Page 6 - Litigation

S6 | TUESDAY, JULY 5, 2016 | Litigation
| NYLJ.COM

‘Jiannaras’ Clariies Approach

To Class Action Practice in New York

OCK
IST

respectively, there remain signiicant differ- part of the action) and would otherwise be Thereafter, a settlement was reached and
BY BARRY KAZAN
ences that require a practitioner’s attention bound by the terms of the settlement, which the plaintiffs and defendants jointly moved
when litigating class actions in state court. included releases of claims for monetary dam- for approval of the settlement. Id. at *2. Of
The question of whether a class action is Indeed, while Article 9 does not have the ages. Id. at *4-*6.
most relevance to the due process issue, the
one for monetary relief or whether the robust jurisprudence of its federal coun- The relevant facts of Jiannaras are as fol- settlement provided for dismissal of the New

monetary relief is “incidental” to broader terpart, the New York Court of Appeals has lows: In August 2009, Google and On2 entered York action with prejudice and included a
injunctive or equitable relief triggers unique historically been guided by decisions inter- into a merger agreement. Id. at *1. After release of “any and all” merger-related claims.
concerns for whether a class action can be preting its federal counterpart while at the announcement of the merger, the plaintiff, Id. The Supreme Court preliminary certiied
maintained in the irst instance, and if so, what same time recognizing material differences who owned common shares of On2 stock, the proposed settlement class pursuant to
protections need to be afforded to absent between the two statutory schemes. The brought a putative class action in the Supreme Article 9, subject to inal determination after
class members (i.e., those class members not most recent example of this is the case of Court of the State of New York on behalf of a fairness hearing. Id. Over 200 sharehold-
before the court, but who will otherwise be Jiannaras v. Alfant, No. 64, 2016 N.Y. LEXIS himself and other similarly situated share- ers iled objections to the proposed settle-
bound by a court’s decision). The New York 1062 (N.Y. May 5, 2016), decided on May 5, holders. Id. The plaintiff alleged that On2’s ment, alleging that the omission of an opt-out
Court of Appeals recently analyzed this ques- 2016. In Jiannaras, the New York Court of board of directors had, among other things, right deprived out-of-state shareholders of

tion in the context of a proposed class action Appeals reiterated its position that Article 9 breached its iduciary duty to its sharehold- their ability to pursue claims arising from
settlement, and its approach is instructive is a unique statute with material differences ers in approving the merger. Id. The relief the merger. Id. at *3. Following a hearing,
to how New York law may follow—and may from Rule 23. Id. at *6-*7. However, the New sought on the face of the complaint was pri- the Supreme Court found that the settle-
diverge from—federal law in the areas of York Court of Appeals also maintained that it marily equitable in nature. Speciically, the ment was fair, adequate, reasonable and in
class actions.
remains ready to interpret New York’s class plaintiff was seeking a declaration that the the best interests of the class members. Id.
While both Article 9 of the New York Civil action rule consistent with the federal courts, merger agreement was entered into in breach Notwithstanding, the Supreme Court refused
Practice Law and Rules (Article 9) and Federal especially where issues of due process are of iduciary duties and was unlawful and unen- to approve the settlement because it did not
Rule of Civil Procedure 23 (Rule 23) govern the concerned. Id.
forceable, rescission of the merger agreement, provide out-of-state class members with the

requirements for maintaining class actions in In Jiannaras, the New York Court of Appeals an injunction against consummation of the opportunity to opt out of the class. Id. The
New York state courts and U.S. federal courts
considered to what extent a New York court merger unless Google and On2 implemented case was appealed to the Appellate Division,
could approve a class action settlement a procedure to obtain the highest price and Second Department, which, with one judge
wherein non-New York resident class mem- made full disclosure of material facts, and a dissenting, afirmed the supreme court’s deci-
BARRY KAZAN is a partner at Thompson Hine in New bers would not be afforded the opportunity constructive trust over consideration improp- sion, inding that a prior New York Court of
York.
to opt out of the class (i.e., choose to not be
erly received. Id. at *2 n.1.
Appeals decision, Matter of Colt Industries