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1SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF HAMILTON

________________________________________________

PEOPLE OF THE STATE OF NEW YORK, by

ERIC T. SCHNEIDERMAN, Attorney General of the

State of New York, Petitioner,

Index No. 2012/6972

-against-

HUDSON RIVER RAFTING COMPANY, INC.

And PATRICK CUNNINGHAM,

Respondents.

________________________________________________

MEMORANDUM OF LAW IN REPLY TO

OPPOSITION SUBMITTED BY RESPONDENTS

Eric T. Schneiderman, Attorney GeneralOf the State of New York, AttorneyFor Petitioner

G. Nicholas Garin, Of Counsel


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TABLE OF CONTENTS

PRELIMINARY STATEMENT.1

STATEMENT OF FACTS...1

ARGUMENT 3

I RESPONDENTS ACTS AND PRACTICES

CONSTITUTE REPEATED ILLEGALITY

AND FRAUD IN VIOLATION OF

EXECUTIVE LAW 63(12)3

A: Repeated or Persistent Violation of Environmental

Conservation Law 11-0533 and Vehicle and Traffic

Law 509-b Constitute Violations of Executive Law 63 (12) ...3B. Repeated or Persistent Fraud/Deception

Constitutes Violation of Executive Law 63 (12)

...5

II SINCE RESPONDENT HAS FAILED TO RAISE

A TRIABLE ISSUE OF FACT, THE PETITION

SHOULD BE GRANTED .9

III THE STATUTE OF LIMITATIONS DOES NOT LIMIT

THE EVIDENCE THAT MAY BE SUBMITTED AND,

CONTRARY TO RESPONDENTS ARGUMENT, IS

SIX YEARS UNDER EXECUTIVE LAW 63(12) ..10

IV THE ATTORNEY GENERAL IS ENTITLED TO

INJUNCTIVE RELIEF, AN ACCOUNTING,

RESTITUTION AND PENALTIES ..12

A. Injunctive Relief12

B. Restitution..13

C. Civil Penalties17


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CONCLUSION....19


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1SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF HAMILTON

________________________________________________

PEOPLE OF THE STATE OF NEW YORK, by

ERIC T. SCHNEIDERMAN, Attorney General of the

State of New York,

Petitioner,

Index No. 2012/6972

-against-

HUDSON RIVER RAFTING COMPANY, INC.

And PATRICK CUNNINGHAM,

Respondents.

________________________________________________

MEMORANDUM OF LAW IN REPLY TO

OPPOSITION SUBMITTED BY RESPONDENTS

PRELIMINARY STATEMENT

The Attorney General submits this memorandum of law in reply to the opposition to the

States petition submitted by respondents and in further support of the petition.

STATEMENT OF FACTS

Patrick Cunningham has gone from pioneer to pariah over the course of three

decades at the helm of Hudson River Rafting Company, Inc. (HRRC). In 1979

he was one the earliest persons to create a business guiding customers on white

water rapids on the Adirondack rivers and many of the owners of such businesses

today got their start guiding recreational rafters for HRRC. As shown in the

States petition and exhibits Mr. Cunningham has fallen from grace in the

industry due entirely to his cavalier disregard for safety. This is evident in the

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repeated use of guides who are not licensed by the Department of Environmental

Conservation (DEC)1, the use of bus drivers who are not licensed to drive

busses2, the tolerance of drinking alcoholic beverages by his guides3, letting

rafters and kayakers go unguided on rivers where the use of licensed guides is

required by law4 , and failing to keep critical equipment, including the rafts, in

safe and workable condition.5

Despite respondents utter disregard for safety in all aspects of the guide service

that they provide, they continue to advertise safe or the safest rafting

excursions available. See, Exhibit 2 to Affirmation. White water rafting is

inherently dangerous, but with licensed guides, common sense precautions, proper

instruction, and good equipment, the experience need not be harrowing. At a bare

minimum to advertise safe or the safest rafting experience available, the

advertiser should provide licensed guides and do everything within reason to

make the experience safe. As demonstrated in the States petition and exhibits

attached thereto, by that simple standard respondents fail miserably and seriously

mislead the public by making such a claim.

_______________________

1. See, Exhibit 4 to Garin Affirmation in support of petition dated October 10, 2012(Affirmation), Affidavit of NY Forest Ranger Bruce Lomnitzer sworn to October 10, 2012 andattached to Affirmation as part of Exhibit 5 (Lomnitzer Aff.); See also, Rader Affidavit Swornto December 4, 2012 and attached as Exhibit 5 to Garin Reply Affirmation in further support ofpetition dated February 21, 2013 (Reply Affirmation), and Exhibit 6 to Reply Affirmation.

