State Class Actions 2013 And Call to Repeal CPLR §901(b)

, New York Law Journal

   |0 Comments

Justice Thomas A. Dickerson

We noted in last year's survey that there has been a noticeable and positive change in the receptivity of New York courts, especially the Court of Appeals,1 in making our class action statute (CPLR §§901-909) more readily available to groups of litigants. This positive trend continued in 2013 with class actions brought by tenants, New York counties, catering hall servers, stockbrokers and models. In addition, it is time for the Legislature to consider shedding the unnecessary and vestigial CPLR §901(b) so as to make our class action statute as modern and relevant as those of most other states.2

Types of Actions

Luxury Decontrol of Apartments. In Downing v. First Lenox Terrace,3 a class of tenants alleged that the landlords "unlawfully deregulated their apartments under the luxury decontrol provisions of Rent Stabilization Law (Administrative Code of City of NY) §26-501 et seq. (hereinafter RSL) while receiving tax incentive benefits under the City of New York's J-51 program."

Plaintiffs sought "a declaration that all apartments in the complex are subject to rent stabilization, injunctive relief and a money judgment." In denying defendant's motion to dismiss based upon CPLR §901(b), the Appellate Division, First Department, expanded the application of CPLR Article 9 to allow class actions seeking actual damages consisting of rent overcharges plus interest pursuant to RSL §26-516(a).

Taxing Internet Sales. In County of Nassau v. Expedia,4 Nassau County sought to enforce its Hotel and Motel Tax Law and other similar taxing statutes on behalf of a class of 56 other local governmental agencies. The county alleged that the online sellers collect 3 percent hotel tax from consumers based on retail room rates but remit to the county only the portion of the tax based on defendants' lower "wholesale rate." Relying on Overstock.com v. Dept. of Taxation and Finance5 the trial court (Supreme Court, Nassau County) found a predominance of common questions concluding that the 'means and manner' of collecting the taxes is sufficiently similar among class members. Many other taxing authorities throughout the country have brought similar class actions.6

Banquet Servers Seeking Tips. In Picard v. Bigsbee Enterprises,7 a class of catering hall servers challenged their employer's retention of a "20% Service Personnel Charge" imposed upon all customers. Alleging a violation of Labor Law §196-d ("No employer…shall…retain any part of a gratuity…purported to be a gratuity for an employee"), the trial court (Supreme Court, Albany County) accepted plaintiff's waiver of the statutory penalty (Labor Law §198(1-a) and denied defendant's motion to dismiss based on CPLR §901(b).

Stockbrokers Seeking Proper Compensation. In Thomas v. Meyers,8 a class of stockbrokers alleged that defendants "'engaged in a systemic practice of failing to properly compensate stockbrokers'" in violation of Labor Law §50 by failing to pay overtime, making unlawful paycheck deductions, failing to pay on time and failing to pay the minimum wage.

The trial court (Supreme Court, New York County) certified the class action noting that the plaintiff waived "statutory penalty of liquidated damages for any of these claims damages." In an earlier motion by defendants seeking to compel arbitration and enforce a class action waiver the court denied the motion noting that "The FINRA (Financial Industry Regulatory Authority) Code explicitly carves out claims brought as a class action as non- arbitrable."

Models Seeking Unpaid Fees. In Raske v. Next Management,9 a class of models sought additional compensation "for renewal or expansion of usage of [their] images made after expiration of the initial usage period." While dismissing the complaint as "flawed" but noting that the models, "are not left without a remedy," the trial court (Supreme Court, New York County) encouraged the models to seek class action relief. "If…modeling agencies fail to pay models…fees contractually owed to them [they] may sue to enforce their contract rights and may invoke class action procedures in proper cases."

Time to Repeal CPLR §901(b)

When CPLR Article 9 was enacted in 1975 the Legislature engrafted10 onto an otherwise modern class action statute, a limiting mechanism, relatively unique among the states,11 i.e., CPLR 901(b), which provides:

Unless a statute creating or imposing a penalty, or a minimum measure of recovery specifically authorizes the recovery thereof in a class action, an action to recover a penalty, or minimum measure of recovery created or imposed by statute may not be maintained as a class action.12

There are three reasons to repeal CPLR §901(b).13

First, it is now useless in prohibiting class actions seeking a statutory penalty or minimum recovery since such a class action can now be brought in federal court. In 2010, the U.S. Supreme Court in Shady Grove Orthopedic Associates v. Allstate Insurance14 rejected the notion that CPLR §901(b) should be applied by federal courts (and by implication in other state courts as well15) in class actions alleging violations of the General Business Law (GBL) §340 (the Donnelly Act) and brought under Federal Rule of Civil Procedure 23.

What's being said

Comments are not moderated. To report offensive comments, click here.

Preparing comment abuse report for Article# 1202634541190

Thank you!

This article's comments will be reviewed.