United States District Court, D. New Jersey
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,
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
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
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
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.
G. The Fairness Hearing
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).
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
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.
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 publication notice constituted "the best practicable notice" and
reasonably calculated, under the circumstances, to
apprise the Class Members of the pendency of this
Action, the terms of the proposed settlement, and
their rights under the proposed settlement,
including, but not limited to, their right to object
or exclude themselves from the proposed settlement .
. . [are] reasonable and constitute? due, adequate and
sufficient notice to all Class Members and other
persons entitled to receive notice; and ? meet? all
applicable requirements of law, including but not
limited to, Fed.R.Civ.P. 23(c) and the Due Process
Clause(s) of the United States Constitution.
(Preliminary Approval Order at 9). In addition, the Court found that "all
of the notices are written in simple terminology, are readily
understandable by Class Members, and comply with the Federal Judicial
Center's illustrative class action notices." (Id.). Based on the findings
set forth below, the Court affirms these conclusions.
In this case, notice was a combined notice to inform Class Members of
the existence of a class action and the existence and substance of the
Proposed Settlement. Thus, the combined class notice must conform with
both Rule 23(c)(2) and Rule 23(e). Rule 23(c)(2) requires that with
classes certified under "23(b)(1) or (2) the court may direct appropriate
notice to the class." Fed.R.Civ.P. 23(c)(2)(A). However, with classes
certified under 23(b)(3), notice to the Class must be "the best notice
practicable under the circumstances, including individual notice to all
members who can be identified through reasonable effort." Fed.R.Civ.P.
23(c)(2)(B). In addition, for classes certified under Rule 23(b)(3).
The notice must concisely and clearly state in plain, easily understood
the nature of the action,
the definition of the class certified,
the class claims, issues, or defenses,
that a class member may enter an appearance through
counsel if the member so desires,
that the court will exclude from the class any
member who requests exclusion, stating when and how
members may elect to be excluded, and
the binding effect of a class judgment on class
members under Rule 23(c)(3).
Rule 23(e) requires that "notice of the proposed dismissal or
compromise shall be given to all members of the class in such manner as
the court directs." Fed.R.Civ.P. 23(e). It is evident that the
requirements of Rule 23(c)(2) are more rigorous than those of Rule
23(e). See also Carlough v. Amchem Products, Inc., 158 F.R.D. 314, 324-25
(E.D. Pa. 1993) ("The requirements of Rule 23(c)(2) are stricter than the
requirements of Rule 23(e) and arguably stricter than the due process
"Notice of a proposed settlement under Rule 23(e) must inform class
members (1) of the nature of the pending litigation, (2) of the
settlement's general terms, (3) that complete information is available
from the court files, and (4) that any class member may appear and be
heard at the Fairness Hearing." Prudential I, 962 F. Supp. at 527
(citing 2 Herbert Newberg & Alba Conte, Newberg on Class Actions, §
8.32, at 8-103 (3rd ed. 1992) (hereinafter "Newberg")).
"The notice of the Proposed Settlement, to satisfy both Rule 23(e)
requirements and constitutional due process protections, need only be
reasonably calculated, under all of the circumstances, to apprise
interested parties of the pendency of the settlement proposed and to
afford them an opportunity to present their objections." Prudential I,
962 F. Supp. at 527 (citing Mullane v. Central Hanover Bank & Trust
Co., 339 U.S. 306, 314 (1950)).
As approved by the Court, approximately 3 million detailed Class Notice
Packages were mailed by first-class, postage prepaid U.S. mail, to the
last known address of each member of the Class. (See Affidavit of Nicole
F.J. Hamann submitted with Motion for Final Approval ("Hamann Aff.") at
¶ 11, Docket Entry # 116). Other courts have held that this method of
notification has been deemed "ideal." Prudential I,
962 F. Supp. at 527-28 (citing Grunin v. Int'l House of Pancakes,
513 F.2d 114, 121 (8th Cir. 1975)); In re Chambers Dev. Sec. Litig.,
912 F. Supp. 822, 836 (W.D. Pa. 1995). Indeed, it is further
significant that the Court has not received any objection challenging
this mode of dissemination. As stated by Judge Wolin in the Prudential
case, involving a practically identical mode of dissemination,
"Dissemination of the Class Notice in this case has been extraordinary."
Prudential I, 962 F. Supp. at 527.
These Class Notice Packages were mailed out between August 23, 2004 and
September 7, 2004. (Hamann Aff. at ¶ 11). Any that were returned as
undeliverable with no forwarding address were then researched using an
address locator service so they could be re-mailed. (Id. at ¶ 13).
The Notice Package included, among other things (a) the case caption;
(b) the definition of who is a Class Member; (c) identification of
counsel for the Class; (d) the terms and benefits of the Settlement
Agreement and how the Settlement would provide relief to the Class
Members; (e) the binding effect of any judgment on those persons who are
Class Members; (f) information about the right of Class Members to
request exclusion (i.e., opt out) from the Class and the procedures and
deadlines for doing so; (g) the right of Class Members to object to any
aspect of the Settlement and the procedures and deadlines for filing
objections to the Settlement; (h) the date, time, and location of the
Fairness Hearing; (i) information about appearing at the Fairness Hearing
and the deadlines for filing notice of an intent to appear; (j) how to
obtain additional information, including the toll-free telephone number
established to respond to Class Member inquiries; (k) the binding effect
of the Settlement, if finally approved; and (l) the fees and expenses
requested by Class Counsel, and incentive awards requested for
The Notice Package provided to Class Members contains clear and
comprehensive documents that the Court finds are written in simple
terminology, and are readily understandable by Class Members. Moreover,
the Notice Package in this case parallel that approved by the Third
Circuit in Prudential II. There the court held that "the provision of
individual notice to each class member is by no means typical of the
notice provided in most class actions, and certainly qualifies as
unprecedented." Prudential II, 148 F.3d at 306.
In addition to providing the individual notice described about, the
Notice Administrator published a Summary Settlement Notice in numerous
leading nationwide newspapers and magazines from August 30, 2004 through
September 6, 2004. (Affidavit of Jeanne C. Finegan submitted with Joint
Motion for Final Approval ("Finegan Aff.") at ¶ 6.4, Docket Entry # 116
at ¶ 6.4). By working with a nationally syndicated media research firm,
the Notice Administrator was able to define a target audience for the
MassMutual Class Members which provided a valid basis for determining the
magazine and newspaper preferences of the Class Members. (Id. at ¶
5.2). The Summary Notice ran for two consecutive weeks in Parade
Magazine and USA Weekend, two major newspaper inserts. (Id. at ¶ 6.4).
In addition, it was published twice in People, Time and Newsweek, and one
time in Fortune, Business Week, the Wall Street Journal and the New York
Times. (Id.). The combined circulation of these publications is
76,114,970 reaching an approximate audience of 223,427,175 readers. (Id.).
It has been reported to the Court that the publication notice program
reached an estimated 92.48 percent of the Class, with an estimated
average frequency of exposure of 3.09 times. (Id. at ¶ 6.1). The Court
agrees with Class Counsel that this was more than adequate. See, e.g., In
re American Family Ent., 256 B.R. 377, 417 (D.N.J. 2000) (finding notice
sufficient and citing a comparable affidavit).
The Summary Notice included, among other things, (a) a plain and
concise description of the nature of the Action; (b) the definition of
the Class; (c) the terms of the Proposed Settlement, including
information on the proposed relief and what claims would be released; (d)
the dates and deadlines for Class Members to exercise their right to opt
out of the Class; (e) the dates and deadlines for Class Members to
exercise their right to object at the Fairness Hearing; (f) the date of
the Fairness Hearing; (g) a toll-free number and address where Class
Members could obtain additional information; and (h) the fees and
expenses requested by Class Counsel and the awards requested for the
The Claims Administrator also established three toll-free telephone
numbers, at a telephone center (the "Call Center") in Minneapolis,
Minnesota, which answered close to 80,000 calls. (Affidavit of Richard
H. Redfern submitted with Joint Motion for Final Approval ("Redfern
Aff.") at ¶ 23, Docket Entry # 116). The Call Center opened on August
23, 2004, and will continue operating until the CRP process is complete.
(Id.). Three separate numbers were established for policyholders, the
hearing impaired, and MassMutual agents. (Id. at ¶ 11). These toll-free
telephone lines are staffed by trained telephone representatives and
supervisors to provide Class Members and the general public with
information about the Settlement. (Id. at ¶¶ 12-13). In instances where
the representative can not fully answer a question, Class Counsel is
available to speak directly with Class Members. (Id. at ¶ 19).
The Court is not persuaded by the objections*fn12 raised as to the
timeliness of the notice. (See, e.g., Wolfson Obj., Docket Entry # 94;
Baulch Obj., Docket Entry # 100; Daley Obj., Docket Entry # 102; Basil
Obj., Docket Entry # 105; Miller Obj., Docket Entry # 113; Holthaus
Obj., Docket Entry # 115). These objections generally contend that they
lacked sufficient time to decide what to do. However, the overwhelming
majority received their Notices with more than sufficient time to review
the Notice, call the toll-free number or Class Counsel for more
information, and/or even to consult with counsel. With the exception of
the Notices that needed to be re-mailed, the vast majority of the Class
Members received their Notices within 45 to 60 days before any of the
deadlines, and about three months before the Fairness Hearing. It has
been held that notice mailed even one month before any of the deadlines
was still timely. See, e.g., Torrisi v. Tucson Elec. Power Co.,
8 F.3d 1370, 1375 (9th Cir. 1993) (finding notice mailed 31 days prior
to deadline for submitting objections timely); Marshall v. Holiday
Magic, Inc., 550 F.2d 1173, 1178 (9th Cir. 1977) (notice mailed 26 days
before deadline for opting out was adequate). Even for those did not
receive a Class Notice Package, the Summary Notice, that was published in
leading newspapers and magazines, was estimated to have reached 92.48% of
the Class, with an estimated frequency of 3.09 times. Nevertheless, Rule
23 only requires the "best possible notice under the circumstances." It
does not require perfect notice.
The Court is likewise unpersuaded by the objections raised as to the
adequacy of the notice. (See, e.g., Gupta Obj., Docket Entry # 25;
Gambello Obj., Docket Entry # 85; Koppell Obj., Docket Entry # 88, 89;
Izes Obj., Docket Entry # 90; Smith Obj., Docket Entry # 97, 98; Yoes
Obj., Docket Entry # 106; Basil Obj., Docket Entry # 105; Corcoran Obj.,
Plante Aff. Ex. 22). The Class Notice Packages informed, as clearly and
as concisely as possible, the Class Members of the nature of the
litigation, the terms of the Settlement Agreement and all other
requirements. The content of the Notices were scrupulously reviewed and
approved by this Court, in its Preliminary Approval Order, and were based
on models approved by courts in other insurance sales practices
settlements. Class Members were given the opportunity to exclude
themselves from the Class and pursue their own litigation. A notice, such
as the one used here, is "designed only to be a summary of the litigation
and the settlement" and should not be "unduly specific." 2 Newberg §
As to the objections that the Notices provided insufficient information
about the Claim Review Process, the Court finds them unfounded. (See,
e.g., Sealy Obj., Docket Entry # 75; Gambello Obj., Docket Entry # 85;
Wilensky Obj., Docket Entry # 75; Yoes Obj., Docket Entry # 106). Any
Class Member who wanted more specific information could have called the
Information Center or Class Counsel, or reviewed the Settlement Agreement
itself. The Claim Review Process is based on each Class Member's
individual circumstances and every contingency could not possibly be
summarized in any Notice. Had such been done, the Notice would most
certainly have been too long and complex.
