New York State class actions: make it work - fulfill the promise.

• Author: Dickerson, Thomas A.
• Position: Company overview

The purpose of this article is to demonstrate that New York's class action statute, Article 9 of the Civil Practice Law and Rules ("CPLR"), is underutilized and has been during its entire thirty-five-year history. This article identifies what types of class actions are presently certifiable and what types of class actions are not, but should be, given the broad legislative history of CPLR Article 9, and the needs of New York State residents for a meaningful group remedy. In that regard, this article focuses on three types of class actions which can be, and should be, certifiable: mass torts involving physical injuries and/or property damage, class actions challenging governmental operations, and class actions otherwise prohibited by CPLR 901(b), such as antitrust actions alleging a violation of General Business Law ("GBL") section 340 ("Donnelly Act"), and the Federal Telephone Consumer Protection Act. And, lastly, the article encourages the New York State Court of Appeals to continue to take a more active role in choosing to hear appeals in class action cases involving a variety of issues, including the granting or denial of class certification (CPLR 901, 902).

1. PERSPECTIVE

   I have been writing on the subject of New York State class actions for thirty-one years, including articles in various legal publications (1) and my annually-updated treatise on Article 9 of Weinstein, Korn & Miller's New York Civil Practice: CPLR. (2) I also write about class actions in other states as well. (3) And, on occasion, I have given lectures on class actions to law students and members of the bench and bar.

   Before becoming a judge, I spent fifteen years (1978-1993) as a solo practitioner in Manhattan, prosecuting consumer class actions before various state and federal courts. In fact, my experience with CPLR Article 9 really began in 1975, just a few months after its enactment, when I was a young associate attorney with the law firm of Shea & Gould in Manhattan. I vividly recall my experience during a vacation to the infamous and wildly misrepresented Club Islandia in Jamaica, and the subsequent consumer class action litigation brought on behalf of 250 victimized travelers, which led to the first certified consumer fraud class action under CPLR Article 9. (4)

2. 1975--ENACTMENT OF CPLR ARTICLE 9: THE PROMISE

   After prodding from the Court of Appeals in Moore v. Metropolitan Life Ins. Co. (5) and Ray v. Marine Midland Grace Trust, (6) from legal scholars, (7) and the New York State Judicial Conference, (8) CPLR Article 9 was enacted in 1975 to infuse New York's moribund class action remedy (CPLR 1005) (9) with modern procedures.

   In recommending passage, then Assembly Majority Leader Stanley Fink stated that:

   In its present form the statute fails to accommodate pressing needs for an effective, flexible and balanced group remedy in vital areas of social concern, such as claims arising from exposure of numerous persons[] to environmental offenses, violation of consumer interests, invasion of civil rights, execution of adhesion contracts, and many other collective activities reaching virtually every phase of human life. While the substantive law applicable in these cases may be generally adequate, there exists no workable remedy when neither relief on an individual basis nor actual joinder of the class is economically or administratively feasible. (10) And, in approving the proposed legislation, then Governor Hugh Carey noted that

   [i]n many instances, an individual's own damages resulting from a pattern of illegal behavior by another may not be sufficient to justify the costs of litigation although the aggregate damages of all others similarly injured by the illegal behavior certainly would. Under present law, unless the individual thus injured is willing and able to press his legal claim as a matter of principle despite the financial loss, there is no economic deterrent to poor workmanship, deceptive or unconscionable trade practices and illegal conduct. (11) III. 2010--THIRTY-FIVE YEARS LATER: CPLR ARTICLE 9'S FULL POTENTIAL HAS YET TO BE REACHED

   Notwithstanding the broad language in the legislative history of CPLR Article 9, New York courts have not implemented this salutary statute as broadly as they might have. (12) As a remedial vehicle, CPLR Article 9 is operating at approximately forty percent of its intended potential.

