The Interplay Between Federal and New York State Law Regarding Business Matters

A recent decision from the Supreme Court, Appellate Division, Second Department, demonstrates the interplay between Federal and New York State law regarding business matters. The case involved issues of business law and constitutional law.

The case, Sharabani v. Simon Property Group, Inc., 15224/09, NYLJ 1202549881412 (2d Dept April 17, 2012), involved a young girl who was given a mall gift card as a present. When the card expired and the mall sought to charge her a penalty to use the money still on the card, the girl sued on behalf of herself and others similarly situated, alleging violation of the obligation of good faith and fair dealing, breach of contract (based in part on the New York Abandoned Property Law), fraud and violation of New York’s consumer protection laws. The defendant argued that federal regulations governing banks’ issuance of gift cards preempted the state laws and state causes of actions. Rejecting defendant’s argument, the Court noted that the federal regulations explicitly stated that they preempt state abandoned property law regarding dormant gift card accounts, but do not preempt state contract law or commercial law of general applicability which only “incidentally affects” such accounts. Because the plaintiffs alleged various contract and commercial claims pursuant to generally-applicable state law, most of plaintiffs’ claims were not preempted.

Sharabani demonstrates the interplay between federal and state law—because the federal regulations specified that they preempted a certain category of state laws but not others, some of the plaintiff’s causes of action were preempted while others were not. At Tesser, Ryan & Rochman, LLP, our attorneys are familiar with both state and federal business law issues and can identify issues regarding federal preemption.