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VARACALLO v. MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

February 2, 2005.

PAUL VARACALLO, STEVEN E. FELDMAN, K. WERNER GASS, JEREMIAH B. WALSH, WILLIAM A. KARGES, JR., JEFFREY M. WEINER, as Trustee of the KARGES IRREVOCABLE TRUSTS I and II, and DONALD A. WOFFORD, individually and on behalf of all other persons similarly situated, Plaintiffs,
v.
MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY, CONNECTICUT MUTUAL LIFE INSURANCE COMPANY, C.M. LIFE INSURANCE COMPANY, MML BAY STATE LIFE INSURANCE COMPANY, Defendants.



The opinion of the court was delivered by: JOSE LINARES, District Judge

AMENDED OPINION*fn1

INTRODUCTION

Before this Court are (1) an application by the parties for approval of the Proposed Settlement*fn2 of this proposed class action that is memorialized in a Settlement Agreement dated June 23, 2004, with exhibits (hereinafter the "Settlement Agreement" or "Settlement" or "S.A."),*fn3 (2) an application for an award of attorneys' fees and reimbursements of expenses to Class Counsel, and (3) an application for incentive awards for the representative Plaintiffs. For the reasons set forth below in its Findings of Fact and Conclusions of Law, the Court has determined that the Settlement is fair, reasonable and adequate and should therefore be approved. In addition, the Court grants the application for attorneys' fees and expenses, and grants in part the application for incentive awards for the Representative Plaintiffs. Contemporaneously, the Court has issued a Final Order and Final Judgment Approving Class Action Settlement and dismissing the Class Action Complaint in this action with prejudice, granting the application for attorneys' fees and expenses, and granting in part the application for incentive awards.

  FINDINGS OF FACT AND CONCLUSIONS OF LAW

  I. BACKGROUND

  A. Materials Considered by the Court

  In reaching its decision in this case, the Court has reviewed and considered (a) the Settlement Agreement dated June 23, 2004, with its attached exhibits, and definitions included therein, filed with this Court on June 23, 2004; (b) Plaintiffs' Complaint; (c) the briefs, affidavits and other materials filed in support of the Settlement; (d) the written objections submitted by Class Members; (e) the affidavits and reports filed in support of the Settlement; (f) the record at the Fairness Hearing on November 22, 2004; (g) the documents listed on the docket sheet or otherwise submitted to the Court; and (h) all prior proceedings in this Action.

  B. History of the Litigation Against MassMutual

  According to the parties' submissions, over the past nine years, Class Counsel have filed a number of putative class action sales practices cases against MassMutual in several states, which have been litigated in both the trial and appellate courts. See, e.g., Varacallo, et al. v. Massachusetts Mut. Life Ins. Co., No. ESX-L-3403-97 (Superior Ct., Law Div., Essex County, N.J.) (class certification was granted and the pending motions to supplement the witness list were not resolved because these settlement discussions commenced); Karges, et al. v. Massachusetts Mut. Life Ins. Co., No. GIC-713920 (Superior Ct., San Diego County, Cal.) (class certification was granted and the case was scheduled for trial until these settlement discussions commenced); Gass, et al. v. Massachusetts Mut. Life Ins. Co., No. 2000-05-2010 (Ct. of Common Pleas, Summit County, Ohio) (the trial court granted MassMutual's motion for summary judgment and denied plaintiffs' motion for summary judgment and class certification; the appeal was stayed pending approval of the proposed settlement in this action); Russo, et al. v. Massachusetts Mut. Life Ins. Co., No. 96-0368 (Supreme Ct., Tompkins County, N.Y.) (plaintiffs' appeal of the denial of class certification was withdrawn in favor of the settlement of this case); O'Brien, et al. v. Massachusetts Mut. Life Ins. Co., Civil Action Number 95-1594 (Superior Ct., Suffolk County, Mass.), subsequently transferred to and renumbered as Civil Action Number 96-0160 (Superior Ct., Hampden County, Mass.); Wofford, et al. v. Massachusetts Mut. Life Ins. Co., Case No. GIC-795696 (Superior Ct., San Diego County, Cal.) (on April 9, 2004 the court set a trial readiness conference).*fn4 (Defendants' Memorandum of Law in Support of Final Approval of Class Action Settlement ("Def. Settle. Mem.") at 4, Docket Entry # 116).

