The People of the State of New York by Eric T. Schneiderman v. Maurice R. Greenberg

This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 90
The People of the State of New
York by Eric T. Schneiderman,
&c.,
Respondent,
v.
Maurice R. Greenberg, et al.,
Appellants.

David Boies, for appellant Greenberg.
Vincent A. Sama, for appellant Smith.
Barbara D. Underwood, for respondent.
AARP; North American Securities Administrators
Association, Inc.; Chamber of Commerce of the United States of
America et al., amici curiae.

STEIN, J.:
This appeal is the second to have come before us
challenging the denial of motions for summary judgment dismissing
the complaint in this action, which was commenced in 2005 by the
Attorney General under the Martin Act (General Business Law
article 23-A) and Executive Law § 63 (12) against defendants, two

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former officers of American International Group, Inc. As in the
prior appeal, defendants challenge the availability of certain
equitable relief. We again hold that the Attorney General's
claims against defendants withstand summary judgment and,
therefore, should proceed to trial.
The underlying facts of this matter are more fully set
forth in our prior decision (21 NY3d 439 [2013]), in which we
rejected defendants' argument "that no basis exist[ed] for
granting equitable relief . . . [because] all such relief that
could possibly be awarded has already been obtained in litigation
brought by the Securities and Exchange Commission (SEC), which
[defendants] settled in 2009" (id. at 447). In addition,
defendants had requested in that appeal that this Court
determine, as a matter of law, that equitable relief was
unavailable in this case under the Martin Act. Specifically,
defendants argued that the Attorney General has no "ability to
ask for disgorgement" because there was no "illegal gain[]," and
the Attorney General could not demonstrate "some danger of
continuing violation," the showing defendants asserted was
necessary to obtain injunctive relief under the Act. In the face
of these arguments, we were unable to "say as a matter of law
that no equitable relief may be awarded" (21 NY3d at 448), and we
concluded that it was necessary for the lower courts to
determine, in the first instance, whether the injunction sought
by the Attorney General -- a lifetime ban on defendants'

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participation in the securities industry and service as an
officer or director of a public company -- "would be a
justifiable exercise of a court's discretion" (id. at 448). We
similarly concluded that the "availability" of any other
equitable relief sought by the Attorney General -- i.e.,
disgorgement -- must initially be decided by the lower courts
(id.).
One month after this Court's prior decision was issued,
defendants moved again for summary judgment dismissing the
complaint against them. Defendants primarily argued that: the
equitable relief sought was not warranted on the facts of this
case; disgorgement is not an authorized remedy under the Martin
Act or Executive Law § 63 (12); and disgorgement is preempted by
federal law. Supreme Court rejected those arguments and denied
defendants' motion, and the Appellate Division affirmed (127 AD3d
529, 529-530 [1st Dept 2015]). The Appellate Division thereafter
granted defendants leave to appeal and certified the following
question to this Court: "Was the order of the Supreme Court, as
affirmed by this Court, properly made?"
Initially, we note that defendants may not relitigate
the issues that were resolved in our prior decision (see People v
Rodriguez, 25 NY3d 238, 243 [2015]; see generally People v Evans,
94 NY2d 499, 502-503 [2000]), or raise issues on appeal that were
not preserved on the record for our review. Thus, the majority
of their arguments regarding the availability of injunctive

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relief are not properly before us.
Turning to the first of defendants' arguments that are
not beyond our review, we conclude that the Attorney General may
obtain permanent injunctive relief under the Martin Act and
Executive Law § 63 (12) upon a showing of a reasonable likelihood
of a continuing violation based upon the totality of the
circumstances (see People v Lexington Sixty-First Assoc., 38 NY2d
588, 598 [1976]; Securities & Exch. Commn. v Management Dynamics,
Inc., 515 F2d 801, 807 [2d Cir 1975]). "This is not a 'run of
the mill' action for an injunction, but rather one authorized by
remedial legislation, brought by the Attorney General on behalf
of the People of the State and for the purposes of preventing
fraud and defeating exploitation" (Lexington Sixty-First, 38 NY2d
at 598). "'[T]he standards of the public interest not the
requirements of private litigation measure the propriety and need
for injunctive relief'" (Management Dynamics, 515 F2d at 808,
quoting Hecht Co. v Bowles, 321 US 321, 331 [1944]). Therefore,
we reject defendants' argument that the Attorney General must
show irreparable harm in order to obtain a permanent injunction.
Defendants' reliance upon State of New York v Fine (72
NY2d 967, 969 [1988]) -- in which we held that the Attorney
General must demonstrate irreparable harm to obtain a preliminary
injunction under the Martin Act -- is misplaced. Our holding in
that case was grounded upon the interplay of General Business Law
§ 357, which incorporates the CPLR, and the relevant provision of

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the CPLR itself, which require a showing of irreparable injury
before a preliminary injunction may be granted (see CPLR article
63; Fine, 72 NY2d at 969). That holding is of no moment here,
inasmuch as the CPLR has no similar provisions governing
permanent injunctive relief and, in any event, Executive Law § 63
(12) does not incorporate the CPLR. Thus, no showing of
irreparable harm was necessary and we agree with the courts below
that, under the circumstances of this case, questions of fact
exist regarding the propriety of the permanent injunctive relief
sought, which preclude summary judgment.
We further conclude that disgorgement is an available
remedy under the Martin Act and the Executive Law. The Martin
Act contains a broad, residual relief clause, providing courts
with the authority, in any action brought under the Act, to
"grant such other and further relief as may be proper" (General
Business Law § 353-a). Indeed, this Court has previously
recognized that the courts are not limited to the remedies
specified under either of these statutes (Lexington Sixty-First,
38 NY2d at 593-594, 598-599). In our view, disgorgement "merely
requires the return of wrongfully obtained profits [and] does not
result in any actual economic penalty" (Official Comm. of
Unsecured Creditors of WorldCom, Inc. v Securities & Exch.
Commn., 467 F3d 73, 81 [2d Cir 2006]). As we have previously
stated, in an appropriate case, disgorgement may be an available
"equitable remedy distinct from restitution" under this State's

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anti-fraud legislation (Matter of People v Applied Card Sys.,
Inc., 11 NY3d 105, 125 [2008], cert denied 555 US 1136 [2009];
see People v Ernst & Young LLP, 114 AD3d 569, 569-570 [1st Dept
2014]). Nor is there any merit to defendants' arguments that
such relief is barred under the Supremacy Clause or that it was
waived by the Attorney General. Moreover, as with the Attorney
General's claim for an injunction, issues of fact exist which
prevent us from concluding, as a matter of law, that disgorgement
is unwarranted.
Accordingly, the order of the Appellate Division should
be affirmed, with costs, and the certified question answered in
the affirmative.
* * * * * * * * * * * * * * * * *
Order affirmed, with costs, and certified question answered in
the affirmative. Opinion by Judge Stein. Chief Judge DiFiore
and Judges Pigott, Rivera, Abdus-Salaam and Fahey concur. Judge
Garcia took no part.

Decided June 2, 2016

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