)?

The full text of the opinion is here, and the amended complaint is here.

Posted by James R. Copland at 05:21 PM | TrackBack (2)

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