  Each of these cases had to surmount a threshold motion to dismiss and entailed significant discovery. For example, in the three "vanishing premium" cases, Varacallo, Russo, and Karges, over 800,000 pages of documents were produced by MassMutual. Additional documents were produced by MassMutual in the Gass "churning" case and the Wofford "juvenile smoker" case. In addition to document production, the Plaintiffs also took more than 25 depositions in these cases, conducted interviews of numerous officers and employees of MassMutual, and solicited expert opinions. (Brief of Plaintiffs in Support of Final Approval of Proposed Settlement ("Pl. Settle. Mem.") at 5, Docket Entry # 114; Def. Settle. Mem. at 5). In both Varacallo and Karges, the Plaintiffs succeeded in obtaining class certification. See Varacallo v. Mass. Mut. Life Ins. Co., 332 N.J. Super. 31 (App.Div. 2000); Mass. Mut. Life Ins. Co. v. Superior Ct., 119 Cal. Rptr. 2d 190 (Cal.Ct.App. 2002). (See also Declaration of Andrew S. Friedman in Support of Request for Final Approval of Proposed Settlement ("Friedman Decl.") at ¶¶ 23-24, 72-74, Docket Entry # 114).

  C. Plaintiffs' Allegations Against MassMutual

  Individually and on behalf of all other persons similarly situated, Paul Varacallo, Steven E. Feldman, K. Werner Gass, Jeremiah B. Walsh, William A. Karges, Jr., Jeffrey M. Weiner, as Trustee of the Karges Irrevocable Trusts I and II, and Donald A. Wofford (hereinafter "Plaintiffs" or "Class Representatives") filed a Class Action Complaint on June 10, 2004 against Massachusetts Mutual Life Insurance Company, Connecticut Mutual Life Insurance Company, C.M. Life Insurance Company, and MML Bay State Life Insurance Company (hereinafter "Defendants" or "MassMutual").*fn5 (See Complaint ("Compl."), Docket Entry # 1). The Complaint is brought on behalf of a class of persons or entities (hereinafter the "Class" or "Class Members") who own or owned one or more of the following types of Policies issued between January 1, 1983 and December 31, 2003: (i) Permanent Policies (such as whole life, universal life, variable universal life and variable life policies); (ii) Disability Income Policies that have a Delayed Coverage Claim; and/or (iii) Term Life Policies that have a Delayed Coverage and/or Juvenile Smoker Claim, with a few exceptions that are listed in the Settlement Agreement at § II.A.17. The Class description (including identification of the individuals and entities who are specifically excluded from the Class) is set out in the Settlement Agreement and the Court's Final Order Approving Class Action Settlement.

  The Complaint asserts ten causes of action, including violations of 18 U.S.C. § 1961 et seq. (Racketeer Influenced and Corrupt Organizations Act ("RICO")), breach of express and implied contract, common law fraud, fraudulent inducement, breach of fiduciary duty, negligence, negligent misrepresentation, unjust enrichment and imposition of a constructive trust, and reformation. The Complaint seeks compensatory, statutory and punitive damages, attorneys' fees and costs and prejudgment interest. (Compl. at 113). Plaintiffs also seek rescission, injunctive relief, reformation and other equitable relief. (Id.).

  Plaintiffs' Complaint alleges improper practices in marketing, selling, servicing and administering permanent and term life insurance as well as disability income insurance policies by MassMutual during the Class Period. The specific practices alleged in the Plaintiffs' Complaint include, among other things, that:
(a) MassMutual engaged in a scheme of misrepresenting to policyholders that their premiums would "vanish" after a specified amount of out-of-pocket premiums had been paid (the "Vanishing Premium Claims") (Compl. at ¶¶ 1-7, 49-73);
(b) MassMutual engaged in a scheme of misrepresenting to policyholders that non-guaranteed components of the Permanent Policies, such as cash values and account values, would likely not change over time from the amounts depicted on sales illustrations or presentations (the "Performance Claims") (Id.);
(c) MassMutual engaged in improper and systematic "churning" activities to sell replacement policies to existing permanent life insurance policyholders (the "Replacement Claims") (Compl. at ¶¶ 8-18, 74-117);
(d) MassMutual charged premiums for periods of non-existent coverage with respect to Permanent, Term Life and Disability Income Policies (the "Delayed Coverage Claims") (Compl. at ¶¶ 19-20, 118-123);
(e) MassMutual induced policyholders to purchase permanent life insurance products by misrepresenting them as investment, retirement, college funding or savings plans (the "Retirement/Investment Plan Claims") (Compl. at ¶¶ 21-22, 124-131); and
(f) MassMutual priced policies issued to juveniles based upon substandard smoker rates even though the insureds were non-smoking infants and children at the time the policies were issued (the "Juvenile Smoker Claims") (Compl. at ¶¶ 23-28, 132-155).
  Although MassMutual has agreed to settle the claims asserted in this action, MassMutual does not concede that it engaged in any wrongful conduct and denies all of the Plaintiffs' allegations. MassMutual considers it desirable to settle this case because the Settlement will: "(i) provide substantial benefits to MassMutual's present and former policyholders; and (ii) avoid the substantial expense, burdens and uncertainties associated with continued litigation of Plaintiffs' claims." (Def. Settle. Mem. at 5).