2. See, Exhibit 7 to Affirmation; See also, Fay Statement attached as Exhibit 1, p. 2, LaddStatement attached as Exhibit 2, p. 3, Rader Affidavit attached as Exhibit 5 to Reply Affirmation,and Lomnitzer Affidavit attached to Affirmation as part of Exhibit 5.

3. See, Exhibit 6 to Affirmation; See also, Exhibit 1, Exhibit 2, and Exhibit 5 to ReplyAffirmation.

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4. See, Rowe Affidavit sworn to October 5, 2012, Savage Affidavit sworn to October 5,2012, and Belson Affidavit sworn to October 8, 2012, and Lomnitzer Aff., all attached as part ofExhibit 5 to Affirmation, and Norton Affidavit sworn to November 29, 2012 attached to ReplyAffirmation as Exhibit 3.

5. See, Fay Affidavit, Exhibit 1 to Reply Affirmation, and Rader Affidavit, Exhibit 5 toReply Affirmation.

ARGUMENT

POINT I

RESPONDENTS ACTS AND PRACTICES

CONSTITUTE REPEATED ILLEGALITY

AND FRAUD IN VIOLATION OF

EXECUTIVE LAW 63(12)

A: Repeated or Persistent Violation of Environmental

Conservation Law 11-0533 and Vehicle and Traffic

Law 509-b Constitute Violations of Executive Law 63 (12)

Environmental Conservation Law (ECL) 11-0533 requires that all white water rafting

guides for hire be licensed. Those parts of the Adirondack rivers that require licensed guides are

specified in 6 NYCRR 197.2 (k) and include parts of the Moose, Black, Indian and Hudson

Rivers for which respondents offer guides for hire. The purpose of this law is to provide a

measure of safety for the public who engage in this recreational activity. The same is true of

Vehicle and Traffic Law (V & T) 509-b which requires enhanced testing for a special license

to operate a bus.

Executive Law 63(12) empowers the Attorney General to bring a special proceeding for

injunctive relief, restitution, damages, and costs whenever any person or business engages in

repeated or persistent fraudulent or illegal conduct. Executive Law 63(12) states, in pertinent

part, The term repeated as used herein shall include repetition of any separate and distinct

illegal act or conduct that affects more than one person. Repeated violations of ECL 11-0533

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and V & T Law 509-b by respondents as shown in the States submissions constitute

violations of Executive Law 63(12). It is not necessary to establish a large percentage of

violations under 63(12). State of New York v. Princess Prestige, 42 N.Y.2d 104 (1977) (16

illegal transactions out of 3,600 is sufficient). All the Attorney General is required to show is

any number of separate and distinct fraudulent or illegal acts which affect more than one

individual. Abrams v. 21st Cent. Leisure Spa Intl Ltd., 153 Misc. 2d 938, 955 (Sup. Ct. N.Y.

Co. 1991). Unlike the business cases cited above, even a single repetition for failing to follow

the most fundamental safety practice in a business like respondents should be sufficient to

ground the company. There is no room for misjudgment in such an inherently dangerous

enterprise and there is no possibility that respondents were ignorant of the fact that their guides

lacked licenses. Nor does it matter if the fraudulent or illegal conduct has been discontinued

because such discontinuance is no guarantee that the conduct will not be resumed at a later date.

People v. General Electric Co., 302 A.D. 2d 314, 316 (1st Dept 2003); State of New York v.

Person, 75 Misc. 2d 252, 253 (Sup. Ct. N.Y. Co. 1973);Lefkowitz v. Hotel Waldorf-Astoria

Corp., 67 Misc. 2d 90, 91-92 (Sup. Ct. N.Y. Co. 1971).

Executive Law 63(12) specifically authorizes the Attorney General to take proof and

make factual determinations prior to filing the petition in order to facilitate the summary

determination. The authorities are unanimous that once petitioners have made a sufficient

submission in a special proceeding, the burden rests upon respondents to come forward with

evidence sufficient to raise triable issues of fact. Answers which consist of only general denials

or conclusory allegations do not meet this burden. As the Third Department has stated, in an

Executive Law 63(12) proceeding:

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[W]here, in a special proceeding as here, the petitioner andsupporting papers contain sufficient allegations of fact tomerit the relief requested and the respondents have raisedno evidentiary showing, but only assert conclusorystatements in a general denial, judgment without trial is

proper....

