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Litigation | TUESDAY, JULY 5, 2016 | S7

Shareholder Litigation, 77 N.Y.2d 185, 565 Rule 23(b)(2). Third, there are class actions damages claims separate from class-wide framework. For example, in Douglin v. Great-

N.Y.S.2d 755 (N.Y. App. Div. 1991) governed that are superior to other methods of adju- equitable relief.” Jiannaras, 2016 N.Y. LEXIS banc Trust Co., 115 F. Supp. 3d 404 (S.D.N.Y.
the case respecting whether and under what dications of individual claims. Rule 23(b)(3).
1062, at *7. Arguably, the Court of Appeals is 2015), Magistrate Michael Dolinger analyzed
circumstances out-of-state residents had to With respect to Rule 23, the Court of signaling that the barrier for certiication of a whether monetary damages were available
be afforded the opportunity to opt out of a Appeals noted that only Rule 23(b)(3) class non-opt-out class may be higher in the context in a Rule 23(b)(2) case involving equitable
class action. Jiannaras v. Alfant, 124 A.D.3d actions require the opportunity to opt out and of Article 9 than Rule 23, but that ultimately claims for relief in connection with the defen-
582, 1 N.Y.S.3d 332 (N.Y. App. Div. 2015). The that Rule 23(b)(1) and (b)(2) class actions do Article 9 vests within the trial courts broad dants’ management of an employee stock
Court of Appeals afirmed. Jiannaras, 2016 not have that requirement. Jiannaras, 2016 discretion as to what is required to provide option plan. Magistrate Dolinger’s analysis
N.Y. LEXIS 1062.
N.Y. LEXIS 1062, at *6-*7. Moreover, the Court due process.
concluded that “the monetary aspect of the
The Court of Appeals analyzed U.S. of Appeals observed that the U.S. Supreme These considerations are important for
case does not involve any claims for relief
Supreme Court decisions interpreting Rule Court in Wal-Mart held that claims for mon- practitioners in the area of class actions unique to any class member. All that plaintiffs
23’s requirements as well as its own historic etary relief could not be certiied under Rule as more and more federal courts are look- seek is that the defendant compensate the
interpretation of Article 9 in the context of 23(b)(2) “at least where . the monetary relief ing at whether and what types of incidental ESOP for its injury, even though the ultimate
federal due process requirements. Speciically is not incidental to the injunctive or declara- monetary relief fall under the Rule 23(b)(2) derivative injury to class members may vary
the court noted that in Phillips Petroleum Co. tory relief.” Id. (quoting Wal-Mart, 113 S. Ct. class actions and therefore whether these among them. Since no calculation of sepa-
v. Shutts, 472 U.S. 797 (1985) and in Matter of at 2557). The Court of Appeals further noted incidental monetary damages could in fact rate losses to any class members is sought or
Colt, due process requires opt-out rights in that the Wal-Mart decision did not speciically be approved under Article 9.
class actions that are “wholly or predomi- adjudicate whether due process requires the required, certiication may be ordered under
JiannarasRule 23(b)(2) based on the apparent avail-
nantly” for monetary damages. , right to opt out of a Rule 23(b)(2) settlement ability of injunctive and declaratory relief to
2016 N.Y. LEXIS 1062, at *3-*4. The reason if the monetary relief sought is incidental to With ‘Jiannaras’, the Court of the plaintiffs.” Id. at 414. Likewise, in Jock v.
for this is that absent class members’ rights the injunctive or declaratory relief. Id. More- Sterling Jewelers, No. 08 Civ. 2875(JSR), 2015
to pursue claims not equitable in nature are over, the Court of Appeals went further and Appeals has further clariied U.S. Dist. LEXIS 154209 (S.D.N.Y. Nov. 15, 2015),
constitutionally protected property rights for observed that the Wal-Mart decision appeared Judge Jed S. Rakoff found that an arbitrator’s
which due process is required. Id. at *5. Thus, to express skepticism as to whether mon- its approach to issues ruling had to be vacated, determining that the
a court cannot extinguish those protected etary damages could ever be incidental to surrounding class action
property rights in a class action unless out-of- injunctive and declaratory relief, signaling arbitrator had acted in manifest disregard of
state class members can make the afirmative that the Court of Appeals may not believe practice in New York state the law by disregarding “the principle that
opt-out classes may not be certiied for the
decision to remain in the class and choose to that there are any situations under Rule 23 courts.
purposes of seeking classwide injunctive
be bound by its outcome (even if that choice whereby monetary damages could be adju- relief [which] was clearly mandated by the
requires afirmative action to opt out). Thus, dicated without affording out-of-state class United States Supreme Court in Wal-Mart v.
the Court of Appeals ruled that even though members an opportunity to opt out. Id.
After the Wal-Mart decision, in Amara v. Dukes.” Id. at *18.
the initial complaint may have sought only Even though the Court of Appeals CIGNA, 775 F.3d 510, 519 (2d Cir. 2014), the
equitable relief, which would not necessar- addressed the issue of monetary damages Second Circuit was forced to re-examine its Finally, as with Jiannaras, the Eastern Dis-
ily have required the opportunity for out-of- being incidental in the context of Rule 23, earlier holding in Robinson v. Metro-North trict of New York had occasion post-Wal-Mart
state residents to opt out, the relief that was it ultimately determined that “Wal-Mart has Commuter Railroad Co., 267 F.3d 147 (2d Cir. to address whether the scope of releases in a
ultimately requested in the form of releases no bearing on the resolution of this appeal” 2001), wherein it had previously rejected the proposed Rule 23(b)(2) class action violated