  D. The Parties and Their Counsel

  1. The Class Representatives

  Plaintiff Paul Varacallo is a citizen and resident of the State of New Jersey. (Compl. at ¶ 35). Varacallo is a policy owner of multiple MassMutual life insurance policies, including a Convertible Whole Life policy insuring his life, a Limited Whole Life policy insuring the life of his minor daughter Jaclyn E. Varacallo, and a Whole Life policy on his minor daughter Lisa F. Varacallo. (Id.).

  Plaintiff Steven E. Feldman is a citizen and resident of the State of California. (Compl. at ¶ 39). Feldman owns a Graded Premium Life-20 insurance policy with a separate PUA rider insuring the life of his mother, June Feldman. (Id.).

  Plaintiff K. Werner Gass is a citizen and resident of the State of Ohio. (Compl. at ¶ 40). Gass is the owner and insured of a Whole Life policy. (Id.).

  Plaintiff Jeremiah B. Walsh is a citizen and resident of the State of New Jersey. (Compl. at ¶ 41). Walsh is th eowner and insured of a Whole Life policy. (Id.).

  Plaintiff William A. Karges, Jr. is a citizen and resident of the State of California. (Compl. at ¶ 36). Karges is a policy owner of a Survivorship Whole Life policy and a Modified Premium Whole Life policy. (Id.).

  Plaintiff Jeffrey M. Weiner, as Trustee of the Karges Irrevocable Trusts I and II, is a citizen and resident of the State of California. (Compl. at ¶ 38). The Karges Irrevocable Trusts I and II were established by Plaintiff Karges and his spouse, Merrily D. Karges, for the purpose of, among other things, holding beneficial interest in life insurance policies on Karges' life in trust for their children. (Compl. at ¶ 37).

  Plaintiff Donald A. Wofford is a citizen and resident of the State of California. (Compl. at ¶ 42). Wofford is the owner of a Whole Life Policy with Premiums Payable to Age 65, insuring the life of his son, Michael Wofford, who was five months old at the time the policy was issued. (Id.).

  2. Class Counsel

  The Class Representatives and the Class are represented by the law firms of Bonnett, Fairbourn, Friedman & Balint, P.C., Finkelstein and Krinsk, LLP, Lite DePalma Greenberg & Rivas, LLC, Lerach Coughlin Stoia Geller Rudman & Robbins LLP, Specter Specter Evans & Manogue, P.C, and Milberg Weiss Bershad & Schulman LLP. All are experienced and skilled class action counsel with expertise in insurance sales practices cases. (See Friedman Decl. at 57). Indeed, Class Counsel are responsible for other similar settlements and significant legal decisions including, but not limited to, In re The Prudential Insurance Company of America Sales Practices Litigation ("Prudential I"), 962 F. Supp. 450 (D.N.J. 1997), aff'd, 148 F.3d 283 (3d Cir. 1998) ("Prudential II"), cert. denied, 525 U.S. 1114 (1999); Duhaime v. John Hancock Mut. Life Ins. Co., 177 F.R.D. 54 (D. Mass. 1997); and Willson v. New York Life Ins. Co., 1995 N.Y. Misc. LEXIS 652 (N.Y. Sup. Ct. Nov. 8, 1995), that set precedent and enable litigation such as this to be successfully prosecuted. (See Friedman Decl. at 57).