State v. Daro Chartours, 72 A.D.2d 872, 872 (3d Dept 1979) (emphasis added). See also, People

v. Helena VIP Personal Introduction Service of New York, Inc., 199 A.D. 2d 186 (1st Dept

1993); Lefkowitz v. McMillen, 57 A.D.2d 979, 979 (3d Dept 1977) appeal denied, 42 N.Y.2d

807 (1977) (The burden was on [respondent] to reveal his proofs and show that his defenses

were real and capable of being established.); Ehrlich v. American Moninger Greenhouse Mfg.

Corp., 26 N.Y.2d 255, (1970); State v. Management Transition Resources, Inc., 115 Misc.2d

489, (Sup. Ct. N.Y. Co. 1982).

In a 63(12) proceeding . . . . even affidavits submitted to the court are insufficient if

they merely set forth conclusions or repeat the allegations contained in the pleading. Bald,

conclusory and self serving explanations, even if believable, are not enough. Ehrlich v.

American Moninger Greenhouse Mfg. Co., 26 N.Y.2d 255 (1970). See also, Joint Venture

Asset Acquisition v. Tufano, 203 A.D.2d 102 (1st Dept 1994); People v. Helena VIP Personal

Introduction Service of New York, Inc., N.Y.L.J., 1/17/92, p.26 Col. 3 (Sup. Ct. N.Y. Co.), affd,

199 A.D.2d 186 (1st Dept 1993). Respondents must present facts having probative value

sufficient to demonstrate an unresolved material issue. Id.

B. Repeated or Persistent Fraud/Deception

Constitutes Violation of Executive Law 63 (12)

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The term fraud has a special and broad meaning within the context of Executive Law

63(12). That section provides:

The word fraud or fraudulent as used herein shall include anydevice, scheme, or artifice to defraud and any deception,misrepresentation, concealment, suppression, false pretense, falsepromise or unconscionable contractual provisions.

The judicial interpretation of statutory fraud is equally broad and goes well beyond that

of common law fraud. The definition of statutory fraud was first enunciated by the Court of

Appeals inPeople v. Federated Radio Corp., 244 N.Y. 33, 38-39 (1926), in connection with a

proceeding under the Martin Act:

In a broad sense the term [fraud ] includes all deceitful practicescontrary to the plain rules of common honesty . . . The wordsfraud or fraudulent conduct in this connection should, therefore,be given a wide meaning so as to include all acts, although notoriginating in any actual evil design or contrivance to perpetratefraud or injury upon others which do by their tendency to deceiveor mislead the purchasing public come within the purpose of thelaw.

This broad view of fraud has been followed by New York courts at all levels in the more

than seventy years sinceFederated Radio. Reliance, actual deception, knowledge of deception

and intent to deceive, traditional elements of common law fraud, are not required to establish

liability for statutory fraud. See, e.g.,People v. Applied Card Systems, Inc., 27 A.D.3d 104 (3d

Dept 2005);People v. General Electric Co., 302 A.D.2d 314 (1st Dept 2003);People v.

Telehublink Corp., 301 A.D.2d 1006 (3rd Dept 2003);People v. Empyre Inground Pools, Inc.,

227 A.D.2d 731, 722 (3d Dept 1996);People v. Apple Health and Sports Clubs, Ltd., Inc., 206

A.D.2d 266, 267 (1st Dept 1994), affd, 84 N.Y.2d 1004 (1994); State v. Ford Motor Co., 136

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A.D.2d 154, 158 (3d Dept 1988), affd, 74 N.Y.2d 495 (1989); andLefkowitz v. Bull Investment

Group, 46 A.D.2d 25 (3d Dept 1974), appeal denied, 35 N.Y. 2d 647 (1975).

Along with Executive Law 63(12), GBL Article 22-A provides the other major source

of the Attorney Generals authority to prosecute false advertising and deceptive conduct. GBL

349(a) provides that [d]eceptive 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. GBL

349(b) provides:

Whenever the Attorney General shall believe from evidence satisfactory

to him that any person, firm, corporation or association or agent oremployee thereof has engaged or is about to engage in any of the acts orpractices stated to be unlawful he may bring an action in the name and onbehalf of the people of the state of New York to enjoin such unlawful actsor practices . . .

The definition of fraud under Executive Law 63(12) parallels the meaning of deceptive

acts and practices under GBL 349. Colorado State Christian College, 79 Misc. 2d at 54.

Intent, proof of actual deception and reliance are not elements of deception under the General

Business Law. Id. Moreover, both Executive Law 63(12) and GBL 349 are meant to be

construed liberally to effectuate their remedial purposes. See, e.g., State v. Princess Prestige

Co.,supra,42 N.Y. 2d at 108 (1977); State v. Mariano, 189 A.D.2d 766,767 (2d Dept 1993).