In addition, objections to the Notice containing a slightly different
Class definition from that in this Court's Preliminary Approval Order are
also overrruled. (See Sealy Obj., Docket Entry # 75). The Court agrees
with Class Counsel and finds that it was a technical error and that what
is critical is that the Class Notice had the correct definition because
that is what Class Members were sent. (See Tr. at 123-24). The Class
definition in the Notice was in fact the correct definition and it
conformed with the definition in the Proposed Settlement Agreement. The
fact that the Preliminary Approval Order omitted a couple of terms is not
significant because the Proposed Settlement Agreement and Class Notice
contained the correct Class definition.
Based upon its review of the individual and publication notice
materials, and expert testimony concerning those materials, and having
considered the objections of Class Members, the Court concludes that the
Class Notice Packages and their dissemination to the Class and all other
notices, the publication of the Summary Settlement Notice and notice
methodology implemented pursuant to the Settlement Agreement and this
Court's Preliminary Approval Order, (a) constituted the best practicable
notice to Class Members under the circumstances of this Action; (b)
constituted notice that was reasonably calculated, under the
circumstances, to apprise Class Members of (i) the pendency of this
action; (ii) the terms of the Proposed Settlement; (iii) their rights
under the Proposed Settlement; (iv) their right to exclude themselves
from the Class and the Proposed Settlement; (v) their right to object to
any aspect of the Proposed Settlement (including final certification of
the settlement class, the fairness, reasonableness or adequacy of the
Proposed Settlement, the adequacy of the Class's representation by
Plaintiffs or Class Counsel and/or the award of attorneys' fees); (vi)
their right to appear at the Fairness Hearing either on their own or
through counsel hired at their own expense if they did not exclude
themselves from the Class, and (vii) the binding effect of the Orders and
Judgment in this action, whether favorable or unfavorable, on all persons
who did not request exclusion from the Class; (c) constituted notice that
was reasonable, due, adequate and sufficient notice to all persons and
entities entitled to be provided with notice; and (d) constituted notice
that met all applicable requirements of the Federal Rules of Civil
Procedure and the Due Process Clause of the United States Constitution
and any other applicable law, as well as complying with the Federal
Judicial Center's illustrative class action notices. All objections
submitted with regard to Notice are hereby overruled.
The Court thus affirms its finding and conclusion in the June 24, 2004
Preliminary Approval Order that the notice in this case meets the
requirements of the Federal Rules of Civil Procedure and the Due Process
Clause of the United States and/or any other applicable law, as well as
complying with the Federal Judicial Center's illustrative class action
V. CLASS CERTIFICATION
Through the Preliminary Approval Order, this Court preliminarily
certified this Class for settlement purposes. "Class actions created for
the purpose of settlement are well recognized under Rule 23 of the
Federal Rules of Civil Procedure." In re Lucent Techs., Inc. Sec. Litig.
("Lucent I"), 307 F. Supp. 2d 633, 639-40 (D.N.J. 2004) (citing
Prudential I, 962 F. Supp. 450). The Court now turns to an analysis of
whether class certification remains appropriate for this matter.
Class certification "enables courts to treat common claims together,
obviating the need for repeated adjudications of the same issues."
General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig. ("GM
Trucks"), 55 F.3d 768, 783 (3d Cir.), cert. denied, 516 U.S. 824 (1995).
"Courts increasingly have used the class action device in cases, such as
this one, in which a class of policyholders has sued an insurance company
for misrepresentations in the sale of insurance policies and benefit
plans." Prudential I, 962 F. Supp. at 507 (citing Reserve Life Ins. Co.
v. Kirkland, 917 S.W.2d 836 (Tex.App. 1996); Janicik v. Prudential Ins.
Co. of America, 451 A.2d 451 (Pa.Super.Ct. 1982)).
Rule 23 of the Federal Rules of Civil Procedure allows the Court to
certify a class for settlement purposes only. Prudential I,
962 F. Supp. at 508. A settlement class is "a device whereby the court
postpones the formal certification procedure until the parties have
successfully negotiated a settlement, thus allowing a defendant to
explore settlement without conceding any of its arguments against
certification." GM Trucks, 55 F.3d at 786. "In certifying a class for
settlement purposes, the Court must abide by the ordinary Rule 23
requirements. . . ." Prudential I, 962 F. Supp. at 508; see also GM
Trucks, 55 F.3d at 778 (holding that Rule 23(a) requirements must be
satisfied as if class were to litigate its claims). "Thus, a settlement
class must satisfy the Rule 23(a) requirements of numerosity,
commonality, typicality, and adequacy of representation and the Rule
23(b) requirements." Prudential I, 962 F. Supp. at 508. In addition,
because the settlement proponents in this case seek to certify the class
under Rule 23(b)(3), the class must also satisfy this provision's
superiority and predominance standards. See id.
Further, in a settlement class action, the "Court must consider the
propriety of certification as if the case were to go to trial." Prudential
I, 962 F. Supp. at 508. It is the rule in this Circuit "that settlement
class certification is not permissible unless the case would have been
`triable in class form.'" Id. (quoting Georgine, 83 F.3d at 625). Here,
for example, two courts (the Superior Courts in New Jersey and
California) have certified both Varacallo and Karges as class actions for
trial purposes. (See Friedman Decl. at ¶¶ 23-24, 72-74 (discussing
Varacallo, et al. v. Massachusetts Mut. Life Ins. Co., No. ESX-L-3403-97
(Superior Ct., Law Div., Essex County, N.J.) and Karges, et al. v.
Massachusetts Mut. Life Ins. Co., No. GIC-713920 (Superior Ct., San Diego
The Court received one objection that asserted that this Court is
precluded on res judicata grounds from granting certification to this
nation-wide class. (See, e.g., Wolfson Obj., Docket Entry # 94). Citing
to Markarian v. Connecticut Mutual Life Ins. Co., 202 F.R.D. 60 (D.
Mass. 2002) and Cohn v. MassMutual, 189 F.R.D. 209 (D. Conn. 1999),
Wolfson contends that the decisions made by these two other federal
courts in denying class certification preclude class certification here.
(Id.). Although that is an interesting position, it is contrary to the
law and facts. Those cases did not involve settlement class certification
and they alleged sales tactics that were orchestrated by the sales agents
themselves as opposed to a "top down" scheme involving written
illustrations and other sales materials as is alleged here. See Snell v.
Allianz Life Ins. Co. of North America, 2000 U.S. Dist. LEXIS, at *43
(D. Minn. Sept. 8, 2000) ("Both of those cases, however, considered the
issue in a different context, as neither Court was confronted with a
settlement proposal. . . ."). Furthermore, denials of class certification
are without prejudice and likely would not have a res judicata effect on
this Court because a new motion for class certification could be
asserted. See, e.g., In re Ford Motor Co. Ignition Switch Litig.,
174 F.R.D. 332, 356 (D.N.J. 1997) (stating that if the parties can cure
the noted shortcomings they could re-apply for the appropriate class
certification). Therefore, the Court overrules this objection.
The Court is required to spell out its findings of fact so as to
establish each of the Rule 23 requisites.*fn13 See Prudential I,
962 F. Supp. at 508. "In a borderline case, the Court should allow
class certification: `the interests of justice require that in a doubtful
case . . . any error, if there is to be one, should be committed in favor
of allowing a class action.'" Id. (quoting Eisenberg v. Gagnon,
766 F.2d 770, 785 (3d Cir.) (citations omitted), cert. denied, 474 U.S. 946
(1985)). For the following reasons, this Court finds that class
certification remains appropriate.
Rule 23(a)(1) provides that the proposed class must consist of members
that are so "numerous that joinder of all members is impracticable."
Fed.R.Civ.P. 23(a)(1). Notwithstanding, "`[i]mpracticability' does not
mean `impossibility.'" Lucent I, 307 F. Supp. 2d at 640. "To meet the
numerosity requirement, class representatives must demonstrate only that
`common sense' suggests that it would be difficult or inconvenient to
join all class members." Prudential I, 962 F. Supp. at 510 (citing
Lerch v. Citizens First Bancorp, Inc., 144 F.R.D. 247, 250 (D.N.J.
When dealing with a large class, that numbers in the hundreds, joinder
will be impracticable. Id. (quoting 1 Newberg § 3.05, at 3-25) (stating
that a number less than one hundred will usually satisfy the numerosity
requirement of Rule 23(a)(1)). Here, joinder of all Class Members is
impracticable because there are nearly 3,000,000 Class Members. Rule
23(a)(1) is therefore satisfied.*fn14
B. Commonality and Predominance
It is customary in Rule 23(b)(3) class actions for courts to jointly
apply the Rule 23(a)(2) commonality requirement and the Rule 23(b)(3)
predominance tests. Prudential I, 962 F. Supp. at 510 (citing 1 Newberg
§ 3.13, at 3-71). This approach has been approved by the Third Circuit.
See In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 528 (3d Cir.
2004) ("the Rule 23(b)(3) predominance requirement, which is far more
demanding, incorporates the Rule 23(a) commonality requirement. . . .
Accordingly, we analyze the two factors together. . . ." (citations
omitted)); Georgine, 83 F.3d 610 at 626.
Another prerequisite to a class action is that "there are questions of
law or fact common to the class." Fed.R.Civ.P. 23(a)(2). "This
requirement is satisfied `if the named plaintiffs share at least one
question of fact or law with the grievances of the prospective class.'"