  3. The Defendants

  Plaintiffs' Class Action Complaint names Massachusetts Mutual Life Insurance Company, Connecticut Mutual Life Insurance Company, C.M. Life Insurance Company, and MML Bay State Life Insurance Company (hereinafter "Defendants" or "MassMutual") as Defendants.

  Defendant Massachusetts Mutual Life Insurance Company,*fn6 individually and as surviving company pursuant to the merger between itself and Connecticut Mutual Life Insurance Company and C.M. Life Insurance Company, is a mutual life insurance corporation organized under the laws of the Commonwealth of Massachusetts with its principal place of business in Massachusetts. (Compl. at ¶ 44).

  Defendant MML Bay State Life Insurance Company is a life insurance corporation organized under the laws of the State of Connecticut with its principal place of business in Massachusetts. (Compl. at ¶ 45). This Defendant is a subsidiary of Defendant Massachusetts Mutual Life Insurance Company. (Id.).

  Defendant Connecticut Mutual Life Insurance Company was, prior to the merger, a mutual life insurance corporation incorporated under the laws of the State of Connecticut with its principal place of business in Connecticut. (Compl. at ¶ 46).

  Defendant C.M. Life Insurance Company was, prior to the merger, a life insurance corporation incorporated under the laws of the State of Connecticut with its principal place of business in Connecticut. (Compl. at ¶ 47). This Defendant was a subsidiary of Defendant Connecticut Mutual Life Insurance Company. (Id.).

  On or about March 1, 1996, Massachusetts Mutual Life Insurance Company merged with Connecticut Mutual Life Insurance Company and assumed control over Connecticut Mutual's business operations and liabilities. (Compl. at ¶ 48).

  4. Defendants' Counsel

  The Defendants are represented in this Settlement by the law firm of Edwards & Angell, LLP. This firm has extensive experience in the defense of complex and class action litigation.

  E. The Settlement

  This Settlement Class Action arose following the coordination of this Class Counsel, that represented the Plaintiffs in Varacallo, Karges, Russo, Gass, and Wofford, in discussing the prospects for the settlement of the pending actions. (Friedman Decl. at 39). During the early discussions, beginning around April of 2003, counsel for MassMutual stressed that any class settlement would need to settle all claims by policyholders, nationwide, against all of MassMutual. (Id. at 40). MassMutual was not interested in discussing piecemeal settlements, rather all negotiations were to be global. (Id.). In addition, counsel for MassMutual expressed that any such settlement would need to be comparable to the other nationwide class settlements that had been negotiated with other large insurance companies and that had been uniformly approved by the courts across the country. (Id.).

  Under those circumstances, counsel for the parties began intensive settlement negotiations, which nearly fell apart at the outset. (Id. at 41). Nevertheless, talks continued, both face to face and by telephone. (Id.). Throughout these negotiations, the parties consulted with actuarial and other experts to ensure that counsel were fully informed on all financial and actuarial aspects of the settlement's proposed terms. (Id.). In addition, MassMutual made available to Class Counsel hundreds of thousands of additional documents that had not previously been obtained during discovery. (Id.). Class Counsel also interviewed several former employees of ConnMutual. (Id.).

  Since Class Counsel had been involved in many other insurance sales practices cases against other companies, such as Prudential, which resulted in class action settlements, Class Counsel suggested applying those structural models to the proposed settlement with MassMutual. (Friedman Decl. at 43). MassMutual, however, had studied other insurance sales practices settlements and sought to have features of those settlements that would be most favorable to itself applied in its settlement terms. (Id.).

  The Settlement that is before the Court is the product of about twelve months of lengthy and difficult negotiations, which resulted in an agreement on the terms of a settlement of all sales practices claims against MassMutual on a nationwide basis that Class Counsel concluded was very favorable to Class Members. (Id. at 44). Since the settlement would be a nationwide resolution of all insurance sales practices claims against MassMutual and its family of companies, the parties decided to file a new action in federal court. (Id. at 47). New Jersey was selected as the proper forum since Varacallo, being the closest to trial, was pending in New Jersey state court. (Id.). Furthermore, the District of New Jersey had seen other successful insurance sales practices settlements, such as Prudential I and Roy v. Independent Order of Foresters, Civil Action No. 97-6225 (D.N.J. Aug. 3, 1999), on which the MassMutual settlement was modeled. (Id.).

