Settlement of RICO Claim Between Landlord and Tenants Upheld

A large group of 20,000 current and former rent-stabilized and rent-controlled tenants sued landlord, claiming that landlord engaged in a conspiracy to fraudulently increase rents in violation of the federal Racketeer Influenced and Corrupt Organizations Act (RICO) and the New York Consumer Protection Act (NYCPA). The case was certified as a class action. Despite the objections of some tenants, the federal district court approved a settlement agreement between landlord and tenants.

The objectors appealed and lost. They claimed that there were subclasses of tenants who should have been treated differently from each other. The appeals court found that the lower court didn't abuse its discretion in approving the class action settlement, that the failure to create subclasses didn't violate the adequacy of representation requirement for class certification, and that rejection of the proposed settlement by all named class representatives didn't require its rejection by the court. The lower court treated objections seriously, delayed a fairness hearing for many months, required revised notice and 20-building sampling, and ordered the parties to answer detailed questions about the settlement's effects on various hypothetical class members before approving the settlement.

If the settlement was rejected, landlord could have sought class decertification, which would have drastically reduced the chances of any class members getting meaningful relief. Even though the class of tenants who received damages included only tenants whose rents were set unlawfully high after a specific date, and a large number of class members had leases that predated the cut-off date, the complaint didn't claim individualized claims of erroneously charged rents, and the settlement didn't bar any tenant from seeking harassment or eviction-related damages. All current tenants benefitted from injunctive measures included in the settlement.

Charron v. Wiener: Index Nos. 12-2834-CV L, 12-2907-CV ,2013 WL 5420976 (CA2; 9/30/13; Lynch, Calabresi, Livingston, Circuit JJ)