   1. Guidance Was Needed

      It is ironic, indeed, that while the New York State Court of Appeals recognized the need for a modern class action statute, and encouraged the legislature to enact such a salutary statute, (13) it did not, in the early years (1975-1986), give the appellate divisions and trial courts needed guidance on the proper interpretation of CPLR Article 9, (14) the rationale being that orders granting or denying class certification are non-final. (15) As a result, the appellate divisions16 enunciated policies regarding the implementation of CPLR Article 9, which on their face seem contrary to the legislative history, and some policies which have since faded in significance. (17)

      It is fair to state that until very recently (with a few exceptions such as Weinberg v. Hertz Corp., (18) In re Colt Industries Shareholder Litigation, (19) Small v. Lorillard Tobacco Co., (20) and Mahoney v. Pataki (21)), the New York State Court of Appeals has heard those class action appeals which typically only involve the viability of a cause of action. (22)

   2. More Active Role Taken

      Recently, however, the New York State Court of Appeals has taken a more active role in interpreting various provisions of CPLR Article 9 by choosing to hear appeals in Sperry v. Crompton Corp., (23) Wyly v. Milberg Weiss Bershad & Schulman, (24) City of New York v. Maul, (25) and Flemming v. Barnwell Nursing Home and Health Facilities, Inc. (26)

4. WHAT'S CERTIFIABLE & WHAT'S NOT, BUT SHOULD BE

   Today, it is fair to state that some types of class actions are generally certifiable, and some types of class actions are not, but should be, given the broad legislative history discussed above.

   1. Unfulfilled Uniform Promises

      Class actions based upon uniform printed contracts, solicitation materials, a common core of contractual promises, or misrepresentations in different documents are typically certifiable. This type of class action may assert causes of action alleging breach of contract, (27) fraud, (28) negligent misrepresentation, (29) violation of GBL sections 349 and 350, (30) quasi-contractual claims, such as unjust enrichment, (31) economic duress, (32) breach of implied covenant of good faith, (33) bad faith dealings, and money had and received. (34)

      Recent examples of the certification of this type of class action include: (1) Emilio v. Robison Oil Corp., involving unilateral changes of fixed-price electricity contracts (three different versions), and alleging breach of contract, breach of the covenant of good faith, and violation of GBL section 349; (35) (2) Argento v. Wal-Mart Stores, Inc., involving the backdating of renewal memberships wherein members who renewed after their membership expiration date were required to pay the full annual fee for less than a full year's membership, and alleging violation of GBL section 349; (36) (3) Morrissey v. Nextel Partners, Inc., involving a contract for the provision of cellular telephone services, and alleging violations of GBL sections 349 and 350 regarding a Bonus Minute subclass and a Spending Limit subclass, the former being denied certification because of the high extent of individual inquiry necessary, and the latter being certified based on the common question of law and fact regarding the disclosure under GBL section 349; (37) and (4) Pludeman v. Northern Leasing Systems, Inc., involving lease agreements for equipment, and challenging the enforceability of concealed microprint disclaimers and waivers, and alleging breach of contract2s

   2. Uniform Misconduct

      Class actions based upon uniform misconduct are generally certifiable. This type of class action may assert causes of action alleging breach of fiduciary duty, (39) negligence, (40) violation of a statute, (41) and quasi-contractual claims. (42)

      Recent examples of the certification of this type of class action include: (1) Dowd v. Alliance _Mortgage Co., involving the assessment of a "priority handling fee" of $20 for providing a requested mortgage note payoff statement regarding the sale of a house; (43) (2) Ramirez v. Mansions Catering, Inc., involving a claim by waitstaff employees for the payment of gratuities collected from customers pursuant to Labor Law section 196-d; (44) (3) Galdamez v. Biordi Construction Corp., involving an action by employees seeking to recover "the prevailing rate of wages and supplemental benefits pursuant to Labor Law section 220"; (45) (4) Nawrocki v. Proto Construction & Development Corp., involving an action by employees on public works projects seeking wages at the prevailing rate, supplemental benefits, and overtime pay, and alleging "breach of public works contracts, violation of New York's overtime compensation [statutes], quantum meruit and unjust enrichment"; (46) and (5) Krebs v. Canyon Club, Inc., involving an action by employees seeking retained service charges gratuities, allegedly misrepresented to customers as gratuities meant for employees, and alleging a violation of Labor Law section 196-d. (47)

   3. Declaratory and Injunctive Relief, and Governmental Operations

      Class actions seeking declaratory and/or injunctive relief are generally certifiable (48) unless they challenge governmental operations. In that case, they may not be certifiable, (49) but could be certifiable under appropriate circumstances. (50)

      Recent examples of the certification of this type of class action challenging governmental operations are: (1) City of New York v. Maul, involving a class of developmentally-disabled children and young adults who are or have been in New York City's foster care system, and...