The opinion of the court was delivered by: JOSE LINARES, District Judge
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
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
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.
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
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).
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).
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.
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
The Complaint generally describes the Settlement Class (the "Class")
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
(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.
Prior to the date scheduled for the Fairness Hearing, the parties filed
comprehensive memoranda, declarations, affidavits and reports with the
(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
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
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).
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.
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
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).
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
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.
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