due process. In re Payment Card Interchange
for monetary damages changed the nature because Article 9 of the CPLR differs materi- claim that Rule 23(b)(2) could not be used to Fee and Merch. Dis. Antitrust Litig., 986 F. Supp.
of the rights being adjudicated. Id.
ally from Rule 23. Id. at *7. Speciically, CPLR certify a class for compensatory and other 2d 207, 236 (E.D.N.Y. 2013). In considering
Faced with the due process consideration, §903 provides only that “[t]he order permit- non-incidental damages. Amara, 775 F.3d at the issue, Judge Gleeson acknowledged that
the parties asked the court to follow Wal-Mart ting a class action shall describe the class. 520. In so doing, the Second Circuit recognized
Stores v. Dukes, 113 S.Ct. 2541 (2014) and ind When appropriate the court may limit the that several circuit courts of appeal had rec- objectors to the class action settlement raised
that the monetary damage claims were merely class to those members who do not request ognized that incidental monetary relief may concerns regarding the scope of releases in
incidental to the equitable relief for which exclusion from the class within a speci- be appropriate where it lows directly from connection with the settlement. Id. He over-
Rule 23 and constitutional due process would ied time after notice.” N.Y. CPLR §903. The liability to the class as a whole from claims ruled the objectors and stated that the releas-
es contained in the non-opt-out class action
not require the opportunity to opt out. Id. at Court of Appeals referred back to its hold- forming the basis of injunctive or declara- “cover only the claims that may properly
*6. In response to this argument, the Court of ing in Matter of Colt that “unlike Rule 23,” tory relief. Id. at 519. In Amara, the Second be extinguished by the settlement of a class
Appeals took the opportunity to point out the which deines three types of class actions Circuit analyzed whether the monetary ben-
differences between Rule 23, which explicitly and requires notice and opt-out rights only eits that lowed from the reformation of a action” and that the releases “do not release
deals with these issues, and Article 9, which as to one type of class, the New York statute pension plan were considered incidental and the defendants from liability for claims based
does not. Id. at *6-*7.
“contemplates . that a Judge may choose to therefore permissible under Rule 23(b)(2). on new rules or new conduct or a reversion
Speciically, Rule 23 describes three types exercise discretion to permit a class member Id. at 519-20. The Second Circuit analyzed to the pre-settlement rules. They appropri-
of situations where class actions are appropri- to opt out of a class.” Id. (quoting Matter of the issue and stated that the requirement for ately limit future damages claims based on
ate. First, there are class actions where pros- Colt, 77 N.Y.2d at 194, 565 N.Y.S.2d at 760). monetary relief to arise only incidentally from the pre-settlement conduct of the networks.”
Id. at 235-36.
ecuting separate actions against a defendant Moreover, Article 9 does not even, in certain a defendant’s liability to the class as a whole With Jiannaras, the Court of Appeals has
by individual class members would create a circumstances, require notice to be given to is to protect the legitimate business interests
risk of inconsistent adjudications that would absent class members. Speciically, CPLR 904 of potential class members who might wish further clariied its approach to issues sur-
establish incompatible standards of conduct provides that “[i]n class actions brought to pursue their monetary claims individually. rounding class action practice in New York
for the party opposing the class or where primarily for injunctive relief or declaratory Id. at 523. The Amara court went on to base state courts. 2016 N.Y. LEXIS 1062. The court
adjudication with respect to individual class relief, notice of the pendency of the action its conclusion on the fact that absent class highlighted its understanding of federal prac-
members would be dispositive of the interests need not be given to the class unless the court members did not have a need for protection tice in the area and the questions that are
of other members who are not parties to the inds that notice is necessary to protect the because the monetary relief did not depend raised with respect to opt-out rights and due
individual adjudications or would substan- interests of represented parties and that the on “complex individual determinations” for process, but made clear that its decisions will
in part be dictated by the unique structure
tially impair their ability to protect their inter- cost of notice will not prevent the action from which litigation speciic to each individual
ests. Rule 23(b)(1). Second, there are class going forward.” N.Y. CPLR §904(a). Relying could make a difference and each individual of Article 9. Id. at *7. In so doing, the Court
actions where the party opposing the class on these two provisions, the court reiterated class member would not be entitled to a dif- of Appeals appears to have given trial courts
has acted or refused to act on grounds that its prior holdings and speciically held that ferent injunction or declaratory judgment. Id.
more lexibility to address issues of due pro-
apply generally to the class so that the inal “the CPLR authorizes trial courts to expand District courts are also seeing various cess where individual damage claims exist
injunctive relief or corresponding declaratory due process rights where a class settlement issues arise regarding the incidental dam- and those issues are sought to be litigated
relief is appropriate to the class as a whole.
would extinguish out-of-state class members’
ages that may fall within the Rule 23(b)(2)
or released.

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