Prudential I, 962 F. Supp. at 510 (quoting Baby Neal v. Casey,
43 F.3d 48, 56 (3d Cir. 1994) (citation omitted)). Here, the commonality
requirement is met because there are many common questions, including the
following that are listed in the Complaint:
(a) whether MassMutual and Conn Mutual, through their
agents, engaged in uniform deceptive acts and
practices, whether by omission or commission;
(b) whether MassMutual and Conn Mutual, through their
agents, misrepresented to or concealed from the Class
material information concerning the financing of life
(c) whether MassMutual and Conn Mutual, through their
agents, misrepresented to or concealed from the Class
the current and/or future value of life insurance
(d) whether MassMutual and Conn Mutual placed new and
existing policyholders at an undisclosed, increased
and unnecessary economic risk by selling them life
insurance policies upon the false and misleading
uniform sales presentations;
(e) whether the uniform sales presentations, policy
illustrations and related materials, described in the
Complaint, contained false or misleading facts or
omitted material facts;
(f) whether MassMutual, Conn Mutual and their agents
developed, encouraged and engaged in a scheme or
schemes to sell life insurance policies upon false
and misleading uniform sales presentations, policy
illustrations and related materials as described in
(g) whether MassMutual and Conn Mutual created and
supplied their agents with flawed computer programs
employing artificially inflated dividend scales
and/or interest rates with the instruction that they
use them to generate false and misleading uniform
sales presentations, policy illustrations and related
materials with which to sell life insurance policies;
(h) whether MassMutual and Conn Mutual instructed,
encouraged or permitted their agents to mismark or
otherwise improperly complete policy applications and
(i) whether MassMutual and Conn Mutual
misrepresented, concealed or failed to disclose that
dividend scales and interest rates used to illustrate
policy performance in the uniform false and misleading
sales presentations, policy illustrations and related
materials were artificially inflated in excess of
their then current experience and could not be
maintained at illustrated levels if conditions
(j) whether MassMutual and Conn Mutual concealed or
failed to disclose in the uniform false and misleading
sales presentations, policy illustrations and related
materials that they expected and/or, in fact,
developed a plan to reduce dividend scales and
interest rates used to illustrate policy performance
in future policy years;
(k) whether MassMutual and Conn Mutual failed to
supervise and train their nationwide sales force
adequately with regard to the sale of life insurance
(l) whether MassMutual and Conn Mutual encouraged or
instructed their sales force to engage in any of the
deceptive practices as described in the Complaint;
(m) whether MassMutual and Conn Mutual failed to
maintain adequate internal controls to prevent,
detect and/or deter the deceptive practices as
described in the Complaint;
(n) whether MassMutual and Conn Mutual ignored or
failed to properly respond to reports, whether
internal or not, that their agents were engaging in
the deceptive practices as described in the
(o) whether MassMutual and Conn Mutual, through their
agents, mischaracterized the suitability of life
insurance products for certain purposes, such as
funding a savings or investment plan;
(p) whether MassMutual delayed the effective date of
coverage on permanent and term life insurance
policies and disability insurance policies;
(q) whether MassMutual improperly payed lower
dividends, collected higher costs of insurance
charges, and charged higher premiums for policies
initially issued on the lives of juvenile insureds
based on smoker mortality tables when in fact the
insureds did not smoke an did so without an adequate
or appropriate actuarial basis; and
(r) whether MassMutual devised and deployed a scheme
or artifice to defraud, or engaged in a common course
of charging net premiums based on smoker mortality
tables to non-smokers.
(Compl. at ¶ 222).
For a class that is certified under Rule 23(b)(3), which the parties
are here seeking, the Court must find that these common questions
predominate over individual issues. Prudential I, 962 F. Supp. at 510-11.
"To evaluate predominance, the Court must determine whether the
efficiencies gained by class resolution of the common issues are
outweighed by individual issues presented for adjudication." Id. at 511
(citing 1 Newberg § 4.25, at 4-81 to 4-86). Courts have readily held that
even a few common issues can satisfy this requirement where their
resolution will significantly advance the litigation. Id. (gathering
authority). For example, in cases where it is alleged that the defendant
made similar misrepresentations, non-disclosures, or engaged in a common
course of conduct, courts have found that conduct to satisfy the
commonality and predominance requirements. Id. (gathering authority).
Predominance has been found to not be met in cases that "required
individualized proof of `highly case-specific factual issues.'" Elkins
v. Equitable Life Ins. Co., 1998 U.S. Dist. LEXIS 1557, at *49 (M.D.
Fla. Jan. 27, 1998) (quoting Jackson v. Motel 6 Multipurpose, Inc.,
130 F.3d 999, 1004-05 (11th Cir. 1997) (involving whether Motel 6 had a
practice or policy of racial discrimination)); see also Amchem,
521 U.S. at 622 (involving widely varying personal injuries as a result
of different sorts of exposure to different types of asbestos products
with current and future asbestos-related claims).
As is relevant to the case at hand, many courts have found predominance
in similar nationwide insurance sales practices settlement cases. See,
e.g., Prudential II, 148 F.3d at 314-15; In re Metropolitan Life Ins.
Co. Sales Practices Litig., 1999 U.S. Dist. LEXIS 22688, *64-68 (W.D.
Pa. Dec. 28, 1999) ("MetLife"); Manners v. Am. Gen'l Life Ins. Co., 1999
U.S. Dist. LEXIS 22880, at *47-50 (M.D. Tenn. Aug. 10, 1999); Bussie v.
Allmerica Financial Corp., 50 F. Supp. 2d 59, 71 (D. Mass. 1999);
Elkins, 1998 U.S. Dist. LEXIS 1557, at *46-55; Duhaime, 177 F.R.D. at 64.
Furthermore, as courts have frequently held, any potential choice of
law issues do not outweigh the many other common issues so as to preclude
a finding of predominance. Prudential II, 148 F.3d at 315; MetLife, 1999
U.S. Dist. LEXIS 22688, at *67; Manners, 1999 U.S. Dist. LEXIS 22880, at
*50; Bussie, 50 F. Supp. 2d at 71; Elkins, 1998 U.S. Dist. LEXIS 1557,
at *51; Duhaime, 177 F.R.D. at 64. "At the certification stage, the Court
need only determine which state law is `likely' to apply" should this
case be litigated." Elkins, 1998 U.S. Dist. LEXIS 1557, at *51. Here, the
case is not being certified for litigation purposes, thus, as in
Prudential, predominance is not defeated by any differences in the
various laws of the fifty states. 148 F.3d at 315. The Third Circuit
recently stated that "[i]n certifying a nationwide settlement class, the
District Court was well within its discretion in determining that
variations between the laws of different states were insufficient to
defeat the requirements of Rule 23." In re Warfarin Sodium Antitrust
Litig., 391 F.3d at 530.
Here, the common factual and legal thread is an alleged nationwide
scheme of uniform deceptive insurance sales practices that purportedly
injured Defendants' policyholders. Considering all the allegations in the
Complaint, the Court finds that common questions of fact and law
predominate over any questions of law or fact affecting only individual
members of the Class.*fn15
Rule 23 requires also that "the claims or defenses of the
representative parties are typical of the claims or defenses of the
class." Fed.R.Civ.P. 23(a)(3). In essence, "[t]he typicality requirement
is said to limit the class claims to those fairly encompassed by the
named plaintiff's claims." General Tel. Co. v. EEOC, 446 U.S. 318, 330
(U.S. 1980). "Typicality lies where there is a strong similarity of legal
theories or where the claims of the class representatives and the class
members arise from the same alleged course of conduct by the defendant."
Prudential I, 962 F. Supp. at 518 (citations omitted). Hence, even
where there may be factual differences between the claims of the Class
Representatives and other Class Members, it does not rule out a finding
of typicality. Lucent I, 307 F. Supp. 2d at 640 (citing Prudential II,
148 F.3d at 310). Therefore, the Court is not persuaded by the objection
of Hildebrand in which he contends that the "claims of class members who
may be entitled to Claim Review Relief are not typical of claims of class
members who may be entitled to General Policy Relief," (Hildebrand Obj.,
Docket Entry # 56), because he ignores the fact that the Complaint pleads
claims that are common to all Class Members. The choice of relief that
the Class Members select does not affect typicality.
Two more objections best addressed to typicality assert that the
settlement class is too "sprawling" and uncohesive to be certified.
(Walters Obj. at ¶ 10, Docket Entry # 45; Wolfson Obj. at 9-12, Docket
Entry # 94). More specifically, Ms. Wolfson's objection focuses on the
difference between the performance claims and the delayed coverage and
juvenile smoker claims. She asserts that the delayed coverage and
juvenile smoker claims are not about performance and did not involve any
top-down training scheme, rather "[t]hey are about coverage,
underwritability, convertability, and perhaps one or two other features
that are not gradable, graphable, or saleable in the way that the
performance schemes allege." (Wolfson Obj. at 12, Docket Entry # 94). She
believes that these are competing claims that "place class members in
distinct camps with differing interests." (Id.). The Court, however,
disagrees with Ms. Wolfson's point of view. In endorsing class
certification in Prudential, the Third Circuit stated that, while the
Class suffered various forms of injuries, they all were derived from some
alleged common wrong that provided a sufficient basis for a finding of
typicality. 148 F.3d at 312. Plaintiffs correctly point out that
Prudential approved a far broader class of persons, including victims of
all improper sales practices. Id. at 311, 313.
This is further supported by a recent Third Circuit decision stating
that "typicality, as with commonality, does not require `that all
putative class members share identical claims.'" In re Warfarin Sodium
Antitrust Litig., 391 F.3d at 531-32 (citation omitted). Likewise,
"factual differences among the claims of the putative class members do
not defeat certification." Baby Neal for & by Kanter v. Casey, 43 F.3d 48,
56 (3d Cir. 1994). While there are some differences between the types of
improper sales practices alleged, the Court recognizes that the named
Class Representatives include members that assert all of the improper
sales practices at issue. Since the Class Representatives and Class
Members assert claims for similar courses of fraudulent conduct, alleging
improper sales practices, the typicality requirement of Rule 23(a)(3) is
D. Adequacy of Representation
As for the adequacy of representation factor, Rule 23(a)(4) requires
that "the representative parties [must] fairly and adequately protect the
interests of the class." Fed.R.Civ.P. 23(a)(4). Courts look at two
factors: "(1) the plaintiff's attorney must be qualified, experienced,
and generally able to conduct the proposed litigation, and (2) the
plaintiff must not have interests antagonistic to those of the class."
Prudential I, 962 F. Supp. at 519. A party challenging the Class'
representation has the burden to prove that the representation is not
These requirements have been met. First, Class Counsel are more than
adequate representatives of this Class. They have significant experience
in class actions and insurance sales practices cases. (See Friedman
Decl., Resumes). They have also displayed their diligent and competent
representation in the state court cases that led to this Settlement.
Second, the named Plaintiffs are appropriate Class Representatives. They
have no interests antagonistic to those of the Class and they have
indicated their willingness to represent the Class.
Objectors Gambello, Deese, Basil and Costello/Robertshaw assert that
there are conflicts between the Class Counsel and Class Representatives
on the one hand and the Class Members on the other hand because of the
size of the attorneys' fees and incentive awards. (Gambello Obj., Docket
Entry # 85; Deese Obj., Docket Entry # 91; Basil Obj., Docket Entry #
105; Costello/Robertshaw Obj., Docket Entry # 66). This objection is
factually incorrect because the parties did not commence negotiations on
the amount of attorneys' fees and expenses that MassMutual would agree to
pay until all material terms of the Settlement had been agreed upon, about
one year after settlement negotiations began. (Friedman Decl. ¶¶ 115,
136). Considering that fact and the almost nine year time span of the
underlying litigation, that counsel undertook on a contingency fee
basis, the Court finds that the size of the attorneys' fees and incentive
awards did not compromise Class Counsel's ability or the ability of the
Class Representatives to negotiate relief on behalf of the Class.
