1. Whenever the department shall believe from evidence satisfactory to it that any person has engaged in or is engaged in or is about to engage in any practice or transaction heretofore referred to as and declared to be an unlawful or a fraudulent practice, it may bring an action in the name and on behalf of the people of the state of New York against such person and any other person theretofore concerned in or in any way participating in such unlawful or fraudulent practice, to enjoin such person or persons from continuing such unlawful and fraudulent practice or engaging therein or doing any act or acts in furtherance thereof or, if the department should believe from such evidence that such person actually has or is engaged in any such unlawful or fraudulent practice, it may include in such action an application to enjoin permanently such person and such other person as may have been or may be concerned with or in any way participating in such unlawful or fraudulent practice, from selling or offering for sale within or from this state as franchisor, franchise sales agent, franchise salesman, or a principal thereof, any franchise offered or to be offered or sold, or from continuing any such practice. In said action an order or a judgment may be entered awarding the relief applied for or so much thereof as the court may deem proper. Upon a showing by the department in its application for a permanent injunction hereunder that the defendant named in the action or an officer thereof has refused to be sworn or to be examined or to answer a material question or to produce a book or paper relevant to the inquiry when duly ordered to do so by the officer or judge duly conducting an inquiry into the subject matter forming the basis of the application for such injunction, such refusal shall be prima facie proof that such defendant is or has engaged in an unlawful or fraudulent practice as set forth in such application and a permanent injunction may issue from the supreme court without further showing by the department. In an action brought under this section the court may award to the plaintiff a sum not in excess of ten thousand dollars for each defendant as an additional allowance.

Terms Used In N.Y. General Business Law 689

  • Adjourn: A motion to adjourn a legislative chamber or a committee, if passed, ends that day's session.
  • Answer: The formal written statement by a defendant responding to a civil complaint and setting forth the grounds for defense.
  • Continuance: Putting off of a hearing ot trial until a later time.
  • Corporation: A legal entity owned by the holders of shares of stock that have been issued, and that can own, receive, and transfer property, and carry on business in its own name.
  • Defendant: In a civil suit, the person complained against; in a criminal case, the person accused of the crime.
  • Equitable: Pertaining to civil suits in "equity" rather than in "law." In English legal history, the courts of "law" could order the payment of damages and could afford no other remedy. See damages. A separate court of "equity" could order someone to do something or to cease to do something. See, e.g., injunction. In American jurisprudence, the federal courts have both legal and equitable power, but the distinction is still an important one. For example, a trial by jury is normally available in "law" cases but not in "equity" cases. Source: U.S. Courts
  • Evidence: Information presented in testimony or in documents that is used to persuade the fact finder (judge or jury) to decide the case for one side or the other.
  • Felony: A crime carrying a penalty of more than a year in prison.
  • Injunction: An order of the court prohibiting (or compelling) the performance of a specific act to prevent irreparable damage or injury.
  • Jurisdiction: (1) The legal authority of a court to hear and decide a case. Concurrent jurisdiction exists when two courts have simultaneous responsibility for the same case. (2) The geographic area over which the court has authority to decide cases.
  • Oath: A promise to tell the truth.
  • Plaintiff: The person who files the complaint in a civil lawsuit.
  • Subpoena: A command to a witness to appear and give testimony.
  • Testify: Answer questions in court.
  • Testimony: Evidence presented orally by witnesses during trials or before grand juries.

2. Upon a showing by the department, in an application for an injunction, that any person engaged in the offer or sale of a franchise in this state has ever been convicted by a court of competent jurisdiction in any state or county of any felony or of any other criminal offense by any such court, whether or not constituting a felony, involving franchises, securities or subdivided land, the supreme court after a hearing may issue a permanent injunction awarding the relief applied for, or so much thereof as the court may deem proper, against such person shown to have been so convicted, in the form and manner provided for in subdivision one of this section in the case of one who actually has or is engaged in any unlawful or fraudulent practice.

3. If a franchise is offered or sold within the state of New York by a non-resident person and such non-resident person has not filed pursuant to laws heretofore or hereafter existing the designation of a person upon whom process against him or it may be served or the designation of the secretary of state as such person, pursuant to section thirteen hundred four of the business corporation law or other laws heretofore or hereafter existing, or in lieu thereof, an instrument in writing duly acknowledged and filed in the office of the secretary of state designating the secretary of state as the person upon whom may be served any subpoena, subpoena duces tecum or other process directed to such non-resident person and issued in any investigation, examination or proceeding pending or about to be instituted under and pursuant to the provisions of this article, the department may serve a notice upon such

non-resident person by mailing the same in a securely sealed postpaid wrapper addressed to such non-resident person at its or his last known place of business or residence, and may in such notice require that such non-resident person furnish a written statement under oath, as required in said notice, giving the information therein specified relating to the franchise offered, to be offered or sold in the state of New York by such non-resident person or, in the alternative, that such non-resident person shall appear within a reasonable time from the date of mailing such notice at a designated place within this state for examination and shall produce at the time and place of such examination such books and papers of such non-resident person as may be designated in such notice.

If such non-resident person shall fail to appear pursuant thereto or to produce the books and papers required thereby to be produced, or shall refuse to submit to examination or to answer any proper question, the proof of such failure or refusal shall constitute prima facie evidence that the offer or sale of a franchise by such non-resident person constitutes a fraudulent practice and may in the discretion of the court be treated as a sufficient basis for a permanent injunction against the continuance of such fraudulent practice.

