## Facts

- Borrowers obtained a $175,000 loan from a bank to purchase a cooperative apartment, secured by their co-op shares.
- The promissory note permitted full or partial prepayment “without paying any prepayment charge.”
- When borrowers sought to refinance with a different bank using the same collateral, the original bank would not release the shares until paid, and the new bank would not fund until it received the shares.
- The original bank offered to coordinate a simultaneous exchange of funds and collateral, conditioned on payment of a $275 “attorney’s fee.”
- Borrowers paid the $275 under protest to close the refinancing and later alleged the fee was a disguised prepayment penalty and was misleadingly labeled because the person performing the exchange was allegedly not an attorney.
- The trial court allowed a New York General Business Law (GBL) § 349 claim to proceed; the Appellate Division dismissed for lack of justifiable reliance.

## Issues

1. Whether charging a $275 “attorney’s fee” to coordinate a refinancing closing constituted a materially deceptive act or practice under GBL § 349.
2. Whether a plaintiff asserting a GBL § 349 claim must prove justifiable reliance, or instead only that the materially deceptive act caused the injury.

## Decision

- The Court of Appeals affirmed dismissal of the GBL § 349 claim.
- The court held justifiable reliance is not an element of a § 349 claim, but the plaintiff must show the defendant’s materially misleading act caused the injury.
- The $275 charge was treated as a fee for a special service facilitating a simultaneous exchange, not a “prepayment charge” barred by the note.
- Labeling the fee as an “attorney’s fee,” even assuming the work was performed by a non-attorney, was not shown on these allegations to be materially misleading within § 349.

## Legal Principles

- A GBL § 349 private claim requires: (1) consumer-oriented conduct, (2) materially misleading conduct, and (3) injury caused by the deceptive act.
- GBL § 349 does not require proof of justifiable reliance in the manner of common-law fraud.
- Even without a reliance requirement, plaintiffs must plead and prove a causal connection between a materially deceptive act and actual injury.
- Contract language permitting prepayment without a “prepayment charge” does not necessarily bar separate fees for ancillary services tied to a refinancing transaction, absent a materially misleading representation.

## Conclusion

The court clarified that GBL § 349 does not impose a justifiable-reliance element, but still requires injury caused by materially misleading, consumer-oriented conduct; because the challenged $275 fee was treated as a charge for a refinancing-related service rather than a prepayment penalty, the § 349 claim was properly dismissed.


Stutman v. Chem. Bank, 95 N.Y.2d 24 (2000)