GBL 350 outlaws false advertising, the definition of which is found in GBL 350-a(1).

In New York, as in many other states, the test of whether advertising false or a practice is

deceptive is whether it has the capacity or tendency to deceive. See., e.g., Empyre Inground

Pools, 227 A.D.2d at 732; State v. Volkswagen of America., 47 A.D.2d 868 (1st Dept 1975); and

Lefkowitz v. E.F.G. Baby Products, 40 A.D.2d 364, 368 (3d Dept 1973).

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It has long been the law in New York that when a government agency brings an action

pursuant to Executive Law 63(12), on behalf of the public, it does so with a mandate to protect

the vast multitude of consumers, including the ignorant, the unthinking and the credulous, and

not only the reasonable consumer or even the average consumer. Guggenheimer v. Ginzburg, 43

N.Y. 2d 268, 273 (1977) (emphasis added). Consistently, actions brought by the Attorney

General to enjoin fraudulent, deceptive and illegal business practices have been judged by the

credulous consumer standard articulated in Ginzburg. See, e.g., People v. Applied Card

Systems, Inc.,supra 27 A.D.3d at 106; People v. General Elec. Co., 302 A.D.2d 314 (1st Dept

2003); State v. Volkswagon of America, Inc., supra 47 A.D.2d at 868; People v. Lipsitz,174

Misc. 2d 571, 583 ( Sup. Ct. N.Y. Co. 1997); State v. Terry Buick, Inc., 137 Misc. 2d 290, 294

(Sup. Ct. Dutchess Co. 1987).

In recent decisions, the First and Third Departments of the Appellate Division re-iterated

that in actions brought pursuant to Executive Law 63(12) by the Attorney General the purpose

of the law is to protect not only the average consumer, but also the ignorant, the unthinking and

the credulousPeople v. General Elec. Co., supra 302 A.D.2d 314 (1st Dept 2003); andPeople

v. Applied Card Systems, Inc.,supra 27 A.D.3d 104, 106 (3rd Dept 2005)(quoting

Guggenheimerv. Ginzburg). In this case, whether the Court applies the standard of a credulous

consumer or the average consumer, the result is the same -- respondents advertising is patently

misleading. The unique feature of this case is that the activity being promoted is inherently

dangerous so the issue of safety is of paramount concern to potential recreational rafters. Just

like a consumer shopping for auto repairs, a subject about which they know nothing or very little,

a consumer shopping for a rafting guide knows practically nothing about the business or activity.

When a business like respondents holds itself out to the public as capable of providing a service

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requiring licensure, that business implies that its guides are licensed. In this case, that implicit

representation was repeatedly false and deceptive. Whether it is an auto mechanic or a rafting

guide, the consumer is at the mercy of the integrity of the person offering the service. The lack of

integrity by a rafting guide when it comes to safety issues can have tragic consequences. To

disregard basic safety measures that are within ones control is unconscionable and to advertise

by promoting the safety of your services when you disregard practically all elements of safety is

undoubtedly false and deceptive.

In this case the State has shown that respondents did not disregard safety in one instance.

Rather, the evidence shows that over several years (possibly much longer), Patrick Cunningham

has: a) treated the licensing laws as if they were a nuisance breaking the laws whenever they

seemed inconvenient and certainly getting away with it more times than getting caught, 2)

abandoned rafters mid-trip himself as if guiding them was a bother instead of a duty, 3) cared

not what state of intoxication, (hung over, or strung out) his guides were in, so long as the

drinking or smoking marijuana was done out of sight of customers as that might have hurt

business and 4) allowed his equipment, even his rafts to fall into disrepair as if the cost of

keeping them in shape was too burdensome even going so far as to paint over rips and tears in

the fabric rather than repair them.

Although it is unfortunate that it took the death of one of his customers to bring these

issues to a head, the counter culture Mr. Cuningham has been fostering for years cannot be

tolerated in an industry whose first responsibility is the safety of its customers.