  The federal Complaint was filed in this Court on or about June 10, 2004. On or about June 23, 2004, counsel for the parties appeared before this Court seeking preliminary approval of the Proposed Settlement. On that date, the parties jointly submitted the Settlement Agreement to this Court.

  The Complaint generally describes the Settlement Class (the "Class") as:
all persons in the United States who own or owned MassMutual or Conn Mutual permanent life insurance policies issued from January 1, 1983 through December 31, 2003 and who are victims of any one or more of the following deceptive practices of MassMutual or Conn Mutual: (1) the Vanishing Premium Schemes; (2) the Performance Schemes; (3) the Replacement Sales Presentation Schemes; (4) the Replacement Policy Schemes; (5) the Delayed Coverage Schemes; (6) the Retirement/Investment Plan Schemes; and/or (7) the Juvenile Policy Smoker Rate Schemes. . . . . all persons who, from January 1, 1983 through December 31, 2003, purchased term life insurance policies or disability insurance policies from MassMutual or Conn Mutual, and who were damaged by the Delayed Coverage Schemes. . . . all persons who, from January 1, 1983 through December 31, 2003, purchased a life insurance policy from MassMutual or Conn Mutual that is either dividend-paying or has a cost of insurance, and who were damaged by the Juvenile Policy Smoker Rate Schemes.
(Compl. at ¶ 216).

  The Final Order being executed contemporaneously with this Opinion specifically sets forth that the Class

 
consists of all persons or entities who or which, has/have as of the Eligibility Date,*fn7 or who had at the time of the Policy's termination (where termination occurs prior to the Eligibility Date), or who had at the time of the Policy's absolute assignment to an insurance company under Internal Revenue Code § 1035 (where assignment occurs prior to the Eligibility Date), an ownership interest in a Policy issued during the Class Period,*fn8 except "Class" or "Class Member" does not include a person(s) or entity(ies) (unless and to the extent the person or entity is a Class Member by virtue of an ownership interest in another Policy) (a) who has or had an ownership interest in a Policy that (i) was terminated on or before the Eligibility Date due to the death of the insured and MassMutual has or will pay a death benefit prior to the Implementation Date, (ii) was issued, but not accepted or was returned to the Company as part of the exercise of the free look provision in the Policy, or (iii) was rescinded and premiums were returned to the Policy owner as part of the reissue of a new Policy, or because of a misrepresentation by the Applicant on a Policy application; (b) who, while represented by counsel, signed a document that released MassMutual from any further Claims concerning the Policy; (c) whose rights and claims respecting the Policy have been finally adjudicated in a court of law; (d) who is or was a member of the Board of Directors and/or officer of MassMutual during the Class Period; (e) who made a valid election to be excluded from the Class pursuant to the Preliminary Approval Order; (f) who is an insurance company that has or had an ownership interest in the Policy pursuant to an absolute assignment effected as part of an Internal Revenue Code § 1035 exchange; (g) who owns or owned Disability Income Policies, except to the extent they have a Delayed Coverage Claim and then only for such Delayed Coverage Claim; or (h) who owns or owned Term Life Policies, except to the extent they have a Delayed Coverage Claim and/or a Juvenile Smoker Claim and then only for such Delayed Coverage Claim and/or Juvenile Smoker Claim.
(Final Order at 3-5) (footnotes added).

  F. The Preliminary Approval Order

  The Court entered an Order dated June 24, 2004 (the "Preliminary Approval Order") preliminarily certifying the putative class in this action for settlement purposes under Fed.R.Civ.P. 23(a), 23(b)(2) and (b)(3), ordering individual and publication notice to potential Class Members, scheduling a Fairness Hearing for November 22, 2004, providing potential Class Members with an opportunity either to exclude themselves from the settlement class or to object to the Proposed Settlement and issuing related orders. The Order also enjoined Class Members from pursuing related litigation elsewhere unless they timely excluded themselves from the Class.

  G. The Fairness Hearing

  Prior to the date scheduled for the Fairness Hearing, the parties filed comprehensive memoranda, declarations, affidavits and reports with the Court.

  (a) Plaintiffs presented declarations and affidavits from: Andrew S. Friedman (Class Counsel and a member of the law firm of Bonnett, Fairbourn, Friedman & Balint, P.C.); Terry M. Long (Senior Vice President and Principal of Lewis & Ellis, Inc., an actuarial consulting firm); and Bruce D. Greenberg (Class Counsel and a member of the law firm of Lite DePalma Greenberg & Rivas, LLC). (Docket Entry # 114 & 117).

