Friday, July 10, 2015

And his fate is still unlearn’d: Subway overcharge claim fails

Hollander v. Metropolitan Transp. Authority, 2015 N.Y. Slip Op. 50991(U), 2015 WL 4077193, No. 160972/13 (Sup. Ct. June 25, 2015)
Hollander sued the MTA on behalf of purchasers of 7–Day and 30–Day MetroCards, alleging they were falsely advertised because they aren’t valid for a full 7 or 30 days.  Instead, no matter when you first activate them, they end at midnight 7/30 calendar days later, meaning that you might lose up to nearly a day depending on when you activate them.  Even activation at 11 pm will be counted as your “Day 1.”  The MTA website says that the 7–Day MetroCard is “[g]ood for unlimited subway and local bus rides until midnight, 7 days from day of first use,” and a similar statement for the 30-day version.
Hollander alleged that this violated General Business Law §§ 349-350, constituted breach of contract, and resulted in unjust enrichment.  The MTA disagreed, noting that Hollander had been using such unlimited ride cards since as early as 2000, and that he’d been put on repeated notice as to the actual duration. “There is no disputing that straphangers get better deals with these cards when they ride the subways and buses more frequently, and consequently, the MTA earns less per ride.”  According to an affidavit from the MTA, “the total average cost per passenger on the subways and buses is $3.15, only about 50% of which is accounted for by revenue collected from unlimited ride MetroCards.”  Weekly and monthly passes are estimated to reduce fare revenue by 5% to 8%.  The MTA further argued that users are overwhelmingly satisfied and prefer the security of knowing the card won’t run out of value.  “[O]f the tens of thousands of complaints processed since the inception of the program, there has not been a single claim concerning the short dating practice alleged by plaintiff in this action.”
The MTA contended that, given the age of the program, lengthy and detailed explanations were no longer required, though a 1998 brochure directed at tourists did say: “Your seven days start when you use your card the first time, so if you use it for the first time on a Monday morning, it’ll run out on the following Sunday at midnight.” The MTA’s website says that the use of unlimited ride MetroCards is subject to the MTA New York City Transit tariff, and similar language appears on the back of every MetroCard. The current tariff says the 7-day card is: “Valid for unlimited rides on NYCTA subway or … local bus …, taken within 7 days of initial swipe or dip of pass. Pass valid until 11:59 pm on 7th day.”
The court noted that the standard in New York is whether allegedly deceptive conduct would “mislead a reasonable consumer acting reasonably under the circumstances”; the Court of Appeals hasn’t explicitly overruled the older “ignorant, unthinking and credulous” standard, but it also has applied the reasonability standard in recent cases.  The court ruled that, given the “clearly-stated midnight deadline,” it was evident that the first day of use, no matter how short, must be counted; if days were counted with Day 1 as the day after first use, a consumer could get nearly 8 days from a 7-day pass. “[D]ue to the midnight expiration, the average consumer of reasonable intelligence should realize that cards first swiped later on the first day of use will cut down on the amount of overall hours in which the card can be used.”  The MTA never promises 7 or 30 “full” days of use, and the expiration date appears every time users swipe an unlimited ride card. The lack of any complaints about this reinforced Hollander’s strained interpretation.
In any event, the public is “conclusively presumed to know” the terms and conditions of legal tariffs.  The filed rate doctrine therefore barred any challenge that would enmesh the court in the rate-making process, as here.  Hollander argued that he wasn’t challenging the reasonableness of the tariff, but only the marketing; but the materials clearly stated they were subject to the tariff, and he was actually challenging the cards’ conditions of use.  The filed rate doctrine applies not only to charges, but to the “classifications, practices, and regulations affecting such charges,” since rates and charges “do not exist in isolation.”
In addition, Hollander couldn’t show any injury. He didn’t argue that he wouldn’t have bought the cards had he known the truth, or that he was forced to pay more in transportation costs as a result of being misled. “Any subscriber who pays the filed rate has suffered no legally cognizable injury.”  Plus, it was undisputed that the unlimited cards were better for regular riders like plaintiff, who even testified that he continued to buy 30-day cards, because of the better per-ride price.  (Hmm, under other circumstances I would think it was still possible to suffer injury even if there were no alternative, but ok.)
Breach of contract and unjust enrichment claims failed too.  I was amused to note that there’s a 1983 case dismissing a subway user’s claim that the MTA was in breach of an implied contract to transport passengers arising from the sale and purchase of a token, because the MTA “provided persistently late train service and permitted unsanitary, unsafe, and overcrowded conditions on its trains.”


  1. The MTA probably has the winning argument, even though I think they should lose--there's no technological reason why the 7-day pass can't last exactly 7 days from first use. That aside, I think it's funny that they argue that it's unreasonable for a customer to think they'd get almost 8 days at the same time they are arguing it is completely reasonable to give people almost 6 days.

  2. I agree that they both ignored what seems the obviously technologically possible result now (though perhaps not when the program began)--but I see the MTA's point too that at least you know exactly when your card ends with their rule.