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Kemp-DeLisser v. Saint Francis Hospital And Medical Center

United States District Court, D. Connecticut

November 3, 2016

CAROL KEMP-DELISSER, on behalf of herself and all others similarly situated, Plaintiff,
v.
SAINT FRANCIS HOSPITAL AND MEDICAL CENTER, SAINT FRANCIS HOSPITAL AND MEDICAL CENTER FINANCE COMMITTEE, SAINT FRANCIS HOSPITAL AND MEDICAL CENTER RETIREMENT COMMITTEE, and JOHN DOES 1-20, Defendants.

          ORDER GRANTING FINAL APPROVAL OF CLASS ACTION SETTLEMENT AND AWARDING ATTORNEYS' FEES AND EXPENSES AND GRANTING CASE CONTRIBUTION AWARD

          Victor A. Bolden, United States District Judge

         Plaintiff, Carol Kemp-DeLisser (the “Plaintiff” or “Named Plaintiff”), on behalf of herself and all others similarly situated, filed a class action complaint against Defendants, Saint Francis Hospital and Medical Center (“SFH”), the Saint Francis Hospital and Medical Center Finance Committee (the “Finance Committee”), the Saint Francis Hospital and Medical Center Retirement Committee (the “Retirement Committee”), and John Does 1-20 (the “Committee Members”) on July 21, 2015. ECF No. 1.

         Plaintiff alleges that Defendants violated the Employee Retirement Income Security Act of 1974 (“ERISA”) by significantly underfunding the St. Francis Hospital and Medical Center Pension Plan (the “Plan”). Compl. ¶ 1, ECF No. 1. On May 20, 2016, Plaintiff moved for preliminary approval of the Class Action Settlement Agreement negotiated between the parties (“Settlement” or “Settlement Agreement”). ECF No. 45. Following a hearing on the motion for preliminary approval held on July 5, 2016, the Court granted preliminary approval of the Settlement on July 12, 2016. ECF No. 53. On September 16, 2016, Plaintiff moved for final approval of the class action settlement, ECF No. 55, and for attorney's fees, reimbursement of litigation expenses, and a case contribution award. ECF No. 56. The Court held the final Fairness Hearing on October 19, 2016.

         For all of the reasons discussed below, the Court finds that the Settlement is fair, reasonable, and adequate, GRANTS the motion for final approval of the class action settlement, and GRANTS the motion for attorneys' fees, reimbursement of litigation expenses, and an incentive award for the Named Plaintiff.

         I. BACKGROUND

         Plaintiff's complaint alleged that the Defendants improperly characterized the Plan as a church plan in order to avoid their obligations under ERISA. Compl. ¶ 2. Plaintiff alleged that SFH is a hospital, not a church nor an association of churches, and that SFH's primary business is healthcare, so it is not an organization with the principal purpose or function of providing retirement or welfare benefits. Approval Br. at 3, ECF No. 55-2. Plaintiff therefore alleged that the Plan is not a church plan and is not, therefore, exempt from the requirements of ERISA. Compl. ¶¶ 3-4. Plaintiff further alleged that the Plan was underfunded by $140 million, or approximately 34%. Compl. ¶ 1.

         Plaintiff filed the complaint through her counsel, Izard Nobel LLP and McCarthy, Coombes & Costello LLP (collectively, “Class Counsel”), who conducted a factual investigation of the case and evaluated all pertinent legal issues prior to filing the complaint. Izard Decl. ¶ 2, ECF No. 55-3. Class Counsel are experienced in handling class actions, other complex litigation, and claims of the type asserted in this litigation, and are knowledgeable about the law applicable to this case. Izard Firm Resume, Izard Decl. Ex. B, ECF No. 55-5; Coombs Decl. ¶ 3, ECF No. 55-8.

         Defendants previously filed a motion to dismiss, arguing that ERISA's statutory text, case law, and administrative agency interpretations all support the conclusion that the Plan is church plan that is exempt from ERISA's requirements. ECF No. 32. The issue of whether a non-church entity, such as SFH, can nonetheless establish a church plan that is exempt from ERISA's requirements is an issue of first impression in the Second Circuit. Approval Br. at 9-10. Other circuit courts have reached conflicting conclusions regarding whether a non-church entity could establish a church plan exempt from ERISA. Fee Br. at 10-11.

         Nonetheless, before the motion to dismiss was fully briefed, the parties agreed to mediation before Robert A. Meyer (the “Mediator”), who is experienced with mediating large, complex matters similar to this case, including other ERISA class actions. Izard Decl. ¶ 3. The parties agreed to mediation out of a desire to avoid the burden, expense, and uncertainty of continued litigation. Id.

