§ 689 — Action by the department of law

§ 689. Action by the department of law. 1. Whenever the department\nshall believe from evidence satisfactory to it that any person has\nengaged in or is engaged in or is about to engage in any practice or\ntransaction heretofore referred to as and declared to be an unlawful or\na fraudulent practice, it may bring an action in the name and on behalf\nof the people of the state of New York against such person and any other\nperson theretofore concerned in or in any way participating in such\nunlawful or fraudulent practice, to enjoin such person or persons from\ncontinuing such unlawful and fraudulent practice or engaging therein or\ndoing any act or acts in furtherance thereof or, if the department\nshould believe from such evidence that such person actually has or is\nengaged in any such unlawful or fraudulent practice, it may include in\nsuch action an application to enjoin permanently such person and such\nother person as may have been or may be concerned with or in any way\nparticipating in such unlawful or fraudulent practice, from selling or\noffering for sale within or from this state as franchisor, franchise\nsales agent, franchise salesman, or a principal thereof, any franchise\noffered or to be offered or sold, or from continuing any such practice.\nIn said action an order or a judgment may be entered awarding the relief\napplied for or so much thereof as the court may deem proper. Upon a\nshowing by the department in its application for a permanent injunction\nhereunder that the defendant named in the action or an officer thereof\nhas refused to be sworn or to be examined or to answer a material\nquestion or to produce a book or paper relevant to the inquiry when duly\nordered to do so by the officer or judge duly conducting an inquiry into\nthe subject matter forming the basis of the application for such\ninjunction, such refusal shall be prima facie proof that such defendant\nis or has engaged in an unlawful or fraudulent practice as set forth in\nsuch application and a permanent injunction may issue from the supreme\ncourt without further showing by the department. In an action brought\nunder this section the court may award to the plaintiff a sum not in\nexcess of ten thousand dollars for each defendant as an additional\nallowance.\n 2. Upon a showing by the department, in an application for an\ninjunction, that any person engaged in the offer or sale of a franchise\nin this state has ever been convicted by a court of competent\njurisdiction in any state or county of any felony or of any other\ncriminal offense by any such court, whether or not constituting a\nfelony, involving franchises, securities or subdivided land, the supreme\ncourt after a hearing may issue a permanent injunction awarding the\nrelief applied for, or so much thereof as the court may deem proper,\nagainst such person shown to have been so convicted, in the form and\nmanner provided for in subdivision one of this section in the case of\none who actually has or is engaged in any unlawful or fraudulent\npractice.\n 3. If a franchise is offered or sold within the state of New York by a\nnon-resident person and such non-resident person has not filed pursuant\nto laws heretofore or hereafter existing the designation of a person\nupon whom process against him or it may be served or the designation of\nthe secretary of state as such person, pursuant to section thirteen\nhundred four of the business corporation law or other laws heretofore or\nhereafter existing, or in lieu thereof, an instrument in writing duly\nacknowledged and filed in the office of the secretary of state\ndesignating the secretary of state as the person upon whom may be served\nany subpoena, subpoena duces tecum or other process directed to such\nnon-resident person and issued in any investigation, examination or\nproceeding pending or about to be instituted under and pursuant to the\nprovisions of this article, the department may serve a notice upon such\nnon-resident person by mailing the same in a securely sealed postpaid\nwrapper addressed to such non-resident person at its or his last known\nplace of business or residence, and may in such notice require that such\nnon-resident person furnish a written statement under oath, as required\nin said notice, giving the information therein specified relating to the\nfranchise offered, to be offered or sold in the state of New York by\nsuch non-resident person or, in the alternative, that such non-resident\nperson shall appear within a reasonable time from the date of mailing\nsuch notice at a designated place within this state for examination and\nshall produce at the time and place of such examination such books and\npapers of such non-resident person as may be designated in such notice.\n If such non-resident person shall fail to appear pursuant thereto or\nto produce the books and papers required thereby to be produced, or\nshall refuse to submit to examination or to answer any proper question,\nthe proof of such failure or refusal shall constitute prima facie\nevidence that the offer or sale of a franchise by such non-resident\nperson constitutes a fraudulent practice and may in the discretion of\nthe court be treated as a sufficient basis for a permanent injunction\nagainst the continuance of such fraudulent practice.\n 4. In any action brought by the department as provided in this\narticle, the court at any stage of the proceedings may appoint a\nreceiver of any and all property derived by the defendant or defendants\nor any of them by means of any such unlawful or fraudulent practice,\nincluding also all property with which such property has been commingled\nif such property cannot be identified in kind because of such\ncommingling, together with any or all books of account and papers\nrelating to the same. The judgment entered in such action may provide\nthat such receiver shall take title to any or all such property and\nbooks of account and papers relating to the same and liquidate such\nproperty or any part thereof for the benefit of all persons intervening\nin the said action and establishing an interest in such property. The\njudgment may also provide that all such property, the title to or\ninterest in which has not been established in such action by intervenors\nor otherwise by due process to be in a person or persons other than\ndefendant or defendants, shall be returned to the defendant or\ndefendants as their interest may appear. Such receiver shall be subject\nto all the duties of receivers in civil actions as far as practicable\nexcept that such provisions relating to commissions or compensation of\nreceivers shall not be applicable to receivers appointed pursuant to\nthis section, but such commissions or compensations shall be fixed by\nthe court in any amount which it may determine to be just and equitable.\nIn any action brought by the department as provided in this article the\ncourt may grant such other and further relief as may be proper.