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Action by the department of law
General Business (GBS) CHAPTER 20, ARTICLE 33
§ 689. Action by the department of law. 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

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

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