         A. Settlement Negotiations and Mediation

         The mediation process involved the production of documents, the submission of letter briefs to the Mediator, and two meetings with the Mediator, one in New York on December 9, 2015 and one in Los Angeles on February 18, 2016, to discuss the merits of the case and various issues with regards to liability, causation, and damages. Izard Decl. ¶ 4. As part of the mediation process, Defendants produced an actuarial report and other documents to Plaintiff, and Plaintiff also obtained and produced to Defendants her own actuarial report concerning both liability and damages. Id.

         Following the second meeting on February 18, 2016, the parties successfully reached an agreement-in-principle to settle the case and, at the conclusion of the meeting, signed a term sheet reflecting the material terms of the agreement. Izard Decl. ¶ 4. The parties then finalized the terms and conditions of the Settlement Agreement, which was executed on May 20, 2016. I Id. ¶ 6. The parties then submitted the Settlement to the Court with the motion for preliminary approval. Id.

         As to attorneys' fees, the term sheet indicated that Defendants would pay Plaintiff's attorneys' fees and expenses, in an amount to be negotiated between the parties. Izard Decl. ¶ 4. The term sheet further indicated that the Mediator would act as the final arbiter with respect to any disagreement regarding Plaintiff's reasonable fees and expenses. Id. The parties agreed to submit the issue of fees and expenses to the Mediator, who determined that a reasonable fee would be $800, 000, plus reimbursement for expenses actually incurred, not to exceed $50, 000. Id. At the Fairness Hearing, the parties noted that the decision to defer to the Mediator regarding fees and expenses was a joint one based on the sensitivity of the fee issue in any class action and the parties' mutual respect for the Mediator's ability to decide the most fair and reasonable fee award in this case.

         B. The Settlement Agreement

         The Settlement Agreement provides, in part, that SFH shall contribute a total of $107 million (the “Settlement Amount” or “Settlement Fund”) to the Plan over a period of ten years, consisting of a one-time payment of $17 million sixty days after “the Final Approval Order approving the settlement becomes Final” and a $10 million payment every year thereafter, for nine years. Settlement Agreement § 8.1.1, Izard Decl. Ex. A, ECF No. 55-4. Additionally, the Settlement Agreement further provides that SFH will guarantee benefit payments from the Plan for a period of 15 years, beginning from the date the Settlement becomes final. Settlement Agreement § 9.2. If SFH is unable to guarantee the benefit payments during that fifteen-year period, SFH agrees to borrow needed amounts from Trinity Health Corporation (“Trinity”), SFH's parent company. Id.

         With regards to attorneys' fees, the Settlement Agreement provides that Defendants will not oppose Plaintiff's motion to the Court for attorney's fees, not to exceed $800, 000, or for actually incurred expenses and/or an incentive fee for the Named Plaintiff, not to exceed $50, 000 in the aggregate, in accordance with the agreement the parties reached during mediation. Settlement Agreement § 8.1.3.

         The class of individuals affected by the Settlement Agreement includes “[a]ll present or past participants (vested or non-vested) or beneficiaries of the Plan” as of the date the Settlement becomes final (the “Settlement Class”). Settlement Agreement § 1.18. Because the Plan was already closed as of the date of the July 5, 2016 preliminary approval hearing, the Settlement Class is a finite group consisting of roughly 7, 200 Plan participants and beneficiaries. Prelim. Approval Trans. 11:7-19, ECF No. 52.

         C. Preliminary Approval

         The Court held a hearing on July 5, 2016 to consider the motion for preliminary approval of the Settlement Agreement. ECF No. 51. During the hearing, the parties discussed, among other things, the terms of the Settlement Agreement, the merits of Plaintiff's underlying claims, and the considerable uncertainty of the law governing the claims. Prelim. Approval Trans. 4:1-8:8. The parties also discussed the legal requirements for both preliminary and final approval as well as the parties' proposals for how to proceed with giving notice to class members. Id. at 14:8-24:11.

         On July 12, 2016, the Court issued an order granting preliminary approval of the Settlement Agreement. ECF No. 53. The order provided, among other things:

