Preliminary Approval to Settlement Agreements; Class Action; Opposition Papers; CPLR § 908
By Amanda Tersigni | Staff Writer
In 1870, the New York State Legislature (“the Legislature”), by and through its Parks Department, constructed an educational corporation, surrounding the Metropolitan Museum of Art’s (“the Museum”) to showcase art work and encourage and develop the study of fine arts. Two years later, the Legislature authorized the Parks Department to apply for funding of up to seventy thousand dollars each year for the Museum. The Museum was to be “kept open and accessible to the public hereafter free of all charge throughout the year for five days each week, one of which shall be Sunday afternoon and also for two evenings in each week.” However, budgets deficits emerged as the years progressed and the Museum began seeking to charge some admission fees in response to such deficiencies.
Relevant here is the Museum’s “pay what you wish” admissions policy–where the Museum maintains signs that suggest various admissions fee prices for each visitor depending on their age. The prices differed for children, adults and senior citizens. The purpose of the admissions policy was to provide visitors with a reasonable opportunity to pay an admission fee as they enter the Museum for less than the full suggested admission fee. Essentially, the policy encouraged visitors to donate to the Museum.
Theodore Grunewald and Patricia Nicholson (“the Grunewald Plaintiffs”) commenced an action against the Museum in November 2012 seeking injunctive relief based upon six causes of action, including the Museum’s alleged misrepresentation of the Museum’s admission costs. Czech residents Filip Saska and Tomá Nadrchal, and a New York resident Stephen Michelman (“the Saska Plaintiffs”), commenced a putative class action against the Museum in March 2013 concerning the Museum’s admission costs, demanding injunctive relief and monetary damages. The Saska Plaintiffs allegations were virtually identical to the Grunewald Plaintiffs’ complaint. Subsequently, the issues were joined and after settlement negotiations were broken down, the parties appeared for a preliminary conference, where a class discovery schedule was set. Later, however, the Saska Plaintiffs requested for a stay on discovery because of settlement discussions.
Subsequently, the Saska Plaintiffs and the Museum entered into settlement negotiations and agreed to a class action settlement agreement (“the Original Agreement”) which, amongst other things, consisted of an 8-part proposed consent decree that would bind the Museum. Under this decree, the Museum agreed to disclose the “pay what you wish” admissions policy to the public. Specifically, the Museum shall “maintain a sign or signs plainly visible to visitors approaching the ticket cashiers informing visitors of the Museum’s ‘pay what you wish’ admissions policy and the suggested amounts by each category of visitor.”
Together, the Saska Plaintiffs and the Museum jointly moved for preliminary approval of this Original Agreement pursuant to CPLR § 908. However, the Grunewald Plaintiffs filed opposition to this preliminary approval on the basis that the Original Agreement (1) did not have adequacy of representation by the class representatives and (2) superiority of the action being resolved is not on a class basis. Accordingly, the Original Agreement needed to be edited and resubmitted.
Later, the Saska Plaintiffs and the Museum entered into an Amended Agreement and jointly moved for approval on the Amendment Agreement. The sole change in the Amended Agreement was the emphasis of the following text: “[T]he amount you pay is up to you” and “Please be as generous as you can.” In opposition, the Grunewald Plaintiffs filed opposition to the Amended Agreement because it was merely a “modest improvement” of the Original Agreement but still suffered the same flaws.
The Court granted the motion filed by the Saska Plaintiffs and the Museum for preliminary approval of the Amended Settlement. First, the Court held that the settlement was fair. Under New York law, preliminary approval is the first step in the class action settlement process. Courts must engage in an initial evaluation of the fairness of the proposed settlement on the basis of written submissions and an informal presentation by the settling parties since preliminary approval is mostly just a determination of “probable cause” to submit the proposal to class members and hold a full-scale hearing to its fairness. Here, the Court deemed the settlement fair because there was probable cause that the primary objections to the Original Amendment were resolved through the amendments.
Second, the Court found that the Amended Agreement fell within a reasonable range for preliminary approval, and was a product of bona fide arms’ length negotiation. When an agreement falls within the range of reasonableness, it meets the requirement for preliminary approval. Here, the Court found that the likelihood of expensive and extensive fact and expert discovery, along with the expense of briefing numerous complicated legal issues, plus the cost and uncertainty of trial and appeal, were proper reasons to warrant a settlement.
Saska v. Metropolitan Museum of Art, Index No. 650775/2013 11/10/16 (Kornreich, J.).