POINT II

SINCE RESPONDENT HAS FAILED TO RAISE

A TRIABLE ISSUE OF FACT, THE PETITION

SHOULD BE GRANTED

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Respondents have made no attempt to raise a triable issue of fact by challenging the

evidence submitted in support of the States petition. Respondents opposition consists of

general denials and a misguided legal argument as to the statute of limitations and admissiblility

of evidence. See, Point III below. Should respondents allege that their intentions have been

good, such protestations are irrelevant. Courts in New York have consistently held that intent to

defraud is not an element of statutory fraud under Executive Law 63 (12) or GBL 349. See,

e.g.,People v. General Electric Co.,supra 302 A.D.2d at 315; State v. Ford Motor Co., 136

A.D.2d 154 (3d Dept. 1988), affirmed, 74 N.Y.2d 495 (1989);Lefkowitz v. Bull Investment

Group, 46 A.D.2d 25, 28 (3

rd

Dept 1974). It is even less so as to the cause of action under

Executive Law 63 (12) for repeated or persistent illegality. As the court stated inE.F.G. Baby

Products, supra, 40 A.D.2d at 367, Respondents defense that it acted in good faith, even if

believable, is irrelevant as to the question of illegality. Nor is it a defense that respondents

have satisfied customers. See, State v. Midland Equities of New York, Inc., 117 Misc.2d 489

(Sup. Ct. N.Y.Co. 1982); See also,People v. Empyre Inground Pools, Inc.,supra 227 A.D.2d at

732 (longevity in business does not mean GBL 349 is not applicable as to acts and practices

alleged). It would also be unbelievable should Mr. Cunningham allege he was ignorant of all

that violations shown in the States petition. It is clear that he procured the illegal acts for which

his employees were occasionally caught.

The well documented facts put before the Court by the State establish the repeated or

persistent fraud and illegality alleged in the petition. Respondents have not come forward with

admissible evidence which raises a triable issue of fact. The petition should be granted.

POINT III

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THE STATUTE OF LIMITATIONS DOES NOT LIMIT

THE EVIDENCE THAT MAY BE SUBMITTED AND,

CONTRARY TO RESPONDENTS ARGUMENT, IS

SIX YEARS UNDER EXECUTIVE LAW 63(12)

There is no such objection to admission of evidence on the grounds that it violates the

statute of limitations. One will not find the statute of limitations mentioned in Article 45 of the

CPLR. The only time the statute of limitations might be relevant is when a witness asserts his

right against self-incrimination or, alternatively, when a witnesss testimony can be compelled

because the statute of limitations against prosecution has expired. In this case, the States

evidence of repeated and persistent disregard for ECL 11-0533 and V & T Law 509-b since

2007, and possibly much earlier, establishes the causes of action under Executive Law 63(12).

The Court can weigh all of the evidence submitted and determine the appropriate remedy.

As to respondents argument that the statute of limitaions in this case is three years,

respondents are mistaken. The Court of Appeals has expressly held that proceedings pursuant to

Executive Law 63(12), whether for fraudulent or illegal conduct, are governed by the six year

residual statute of limitations in CPLR 213(1) applicable to equitable proceedings,1 and not the

three year statute of limitations under CPLR 214(2). State v. Cortelle, 38 N.Y.2d 83, 84, 88

(1975) (six year residual statute of limitations applies to 63(12) proceeding for repeated

fraudulent conduct); State v. Princess Prestige, 42 N.Y.2d 104, 107-08 (1977) (six year residual

statute of limitations applies to 63(12) proceeding for violations of the Door-to- Door Sales

Act, PPL Article 10-A). Accord, State v. County Bank of Rehoboth Beach, 45 A.D.3d 1136,

1138 (N.Y. 3d Dep't 2007) (six-year residual statute of limitations period applied to claims that

1 It is well settled that equitable causes of action are governed by the residual statute of limitations set forth inCPLR 213(1), which provides a six-year statute of limitations for an action for which no limitation is specificallyprescribed by law. Singleton v. City of New York, 632 F.2d 185, 190 (2d Cir. 1980);Buscarello v. Guglielmelli, 44Misc.2d 1041, 1042-43 (Sup. Ct. N.Y. Co. 1964). In fact, Cortelle expressly rejected the application of the three-year statute of limitations contained in CPLR 214(2) to actions under Executive Law 63(12) in favor of the six-year residual statute of limitations.

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respondents had engaged in illegal payday lending under Executive Law 63(12),

notwithstanding that the Attorney General had not alleged all of the elements to establish a

common-law fraud claim, including scienter and reliance);Morelli v. Weider Nutrition Group,

Inc., 275 A.D.2d 607, 608 (1st Dep't 2000) ([C]laims . . . brought pursuant to Executive Law

63(12) [are] governed by a six-year limitation period . . . .); State of New York v. Boyajian Law

Offices, 851 N.Y.S.2d 72 (Sup. Ct. N.Y. Co. 2007); cf. State v. Bronxville Glen I Assoc., 181

A.D.2d 516 (1st Dep't 1992) (Martin Act, upon which Executive Law 63(12) was modeled, has

six-year statute of limitations, even if it expande[ed] the definition of fraud so as to create new

liability in some instances.)