that the Settlement Class was preliminarily certified under Federal Rules of Civil Procedure 23(b)(1) and/or (2) and 23(e), and Class Counsel was preliminarily appointed as counsel for the Settlement Class, Prelim. Order at 4, ECF No. 53;
that the proposed Settlement Agreement resulted from (a) informed, extensive arm's-length negotiations, including participation in mediation with an experienced mediator, (b) Class Counsel had concluded that the proposed Settlement is fair, reasonable and adequate, (c) the proposed Settlement has no obvious deficiencies and did not improperly grant preferential treatment to the class representative or segments of the class, (d) the proposed Settlement fell within the reasonable range of possible approval, and (e) the proposed settlement was therefore sufficiently fair, reasonable, and adequate to warrant sending notice of the Settlement to the Settlement Class, Id. at 7;
that the proposed form of Class Notice, attached to the order as Exhibit A (“Class Notice”), fairly and adequately (a) described the terms and effect of the Settlement Agreement, (b) notified the Settlement Class that Class Counsel's attorneys' fees and expenses, and Named Plaintiff's incentive fee, would be determined in the sole discretion of the Court and paid according to §§ 8.1.3 and 8.1.4 of the Settlement Agreement, (c) gave notice to the Settlement Class of the time and place of the Final Fairness Hearing, and (d) described how the recipients of the Class Notice could object to any of the relief requested, Id. at 7-8;
that the parties' proposed method of distributing Class Notice was sufficient, Id. at 8;
that Class Counsel should, no later than 75 days before the Final Fairness Hearing, distribute the Class Notice to each person in the Settlement Class with Defendants to pay the cost for distributing the notice, cause the Settlement Agreement and the Class Notice to be published on the website identified in the Class Notice, file with the Court a proof of timely compliance with these notice requirements, and, no later than 31 days before the Final Fairness Hearing, Class Counsel should file motions for final approval of the Settlement, attorney's fees and expenses, and an incentive fee for Plaintiff, Id. at 8;
procedures for members of the Settlement Class to object to the fairness, reasonableness, or adequacy of the Settlement Agreement, or to any term of the Settlement, to the application for payment of attorneys' fees and expenses, or to the application for an incentive fee for Plaintiff, Id. at 8.

         The Court's preliminary approval order also scheduled the Final Fairness Hearing for October 19, 2016 (the “Fairness Hearing”), and stated that, at the hearing, the Court would determine, among other things:

(1) Whether the Settlement should be approved as fair, reasonable, and adequate;
(2) Whether the Complaint should be dismissed with prejudice pursuant to the terms of the Settlement Agreement;
(3) Whether the Class Notice provided for by the Settlement Agreement: (i) constituted the best practicable notice; (ii) constituted notice that was reasonably calculated, under the circumstances, to apprise members of the Settlement Class of the pendency of the litigation, their right to object to the Settlement, and their right to appear at the Final Fairness Hearing; (iii) was reasonable and constituted due, adequate, and sufficient notice to all persons entitled to notice; and (iv) met all applicable requirements of the Federal Rules of Civil Procedure, and any other applicable law;
(4) Whether Class Counsel adequately represented the Settlement Class for purposes of entering into and implementing the Settlement Agreement;
(5) Whether the application for payment for attorneys' fees and expenses to Class Counsel should be approved; and
(6) Whether the application for an incentive fee for the Named Plaintiff should be approved.

Prelim Order at 11.

         D. Notice to the Class

         The parties engaged a third party, Rust Consulting (“Rust”), to administer notice to the Settlement Class. Schwartz Decl. ¶¶ 1-5, Izard Decl. Ex. D, ECF No. 55-7. Consistent with the Court's preliminary approval order, Rust mailed the Class Notice on August 5, 2016 to the 7, 224 class members who could be identified by the Plan's recordkeeper, using first-class mail. Izard Decl. ¶ 7; Schwartz Decl. ¶ 10. The Class Notice advised class members of the Settlement's terms and how they could object to the Settlement, if they so desired. Schwartz Decl. ¶ 10; Class Notice at 8-10, Settlement Agreement Ex. A, ECF No. 55-4.

         Of the 7, 224 Class Notices that Rust mailed out, 1, 223 were returned as undeliverable. Schwartz Decl. ¶ 11. Of the 1, 223 Class Notices that were returned as undeliverable, Rust performed address traces for all 1, 223 mailings. Id. From the 1, 223 traces, Rust was able to obtain 970 more current addresses, and Rust promptly re-mailed Class Notices to those 970 addresses. Id. Rust was not able to obtain updated addresses for 253 of the 1, 223 undeliverable Class Notices. Id. Seven copies of the Class Notice were also returned to Rust with forwarding addresses, and Rust promptly re-mailed those Class Notices. Id. ¶ 12. During the Fairness Hearing, Class Counsel provided an update regarding the number of Class Notices that were sent, noting that 7, 724 were mailed, 1, 331 were returned, and that, after traces were performed, only 371 Class Notices remained undeliverable.

         The Settlement and all of its attachments, including the Class Notice, were also published on a dedicated page of the Izard, Kindall & Raeebe LLP website (http://ikrlaw.com/file/kemp-delisser-v-st-francis-hospital-medical-center/) on July 12, 2016. Izard Decl. ¶ 8. The website also included copies of the motion for preliminary approval of the Settlement Agreement and all supporting materials. Id.