  (b) Defendants submitted declarations and affidavits from: Godfrey Perrott (associated with the firm of Milliman, Inc., an actuarial firm consulting in the field of life insurance); Jeanne C. Finegan (President of Capabiliti, LLC, a national communications consulting and public relations firm); Richard H. Redfern (President of Rust Consulting, Inc., providing notification and/or claims administration services in class actions); Nicole F.J. Hamann (Director of Legal Services with Poorman-Douglas Corporation, specializing in settlement administration); and Katherine A. Plante (associate with the law firm of Edwards and Angell, LLP). (Docket Entry # 116).

  (c) The parties also submitted briefs responding to the objections submitted by Class Members regarding the Settlement. (Docket Entry # 123, 124, 125, 151, 152).

  On November 22, 2004, the Court held the Fairness Hearing to determine whether to grant final approval to the Proposed Settlement. Counsel for the Class and counsel for the Defendants gave presentations in support of granting class certification; approval of the Settlement Agreement; and approval of Class Counsel's request for an award of attorneys fees, reimbursement of expenses to Class Counsel, and for incentive awards to Representative Plaintiffs. The Court also heard from nine lawyers representing a total of twenty-six objectors. In addition, the Court heard from five objectors*fn9 appearing pro se, who gave short statements in opposition to the Proposed Settlement. In all, there were less than 100 class members who filed written objections,*fn10 amounting to about .003% of the policies covered by the Settlement Agreement. These objections are discussed below. To the extent the Court has not addressed a particular argument, it is because the Court agrees with the positions taken by Class Counsel and Defendants' counsel in their submissions. As of the date of the Fairness Hearing, holders of 2,204 Class policies had requested to opt out of the class, which is about .06% of the covered policies.

  II. TERMS AND VALUE OF THE SETTLEMENT AGREEMENT

  The Proposed Settlement before this Court applies to MassMutual policies issued between January 1, 1983 and December 31, 2003, subject to certain exclusions. (S.A. at 9, 10, 16) (definitions of "Class," "Class Period" and "Policy"). Under the Proposed Settlement, most of the Class has a choice between two types of monetary relief: Claim Review Process Relief ("CRP") and General Policy Relief ("GPR"). (S.A. at 20-21). Claims asserted by term or disability policyholders are limited and any other claims that they may have are not affected by this Settlement. Class Members with term life insurance policies can assert, and will only release, claims for Delayed Coverage and/or Juvenile Smoker allegations. (S.A. at 21). Class Members with disability income policies can assert, and will only release, Delayed Coverage claims. (Id.). Claims such as these, on term life or disability income policies can only be pursued through CRP. (Id.). In addition, MassMutual will provide prospective relief as to these claims. (S.A. at 37-38 & Ex. D1, D2, D3).

  A. Class Members with Permanent Policies are Entitled to Either General Policy Relief or Claim Review Relief

  General Policy Relief, consisting of a Settlement Death Benefit ("SDB"), is provided automatically to Class Members with Permanent Policies who do not elect CRP (as well as those that receive a score of "1" in CRP). The SDB provides a new or additional payment upon the death of an insured in an amount and duration that depend on the age of the insured and the face amount of the policy at issue. (S.A. at 22-25). Class Members do not need to take any action to obtain the SDB. (Id.). They may however decide to relinquish this benefit and present a claim to the Claim Review Process.

  Class Members with Permanent Policies that affirmatively elect to proceed with Claim Review Relief will be able to submit Limited Premium Payment, Performance, Replacement, Retirement/Investment, Delayed Coverage and/or Juvenile Smoker Claims to the CRP and receive monetary relief in accordance with the nature and strength of the Claimant's claim. The relief will be determined by a neutral Claim Evaluator, as more fully described below, based upon objective criteria. In addition, for sales practices or administrative claims that do not fit into one of the defined categories, Class Members will enter the ADR process.

  B. Class Members with Term Life and/or Disability Income Policies May Submit Claims to the Claim Review Process

  Class Members with Term Life and/or Disability Income Policies may submit any Delayed Coverage Claims to the CRP. Class Members with eligible Term Life Policies may submit any Juvenile Smoker Claims to the CRP. It is important to note that these claims on term life or disability income policies may be pursued only through CRP.