Therefore, the Court is satisfied that the Rule 23(a)(4) requirement is
Lastly, Rule 23(b)(3) requires that "a class action [be] superior to
other available methods for the fair and efficient adjudication of the
controversy." The Rule provides the Court with four non-exclusive factors
to aid in its superiority determination:
(1) the interest of individual members of the class
in individually controlling the prosecution of the
action; (2) the extent of litigation commenced
elsewhere by class members; (3) the desirability of
concentrating claims in a given forum; and (4) the
management difficulties likely to be encountered in
pursuing the class action.
Prudential I, 962 F. Supp. at 522.
Here, since the financial losses of most of the Class Members is
relatively small, very few would have an interest or ability to pursue
their own individual case. This is demonstrated by the relative absence
of policyholder suits now pending only eight cases pending against
MassMutual in the entire United States. Also, it is unlikely that
individual Class Members would have the resources to pursue successful
litigation on their own.
In the context of settlement, the desirability or undesirability of
concentrating the litigation of the claims in a particular forum are not
significant and are essentially irrelevant. See Amchem, 521 U.S. 620
(stating that where a district court is confronted with a settlement-only
class certification, the court need not inquire whether the case, if
tried, would present manageability problems because the point is that
there will be no trial). For the purposes of settlement, concentrating
litigation in one forum is desirable. Here, the parties chose this forum
because the New Jersey case brought by Plaintiff Paul Varacallo was on
the eve of trial, and was the furthest along, and because the District of
New Jersey has also resolved other comparable nationwide insurance sales
practices settlements. See, e.g., Prudential I, 962 F. Supp. 450; Roy
v. Indep. Order of Foresters, Civil Action No. 97-6225 (D.N.J. Aug. 3,
Without question, class adjudication of this matter will achieve an
appreciable savings of effort, time, and expense, and will promote
uniformity of decision on the issues resolved and to which the parties
will be bound. This prong is further supported by the unfortunate
circumstances of one of the objectors, Ms. Timmick, who appeared at the
Fairness Hearing so as to explain her own difficulty in resolving the
misrepresentations that she suffered at the hands of MassMutual and to
generally object to the Settlement. (See Tr. at 110-117). Although she
was objecting to the fairness of the Settlement, in light of her own
circumstances, the Court finds that the scenario that Ms. Timmick
portrayed to the Court, namely years of disputes including an unsuccessful
hearing before the insurance commission and the court in Maryland,
demonstrates the superiority of this matter being resolved by way of
Class Action. To hear her tell her story, her voice was simply not heard
by the insurance commission, the Circuit Court in Maryland, and
MassMutual. She has spent $15,000 in litigation costs with no success.
This clearly supports the superiority of a Class Action.
After examining these factors, and considering the difficulty that
individual Class Members would suffer in attempting to bring their own
actions, as evidenced by Ms. Timmick's difficulties, the Court finds that
"the class action is not only the superior method for adjudicating this
controversy, it affords the vast majority of class members the only
practical avenue of redress."*fn16 Prudential I, 962 F. Supp. at 522.
Absent class certification, very few individuals would have the incentive
or resources to bring individual claims against MassMutual. Practically
speaking, if this case were not certified today, the millions of Class
Members would probably not sue MassMutual. (See Redfern 11/17/04 Aff.
noting that less than 3,000 exclusion requests had been received). Thus,
this class action Settlement represents a superior means to resolving the
claims in this case.
F. This Settlement Class Meets All the Requirements of Federal
Rules of Civil Procedure 23(a), (b)(2), and (b)(3)
Accordingly, this Court grants final class certification under Rules
23(a), (b)(2), and (b)(3). All objections to final certification of the
Class are hereby overruled. Therefore, all persons or entities who
satisfy the Class definition,*fn17 except those who properly requested
exclusion from the Class in accordance with the Preliminary Approval
Order, and as explained in the Court's Final Order Approving Class Action
Settlement, are members of the Class and are bound by the terms of the
Settlement, the Order, the Final Judgment, and are entitled to share the
benefits of the Settlement subject to the terms and conditions set forth
in the Order and Final Judgment.
VI. FAIRNESS OF THE SETTLEMENT
Federal Rule of Civil Procedure 23(e) requires court approval of any
class action settlement. Fed.R.Civ.P. 23(e). The standard for approval is
whether the settlement is "fair, reasonable and adequate." GM Trucks,
55 F.3d at 785. As an initial matter, since settlement negotiations
preceded class certification, and the settlement and class certification
are being sought simultaneously, this Proposed Settlement is subject to
an even more scrupulous examination in determining its fairness. In re
Warfarin Sodium Antitrust Litig., 391 F.3d at 534.
Nevertheless, this Proposed Settlement is entitled to an initial
presumption that it is fair because "(1) the settlement negotiations
occurred at arm's length; (2) there was sufficient discovery; (3) the
proponents of the settlement are experienced in similar litigation; and
(4) only a small fraction of the class objected." In re Warfarin Sodium
Antitrust Litig., 391 F.3d at 535 (quoting In re Cendant Corp. Litig.,
264 F.3d 201, 232 n. 18 (3d Cir. 2001)). In Warfarin, the Third Circuit
held that, even though the settlement negotiations preceded the class
certification, the District Court correctly applied the presumption of
fairness because it found that the four factors were met. Id. Here, Class
Counsel have shown by way of Friedman's Declaration that this Settlement
resulted from intensive arm's length negotiations utilizing their unique
familiarity with the facts and law of the state court cases and after
having conducted exhaustive discovery. The Court also recognizes that
Class Counsel are highly experienced in the prosecution of class
actions, both in general terms and with insurance sales practices class
actions particularly. Lastly, as explained above, only about .003% of the
Class submitted objections to the Court this is a tiny percentage of
the total Class.
As for the "fair, reasonable and adequate" standard, the Third Circuit
has broken it down into nine factors that courts must analyze. Girsh v.
Jepson, 521 F.2d 153, 157 (3d Cir. 1975) (hereinafter the "Girsh
The Girsh factors include:
(1) the complexity, expense and likely duration of
(2) the reaction of the class to the settlement;
(3) the stage of the proceedings and the amount of
(4) the risks of establishing liability;
(5) the risks of establishing damages;
(6) the risks of maintaining a class action through
(7) the ability of the defendants to withstand a
(8) the range of reasonableness of the settlement
fund in light of the best possible recovery; and
(9) the range of reasonableness of the settlement fund
in light of all the attendant risks of litigation.
See Girsh, 521 F.2d at 157.
"This nine-factor test requires this Court to conduct both `a
substantive inquiry into the terms of the settlement relative to the
likely rewards of litigation' and `a procedural inquiry into the
negotiation process.'" Prudential I, 962 F. Supp. at 534 (quoting GM
Trucks, 55 F.3d at 796). Furthermore, the Third Circuit has stated that
in assessing the fairness of a proposed settlement,
the Court should be careful not to substitute its
image of an ideal settlement for the compromising
parties' views: `The evaluating court must, of
course, guard against demanding too large a settlement
based on its view of the merits of the litigation;
after all, settlement is a compromise, a yielding of
the highest hopes in exchange for certainty and
Prudential I, 962 F. Supp. at 534 (quoting GM Trucks, 55 F.3d at 806
(citations omitted)). "Thus, the issue is whether the settlement is
adequate and reasonable, not whether one could conceive of a better
settlement." Id.; see also MetLife, 1999 U.S. Dist. LEXIS 22688, at *75.
It is well established that the law has long encouraged settlement.
Williams v. First Nat'l Bank, 216 U.S. 582, 595 (1910); In re Warfarin
Sodium Antitrust Litig., 391 F.3d at 534-35. This proposition is equally
supported, in the case at hand, by the fact that other courts around the
nation have granted final approval to insurance sales practices
settlements similar to this. See, e.g., Grove v. Principal Mut. Life
Ins. Co., 200 F.R.D. 434 (S.D. Iowa 2001); Snell v. Allianz Life Ins.
Co. of N. Am., No. Civ. 97-2784 RLE, 2000 U.S. Dist. LEXIS 1336640 (D.
Minn. Sept. 8, 2000); Manners v. Am. Gen. Life Ins. Co., No. Civ. A.
3-98-0266, 1999 U.S. Dist. LEXIS 22880 (M.D. Tenn. Aug. 11, 1999); Bussie
v. Allmerica Fin. Corp., 50 F. Supp. 2d 59 (D. Mass. 1999); In re
Metropolitan Life Ins. Co. Sales Practices Litig., MDL 1091, 1999 U.S.
Dist. LEXIS 22688 (W.D. Pa. Dec. 28, 1999); In re Mfrs. Life Ins. Co.
Premium Litig., No. 1109, 96-CV-230 BTM (AJB), 1998 U.S. Dist. LEXIS
23217 (S.D. Cal. Dec. 21, 1998); In re Prudential Ins. Co. of America
Sales Practices Litig., 962 F. Supp. 450 (D.N.J. 1997), aff'd,
148 F.3d 283 (3d Cir. 1998); Duhaime v. John Hancock Mut. Life Ins. Co.,
177 F.R.D. 54 (D. Mass. 1997). Moreover, this type of insurance sales
practices settlement in which the Class Members are offered a choice of
(a) a claim review process that offers the potential for full benefit of
the bargain relief, or (b) general policy relief that is available
automatically to those who do not wish to go through the claim review
process, has repeatedly been approved in courts around the nation.*fn18
As explained below, after carefully weighing the Girsh factors and
considering the objections, the Court determines that in the current case
the Proposed Settlement is indeed fair, reasonable, and adequate and
should be approved.
A. Complexity, Expense and Duration of the Litigation
Where the complexity, expense and duration of litigation are
significant, the Court will view this as weighing in favor of
settlement. Prudential I, 962 F. Supp. at 536. This factor is "intended
to capture `the probable costs, in both time and money, of continued
litigation.'" GM Trucks, 55 F.3d at 811 (quoting Bryan v. Pittsburgh
Plate Glass Co., 494 F.2d 799, 801 (3d Cir.), cert. denied, 419 U.S. 900
Up until now, the parties have already expended significant sums of
money on prosecuting and defending the state court cases. For example,
the Varacallo, Karges and Russo cases have already taken more than five
years and they have yet to go to trial. See, e.g., Prudential II,
148 F.3d at 318 (affirming District Court's determination that the case
"would not be completed for years"). Not counting Gass and Wofford,
MassMutual has produced over 800,000 pages of documents and the parties
have conducted more than 25 depositions. If those cases were to go
forward, or if this case were tried as a litigation class, additional
discovery would likely occur, and MassMutual has indicated that it would
vigorously oppose certification of a litigation class and probably seek
summary judgment. Assuming Plaintiffs prevailed over MassMutual's
efforts, a trial would commence that would involve numerous experts on
both sides and significant expenses and time. This would inevitably lead
to the losing party filing an appeal. Eventually the cases would
conclude, however not without significant expense and time being spent by
all. "Avoiding this unnecessary and unwarranted expenditure of resources
and time benefit[s] all parties." In re Computron Software, Inc.,
6 F. Supp. 2d 313, 317 (D.N.J. 1998); see GM Trucks, 55 F.3d at 812.
Furthermore, there are a wide range of issues and defenses involved
here, such as the elements of fraud, consumer protection statutes, RICO,
breach of contract, breach of fiduciary duty, the statute of
limitations, damages, and others. For example, Prudential and MetLife
both involved settlements of claims of deceptive insurance sales
practices as those alleged here and the courts found their settlements to
be preferable to trial. See MetLife, 1999 U.S. Dist. LEXIS 22688, at *77
(finding that litigation without settlement would be "lengthy, complex
and highly expensive for both parties"); Prudential I,
962 F. Supp. at 536 (stating that "the anticipated complexity, costs,
and time necessary to try this case greatly substantiate the fairness of
This Settlement secures a prompt and efficient resolution of the Class'
claims permitting a substantial recovery without further litigation,
delay, expense, or uncertainty. Accordingly, this factor weighs in favor
of the Settlement.
