Thomas J. Hall
New York CPLR Rule 908 requires court approval for class action settlements: “A class action shall not be dismissed, discontinued, or compromised without the approval of the court.” The role of the court is to judge independently whether the settlement is fair, reasonable and in the best interest of the class members. During the 1980s and 1990s, New York courts routinely approved non-monetary class action settlements. More recently, concerns have arisen that courts serve as no more than a “rubber stamp” for collusive settlements of meritless class actions where the real benefit is the payment of attorney fees to class counsel, prompting reconsideration of the judiciary’s role in approving such settlements.
In 2017, the First Department adopted a new standard for such approvals of whether the class members will receive “some benefit” from a disclosure-only settlement with no monetary payment other than to class counsel for attorney fees. In contrast, the Delaware courts now use a higher standard of whether the supplemental disclosures will “materially enhance” the class members’ knowledge. This column discusses recent Commercial Division decisions applying this new standard in New York.
