Bеcause we conclude that the treble damages provision in General Business Law § 340 serves as a penalty for purposes of CPLR 901 (b), such damages are not recoverable in a class action. We therefore affirm the order of the Appellate Division so holding.
Defendants Crompton Corporation, Uniroyal Chemical Company, Inc., Uniroyal Chemical Company, Ltd., Flexsys NV, Flexsys America LI] Bayer AG, Bayer Corporation, Rhein Chemie Rheinau GmbH and Rhein Chemie Corporation produce and sell rubber-processing chemicals that improve the durability, color control and heat resistance of rubber products, including tires, belts, hoses and footwear. 1 Defendants do not manufacture or sell these end products.
In 2002, plaintiff Paul Sperry commenced this purpоrted class action against defendants seeking damages on behalf of himself and all other consumers “who purchased tires, other than for resale, that were manufactured using rubber-processing chemicals sold by defendants since 1994. ” 2 Sperry alleged that defendants entered into a price-fixing agreement, overcharging tire manufacturers for the chemicals, and that the overcharges trickled down the distribution chain to consumers.
The complaint set forth three causes of action. First, Sperry claimed, that defendants violated New York’s antitrust statute (General Business Law § 340 et seq.) — commonly known as the Donnelly Act — by engaging in an arrangement that restrained “[Competition or the free exercise of any activity in the conduct of any business, trade or commerce” (General Business Law § 340 [1]). Relying on the indirect purchaser provision of the Donnelly Act (General Business Law § 340 [6]), Sperry sought “three-fold the actual damages,” costs and attorneys’ fees pursuant to General Business Law § 340 (5). Second, Sperry asserted that defendants’ arrangement constituted a deceptivе practice in violation of General Business Law § 349. Third, Sperry requested recovery on an unjust enrichment theory. Defendants moved to dismiss the complaint under CPLR 3211.
Relying on our decisions in
Cox v Lykes Bros.
(
General Business Law § 340 (5) provides that a successful antitrust plaintiff “shall recover three-fold the actual damages sustained thereby, as well as costs not exceeding ten thousand dollars, and reasonable attorneys’ fees.” The Donnelly Act, however, does not address private class actions. The main issue here is whether treble damages relief is available to class action plaintiffs or is barred by the application of CPLR 901 (b).
The Legislature enacted CPLR article 9 (§§ 901-909) in 1975 to replace CPLR 1005, the former class action statute. The prior class action provision, which remained largely unchanged through its various incarnations dating back to the Field Code of Procedure
(see
L 1849, ch 438, § 119), had been judicially restricted over the years and was subject to inconsistent results
(see generally Moore v Metropolitan Life Ins. Co.,
While the Legislature considered the Judicial Conference report, various groups advocated for the addition of a provision that would prohibit class action plaintiffs from being awarded a statutorily-created penalty or minimum measure of recovery, except when expressly authorized in the pertinent statute (see Legislation Report No. 15 of Banking Law Comm, Business Law Comm and Comm on CPLR of NY St Bar Assn. Bill Jacket, L 1975, ch 207; Legislation Report No. 1 of Banking Law Comm of NY St Bar Assn. Bill Jacket, L 1975, ch 207; Mem in Opposition of Empire St Chamber of Commerce, Feb. 14, 1975, Bill Jacket, L 1975, ch 207). These groups feared that recoveries beyond actual damages could lead to excessively harsh results, particularly where large numbers of plaintiffs were involved. They also argued that there was no need to permit class actions in order to encourage litigation by aggregating damages when statutory penalties and minimum measures of recovery provided an aggrieved party with a sufficient economic incentive to pursue a clаim. Responding to these concerns, the Legislature amended the legislation to include a new subdivision — CPLR 901 (b), which reads: “Unless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of reсovery created or imposed by statute may not be maintained as a class action.” Assemblyman Stanley Fink, the bill’s sponsor, explained the purpose of section 901 (b):
“The bill, however, precludes a class action based on a statute creating or imposing a penalty or minimum measure of recovery unless the specific statute allows fоr a class action. These penalties or ‘minimum damages’ are provided as a means of encouraging suits where the amounts involved might otherwise be too small. Where a class action is brought, this additional encouragement is not necessary. A statutory class action for actual damages would still be permissible” (Sponsor’s Mem, Bill Jacket, L 1975, ch 207).
Henсe, the final bill, which was passed by the Legislature and approved by the Governor on June 17, 1975, was the result of a compromise among competing interests.
“The provision for the recovery of treble damages in civil actions will not only serve as an additional deterrent to violations, and increase recoveries by public agencies, but will also eliminate the additional expense and cumbersome duplication of effort involved in bringing separate actions under the federal antitrust laws after a violation of the Donnelly Antitrust Act has been established (for example, by a criminal conviction)” (id.). 5
The legislation amending section 340 (5) and section 341 was enacted on July 1, 1975.