Thus, respondents completely misread Cortelle to require a common-law cause of action

in order for the six year residual statute of limitations to apply. The only other Executive Law

63(12) case they rely on, State v. Daicel Chemical Indus., Ltd., 840 N.Y.S.2d 8, 11-12 (N.Y.

App. Div. 1st Dep't 2007), fails to even cite Cortelle and instead wrongfully incorporates the

statute of limitations for private actions brought under GBL 349(h).2 Even if common law

fraud were required, the Attorney Generals Petition supports such a finding.

Accordingly, Petitioners request for injunctive and other equitable relief pursuant to

Executive Law 63(12) is subject to the six-year statute of limitations applicable to claims in

equity.

POINT IV

THE ATTORNEY GENERAL IS ENTITLED TO

2 Respondents also cite Gaidon v. Guardian Life Ins. Co. of Am, 96 N.Y.2d 201 (2001), which held that a three yearstatute of limitations applied to private actions brought under GBL 349(h). Even assuming that the statute oflimitation for a governmental enforcement action under GBL 349(b) is three years, this limits the recovery ofpenalties only.

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INJUNCTIVE RELIEF, AN ACCOUNTING,

RESTITUTION AND PENALTIES

A. Injunctive Relief

The courts injunctive powers under 63(12) are extremely broad. See, State of New

York v. Princess Prestige Co., Inc., supra, 42 N.Y.2d 104 (1977); State of New York v.

Management Transition Resources, Inc., supra, 115 Misc.2d 480 (Sup. Ct. N.Y. Co. 1982); State

v. Daro Chartours, Inc., supra, 72 A.D.2d 872 (3rd Dep't. 1979); State of New York v. Scottish-

American Association, supra, 52 A.D.2d 528 (1st Dep't. 1976), appeal dismissed, 39 N.Y.2d

1033 (1976); State of New York v. Midland Equities of New York, Inc.,supra117 Misc.2d 203

(Sup. Ct. N.Y. Co. 1982); and State v. Hotel Waldorf-Astoria Corporation, supra.

The Court should permanently enjoin respondents from engaging in the business of

offering guided rafting excursions on any part of the rivers in New York where licensed guides

are required. It would be totally inappropriate to treat this as a first offense and worthy of only a

temporary suspension of the business of offering guides for rafting on such rivers. The evidence

is compelling that turning respondents loose with an order that says no more than comply with

the licensing laws in the future, or which only temporarily suspends their operation, would

expose the public to a danger that is simply unacceptable. The mandate to provide licensed

guides has existed for many years and respondents have blithely ignored it.

Short of permanent ban and as an alternative, the Court could, as requested, permanently

enjoin respondents from engaging the particular illegal and fraudulent practices proven by the

State and from engaging in the business of offering white water rafting guide services in the

State of New York until a performance bond of at least $100,000 is filed with the Attorney

General by a surety or bonding company licensed and approved by the Superintendent of

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Insurance of the State of New York. The posting of such a bond should be sufficient incentive

for respondents to comply with any injunction this Court issues. The granting of a performance

bond is within the broad remedial injunctive powers of the Court. People v. Allied Marketing

Group, 220 A.D. 2d 170 (1st Dept. 1995) ( $500,000 bond ordered);People v. Helena VIP

Personal Introduction Service of New York, Inc., N.Y.L.J., 1/17/92, p.26 Col. 3 (Sup. Ct. N.Y.

Co.) affirmed199 A.D.2d 186 (1st Dept. 1993) ($500,000 bond ordered);People v. Empyre

Inground Pools, supra, 642 N.Y.S. 2d at 346 (3rd Dept. 1996) ($100,000 bond ordered); State v.

Hotel Waldorf-Astoria Corporation, supra, 67 Misc.2d 70 (Sup. Ct. N.Y. Co. 1971) ($100,000

bond ordered).

B. Restitution

Courts routinely award restitution to consumer victims in Executive Law 63(12), even

where all of the victims may not be identified at the time of the order. See, e.g., State v. General

Electric Co., supra, 302 A.D.2d at 316 (awarding restitution to all consumers who purchased

dishwashers as a result of respondents deceptive statements); State v. Allied Marketing Group,

supra, 220 A.D.2d 370 (awarding restitution to consumers injured by respondent fraudulent and

deceptive sweepstakes scam); State v. Helena VIP Personal Introductions Services, supra, 199

A.D.2d 186 (directing respondent to refund charges to all injured consumers); State v. Ford

Motor Co., supra, 136 A.D.2d at158 (awarding restitution to all consumers who paid an illegal

$100 deductible as part of respondents extended warranty); State v. Scottish-American

Association, supra, 52 A.D.2d at 528-529 (requiring respondent to make full restitution to known

and unknown consumers for unrendered services); State v. Midland Equities, supra, 117 Misc.2d

at 208 (ordering full restitution to all consumers defrauded by respondent's mortgage consulting

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firm); State v. Management Transition Resources, 115 Misc.2d at 492 (granting restitution to all

consumers injured by respondents employment agency).