  MassMutual will also provide prospective relief as to these issues. With regard to the Delayed Coverage Claims, MassMutual has agreed to provide written disclosures aimed at assuring that its policyholders clearly understand the Delayed Coverage issue. (S.A. at 37). As for the Juvenile Smoker Claims, MassMutual has agreed to change the dividend and cost of insurance treatment for current in-force and future juvenile policies upon attaining the age of majority. (Id. at 38). No other claims that term or disability policyholders may have are affected by this Settlement.

  C. The Claim Review Process

  The Claim Review Process is designed to resolve the claims of Class Members who assert that they were somehow misled by MassMutual. The CRP provides that an experienced, neutral Claim Evaluator, who has been selected by Plaintiffs' counsel and approved by MassMutual and the Court, will individually evaluate claims and award appropriate relief. The Claim Evaluator will review (i) the statement(s) and materials submitted by the Class Member, (ii) materials in the Claim File that MassMutual will be required to assemble, and (iii) any statement or materials submitted by the sales agent. (Id. at 28-32). However, individual Class Members may be entitled to relief even if they are unable to prove damage or any misrepresentation.

  In reviewing the file, the Claim Evaluator will use detailed scoring guidelines, that the parties have mutually negotiated, and assign the claim a score from "0" through "4." (Id., Exh A, at 6-7). If more than one improper practice is alleged in the claim, the Claim Evaluator will score each improper practice and the Class Member will get relief based on the highest score. (Id. at 9). Claimants scoring a "4" will receive monetary relief as set forth in accordance with schedules negotiated by the parties' actuaries, that is intended to provide the Claimant with the full benefit of the original bargain. (Id. at 22, 25, 27, 29). Scores of "3" and "2" will respectively receive 65% and 45% of the amount awarded to scores of "4." (Id.). A score of "1" results in the Claimant receiving the alternative form of relief, GPR. (Id. at 22-30). A score of "0" receives no relief. (Id.).

  Submissions of a Delayed Coverage Claim or Juvenile Smoker Claim entail a different process. With Delayed Coverage Claims, the Claim Evaluator will find such a claim, with certain exceptions, if there is evidence that the Class Member paid premiums for periods during which the Policy did not provide coverage. (Id. at 30-31). A Class Member with a valid claim will, in accordance with the Settlement Agreement, receive either a credit to their In-Force Policies or a cash payment if the Policies are Terminated. (Id. at 32-33).

  As for Juvenile Smoker Claims, the Claim Evaluator will not find a valid claim where the Claimant or insured identified the insured as a smoker on the Claim Form or in writing to MassMutual, if MassMutual demonstrates that the insured was actually treated as a non-smoker, or if MassMutual submits documentation demonstrating that the insured was in fact a smoker. (Id. at 34). Any claimant with a valid Juvenile Smoker Claim will receive either a credit to their In-Force Policies or a cash payment for Terminated Policies. (Id. at 35).

  D. The Release

  The Settlement Agreement contains a release that generally bars Class Members from asserting other claims that were or could have been asserted against MassMutual in this case. The release and its exclusions were set forth in Section X of the Settlement Agreement and were reprinted in full as an Appendix to the Notice of Class Action.

  E. Value of the Relief

  The Proposed Settlement offers significant value to the Class Members. Plaintiffs' actuarial expert, Terry M. Long of Lewis & Ellis, Inc., placed an estimated value of CRP and GPR at not less than $698.7 million. (Long Decl. at ¶ 15). This settlement valuation does not include the prospective relief awarded in connection with the Juvenile Smoker and Delayed Coverage Claims, nor the ADR process or other administrative expenses. (Id.). It also does not include the value to the Class of not having to pay the requested $58.2 million attorneys' fees and expenses, which will be paid directly by MassMutual. (Id.). Including that additional relief, the value to the Class is more likely in excess of $750 million.

  Other than the cost of postage, it costs Class Members nothing to participate in the CRP. MassMutual will pay all of the costs for the CRP such as the Claim Evaluator, the CRP process itself, and a separate ADR process that is provided for claims that do not fall into one of the defined categories of claims.