B. Class Reaction to the Settlement
"This factor attempts to gauge whether members of the class support the
settlement." Prudential II, 148 F.3d at 318. Although courts generally
interpret class members' failure to object to proposed settlement terms
as evidence that the settlement is adequate, fair and reasonable, see
Fickinger v. C.I. Planning Corp., 646 F. Supp. 622, 631 (E.D. Pa.
1986) ("[U]nanimous approval of the proposed settlement by the class
members is entitled to nearly dispositive weight."), this Court
recognizes that other courts have found that any inference drawn from
silence may be unwarranted, see GM Trucks, 55 F.3d at 812.
In the instant case, 3 million Class Notice Packages were mailed out
and as of November 17, 2004 only 2,204 valid exclusion requests were
submitted by Class Members. (Affidavit of Richard H. Redfern dated
November 17, 2004 ("Redfern 11/17/04 Aff.") at ¶ 4, Docket Entry #
130). As of November 1, 2004, fewer than 100 written objections were
received by the Court. That correlates to approximately .06% of the Class
has requested exclusion, and approximately .003% of the policies covered
by the Settlement have raised objections. These numbers are extremely
low. The exclusion requests here are smaller than those in MetLife or
Prudential. See, e.g., MetLife, 1999 U.S. Dist. LEXIS 22688, at *43, 78
(exclusions amounting to about .33% of the class); Prudential II,
148 F.3d at 318 (exclusions amounting to about .2% of the class). The
objections are comparable to, if not lower, than what occurred in other
insurance sales practices settlements. See, e.g., Prudential I,
962 F. Supp. at 537-38 (300 out of 8,000,000 or .0036%); Elkins, 1998
U.S. Dist. LEXIS 1557, at *83-84 (6 out of 109,000 or .0055%).
Furthermore, over 80,000 Class Members have utilized the toll-free
telephone numbers to contact the call center or contacted Class Counsel
for additional information about the Settlement and how to be included.
Both the Prudential and Lucent courts found this indicative of
affirmative endorsement of the settlement. Prudential II, 148 F.3d at 318;
Lucent I, 307 F. Supp. 2d at 644.
Lastly, although MassMutual met with regulators before announcing the
Proposed Settlement, no regulator submitted an objection. This fact
further supports that "the reaction of the class" supports settlement.
American Family Ent., 256 B.R. at 418; see also MetLife, 1999 U.S. Dist.
LEXIS 22688, at *80 (finding it significant support of the settlement
that "not one objection to the proposed settlement was filed by any state
insurance regulator" even though MetLife had notified them); Elkins, 1998
U.S. Dist. LEXIS 1557, at *91-92 (stating that the fact that no
governmental entities appeared in the litigation favored approval of the
This matter is similar to that in Prudential. There the court found
that such little negative feedback, given that there had been an
extensive notice and outreach program, weighed in favor of approving the
Proposed Settlement. Prudential I, 962 F. Supp. at 537. Hence, given
the extraordinary notice that has been provided to Class Members and the
relatively small numbers of negative feedback, the Court concludes that
the Settlement is generally approved of by the Class.
C. The Stage of Proceedings and Amount of Discovery Completed
"The Court must examine the stage of the proceedings to assess `the
degree of case development that class counsel have accomplished prior to
settlement.'" Prudential I, 962 F. Supp. at 538 (quoting GM Trucks,
55 F.3d at 813). The parties should have an "adequate appreciation" of
the case's merits when negotiating a settlement of the case. GM Trucks,
55 F.3d at 813.
"While the type and extent of discovery taken are relevant to the
propriety of a settlement, settlements reached early are still favored."
Lucent I, 307 F. Supp. 2d at 644. Although the present case is less
than nine months old, this is most certainly not a case that is settling
in the early stages of litigation. As noted previously, in the current
case, counsel for the parties did not commence settlement discussions
until almost nine years after the first of six cases was initiated. In
just three of those cases, over 800,000 pages of documents were produced
by MassMutual and more than 25 depositions took place. In addition, Class
Counsel obtained experts to assist them in the settlement process. See
Lucent I, 307 F. Supp. 2d at 638 (noting that class counsel had "hired
experts to assist them in evaluating the merits of their claims and the
risks of litigation"). Moreover, the settlement discussions themselves
were not easy, it took nearly one year of hard-fought face-to-face
meetings and telephone conferences to come to an arms-length result.
Given the vast "degree of case development that class counsel have
accomplished prior to settlement," GM Trucks, 55 F.3d at 813, this Court
finds that the parties certainly had an "adequate appreciation" of the
case's merits when they were negotiating this Proposed Settlement and
that settlement at this stage is not premature. See, e.g., In re Warfarin
Sodium Antitrust Litig., 391 F.3d at 537 (concluding that class counsel
adequately appreciated the merits of the case before negotiating
settlement where they had previously pursued litigation for over three
years before the cases were consolidated by the MDL panel, defendant had
produced hundreds of thousands of documents through discovery, there had
been numerous depositions, and class counsel consulted with experts).
D. The Risks of Establishing Liability and Damages
This Court must also "survey the possible risks of litigation in order
to balance the likelihood of success and the potential damage award if
the case were taken to trial against the benefits of an immediate
settlement." Prudential II, 148 F.3d at 319. However, in doing so, a
court need not conduct a "mini-trial and must, to a certain extent, give
credence to the estimation of the probability of success proffered by
class counsel[.]" In re Ikon Office Solutions, Inc. Sec. Litig.,
194 F.R.D. 166, 181 (E.D. Pa. 2000) (citation omitted).
The Court recognizes that a number of similar insurance sales practices
cases have failed on dispositive motions. See, e.g., In re New England
Life Ins. Co., 346 F.3d 218 (1st Cir. 2003); In re Minn. Mut. Life
Ins. Co., 346 F.3d 830 (8th Cir. 2003); Moore v. PaineWebber, Inc.,
306 F.3d 1247 (2d Cir. 2002); In re Northwestern Mut. Life Ins. Co. Sales
Practices Litig., 70 F. Supp. 2d 466 (D.N.J. 1999), aff'd, 259 F.3d 717
(3d Cir. 2001). The Defendants here, were even able to defeat similar
cases. See, e.g., Shocklee v. Mass. Mut. Life Ins. Co., 369 F.3d 437
(5th Cir. 2004); Markarian v. Connecticut Mut. Life Ins. Co.,
202 F.R.D. 60 (D. Mass. 2001) (class certification was denied and
plaintiff's appeal was dismissed with prejudice on March 13, 2002);
Cunningham v. Mass. Mut. Life Ins. Co., No. 4:95-CV-417-B-B (N.D. Miss.)
(the case settled and a judgment dismissing the case with prejudice was
entered on March 4, 2000); Thelen v. Mass. Mut. Life Ins. Co.,
111 F. Supp. 2d 688 (D. Md. 2000); Cohn v. Massachusetts Mut. Life
Ins. Co., 189 F.R.D. 209 (D. Conn. 1999); McCown v. Hayden, et al., No.
01-03867 (193rd Jud. Dist. Dallas County, Tex.) (the appellate court
affirmed the denial of class certification and dismissed the entire case
on April 22, 2004); Solomon v. Mass. Mut. Life Ins. Co., 47 Pa. D&C
4th 36 (Pa. Cty. Sup. Ct. 2000); O'Brien v. Mass. Mut. Life Ins. Co.,
No. 96-0160 (Mass. Superior Ct.) (the case settled and was dismissed by
the court on March 20, 2000); Elliott v. Mass. Mut. Life Ins. Co., No.
333733 (Az. Superior Ct.) (the court granted MassMutual's motion for
summary judgment and pursuant to the parties' stipulation, the case was
dismissed on September 9, 2002).
In addition to defenses to liability, Plaintiffs would have to overcome
any defenses regarding damages that Defendants would assert. Thus,
although the Plaintiffs have had some success in their state court
actions, the Court acknowledges that MassMutual could likely defend
itself successfully in further litigation.
Weighing these factors against the immediate and certain settlement
presented to this Court, this Court concludes that without a doubt this
Settlement is the better course of action.
E. The Risks of Maintaining the Class Action Through Trial
As previously stated, this Court's decision to certify this Class is
for settlement purposes only. MassMutual has specifically reserved the
right to challenge any other type of class certification.
Assuming this Court were to certify this Class for litigation
purposes, there is a significant risk of decertification at a later stage
in the litigation, such as if the Class becomes unmanageable a factor
that does not pose a problem in a settlement class. In re Warfarin Sodium
Antitrust Litig., 391 F.3d at 537. The Third Circuit has stated that a
risk of decertification supports settlement. Id.; Prudential II,
148 F.3d at 321. Thus, this factor weighs favorably in support of
F. The Ability of the Defendants to Withstand a Greater Judgment
This Girsh factor considers "`whether the defendants could withstand a
judgment for an amount significantly greater than the settlement.'" In re
Warfarin Sodium Antitrust Litig., 391 F.3d at 537-38 (quoting Cendant,
264 F.3d at 240). The estimated minimum value of this Proposed Settlement
is $698.7 million, plus legal fees and expenses, and administrative
costs. While there are still other costs that Defendants will incur,
there is no reason to believe that the Defendants are unable to withstand
a greater judgment. Defendants failed to address this point in their
brief, and Plaintiffs assert that Defendants could withstand a greater
judgment, though at some point their credit ratings would be adversely
affected.*fn19 However, Class Members will have the opportunity to
obtain a full-recovery under this Settlement, so its not clear to what
degree a greater judgment would recompense Class Members. Thus, the Court
finds that the Defendants' ability to withstand a greater judgment
neither weighs in favor of or against approval of the Settlement.
