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Class Action Defense Cases–People United For Children, Inc. v. The City of New York: Second Circuit Affirms Approval Of Class Action Settlement But Remands For Clarification Of Scope Of Class Action Release

Class Action Settlement Properly Approved by District Court but Ambiguity in Scope of Release Required Remand for Clarification Second Circuit Holds

Plaintiffs filed a class action in New York federal court against the City of New York and various other defendants that “challenged policies adopted by the New York City Administration for Children’s Services (‘ACS’) relating to the removal of children from their homes in cases of abuse and neglect.” People United For Children, Inc. v. The City of New York, ___ F.3d ___, 2009 WL 4576113, *1 (2d Cir. December 8, 2009). According to the allegations underlying the class action complaint, defendants’ conduct constituted “violations of due process, equal protection, and parental, privacy, cultural, and religious rights,” and constituted discrimination “under the New York State and United States Constitutions.” Id. The class action complaint prayed for declaratory and injunctive relief, and for monetary damages. Id., at *2. Ultimately, the district court granted plaintiffs’ motion to certify the litigation as a class action. Id. Following two years of negotiations, the parties agreed upon a proposed class action settlement that won the preliminary approval of the district court. Id., at *3. At the fairness hearing, the district court gave final approval to the class action settlement over the objection of one of the named plaintiffs (Jones) and the objections of a member of the putative class. Id., at *1, *3. In part, the district court concluded that Jones had effectively “opted out” of the class, removed her as a class representative, and concluded that it need not consider her objections to the proposed settlement. Id., at *1. The objectors appealed the order approving the class action settlement, id. The Second Circuit agreed that the district court should not have concluded Jones had “opted out” of the class, but it found the error to be harmless and therefore affirmed.

We do not here summarize the notice provided to the class or the objections leveled against the class action settlement. See McReynolds, at *4-*6. The central issues on appeal were (1) whether Jones had “opted out” of the class and (2) whether the district court should have ignored her objections to the proposed settlement. Id., at *6. With respect to the first issue, the Second Circuit held that the district court erred because Jones had simply objected to the proposed settlement, and stated as much at the fairness hearing. Id., at *7. The Circuit Court explained at page *7, “Despite Jones’ clear indication that she did not intend to opt out of the class action and her invocation of her right to object under the ‘rules,’ the District Court nevertheless found that Jones had opted out of the class because she ‘can’t have it both ways.’ In so finding, the District Court erred in two ways: first, the finding that Jones elected to opt out of the class action was a clearly erroneous finding of fact; and, second, the court’s conclusion that Jones opted out of the class by reason of her objection to the class settlement was an error of law.” The error was harmless, however, because Jones’ objections had been raised by other members of the putative class and so had been considered (and rejected) by the district court. See id., at *8-*9.

Nonetheless, the Second Circuit found that remand was appropriate in order for the district court “because there is need for clarification in the Settlement Agreement as to whether individual claims for damages may still be pursued following approval of the Settlement Agreement.” McReynolds, at *9. Specifically, the Circuit Court held that “[t]he broad terms of the release provision are…inconsistent with the parties’ stated and undisputed intent to release only the class members’ claims for injunctive relief against the defendants.” Id., at *10. Accordingly, the Second Circuit ordered the district court on remand “to clarify the language of the release provision in order to reflect their stated understanding that plaintiffs are allowed to pursue subsequent actions for damages.” Id. It therefore affirmed the approval of the class action settlement and remanded the matter for the purpose just described, id., at *11.

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