Class Actions In New York – Pre-Certification Settlement Just Got A Lot Harder

On December 12, 2017, in a surprising move, the New York State Court of Appeals, in a 4-3 decision, held that CPLR 908 requires the parties to a potential class action to give notice to putative class members of a proposed dismissal, discontinuance, or compromise. Put more plainly, the court held that, where a complaint containing class allegations – a relatively simple thing to do – is settled or dismissed before a class has been certified by a court, a notice of the impending settlement must nevertheless be sent out to potential class members, even though the settlement is not binding on them. As explained further below, this decision is going to create great confusion and difficulty for both plaintiffs and defendants.