Although we have never construed the term “рenalty” within the meaning of CPLR 901 (b), nor have we had occasion to characterize the treble damages provision of the Donnelly Act, we have articulated various rules regarding the identification of penalties in other contexts. For example, this Court has stated that, where a statute expressly denominates an enhanced dam
We have also indicated that the determination of whether a certain provision constitutes a penalty may vary depending on the context. In
Cox,
then-Judge Cardozo wrote: “We are to remember that the same provision may be penal as to the offendеr and remedial as to the sufferer. The nature of the problem will determine whether we are to take one viewpoint or the other”
(Cox,
Judge Cardozo’s observations in Cox are particularly relevant to this case. It is evident that by including the penalty exception in CPLR 901 (b), the Legislature declined to make class actions availаble where individual plaintiffs were afforded sufficient economic encouragement to institute actions (through statutory provisions awarding something beyond or unrelated to actual damages), unless a statute expressly authorized the option of class action status. This makes sense, given that class actions are designed in large part to incentivizе plaintiffs to sue when the economic benefit would otherwise be too small, particularly when taking into account the court costs and attorneys’ fees typically incurred. Therefore, the term “penalty,” as used for purposes of the class action scheme, has broader application than that given in Sicolo for statute of limitations purposes.
It is notable that the Legislature added the treble damages provision to the Donnelly Act shortly after having adopted CPLR 901 (b). Clearly, the Legislature was aware of the requirement of making express provision for a class action when drafting penalty statutes, and could have included such authorization in General Business Law § 340. 7 In sum, it lies with the Legislature to decide whether class action suits are an appropriate vehicle for the award of antitrust treble damаges. Indeed, the Legislature has contemplated adding such authorization on a number of occasions. 8
We are not persuaded that the outcome of this case is controlled by statements in United States Supreme Court decisions
As an initial matter, none of these United States Supreme Court decisions considered whether treble damages should be considered a “penalty” for purposes of a particular statute. More importantly, Fеderal Rules of Civil Procedure rule 23, the federal class action provision, does not contain a limitation similar to that found in CPLR 901 (b). Since this appeal requires us to view General Business Law § 340 (5)’s treble damages provision in light of the limitation in CPLR 901 (b), we are presented with a state law question that federal precedent is not very helpful in resolving.
Finally, we decline tо reach the issue of whether Sperry may maintain a class action under the Donnelly Act by forgoing treble damages in favor of actual damages. This issue is not properly before us because Sperry has consistently sought treble damages throughout this litigation and has not previously attempted to waive them to pursue only actual damages.
Turning to the unjust еnrichment cause of action, Sperry argues that the courts below erred in dismissing this cause of action on the basis that no privity existed between Sperry and defendants. It is well settled that “[t]he essential inquiry in any action for unjust enrichment or restitution is whether it is against equity and good conscience to permit the defendant to retain what is sought to be recovered”
(Paramount Film Distrib. Corp. v State of New York,
Accordingly, the order of the Appellate Division should be affirmed, with costs.
Chief Judge Kaye and Judges Ciparick, Read, Smith and Pigott concur; Judge Jоnes taking no part.
Order affirmed, with costs.
Notes
. Uniroyal Chemical Company, Inc. and Uniroyal Chemical Company, Ltd. are wholly owned subsidiaries of Crompton Corporation, now known as Chemtura Corporation. Bayer AG and its associated companies, Bayer Corporation, Rhein Chemie Rheinau GmbH and Rhein Chemie Corporation are no longer parties to this appеal.
. The lawsuit has not yet been certified as a class action under CPLR article 9.
. Sperry no longer seeks recovery under General Business Law § 349.
. Before the 1975 amendment, General Business Law § 341 provided that an individual convicted of violating the Donnelly Act was guilty of a misdemeanor, punishable by a fine not exceeding $20,000 and/or imprisonment for not longer than оne year. A corporation was punishable by a fine of not more than $50,000. Under the amendment, convicted individuals would be guilty of a class E felony and punished by a fine not exceeding $100,000 and/or imprisonment for up to four years. A corporation would face a fine of up to $1 million. While these fines are clearly penalties, they are not the types of penalties contemplated by CPLR 901 (b) because they are not recoverable in a private civil action.
. Federal antitrust provisions, since their inception in 1890, have always provided for the recovery of threefold damages in civil lawsuits (see Clayton Act § 4 [15 USC § 15];
see also Brunswick Corp. v Pueblo Bowl-O-Mat, Inc.,
. Former Civil Practice Act § 49 (3) provided a three-year statute of limitations for penalties or forfeitures.
. Although General Business Law § 342-b contemplates that the Attorney General may bring class actions on behalf of governmental entities, General Business Law § 340, in contrast, makes no reference to class actions for private litigants.
. In 1973 аnd 1974, bills died in committee that would have permitted class actions for the recovery of treble damages (see 1973 NY Senate-Assembly Bill S 3544, A 4832; 1974 NY Senate-Assembly S 3544, A 4832). Similarly, in 1975, while the Legislature was considering the treble damages bill that was eventually enacted, a separate proposal (1975 NY Assembly Bill A 1215) would have expressly permitted class actions. More recently, bills to amеnd the Donnelly Act to create a class action provision in General Business Law § 340 (7) have been considered a number of times (see 2002 NY Assembly Bill A 11124; 2003 NY Assembly Bill A 5158; 2005 NY Assembly Bill A 663). The same proposal is currently pending (see 2007 NY Assembly Bill A 396). Under the proposed amendment, General Business Law § 340 (7) would provide: “Any damages recoverable pursuant to this section may be recovered in any action which a court may authorize to be brought as a class action pursuant to article nine of the civil practice law and rules.”