Marjorie CHARRON, Theodore Charron, Andres Mares-Muro, Raymond Andrew Stahl-David, Kim Powell, on behalf of themselves and all others similarly situated, Plaintiffs-Appellants,
Joel WIENER, Pinnacle Group N.Y. LLC, Defendants-Appellees, Enrique Suarez, Hamida Moumouni, Diogenes Abreu, Objectors-Appellants, Buyers and Renters United to Save Harlem, Anthony Casanovas, Karen Flannagan, Tracey Moore, Russell Taylor, Diane Trummer, Plaintiffs, All Others Similarly Situated, Plaintiffs-Appellees, Pinnacle Group Corporation, Pinnacle Group, LLC, Defendants.
Argued: April 22, 2013.
[Copyrighted Material Omitted]
Harold F. McGuire (Kenneth Rosenfeld, James M. Baker, Matthew J. Chachère, Northern Manhattan Improvement Corporation Legal Services, Harvey David Epstein, David A. Colodny, Urban Justice Center, New York, N.Y., on the brief),
Yankwitt & McGuire, LLP, White Plains, New York, for Objectors-Appellants.
Marc Ian Gross, Pomerantz Grossman Hufford Dahlstrom & Gross LLP, New York, N.Y., for Plaintiffs-Appellants.
Richard F. Levy (Joshua H. Rubin, Marisa K. Perry, Katherine A. Neville, on the brief), Jenner & Block LLP, New York, N.Y., for Plaintiffs-Appellees.
Mitchell A. Karlan, Gibson, Dunn & Crutcher LLP, New York, N.Y., for Defendants-Appellees.
Before: CALABRESI, LIVINGSTON, and LYNCH, Circuit Judges.
GERARD E. LYNCH, Circuit Judge:
This appeal presents us with a unique variant of the more common general question of when a class-action settlement requires subclassing of the plaintiff class to ensure adequacy of representation pursuant to Federal Rules of Civil Procedure 23(e) and (a)(4). The district court certified the plaintiff classes, which comprise more than 20,000 current and former occupants of rent-regulated apartments in New York City, pursuant to Rules 23(b)(3) (damages) and (b)(2) (injunctive relief). The settlement that was eventually approved by the district court provides no damages relief for claims that tenants were overcharged rent by prior landlords, rather than by defendants, or for claims for rent overcharges that predate July 11, 2004 (together, the " Excluded Overcharge Claims" ). Appellant objectors to the settlement contend that the lack of separate representation for tenants with Excluded Overcharge Claims during settlement negotiations violated Rule 23 and constitutional due process, and that the district court was therefore required to establish subclasses for tenants who had such claims. Because we reject that contention, and because we also conclude that the settlement was fair, reasonable, and adequate, as required by Rule 23(e)(2), we affirm the judgment of the district court.
I. Plaintiffs' Allegations
On September 14, 2007, plaintiffs Marjorie Charron, Theodore Charron, Andres Mares-Muro, Raymond Andrew Stahl-David, and Kim Powell, along with Buyers and Renters to Save Harlem, Anthony Casanovas, Karen Flannagan, Tracey Moore, Russell Taylor, and Diane Trummer, filed an amended complaint in the United States District Court for the Southern District of New York. That complaint, as amended again on October 24, 2007, alleged that defendants had engaged in a conspiracy to fraudulently increase rents payable by tenants in over 400 buildings they owned in New York City, in violation of the Racketeer Influenced and Corrupt Organizations Act, 18 U.S.C. §§ 1961-1968, and the New York Consumer Protection Act (" NYCPA" ), which prohibits " [d]eceptive acts or practices in the conduct of any business," N.Y. Gen.Bus. Law § 349(a). Specifically, plaintiffs alleged that defendants Pinnacle Group N.Y. LLC, Pinnacle Group Corporation, and Pinnacle Group, LLC (collectively, " Pinnacle" )  and its principal, Joel Wiener, charged tenants higher rents than allowed by New York City rent regulations, refused to acknowledge
tenants' succession rights, misrepresented tenants' rent payment histories, filed meritless eviction suits, and otherwise harassed tenants. The complaint alleged that defendants did so in order to raise rents above legally chargeable levels and to drive tenants out of rent-regulated units, leading to the deregulation of those units and thus allowing defendants to sell the units or charge new tenants a higher, market-rate monthly rent.
II. Class Certification
On June 30, 2009, plaintiffs moved pursuant to Federal Rules of Civil Procedure 23(b)(2) and 23(b)(3) to certify a class of approximately 20,000 former and current residents of Pinnacle-owned buildings. On behalf of the class, they sought compensatory, punitive, and statutory (treble) damages, as well as attorney's fees. They also sought injunctive relief prohibiting defendants from engaging in the conduct alleged in the complaint, appointment of an independent monitor to supervise defendants' compliance, and regular audits of defendants' books. Plaintiffs' proposed class was defined in the Second Amended Complaint as
All persons who, at any time from July 11, 2004 to the date of certification, leased an apartment in the City of New York directly or indirectly owned in whole or in part by the Pinnacle Enterprise. This class seeks certification of claims for declaratory and injunctive relief, and for damages pursuant to 18 U.S.C. § 1962(d) and New York General Business Law § 349(h).
Pls.' Second Am. Compl. ¶ 151 (emphasis added).
On April 27, 2010, the district court certified two classes: an injunctive-relief class comprising all current residents of rent-regulated apartments owned by Pinnacle, and a damages class comprising " all persons who, at any time between July 11, 2004 and the date of this opinion [April 27, 2010], were tenants in rent-regulated apartments in New York City directly or indirectly owned in whole or in part by" Pinnacle. Charron v. Pinnacle Group N.Y. LLC, 269 F.R.D. 221, 244 (S.D.N.Y.2010). The district court found that the proposed injunctive— relief class satisfied Rule 23(a)'s four requirements— numerosity, commonality, representativeness, and adequacy of representation— as well as Rule 23(b)(2)'s requirement that injunctive relief be appropriate to the class as a whole. The district court found that while the proposed damages class satisfied Rule 23(a)'s requirements, it did not satisfy Rule 23(b)(3)'s requirement that questions of law or fact common to the members of the class predominate, given the members' individualized issues relating to injury and causation. However, even though the action as a whole failed to satisfy Rule 23(b)(3)'s predominance requirement, the district court nonetheless certified a class that was limited to certain common liability issues that did satisfy Rule 23(b)(3)'s predominance and
superiority requirements. See Fed.R.Civ.P. 23(c)(4) (" [A]n action may be brought or maintained as a class action with ...