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Post date: October 24 2013

A.G. Schneiderman Announces $40k Settlement With Brooklyn Hotel For Price Gouging In Wake Of Hurricane Sandy

Holiday Inn Express Overcharged 38 Guests A Total Of More Than $15K; Company Will Also Pay $25K In Fines For Violating NYS Price Gouging Laws

Schneiderman: We Will Continue To Protect New Yorkers And Visitors From Gougers

NEW YORK - As part of his ongoing probe of high consumer prices in the wake of Hurricane Sandy, Attorney General Eric T. Schneiderman today announced a settlement of more than $40,000 with MMG Butler Street LLC, a Delaware-based corporation that operates the Holiday Inn Express hotel located at 279 Butler Street in Brooklyn. After receiving a consumer complaint, the Attorney General’s Office found that the hotel charged guests excessive rates for last-minute room reservations in the wake of the deadly storm, and in violation of New York State’s price gouging law. Under the terms of the settlement, the hotel has paid $15,315 in restitution, money that is being distributed to 38 victims. The hotel has also paid a $25,000 civil penalty to the State of New York, the top amount allowable under the law.

“At a time when people desperately needed shelter in the days after Hurricane Sandy, the Holiday Inn Express overcharged them-- taking advantage of its own guests, including New Yorkers and visitors to New York, in violation of state price gouging laws,” Attorney General Schneiderman said. “Today, we are continuing to send the message that ripping off the public during a time of crisis is against the law, and that those who engage in illegal price gouging in New York will be held accountable.”

New York State’s Price Gouging Law (General Business Law § 396-r) prohibits merchants from taking unfair advantage of consumers by selling goods or services for an “unconscionably excessive price” during natural disasters. The price gouging law covers New York State vendors, retailers and suppliers. The law specifically says that a price may be considered excessive if there is a “gross disparity” between the prices charged immediately before and after the emergency and the disparity is not attributable to higher costs imposed upon the seller.

Following Hurricane Sandy, many metropolitan area hotels were forced to close because of flooding and power outages. Stranded tourists and displaced residents found themselves competing for the few remaining hotel rooms. Most area hotels that were still operational quickly filled to capacity, but they charged guests at their normal rates. However, this Holiday Inn Express drastically increased its rates for guests seeking last-minute reservations. One week prior to the storm, the average room rates at the Holiday Inn Express ranged from $155 to $170 per night. However, when the storm struck New York, the hotel charged the 38 guests more than $400 a night, and 15 of them were charged more than $500.

Because there can be seasonal and business-driven fluctuations in hotel pricing during non-emergency times, restitution in this case is limited to 38 specifically identified guests who were charged more than $400 per night for stays between October 30 and November 2, 2012. 

New York State Assemblywoman Joan Millman said, “New York law prohibits price gouging during a state of emergency - and Sandy put us all in a state of emergency. I commend Attorney General Schneiderman for pursuing those who took advantage of their neighbors in the wreckage that the storm left behind.”

New York State Senator Velmanette Montgomery said, “I applaud Attorney General Schneiderman and his staff for their investigation and prosecution of this predatory practice. How anyone could possibly gouge people displaced by Hurricane Sandy is beyond understanding. Fortunately we have laws against this, and an Attorney General who will see those laws are respected. Thank you again, A.G. Schneiderman!”

The settlement also requires that the hotel refrain from price gouging the in future. 

Since the October 2012 storm, the Attorney General’s Office has zeroed in on price gouging and obtained almost $300,000 in penalties and costs from 43 downstate gas stations that engaged in illegal price gouging after the storm.

This case was handled by Assistant Attorney General Matthew Eubank in the Attorney General’s Brooklyn Regional Office, under the supervision of Assistant Attorney General-in-Charge of the Brooklyn Regional Office Lois Booker-Williams and Executive Deputy Attorney General Marty Mack. 

The settlement with MMG Butler Street LLC., d/b/a Holiday Inn Express can be viewed here.

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