         As part of the class notice procedure, Rust also obtained a case-specific toll-free telephone number where Class Members could call with questions regarding the Settlement. Schwartz Decl. ¶ 14. Callers were prompted to listen to a recorded introductory message before selecting an option from an automated menu system designed to answer frequently asked questions about the Settlement. Id. As of September 13, 2016, approximately 326 calls were received at the case-specific toll-free number. Id. During the Fairness Hearing, Class Counsel reported that 331 total calls had been received at the case-specific toll-free number.

         Pursuant to the requirements of the Class Action Fairness Act, 28 U.S.C. § 1711, et. seq. (“CAFA”), the parties also sent a letter, on May 27, 2016, to the United States Attorney General (“CAFA Notice”). Saper Decl. ¶ 3, ECF No. 59. Similar CAFA Notices were also sent to the Attorney Generals of all fifty United States, the District of Columbia, and the United States territories. Id. Each CAFA Notice complied with the requirements of 28 U.S.C. § 1715(b). Id. ¶ 4. Among other things, each CAFA Notice explained the definition of the Settlement Class and provided a reasonable estimate of the number of class members in each state, in addition to attaching copies of the Settlement Agreement and proposed Class Notice to the class members. Id. The only response to any of the CAFA Notice mailings was an email confirming receipt from the Attorney General of the State of Washington, dated June 30, 2016. Id. ¶ 5. At the Fairness Hearing, the parties confirmed that there were no objections in response to the CAFA Notices.

         As of October 19, 2016, the date of the Fairness Hearing, none of the parties or Rust had received any objections from any member of the Settlement Class to any aspect of the Settlement Agreement or the proposed award of attorneys' fees, expenses, or an incentive payment for Plaintiff. No objections to the Settlement were filed with the Court.

         E. Fees, Costs, and Incentive Award

         Plaintiff's motion requests that the Court (1) grant $800, 000 in attorneys' fees to Class Counsel, (2) grant $19, 611.71 as reimbursement of litigation expenses to Class Counsel, and (3) award Plaintiff $2, 000.00 as a case contribution or incentive award, all of which Defendants will pay to Plaintiff and Class Counsel separately from the Settlement Amount, in accordance with the provisions of the Settlement Agreement. ECF No. 56.

         The Mediator, with the parties' agreement, had proposed that the reasonable attorneys' fees and expenses in this case would be $800, 000 in fees, plus reimbursement for expenses actually incurred, not to exceed $50, 000. Izard Decl. ¶ 5. Although the Mediator's determination does not appear to have been based on a lodestar calculation, the proposed $800, 000 fee award represents a “multiplier of 2.77 compared to Class Counsel's lodestar.” Fee Br. at 2. While the fee award will be paid directly by Defendants and will not come out of the Settlement Fund, had the $800, 000 proposed fee award come out of the $107 million dollar settlement instead, it would have been only 0.7% of the Settlement Fund. Id. at 14.

         In support of the request for $800, 000 in attorneys' fees, Class Counsel provided a breakdown of attorney's fees incurred in litigating this class action. Izard, Kindall, & Raabe LLP spent 411.75 attorney hours litigating this case, which, at each attorney's normal billing rate, resulted in a lodestar fee amount of $262, 017.50. Izard Decl. ¶¶ 9-10. McCarthy, Coombes, & Costello LLP spent 40.4 attorney hours litigating this case, which, at each attorney's normal billing rate, resulted in a lodestar fee amount of $26, 215.00. Coombes Decl. ¶¶ 4-5, ECF No. 55-8. The total lodestar amount for Class Counsel is, therefore, $288, 322.50. Fee Br. at 18. A partner at each firm reviewed the time and expense reports associated with this case and certified that the hours spent on this case were reasonable in amount and necessary for the effective and efficient prosecution and resolution of this litigation. Izard Decl. ¶ 9; Coombes Decl. ¶ 4.

         In support of the request for $19, 711.71, as reimbursement of litigation expenses actually incurred, Class Counsel provided a breakdown of the exact expenses incurred in litigating this class action. Izard, Kindall & Raabe LLP incurred $19, 592.71 total in expenses while litigating this case, which are broken down as follows:

Experts:

$3, 375.00

Mediation:

$13, 160.00

Travel:

$2, 766.58

Service of Process:

$198.10

Postage & Delivery:

$15.83

Pacer:

$77.20

         Izard Decl. ¶ 11. McCarthy, Coombes, & Costello LLP incurred $119.00 in travel expenses while litigating this case. Coombes Decl. ¶ 6. A partner at each firm certifies that the expenses incurred while litigating this case were all reasonable and necessary for the efficient prosecution and resolution of this class action and are all of a type that would normally be charged ...


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