G. The Range of Reasonableness of the Settlement Fund in Light of the
Best Possible Recovery and the Attendant Risks of Litigation
The Court must now consider how the Settlement compares to the range of
best possible outcomes for the Class. These "last two Girsh factors
evaluate whether the settlement represents a good value for a weak case
or a poor value for a strong case." Id. at 538. In order to assess the
reasonableness of the Settlement in a case primarily involving monetary
relief, the Third Circuit has stated that "`the present value of the
damages plaintiffs would likely recover if successful, appropriately
discounted for the risk of not prevailing, should be compared with the
amount of the proposed settlement.'" Id. (quoting Prudential II,
148 F.3d at 322).
As in Prudential, the Class Members here are given a choice of a claim
review process (there it was ADR) or automatic relief in the form of
additional or enhanced insurance (there it was Basic Claim Relief or
"BCR"). In Prudential I, the court stated that "[t]o estimate the best
possible recovery for plaintiffs in the aggregate would be exceedingly
speculative, and unnecessary here." Prudential I, 962 F. Supp. at 540.
This Court agrees. The General Policy Relief, offered here to all Class
Members with Permanent Policies, provides real relief, not merely a
coupon. The Claim Review Process, should a Class Member affirmatively
elect it, can provide a Class Member with monetary relief in accordance
with the nature and strength of their claim up to complete relief for
the full benefit of the original bargain. When the risks of litigation
are taken into account, it is doubtful that even if the Class were to
successfully litigate this matter that their individual recoveries would
be in excess of the one offered by this Settlement.
This Settlement yields substantial and immediate benefits, and it is
reasonable in light of the best possible recovery and the attendant risks
of litigation little or no recovery at all. See Lucent I,
307 F. Supp. 2d at 648 (quoting In re Saxon Sec. Litig., Nos.
82-cv-3103 (MJL), 1985 WL 48177, at *13 (S.D.N.Y. Oct. 30, 1985)). Thus,
"an individual's recovery exceeds the value of the best possible recovery
discounted by the risks of litigation." Prudential I,
962 F. Supp. at 540.
H. Class Counsel's Approval of the Settlement
Class Counsel's approval of the Settlement also weighs in favor of the
Settlement's fairness. See Prudential I, 962 F. Supp. at 543 ("the
Court credits the judgment of Plaintiffs' Counsel, all of whom are
active, respected, and accomplished in this type of litigation.") (citing
Cotton v. Hinton, 559 F.2d 1326, 1330 (5th Cir. 1977) (court is
"entitled to rely upon the judgment of experienced counsel for the
parties") and Smith v. Vista Org., Ltd., 1991 U.S. Dist. LEXIS 10484, at
*16 (S.D.N.Y. July 30, 1991) (in appraising fairness of proposed
settlement, view of experienced counsel favoring settlement is entitled
to "considerable weight")). Thus, the Court puts credence in the fact
that Class Counsel consider the Proposed Settlement to be fair,
reasonable and adequate.
I. The Proposed Relief to the Injured Policyholders
As was previously discussed, this Proposed Settlement offers
significant value to the injured policyholders. The estimated value of
CRP and GPR, alone, are at not less than $698.7 million. The Claim Review
Process, should a Class Member affirmatively elect it, can provide a
Class Member with monetary relief in accordance with the nature and
strength of their claim. Thus, where the evidence supports their claim,
they can receive complete relief for the full benefit of the original
bargain. The Proposed Settlement also offers real relief to Class Members
with Permanent Policies through the General Policy Relief. This is not a
case in which the Class Members receive a coupon that necessitates a
future purchase; these Class Members essentially receive free insurance
even though they cannot establish that they were injured by Defendants'
alleged deceptive sales practices. The Court thus finds that this is
adequate relief to the injured policyholders.
J. The Remaining Objections to the Proposed Settlement
While the Court finds that the overall number of objections is low in
comparison to the over three million Class Members, the Court has
carefully reviewed the stated concerns of the objectors giving them
generous weight particularly where they were pro se. Although Defendants
have pointed out that some of the objections have been submitted by
"professional objectors" on behalf of Class Members, and that "[f]ederal
courts are increasingly weary of professional objectors," O'Keefe v.
Mercedes-Benz United States, LLC, 214 F.R.D. 266, 295 n. 26 (E.D. Pa.
2003), this Court has still given these objections full consideration.
*fn20 Nevertheless, as explained below, and without the need of
discussing each individual objection, this Court finds that the substance
of all of the objections submitted to the Court are without merit.
1. Objections to the Terms of the Settlement
(a) Objections to the General Policy Relief
About thirty-five objections focused on the perceived unfairness or
inadequacy of the General Policy Relief. Many of the objectors'
grievances with the proposed GPR assert that the benefit or a Settlement
Death Benefit is inadequate, unfair or does not address the
individualized harm sustained by a particular Class Member with a
Permanent Policy. For example, the argument that the GPR only offers
additional death benefits that may never be claimed by Class Members with
Permanent Policies because they would have to die during the benefit
period in order to recover the benefit is a risk that flows from any life
insurance policy. (See, e.g., Sylberbrg Obj., Plante Aff. at Ex. 24; Gray
/Bolkin Obj. at 8-10, Docket Entry # 93; Matijevich Obj., Docket Entry #
23; Bobowick Obj., Plante Aff. at Ex. 3; Gambello Obj. at 17, Docket
Entry # 85; Denaker Obj., Docket Entry # 74; Costello /Robertshaw Obj. at
3, Docket Entry # 66). This objection has been specifically rejected by
the District of Minnesota in Snell, 2000 U.S. Dist. LEXIS 1336640, at *56
n. 15. Two objectors even stated that the Settlement Death Benefit is no
better than "lottery tickets." (See, e.g., Kinser Obj., Docket Entry #
119; Walters Obj., Docket Entry # 45).
First of all, the GPR is not the only relief being offered in this
Settlement CRP is also available. Any objection that GPR is
unsatisfactory is defeated by the fact that Class Members with Permanent
Policies have the choice of a second remedy that is available. See,
e.g., Duhaime, 177 F.R.D. at 71-72; Prudential I, 962 F. Supp. at 557;
Michels, 1997 N.Y. Misc. LEXIS 17, at *57. Second, these Class Members
all purchased life insurance products so they are well aware of the
inherent risks that they may outlive the period of coverage. That risk,
however, does not make the benefit "illusory" or inadequate. Rather, it
is an added protection provided automatically at no additional cost to
Class Members that may or may not otherwise qualify for additional
coverage due to their age or health condition. Other courts have agreed
that this type of benefit has substantial value to Class Members. See,
e.g., Manners, 1999 U.S. Dist. LEXIS 22880, at *72-73 (stating that "the
free protection itself has a value to the Class as a whole, as
demonstrated by Class Members' prior purchase of life insurance."); Garst
v. Franklin Life Ins. Co., 1999 U.S. Dist. LEXIS 22666, at *73 (N.D.
Ill. June 28, 1999) (same); In re Real Estate Title & Settlement Serv.
Antitrust Litig., 1986 U.S. Dist. LEXIS 24435, at *60-61 (E.D. Pa. June
10, 1986) (holding that additional free title insurance provided a
benefit to class members regardless of whether they made a claim on that
insurance), aff'd, 815 F.2d 695 (3d Cir. 1987). Moreover, MassMutual is
even going to use its best efforts to identify and search for Class
Members that have "died during the applicable Settlement Death Benefit
duration period." (S.A. § IV(B)).
Other objections assert that the Settlement Death Benefit should be
provided for a longer duration, (see, e.g., Finn Obj., Docket Entry # 24;
Cronin Obj., Docket Entry # 36; Hammill Obj., Plante Aff. at Ex. 8;
Decker Obj., Docket Entry # 28; Kominers Obj., Docket Entry # 37), or
that some other form of relief should be provided such as a straight cash
payment, policy credit, or premium reduction, (see, e.g., Decker/Wilson
Obj., Docket Entry # 41; Sealy Obj., Docket Entry # 75). These objectors
are not taking into account that a Settlement is a compromise, "a
yielding of the highest hopes in exchange for certainty and resolution."
GM Trucks, 55 F.3d at 806. This Court's role is to determine whether the
proposed relief is fair, reasonable and adequate, not whether some other
relief would be more lucrative to the Class. "A settlement is, after
all, not full relief but an acceptable compromise." Duhaime,
177 F.R.D. at 72.
Jennifer Gray and Eve Bolkin*fn21 also incorrectly assert that the GPR
fails to adequately remedy the harm alleged in the Complaint and/or
improperly compromises the claims of Class Members residing in New Jersey
or California. (See Gray/Bolkin Obj. at 8-10, Docket Entry # 93). In
addition, the Sealy objectors state "The benefit received by Class
Members with regard to a proposed settlement should have a reasonable
relationship to the wrongs alleged of the defendant and should have a
correlation with the type of relief that would reasonably be anticipate
if the case was to be tried." (Sealy Obj. at 3, Docket Entry # 75). These
Class Members with Permanent Policies who believe that they are entitled
to "cash" or some other relief had the opportunity to submit their claims
to the Claim Review Process where they would have the chance to establish
the merit of their individual claim and be awarded relief that is
tailored to their injury. These Class Members also had the opportunity to
request exclusion and separately litigate their claims. The GPR provides
an automatic free benefit to these Class Members with Permanent Policies
without them even having to establish that they were the subject of any
of the alleged wrongdoings by MassMutual this is a significant benefit
to the Class and the Court therefore overrules these objections.
(b) Objections to the Claim Review Process
Other objections are with the Claim Review Process asserting that it is
unfair because there is a lack of a formal appeals process, they dislike
the scoring system, or they take issue with the request that Class
Members submit supporting documentation with their claim. Several
objections focus on the lack of appeal procedures that were permitted in
settlements in other cases, such as Prudential. (See Balick Obj., Docket
Entry # 21; Wolf Obj., Docket Entry # 50; Beckett Obj., Plante Aff., Ex.
2). These objectors, however, fail to recognize that the appeals process
would be costly and could drag on in endless uncertainty for many Class
Members. The parties in this case reviewed other insurance sales
practices settlements and opted for a streamlined single-tiered Claim
Review Process as opposed that the multi-level processes used in
Prudential and Michels, which Beckett cited. (Beckett Obj. at 11, Plante
Aff., Ex. 2).
