People v. Bestline Products, Inc.

Lane, J. The Attorney-General instituted a special proceed [18] ing pursuant to subdivision 12 of section 63 of the Executive Law, seeking to enjoin Bestline Products, Inc. and Bestline, Inc. (hereinafter referred to collectively as Bestline) from commission of deceptive acts and practices in the conduct of their business and further seeking restitution on behalf of those who invested with the respondents. Bestline is involved in the marketing and selling of its cleaning products for home use. The sales force personnel recruited by Bestline were classified as local, direct, or general distributors and earned commissions based on the volume of products sold. Preliminary to becoming a distributor, a person would be solicited to attend an "opportunity meeting” usually held in a hotel or motel. During the meeting, employees of Bestline or distributors of its products would laud the products and distributorship opportunities. The atmosphere was made conducive to recruiting new personnel by public announcement and delivery of large bonus checks. The speakers would iterate that large sums of money would be earned by local distributors and even greater sums could be earned by building an organization of direct distributors and becoming a general distributor. Of course, a concomitantly larger investment would then be needed. The misrepresentations of Bestline alleged in the petition of the Attorney-General include overstatements of potential profits, overstatements of salability of Bestline products and of customer receptivity, and the minimal training and effort required to reap a return of fantastically large sums of money. The alleged misrepresentations, based on allegedly unfounded opinion, are printed in the recruiting pamphlets of Bestline, which pamphlets also contain a disclaimer of responsibility for any misrepresentations. Refund and cancellation provisions inserted in the contract were in most cases illusory. The Attorney-General, after receipt of both oral and written complaints, conducted an investigation culminating in the institution of this proceeding. It is represented that the Attorney-General is in possession of between 250 to 300 complaints. Bestline, pursuant to CPLR 408, has sought discovery of the names of the complaining witnesses, opportunity to conduct EBTs, and discovery of the documents upon which the Attorney-General will rely. Special Term denied the discovery motion of Bestline and directed a trial to resolve the allegations and denials of deceptive practices. I would modify the determination of Spe [19] cial Term to the extent of directing that the Attorney-General disclose the names and addresses of the complaining witnesses and allow EBTs of those witnesses. In a civil proceeding, the disclosure of that which is "material and necessary” (CPLR 3101, subd [a]) has been liberally interpreted as including "any facts bearing on the controversy which will assist preparation for trial by sharpening the issues and reducing delay and prolixity. The test is one of usefulness and reason” (Allen v Crowell-Collier Pub. Co., 21 NY2d 403, 406). The number of witnesses who may ultimately be deposed, resulting in possible delay of a trial on the merits, must be measured against the fact that the information sought is apparently material to be used as evidence in chief or for rebuttal or cross-examination and should not be denied, the test for acquisition of this material being that of usefulness and reason (Allen v Crowell-Collier, supra, pp 406-407). If Bestline is shown to be proceeding with discovery in bad faith, the Attorney-General may then take appropriate action. Furthermore, even material prepared for litigation is discoverable upon a showing of special circumstances (CPLR 3101, subd [d]). Clearly included in this material is the revelation of names and addresses of witnesses of the occurrences or transactions in issue (Rios v Donovan, 21 AD2d 409; Peretz v Blekicki, 31 AD2d 934). In the case at bar, Bestline cannot in any way prepare itself for the trial directed by Special Term absent investigation of the broad allegations of its misrepresentations made by persons whose identities are in the hands of the Attorney-General. The paucity of material available to Bestline and the broadness of the allegations combine to provide sufficient special circumstances to warrant granting of the disclosure requested. The mere fact that in this proceeding we are dealing with the State rather than a private person does not bar granting the disclosure herein sought (CPLR 3102, subd [f]). Furthermore, our recent decision in People v Volkswagen of Amer. (41 AD2d 827) does not mandate denial of discovery. In Volkswagen, the Attorney-General sought an injunction against alleged false advertising. The respondent in that case sought to examine all the Assistant Attorneys-General involved in the investigation and sought names and addresses of those persons allegedly deceived by the advertising. The court there held that the Assistant Attorneys-General could not be [20] examined since they were acting as counsel for the State and were not parties to the suit. As to the names and addresses sought, the court found that their production was premature and, in any event, they were characterized as "work product for impending litigation” and not discoverable absent a showing of special circumstances. This characterization by the court clearly shows that names and addresses of witnesses are within the ambit of CPLR 3101 (subd [d]) and makes them conditionally discoverable rather than absolutely privileged (cf. CPLR 3101, subd [c] with CPLR 3101, subd [d]; McKinney’s Cons Laws of NY, Book 7B, Practice Commentary by David D. Siegel, §§ C3101:26-C3101:29, inclusive). The witnesses who, I suggest, are subject to disclosure proceedings are limited to that group which participated in the transaction and not the broad spectrum of witnesses alluded to in the dissenting opinion. However, I concur with Justice Silverman that since the documents sought for discovery were not specifically designated, they are not discoverable (CPLR 3120, subd [a], par 1, cl [i]; Rios v Donovan, 21 AD2d 409, 413). Accordingly, the order of the Supreme Court, New York County, denying discovery proceedings and directing a trial on the issue of deceptive practices, should be modified on the law and in the exercise of discretion to the extent of directing disclosure of the names and addresses of the witnesses to the transactions involved, and otherwise affirmed without costs or disbursements. Any applications concerning the scheduling of examinations should be made at Special Term.