Class Actions In New York Pre-Certification Settlement Just Got A Lot Harder
On December 12, 2017, in a surprising move, the New York State Court of Appeals, in a 4-3 decision, held that CPLR 908 requires the parties to a potential class action to give notice to putative class members of a proposed dismissal, discontinuance, or compromise. Put more plainly, the court held that, where a complaint containing class allegations - a relatively simple thing to do - is settled or dismissed before a class has been certified by a court, a notice of the impending settlement must nevertheless be sent out to potential class members, even though the settlement is not binding on them. As explained further below, this decision is going to create great confusion and difficulty for both plaintiffs and defendants.
The case, Desrosiers v. Perry Ellis Menswear, LLC, 2017 NY Slip Op 08620, is a combined decision based on two different and unrelated appeals. In the first case, the plaintiff Geoffrey Desrosiers worked as an unpaid intern for Perry Ellis Menswear, LLC. He commenced a class action to recover wages on behalf of himself "and similarly-situated individuals." In the second lower court case, the plaintiff Christopher Vasquez was employed by National Securities Corporation as a financial products salesperson and filed a class action on behalf of himself and "all similarly-situated individuals" for alleged minimum wage and overtime violations. In both cases, each defendant sent its plaintiff an offer of compromise or settlement, which both plaintiffs accepted before any class was certified. Indeed, in the Desrosiers case, the time to move for class certification had expired.
Both defendants moved to dismiss their respective complaints, and both plaintiffs filed a cross-motion seeking leave to provide notice of the proposed dismissal to putative class members pursuant to CPLR 908. CPLR 908 states that "a class action shall not be dismissed, discontinued, or compromised without the approval of the court," and "notice of the proposed dismissal, discontinuance or compromise shall be given to all members of the class in such manner as the court directs." Both defendants in essence argued that Section 908 was inapplicable because without a certified class, there was no "class action," only a potential class.
In both cases, on appeal, the First Department held that the notice requirement of CPLR 908 applied despite the absence of a certified class. In Desrosiers, the court held the notice requirement "is not rendered inoperable simply...
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