The purpose of restitution is to restore the status quo and to return that which rightfully

belongs to the defrauded purchaser. Porter v. Warner Holding Co., 328 U.S. 395, 402 (1946);

Tull v. United States, 481 U.S. 412, 424 (1987). Since the primary aim of restitution is to restore

the purchaser to the status quo, the basic rule is that the purchaser is entitled to recover that

which he parted with, or, more specifically, that which the seller has received, including the

money which the purchaser has paid. 66 Am. Jur. 2d, Restitution and Implied Contracts 166;

Sohns v Beavis, 200 NY 268 (1911);Motcum, S.A. v Bank of Western Hemisphere, Ltd., 78

AD2d 602 (1st Dept 1980). A person obtains restitution when he is restored to the position he

formerly occupied either by the return of something which he formerly had or by the receipt of

its equivalent in money. (Restatement [1st] of Restitution, 1.)

The Courts equitable powers under Executive Law 63(12) to restore the status quo by

means of restitution for consumers who have been injured as a result of fraudulent or illegal

conduct are extremely broad. Executive Law 63(12) was amended in 1970 to provide for

restitution (ch. 44, L. 1970). The purpose of the amendment, as stated in the Governors

Memorandum, 1970 McKinneys Session Law 3074, was to strengthen the consumer protection

powers of the Attorney General by "clarifying his powers to obtain restitution for defrauded

consumers in [63(12)] proceedings." That memorandum further noted that the power granted the

Attorney General by the amendment "will provide a means to make the victims of past fraud

whole again." (Emphasis supplied.) The scope of the relief granted "is addressed to the sound

judicial discretion of the courts." State v. Princess Prestige Co., supra, 42 N.Y.2d at 108.

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Courts frequently order a restitution fund created and provide for the mechanics of

identification, notification and distribution. State v. Princess Prestige, supra, 42 N.Y.2d at 108;

State v. General Electric Co., supra, 302 A.D.2d at 316; State v. 21st Century Leisure Spa Intl.

Ltd., 153 Misc. 2d 938 (Sup. Ct. N.Y. Co. 1991); State v. Bevis Industries, Inc., 63 Misc. 2d

1088 (Sup. Ct. N.Y. Co. 1970); State v. Life Science Church, 113 Misc. 2d 952 (Sup. Ct. N.Y.

Co. 1982), appeal dismissed, 93 A.D.2d 774 (1st Dept 1983), lv denied, 61 N.Y.2d 604, cert

denied, 469 U.S. 822 (1984); State v. Midland Equities of New York, Inc., supra, 117 Misc. 2d at

208; State v. Hotel Waldorf Astoria Corp., 67 Misc. 2d 90 (Sup. Ct. N.Y. Co. 1971).

It is well settled that courts do not need to know the exact figures to be refunded in order

to award restitution to victims of consumer fraud. State v. Princess Prestige, 42 NY2d at 108;

State v. Allied Marketing Group, supra, 220 A.D.2d at 370; State v. Helena VIP Personal

Introductions Services, supra, 199 A.D.2d at 186; State v. Ford Motor Co.,supra, 136 A.D.2d at

158; State of New York v. Scottish American Association, supra, 52 A.D.2d at 528-29; State v.

Life Science Church, supra, 113 Misc.2d at 971; State v. Management Transition Resources,

supra, 115 Misc.2d at 492; State v. Midland Equities, supra, 117 Misc.2d at 209.

Proof of fraud, scienter or bad faith is not required for an award of restitution. State v.

Ford Motor Co., supra, 136 A.D.2d at 158; State v. Bull Inv. Group,supra 46 A.D.2d 25, 28 (3d

Dep't 1974), appeal denied, 35 N.Y.2d 647 (1975); State v. E.F.G. Baby Products, Inc., 40

A.D.2d 364 (3d Dep't 1973).

Every consumer who contracted for respondents services and who did not get a licensed

guide should get their money back, regardless of whether they completed the trip without

physical injury. They did not get the service for which they paid and respondents profited

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unconscionably in each such sale. The public needs to be notified of that right both directly and

through mass media notices since many consumers who contracted with respondents live outside

the area. The cost of such notification should be born by respondents and all who come forward

with bona fide claims requesting restitution for the failure to receive the services paid for should

get it.