There are also objections to the claim scoring guidelines because they
allow the Claim Evaluator the discretion to award a "0" in certain
circumstances. (Beckett Obj. at 6-7, Plante Aff., Ex. 2; Gray/Bolkin
Obj. at 10-11, Docket Entry # 93). If a claimant receives a "0" as a
score then they do not receive any award. The objectors assert that this
is unfair. However, as Defendants explain, "a score of zero is designed
to prevent the submission of fraudulent or frivolous claims brought
solely to try to `game the system.'" (Def. Opp. Brief at 12). Another
objector similarly argues that "[i]f Claim Review Relief (CRR) is
denied, there is no automatic `fall-back' to General Policy Relief
(GPR)." (Balick Obj., Docket Entry # 21). Thus, if it is not a legitimate
claim then they will not receive any relief and the claimant should have
done nothing and received the GPR. Claimants should not be rewarded for
submitting unfounded claims to CRP by having the "fall-back" of GPR. If
the claimant scores a "1," demonstrating that "the information in the
Claim File, considered as a whole, neither supports nor undermines the
Claim," (S.A. Ex. A, at 8-9), then the claimant does have the "fall-back"
Moreover, the Court has no reason to believe that the Claim Evaluator,
selected by Class Counsel and approved by this Court, would
indiscriminately apply a "0" to a legitimate claim or be unfair in his
evaluations. (See Wolf Obj., Docket Entry # 50; Salerno Obj. at 2, Docket
Entry # 82). The Claim Evaluator in this case is an experienced attorney
representing policyholders in insurance sales practices matters and has
effectively served in other cases as Claim Evaluator. (Friedman Decl. at
¶ 122). The Court is further assured of the fairness of this process
because the burden is on MassMutual to come forward with documentation to
contradict any claim alleging misrepresentation. MassMutual must provide
the Claim Evaluator with the Policy File, including the application
file, account values, Policy transactions, complaint file, the Producer's
complaint data, and Policy charges and premiums. (S.A. at §§ II(A)(57) and
V). This holds MassMutual to a high standard and makes it less likely
that a claimant would score a "0" on their claim.
The Court likewise finds unpersuasive the objections that the
requirement of submitting documentation in support of a claim is unfair.
Initially, it is not "unreasonable" to assume that Class Members would
have retained documentation supporting their allegations of insurance
sales practices abuses. (See Shmagin Obj., Docket Entry # 57; Koppel
Obj., Docket Entry # 111; Greenbaum Obj., Docket Entry # 63).
Notwithstanding, the objection fails to acknowledge that relief is still
available under the CRP even if the claimant fails to submit supporting
documentation they can still submit a claim and score up to a "3".
(S.A. at § II(C)(3)). See Elkins, 1998 U.S. Dist. LEXIS 1557, at *84
(rejecting similar objection stating "the objection does not recognize
that relief is available without documentary evidence, even under the
Claim Review Process"). As stated above, MassMutual must submit the
Policy File which may contain information that would support the
individual's claim. (S.A. at 31, 34). All the same, this scoring system
has been approved in other insurance sales practices settlements. See,
e.g., MetLife, 1999 U.S. Dist. LEXIS 22688, at *22; Garst, U.S. Dist.
LEXIS 22666, at *29; Manners, 1999 U.S. Dist. LEXIS 22880, at *68-69.
Lastly, objector Mucklow contends that the Settlement does not address
"those who had been misled as a retirement vehicle." (Mucklow Obj.,
Docket Entry # 117, 154). Mr. Mucklow appeared at the Fairness Hearing
and voiced this concern, but in his latest letter to the Court he states
that this issue was never responded to at the Hearing. (Mucklow Obj.,
Docket Entry # 154). This concern was, however, specifically addressed by
the Court and Mr. Friedman towards the end of the Hearing:
THE COURT: But what about the argument that what they
were purchasing was not really life insurance, it was
an investment vehicle, and in essence what they are
getting as a benefit now is really short-term life
MR. FRIEDMAN: Two answers. The first answer is
somebody who bought based upon an alleged retirement
type scheme has a recourse to the claim review
process, and that has things that are tailored to
provide very specific relief. But apart from that on
the death benefits side, everybody who is in the class
bought life insurance, and really one way or another,
. . . you bought a certain amount of life insurance
for a certain price based upon the representation of
how many payments you would need to make or what it
would cost, and ultimately by providing additional
life insurance what you are doing is redoing the
equation to provide more of the same product that
people initially bought.
In the retirement situation it is a little more
attenuated because I admit the whole premise is I
never wanted insurance in the first place, but those
people knew for a long time what they bought. When
the insurance policies arrived, they knew they had
insurance. Those people will know now if they have a
claim because if they said I didn't want an insurance
policy, those people should elect to the claim review
(Tr. at 129-130). The Court agrees.
Arlene Timmick expressed a similar objection at the Fairness Hearing,
(Tr. at 116), and in her follow up letter to the Court, (Timmick Letter,
Docket Entry # 156). Timmick contends that her policy was sold to her for
purposes of retirement. (Timmick Letter at 1). In her letter, Timmick
states that having talked with other policyholders and the MassMutual
hotline "I did feel some of my issues were over and above the normal
Policy Holder and I wanted to be sure I was following the right path."
(Timmick Letter at 1).
The recourse for those misled into buying life insurance when they
wanted an investment vehicle is properly dealt with through the CRP. The
other option was to request exclusion from the Settlement and pursue
separate litigation. All of the objections addressed to the fairness or
adequacy of the CRP are overruled.
(c) Objections to the Scope of the Release
To the extent objectors argue that the Settlement is not fair because
the scope of the release is too broad, including claims not pled in the
Complaint or unknown to the Class Member, the Court finds these
objections without merit. The Court recognizes that in class action
settlements, releases may include all claims that arise out of the same
course of conduct alleged in the Complaint, see Prudential II,
148 F.3d at 326; Grimes v. Vitalink Communications Corp., 17 F.3d 1553,
1563 (3d Cir. 1994); Sandler Associates, L.P. v. BellSouth Corp.,
818 F. Supp. 695, 704-05 (D. Del. 1993), aff'd, 26 F.3d 123 (3d Cir.
1994); Class Plaintiffs v. City of Seattle, 955 F.2d 1268, 1287-88 (9th
Cir. 1992); TBK Partners Ltd. v. Western Union Corp., 675 F.2d 456, 460
(2d Cir. 1982); In re Corrugated Container Antitrust Litig., 643 F.2d 195,
221 (5th Cir. 1981), cert. denied sub nom. CFS Continental, Inc. v. Adams
Extract Co., 456 U.S. 998 (1982), releases of known and unknown claims,
Prudential II, 148 F.3d at 326; Bussie, 50 F. Supp. 2d at 85; Duhaime,
177 F.R.D. at 77, or even claims over which the court lacked
jurisdiction, Prudential II, 148 F.3d at 326 & n. 82; Grimes,
17 F.3d at 1563.
Certain objectors argue that the release improperly releases "future"
claims. (See Gambello Obj., Docket Entry # 85; Deese Obj., Docket Entry #
91; Basil Obj., Docket Entry # 105; Costello/Robertshaw Obj., Docket
Entry # 66). Specifically, objectors Costello and Robertshaw argue that
the release "would strip numerous class members of the right to assert
unrelated and unasserted claims against defendants and cause many others
to lose access to the court system altogether." (Costello/Robertshaw
Obj. at 5, Docket Entry # 66). These objectors are mistaken. The law
allows a release to bar future claims for conduct that occurred in the
past that are based on the same factual predicate as those claims in this
action. See Schwartz v. Nat'l Football Club, Ltd., 157 F. Supp. 2d 561,
578 (E.D. Pa. 2001). That is all the release at hand precludes. Future
claims for future conduct are not included in the release. Indeed, the
Settlement Agreement specifically states "nothing in this Release shall
be deemed to . . . (ii) release a Class Member's right to assert any
claims that independently arise from acts, facts, or circumstances
arising exclusively after the end of the Class Period." (S.A. at 47).
The Court overrules the objections by Costello/Robertshaw and Deese
that there is no consideration for this release. (See Costello/Robertshaw
Obj., Docket Entry # 66; Deese Obj. Docket Entry # 91). This is not a
situation where there is "inadequate consideration," Schwartz,
157 F. Supp. 2d at 578 (finding "inadequate consideration"), or where
there is "no consideration," Norman v. McKee, 431 F.2d 769, 774 (9th
Cir. 1970) (holding that "no consideration" existed for part of the
settlement), cert. denied sub nom. Sec. Pac. Nat'l Bank v. Myers,
401 U.S. 912 (1971), rather there are millions of dollars in cash and
additional life insurance coverage that is being provided to the Class,
which includes former and current policyholders, in exchange for the
The release in this case is very similar to the release approved in
Prudential. See Prudential II, 261 F.3d at 367 (finding valid a release
that covered all claims "on the basis of, connected with, arising out
of, or related to, in whole or in part, the Released Transactions.").
Likewise, the Court finds this release proper and overrules the
2. Objection as to Lack of an Expert Valuation Report
The objection submitted by Basil that "[t]he settling parties'
valuation of the benefits to the proposed class as at least $130 million
is unsupported" is incorrect. (Basil Obj. at 5, Docket Entry #105). Both
Plaintiffs and Defendants have provided the Court with reports from their
actuaries that supports the valuation of the benefits to the proposed
Class. The Declaration of Terry M. Long, FSA, MAAA, Plaintiffs'
consulting actuary, states:
The Settlement has been structured to guarantee that
a minimum of $130 million will be paid through CRP.
If, after all CRP Claims have been scored and initial
relief determined, the preliminary Aggregate CRP
Relief to be awarded is less than $130 million, then
an amount equal to the difference between $130
million and the Aggregate CRP Relief will be provided
to certain Class Members.
(Long Decl. at 17, ¶ 34). The Court recognizes that Terry Long, Senior
Vice President and Principal of Lewis & Ellis, Inc., an actuarial
consulting firm, has extensive experience in the valuation of settlements
in class actions alleging similar deceptive sales practices. (Id. at
2-3). In addition, Defendants obtained a similar actuarial analysis of
the benefits in the Proposed Settlement from Godfrey Perrott, FSA, MAAA,
and William C. Hines, FSA, MAAA, of Milliman, Inc., a leading actuarial
firm that provides consulting services to most of the major life
insurance firms in this country.
3. Objection on the Theory that MassMutual Could Demutualize
At the Fairness Hearing, Edward Cochran, an attorney appearing for the
first time for nine objectors,*fn22 asserted a new argument that had not
been raised by his clients in their written objection or by any other
objector. At the Hearing, Mr. Cochran put forth the following argument
that had never been presented to the Court:
one issue that has not been addressed by any
objectors, not addressed by plaintiffs' counsel, not
addressed by defense counsel that I think dwarfs all
others only for the reason that it could totally
eliminate all of the settlement benefits of the
class, reduce them to zero, and, in fact, potentially
make the settlement benefits a negative A, and that is
the issue of [recapture]. . . .
. . . Massachusetts Mutual is a mutual company, of
course, who some day likely will demutualize like a
majority of large mutual insurance companies have
already done. Were they to demutualize, as the current
settlement agreement stands, they would be free to use
the accounting and actuarial method in the
demutualization to recover back directly from all
class members that which they received. That method
essentially is when you demutualize, one of the
processes that must be concluded is a calculation of
net distributable surplus, i.e., the value in the
company which in the mutualization will be distributed
to the policyholders.
When that is done without any limitation on the
Massachusetts Mutual settlement agreement, . . . they
could simply take the entire cost of this settlement
and the plaintiffs' attorneys' fees and the
defendants' attorneys fees and any and all monies that
are used to settle opt-out cases right off the top of
the number, thereby literally taking back at the time
of the demutualization dollar for dollar and more
directly from each policyholder that which he is
supposedly designed to receive in this case.