4. In any action brought by the department as provided in this article, the court at any stage of the proceedings may appoint a receiver of any and all property derived by the defendant or defendants or any of them by means of any such unlawful or fraudulent practice, including also all property with which such property has been commingled if such property cannot be identified in kind because of such commingling, together with any or all books of account and papers relating to the same. The judgment entered in such action may provide that such receiver shall take title to any or all such property and books of account and papers relating to the same and liquidate such property or any part thereof for the benefit of all persons intervening in the said action and establishing an interest in such property. The judgment may also provide that all such property, the title to or interest in which has not been established in such action by intervenors or otherwise by due process to be in a person or persons other than defendant or defendants, shall be returned to the defendant or defendants as their interest may appear. Such receiver shall be subject to all the duties of receivers in civil actions as far as practicable except that such provisions relating to commissions or compensation of receivers shall not be applicable to receivers appointed pursuant to this section, but such commissions or compensations shall be fixed by the court in any amount which it may determine to be just and equitable. In any action brought by the department as provided in this article the court may grant such other and further relief as may be proper.

5. Whenever the department has determined to commence an action under this article, it may present to any justice of the supreme court, before beginning such action, an application in writing for an order directing the person or persons mentioned in the application to appear before the justice of the supreme court or referee designated in such order and answer such questions as may be put to them or to any of them, or to produce such papers, documents and books concerning the alleged unlawful or fraudulent practices to which the action which the department has determined to bring relates, and it shall be the duty of the justice of the supreme court to whom such application for the order is made to grant such application. The application for such order may simply show upon information and belief that the testimony of such person or persons is material and necessary. The provisions of the civil practice law and rules, relating to an application for an order for the examination of witnesses before the commencement of an action and the method of

proceeding on such examination, shall not apply except as herein prescribed. The order shall be granted by the justice of the supreme court to whom the application has been made with such preliminary injunction or stay as may appear to such justice to be proper and expedient and shall specify the time when and place where the witnesses are required to appear. The justice or referee may adjourn such examination from time to time and witnesses must attend accordingly. The testimony of each witness must be subscribed by him and must be filed in the office of the clerk of the county in which such order for examination is filed.

6. The order for such examination must be signed by the justice making it, and service of a copy thereof with an endorsement by the department to the effect that the person named therein is required to appear and be examined at the time and place before the justice and referee specified in such endorsement, shall be sufficient notice for the attendance of witnesses. Such endorsement may contain a clause requiring such person to produce at such examination all books, papers and documents in his possession or under his control relating to the subject of such examination.

The order shall be served upon the person named in the endorsement aforesaid by delivering to and leaving with it or him a certified copy thereof, endorsed as above provided, subject to the payment of witness fees and mileage as and when provided to be paid by paragraph (b) of subdivision four of section six hundred eighty-eight of this article in connection with attendance pursuant to subpoenas authorized to be issued under said section. Service of such an order may also be served under section six hundred eighty-six of this article in cases falling thereunder.

7. The referee appointed as provided in this article possesses all the powers and is subject to all the duties of a referee appointed in a civil action, so far as practicable, and may punish for contempt a witness duly served with the papers as prescribed in this article for non-attendance or refusal to be sworn or to testify or to produce books, papers and documents according to the direction of the endorsement aforesaid in the same manner and to the same extent as a referee to hear, try and determine an issue of fact or law.

8. Any person against whom a permanent injunction has been granted under the provisions of this article may apply to the supreme court at any time upon at least sixty days notice to the department for an order dissolving such injunction or modifying the same upon such terms and conditions as the court deems necessary or desirable. Such application for dissolution or modification of such injunction shall contain a recitation of the facts and circumstances which caused the granting of the injunction; the occupation and employment of the person making the application and his financial remuneration therefrom since the time the injunction was granted; his net worth at the time of the application and the source thereof; together with any other facts bearing upon the reasonableness of the application and the character of the applicant as may enable the court to issue an order that will properly dispose of such application in the interest of justice. A copy of such application together with copies of any other papers in support thereof shall be served upon the department at least sixty days prior to the return date thereof. In addition thereto the applicant shall file with the court a good and sufficient surety bond in the sum of one thousand dollars guaranteeing that he will pay all costs and expenses of an investigation by the department of such applicant and the statements and claims alleged in the application together with any further investigation which the department may deem necessary or desirable to determine whether it should consent to the application, oppose the same, or make such other

recommendations to the court as in its opinion are desirable to be included in any modification of such injunction. Should it appear in the course of such investigation by the department that said sum is not sufficient, the department may apply to the court by usual notice of motion or order to show cause for an increase in the amount of security or further surety bond necessary to fully pay all of the costs of the investigation and the court may require such further bond as the situation requires to fully pay the costs and expenses of the investigation. Upon the completion of such investigation, the department may file an answer to such application setting forth such facts as are pertinent to the determination by the court of the matter before it and whether said injunction should be dissolved, modified or continued in whole or in part and what conditions, if any, shall be attached to any dissolution or modification of said injunction. After a hearing upon such application and after any further investigation, proof or testimony which the court may desire has been offered, or at any adjourned dates thereof, the court may make a final order dissolving the permanent injunction or modifying the same upon such terms and conditions as in its opinion are just and desirable, or in its discretion may deny the application. Such order shall contain a direction that the applicant pay to the department the costs and expenses of the investigation in connection with the proceeding, and any judgment entered thereon may be enforced directly against the surety on the bond. The court shall grant no temporary or other relief from the injunction in force pending a final determination of such application. No application under this subdivision shall be entertained:

(a) in any case where the applicant has been convicted of a felony or a crime that would be a felony if committed in the state of New York since the issuance of the injunction, nor

(b) in any case where the injunction was granted incident to a felony, or the applicant has been convicted at any time of any felony involving franchises which are the subject matter of this article. Nor shall anything contained in this subdivision be construed to deny to or interfere with the power of the department to bring any other action or proceeding, civil or criminal, against the applicant at any time.

9. The provisions of the civil practice law and rules shall apply to all actions brought under this article except as herein otherwise provided.