C. Civil Penalties

GBL Article 22-A, 350-d provides for the assessment of a civil penalty of up to $5,000

for eachdeceptive act or false advertisement in violation of Article 22-A. Courts routinely

award penalties in civil enforcement cases brought by the Attorney General. See, e.g., State v.

Telehublink Corp,supra 301 A.D.2d 1006, 1008 (3rd Dept 2003); State v. Wilco Energy Corp.,

284 A.D.2d 469, 473 (2nd Dept 2001); State v. Allied Marketing Group, supra, 220 A.D.2d 370.

Since civil penalties are paid to the State, their purpose is to punish for unlawful conduct and

deter future violations, not to compensate the injured party. Meyers Bros. Parking Sys. v.

Sherman, 87 A.D.2d 562, 563 (1st Dept 1982 ) affirmed, 57 N.Y.2d 653 (1982);May Dept

Stores Co. v. State ex rel. Woodard, 863 P.2d 967 (Colo App 1993).

Courts have articulated three different approaches to measuring the number of violations

in cases in which false advertising has been disseminated to a vast audience, using one of the

following:

1. the number of individuals who received the false advertisement (U. S. v. ReadersDigest Association, Inc., 662 F.2d 955, 956 (3d Cir. 1981) (upholding $1,750,000penalty based on 17,000 misleading sweepstakes solicitations mailed);B.M.W. ofNorth America v. Gore, 517 U.S. 559 (1996); United States v. Wilson ChemicalCo., Inc., 1962 U.S. Dist. LEXIS 5522 (W.D. Pa. 1962), affd, 319 F.2d 133 (3d

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Cir. 1963); United States v. Golden Fifty Pharmaceutical Co., Inc., 421 F. Supp.1199, 1207 (N.D. Ill. 1976);People v. Superior Court (Jayhill Corp.), 9 Cal. 3d283 (1973));

2. the number of acts of publication that disseminated the advertisement (theappearance in one edition of a magazine or newspaper equals one violation)(United States v. J.B. Williams Co., Inc., 354 F. Supp. 521 (S.D.N.Y. 1973); MayDept Stores Co. v. State ex rel. Woodard, 863 P.2d 967; State of Wisconsin v.Menard, Inc., 121 Wis. 2d 199 (Wis. App. 1984); Williams North West ChryslerPlymouth, Inc., 87 Wash. 2d 298 (1976);People v. Superior Court of OrangeCounty (Olson), 96 Cal. App. 3d 181 (1979)), or

3. the number of individuals who received the false advertisement and who acted onit (May Dept Stores Co. v. State ex rel. Woodard, 863 P.2d 967;People v.Superior Court of Orange County (Olson), 96 Cal. App. 3d 181).

In this case, petitioner submits that the appropriate standard for determining the amount

of civil penalties respondents should pay for their continuous false and deceptive claims on their

web site is to treat each day the web site was up as a separate violation. The false and deceptive

claims of safety or the safest excursions was repeated daily so the Court has the discretion to

impose a substantial civil penalty that will appropriately punishe respondents and will deter

others from making similar false and deceptive claims. An alternative would be to base the

penalty on the number of consumers who were lured into purchasing guided rafting excursions

from respondents and, unbeknownst to them, purchased unlicensed rafting excursions. That

number is unknown, but can be calculated after an appropriate order from the Court requiring

respondents to account to the Attorney General for all customers sold trips in the past three

years and requiring respondents to notify the public through mass media announcements alerting

consumers to make their claims with the Attorney General. Respondents can be given the

opportunity to rebut any claim by proving that such consumer was actually guided by a licensed

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guide. This procedure is more cumbersome and much more time consuming, but using either

method will surely result in such a high number of violations that the theoretical penalty

available to the Court is astronomical. For that reason, and because the penalty is a matter of

discretion for the Court, the State submits that a penalty of $100,000 should be sufficient to

punish respondents for flouting the law so brazenly and should provide a strong deterrent for

similar businesses.

CONCLUSION

For the reasons set forth above, it is respectfully requested that the Court grant the States

petition and grant such other and further relief as the Court deems just and appropriate, including

issuance of an order permanently enjoining respondents from engaging in the business of

offering guided rafting, canoeing or kayaking excursions on rivers in New York where licensed

guides are required.

Dated: Poughkeepsie, NYFebruary 21, 2013

Respectfully submitted,

ERIC T. SCHNEIDERMANAttorney General of theState of New York

Attorney for Petitioner

By:___________________________G. NICHOLAS GARINAssistant Attorney General

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