  MassMutual, however, is obligated to pay out at least $130 million up to a maximum of $165 million, which is subject to adjustment up to $180 million under certain circumstances, in Claim Review Relief. (S.A. at 36, 60-61). If the awards issued by the Claim Evaluator total less than the guaranteed minimum amount, the high scoring CRP Claimants will receive a pro rata increase in their relief awarded to them. (Id. at 36-37). Any awards paid out of the ADR process are uncapped — there is no minimum or maximum.

  Similar to CRP, there are no costs to Class Members for obtaining GPR and no paperwork needs to be submitted. GPR is a Supplemental Death Benefit that will increase the face value of the Claimant's insurance coverage for a specific period of time. (Id. at 22-24). The parties assert that this is free additional insurance. The GPR relief is estimated to be worth at least $568.7 million to the Class. (Long Decl. at ¶ 15).

  III. JURISDICTION

  A. Subject-Matter Jurisdiction

  This Court has federal subject-matter jurisdiction over all claims against MassMutual pursuant to 18 U.S.C. § 1964(c) and 28 U.S.C. § 1331, because Plaintiffs' Complaint alleges violations of federal law, specifically RICO, 18 U.S.C. § 1961 et seq. See Prudential II, 148 F.3d at 301. Moreover, the existence of federal question jurisdiction over the RICO claims authorizes this Court to exercise supplemental jurisdiction under 28 U.S.C. § 1367(a) over the Plaintiffs' remaining state law claims. Id. at 303. Since the RICO claims and the state law claims all arise from the same "common nucleus of operative fact" (i.e., that Defendants allegedly employed unlawful sales practices based upon misrepresentations in order to sell insurance policies), this Court properly has supplemental jurisdiction to resolve them. See id.

  In addition, as Plaintiffs contend, this Court also possesses diversity jurisdiction under 28 U.S.C. § 1332. (Compl. at ¶¶ 32-33). Complete diversity exists between each named Plaintiff and the Defendants, and each named Plaintiff has pleaded an amount in controversy of more than $75,000. (Id.). The named Plaintiffs and Defendants are citizens of different states. (Id. at ¶ 32). Also, Plaintiffs allege that each named Plaintiff's amount in controversy exceeds $75,000, "exclusive of interest and costs, by virtue of the combined loss of death benefit coverage, accumulated cash value, dividends, paid-up additional insurance, lifetime income and/or other non-forfeiture benefits," in addition to the punitive damages and injunctive and equitable relief sought, in which each Class Member has an undivided interest.*fn11 (Id. at ¶ 33).

  Since the named Plaintiffs' claims meet or exceed the amount in controversy requirement and no opposition has been received or any objections made, the Court finds that it also has subject-matter jurisdiction over Plaintiffs' claims by virtue of diversity jurisdiction.

  Therefore, the Court has subject-matter jurisdiction over the claims asserted in the Complaint pursuant to 28 U.S.C. §§ 1331, 1332, and 1367, including, without limitation, jurisdiction to approve the Proposed Settlement and the Settlement Agreement and all exhibits attached thereto, grant final certification of the Class, and dismiss the Complaint on the merits and with prejudice.

  B. Personal Jurisdiction

  This Court has personal jurisdiction over the Plaintiffs, who are parties to this action and have agreed to serve as Class Representatives, and Class Members from New Jersey because those persons have minimum contacts with this forum. This Court also has personal jurisdiction over all out-of-state Class Members because, as will be discussed in more detail below, the extensive Notice provided to Class Members, when combined with the opportunity to object and appear at the Fairness Hearing or to opt out, fully satisfies due process requirements for a Rule 23(b)(3) class. See Prudential II, 148 F.3d at 306 (citing Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12 (1985)).

  Because due, adequate and the best practicable notice has been disseminated and all potential Class Members have been given the opportunity to exclude themselves from or object to this class action settlement, the Court has personal jurisdiction over all Class Members. The Court therefore finds that all Class Members who did not timely request exclusion from the Class by the October 24, 2004 deadline, or who failed to request exclusion as set out in the Court's Preliminary Approval Order dated June 24, 2004 and described in the notice, are subject to this Court's personal jurisdiction. See Phillips Petroleum Co. v. Shutts, 472 U.S. at 812-13.

  IV. NOTICE TO CLASS MEMBERS

  In its Preliminary Approval Order (Docket Entry # 8), the Court found that the Class Notice Packages to be provided to Class Members, the procedures for mailing and re-mailing the Class Notice Packages, and the summary ...


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