\n 5. Whenever the department has determined to commence an action under\nthis article, it may present to any justice of the supreme court, before\nbeginning such action, an application in writing for an order directing\nthe person or persons mentioned in the application to appear before the\njustice of the supreme court or referee designated in such order and\nanswer such questions as may be put to them or to any of them, or to\nproduce such papers, documents and books concerning the alleged unlawful\nor fraudulent practices to which the action which the department has\ndetermined to bring relates, and it shall be the duty of the justice of\nthe supreme court to whom such application for the order is made to\ngrant such application. The application for such order may simply show\nupon information and belief that the testimony of such person or persons\nis material and necessary. The provisions of the civil practice law and\nrules, relating to an application for an order for the examination of\nwitnesses before the commencement of an action and the method of\nproceeding on such examination, shall not apply except as herein\nprescribed. The order shall be granted by the justice of the supreme\ncourt to whom the application has been made with such preliminary\ninjunction or stay as may appear to such justice to be proper and\nexpedient and shall specify the time when and place where the witnesses\nare required to appear. The justice or referee may adjourn such\nexamination from time to time and witnesses must attend accordingly. The\ntestimony of each witness must be subscribed by him and must be filed in\nthe office of the clerk of the county in which such order for\nexamination is filed.\n 6. The order for such examination must be signed by the justice making\nit, and service of a copy thereof with an endorsement by the department\nto the effect that the person named therein is required to appear and be\nexamined at the time and place before the justice and referee specified\nin such endorsement, shall be sufficient notice for the attendance of\nwitnesses. Such endorsement may contain a clause requiring such person\nto produce at such examination all books, papers and documents in his\npossession or under his control relating to the subject of such\nexamination. The order shall be served upon the person named in the\nendorsement aforesaid by delivering to and leaving with it or him a\ncertified copy thereof, endorsed as above provided, subject to the\npayment of witness fees and mileage as and when provided to be paid by\nparagraph (b) of subdivision four of section six hundred eighty-eight of\nthis article in connection with attendance pursuant to subpoenas\nauthorized to be issued under said section. Service of such an order may\nalso be served under section six hundred eighty-six of this article in\ncases falling thereunder.\n 7. The referee appointed as provided in this article possesses all the\npowers and is subject to all the duties of a referee appointed in a\ncivil action, so far as practicable, and may punish for contempt a\nwitness duly served with the papers as prescribed in this article for\nnon-attendance or refusal to be sworn or to testify or to produce books,\npapers and documents according to the direction of the endorsement\naforesaid in the same manner and to the same extent as a referee to\nhear, try and determine an issue of fact or law.\n 8. Any person against whom a permanent injunction has been granted\nunder the provisions of this article may apply to the supreme court at\nany time upon at least sixty days notice to the department for an order\ndissolving such injunction or modifying the same upon such terms and\nconditions as the court deems necessary or desirable. Such application\nfor dissolution or modification of such injunction shall contain a\nrecitation of the facts and circumstances which caused the granting of\nthe injunction; the occupation and employment of the person making the\napplication and his financial remuneration therefrom since the time the\ninjunction was granted; his net worth at the time of the application and\nthe source thereof; together with any other facts bearing upon the\nreasonableness of the application and the character of the applicant as\nmay enable the court to issue an order that will properly dispose of\nsuch application in the interest of justice. A copy of such application\ntogether with copies of any other papers in support thereof shall be\nserved upon the department at least sixty days prior to the return date\nthereof. In addition thereto the applicant shall file with the court a\ngood and sufficient surety bond in the sum of one thousand dollars\nguaranteeing that he will pay all costs and expenses of an investigation\nby the department of such applicant and the statements and claims\nalleged in the application together with any further investigation which\nthe department may deem necessary or desirable to determine whether it\nshould consent to the application, oppose the same, or make such other\nrecommendations to the court as in its opinion are desirable to be\nincluded in any modification of such injunction. Should it appear in the\ncourse of such investigation by the department that said sum is not\nsufficient, the department may apply to the court by usual notice of\nmotion or order to show cause for an increase in the amount of security\nor further surety bond necessary to fully pay all of the costs of the\ninvestigation and the court may require such further bond as the\nsituation requires to fully pay the costs and expenses of the\ninvestigation. Upon the completion of such investigation, the department\nmay file an answer to such application setting forth such facts as are\npertinent to the determination by the court of the matter before it and\nwhether said injunction should be dissolved, modified or continued in\nwhole or in part and what conditions, if any, shall be attached to any\ndissolution or modification of said injunction. After a hearing upon\nsuch application and after any further investigation, proof or testimony\nwhich the court may desire has been offered, or at any adjourned dates\nthereof, the court may make a final order dissolving the permanent\ninjunction or modifying the same upon such terms and conditions as in\nits opinion are just and desirable, or in its discretion may deny the\napplication. Such order shall contain a direction that the applicant pay\nto the department the costs and expenses of the investigation in\nconnection with the proceeding, and any judgment entered thereon may be\nenforced directly against the surety on the bond. The court shall grant\nno temporary or other relief from the injunction in force pending a\nfinal determination of such application. No application under this\nsubdivision shall be entertained:\n (a) in any case where the applicant has been convicted of a felony or\na crime that would be a felony if committed in the state of New York\nsince the issuance of the injunction, nor\n (b) in any case where the injunction was granted incident to a felony,\nor the applicant has been convicted at any time of any felony involving\nfranchises which are the subject matter of this article. Nor shall\nanything contained in this subdivision be construed to deny to or\ninterfere with the power of the department to bring any other action or\nproceeding, civil or criminal, against the applicant at any time.\n 9. The provisions of the civil practice law and rules shall apply to\nall actions brought under this article except as herein otherwise\nprovided.\n