(Tr. at 86-87). It is notable that Mr. Cochran points out that nobody
raised this argument prior to the Fairness Hearing, on November 22,
2004, because it was never raised by Mr. Tsai on behalf of the same
objectors in their objection submitted to the Court on October 25, 2004.
This argument was not mentioned in Mr. Tsai's motion to admit Mr.
Cochran pro hac vice, which was filed on November 19, 2004, the eve of
the Fairness Hearing. Indeed, it was not raised until Mr. Cochran
addressed the Court at the Fairness Hearing. Further, without seeking the
Court's permission, Mr. Cochran submitted a supplemental memorandum on
December 7, 2004 that solely addressed this demutualization issue. With
the Court's permission, and to reduce any prejudice to the Parties that
had no notice of this argument, Plaintiffs and Defendants submitted short
briefs in opposition to Mr. Cochran's supplemental memorandum.
Initially, the court observes that the Class Notice specifically
stated, in bold letters, that objections must be submitted:
in writing and must be received by the Court and
the Parties no later than October 25, 2004. . . .
The Court will not consider any objections filed
after October 25, 2004. Late objections will be
deemed to have been given up or waived.
(Class Notice, at 11 (emphasis in original)). Based on the date that the
Yoes objectors submitted their initial objection, October 25, 2004, the
Court concludes that they were well aware of this deadline. Although this
Court and the Class Notice unambiguously stated that this Court would not
consider any late objections, and courts frequently overrule untimely
objections, see, e.g., Ass'n for Disabled Americans, Inc. v. Amoco Oil
Co., 211 F.R.D. 457, 476 (S.D. Fla. 2002) ("Given that the objections are
extraordinarily untimely, that no valid excuse has been shown, and that
substantial prejudice to the parties would result, they are denied.");
Manners v. Am. Gen. Life Ins. Co., 1999 U.S. Dist. LEXIS 22880, at *72
(untimely objection overruled); Cook v. McCarron, 1997 U.S. Dist. LEXIS
1090, at *53 (N.D. Ill. Jan. 22, 1997) (denying motion to file untimely
objections); In re Centocor, Secs. Litig., 1993 U.S. Dist. LEXIS 7229, at
*10 n. 5 (E.D. Pa. June 2, 1993) (refusing to consider late objections);
Roberts v. Heim, 1991 U.S. Dist. LEXIS 18208, at *3 (N.D. Cal. Aug. 28,
1991) (no legitimate excuse for filing objections two weeks late); Haynes
v. Shoney's, Inc., 1993 U.S. Dist. LEXIS 749, at *6 (N.D. Fla. Jan. 25,
1993) (objections filed two days after deadline "would be reason enough
to reject . . . objection"), this Court has considered this particular
objection for thoroughness sake and finds it is without merit. While Mr.
Cochran asserts that "almost all mutual companies are considering
demutualization," and that MassMutual "would have tremendous incentive to
do so, as they could save the company the entire cost of the settlement,"
he fails to substantiate this argument with anything more than
speculation and one example that this occurred three months after the
Western District of Pennsylvania approved the nationwide class settlement
in MetLife. (See Objectors' Supplemental Memorandum Re: Recapture of
Settlement Benefits by Massachusetts Mutual Life Insurance Company
("Cochran Suppl. Memo.") at 1-2, Docket Entry # 150). He proposes that in
order to avoid the recapture of the settlement costs, in the event that
MassMutual does demutualize, that one sentence should be inserted in the
In any demutualization of the company, Mass Mutual
cannot recapture the costs of the settlement benefits
to these class members by accounting for said costs
to diminish the distribution in the demutualization
to the class members.
(Cochran Suppl. Memo. at 4). Since this is a serious allegation,
the Court feels compelled to consider the argument.
Defendants contend that there is no concrete evidence, other than what
occurred with an unrelated insurance company, that MassMutual plans to
demutualize and recapture the costs of this Settlement. (Defendants'
Supplemental Mem. of Law Responding to the Objection of Edward Cochran on
Behalf of the Yoes Objectors ("Def. Suppl. Opp.") at 4, Docket Entry #
151). In fact, at the Fairness Hearing, Mr. Hooper represented to this
Court that ". . . there is no intent to try to resolve the settlement, to
my knowledge and I have been their counsel, in order to get to a point to
demutualize. . . ." (Tr. at 136). Further, in a letter dated February
15, 2004, Robert O'Connell, the Chief Executive Officer of MassMutual
MassMutual enjoys enviable financial strengths. We
continually examine our organizational structure, and
we have determined that the mutual form serves us
very well at the present. Our loyalties are not
divided between policyholders and shareholders. As a
mutual company, we can be insulated from the wave of
consolidation that has swept our industry, yet our
capital reserves are adequate for those strategic
acquisitions that might arise. As Standard & Poor's
succinctly put it in November when reaffirming our
AAA rating, `MassMutual is well-positioned for
sustained revenue, operating earnings, and capital
growth due to its well-diversified business profile.'
See 2003 MassMutual Annual Report (cited in Def. Suppl. Opp. at 4). In
sum, Defendants' contend that "Mr. Cochran's arguments regarding
recapture of benefits and demutualization are baseless." (Def. Suppl.
Opp. at 4).
Plaintiffs contend that the MetLife case is tangential. They point out
that in MetLife the company had approved the demutualization plan on
September 28, 1999, three months before the court approved the class
action settlement on December 28, 1999. (Plaintiffs' Brief in Opposition
to Supplemental Brief of the Cochran Objectors ("Pl. Suppl. Opp.") at 1,
Docket Entry # 152 (citing In re MetLife Demutualization Litig.,
156 F. Supp. 2d 254, 258 (S.D.N.Y. 2001)). Here, MassMutual has not
made a decision to demutualize. The Plaintiffs also point out that if
such did occur, "MassMutual could not take away Settlement Death Benefits
from Class Members who chose GPR, or the cash or cash values added to
policies of those who get relief in CRP." (Pl. Suppl. Opp. at 1).
Further, the Plaintiffs ask the Court not to speculate about the state
of MassMutual's surplus if it did demutualize at some hypothetical time,
as Mr. Cochran asks this Court to do and as he asked the Wright court to
do. (Id. (citing Wright v. Prudential Ins. Co. of Am.,
285 F. Supp. 2d 515, 524 (D.N.J. 2003) (stating that in the four
years that lapsed between the settlement and the regulatory approval of
the demutualization, "there is no way to be certain that the money
Prudential expended on the Costs & Expenses would necessarily have been
a part of the company's surplus at the time of demutualization had the
company not been under order to pay for the Costs & Expenses."))).
Lastly, the Plaintiffs argue that if MassMutual sought to demutualize,
and if it attempted to recapture settlement costs, MassMutual would have
to seek regulatory approval and the approval of its policyholders. (Id.
Additionally, the Court conducted its own research and found the
following statement on MassMutual's website discussing its organizational
We strongly believe that, at least for the present,
retaining our mutual form of ownership best serves
our customers. Conversion to public ownership remains
a future option, but for now would prove expensive
and time-consuming. Our attention and resources
remain focused on our core mission, which is serving
our customers not just at one moment in time but
over the lifetime of their relationship with us.
MassMutual Organizational Structure, available at
040768-000 May 2004) (footnote omitted). In conclusion, the Court agrees
with the parties that it is sheer speculation that MassMutual would
demutualize and that, if it did, it would also seek to recapture the
costs of this Settlement. The Court is not going to impose the proposed
amendment on the parties and require its inclusion in the Settlement
Agreement. As Plaintiffs stated "it would interfere with any company's
ability to resolve a contingent liability because it would require the
company to limit its future decision-making in advance." (Pl. Suppl.
Opp. at 3).
All additional objections were considered by the Court, and are
overruled as having no merit. For the most part, these objections are
general laments about the perceived unfairness of the Proposed
Settlement. Thus, the Court, having considered all of the objections
submitted to it, including those objections that were untimely filed, it
is the conclusion of this Court that the substance of the objections to
this Proposed Settlement are without merit and do not weaken this Court's
decision that the Settlement is fair, adequate and reasonable, and that
the Settlement provides substantial and real benefits to the Class.
VII. ATTORNEYS' FEES AND EXPENSES, AND INCENTIVE AWARDS FOR NAMED
Also before the Court is Plaintiffs' request for an award of attorneys'
fees and reimbursement of Class Counsel's expenses, and for an incentive
award for the named Plaintiffs. As part of its fairness determination,
the Court must assess the reasonableness of these requested awards. For
the reasons stated below, the Court grants the application for attorneys'
fees and expenses, and grants in part the application for an incentive
award for the named Plaintiffs.
A. Attorneys' Fees and Expenses
In light of the size of the substantial fund and the large number of
persons benefitted, the skill and efficiency of counsel, the complexity
and duration of the underlying actions, the Class Counsel's risk of
nonpayment in this contingent litigation, the efforts and amount of time
that Class Counsel spent on the litigation, and awards in similar
insurance sales practices cases, this Court finds that the requested
attorneys' fees and expenses are reasonable and warrant approval. As
discussed in more detail below, the requested attorneys' fees and
expenses of $58.2 million is approximately 7.58% of the Settlement's
benefit to the Class, is 2.83 times Class Counsel's actual lodestar of
over $19,659,439.50,*fn24 and is within the range of fee awards approved
in cases of similar magnitude and complexity.
In a class action settlement, the court must thoroughly analyze an
application for attorneys' fees, even where the parties have consented to
the fee award. GM Trucks, 55 F.3d at 820 (explaining that consent is not
determinative because of a "`danger . . . that the lawyers might urge a
class settlement at a low figure or on a less-than-optimal basis in
exchange for red-carpet treatment for fees.'") (quoting Weinberger v.
Great N. Nekoosa Corp., 925 F.2d 518, 524 (1st Cir. 1991)). "The
district court employs its discretion to fix the amount of attorney's
fees and expenses." Reinhart v. Lucent Techs. ("Lucent II"),
327 F. Supp. 2d 426, 431 (D.N.J. 2004) (citing GM Trucks,
55 F.3d at 783, 821). "Determining an appropriate award, however, is not
an exact science." Id. at 431. Rather, the facts unique to each case are
relevant to the amount of any award. Id.
1. Method for Determining Fee Award
In order to evaluate the reasonableness of a particular attorneys' fee
request, the Court must first determine the type of action that is being
adjudicated and then apply the appropriate method of awarding fees.
"Relevant law evidences two basic methods for evaluating the
reasonableness of a particular attorneys' fee request the lodestar
approach and the percentage-of-recovery approach. Each has distinct
attributes suiting it to particular types of cases." Prudential I,
962 F. Supp. at 578. "The lodestar method calculates fees by
multiplying the number of hours expended by some hourly rate appropriate
for the region and for the experience of the lawyer." GM Trucks,
55 F.3d at 819 n. 37. The lodestar method is properly used in statutory
fee shifting cases. See id. "The percentage of recovery method resembles
a contingent fee in that it awards counsel a variable percentage of the
amount recovered for the class." Id. at 819 n. 38. "[T]he
percentage-of-recovery method is used in common fund cases on the theory
that class members would be unjustly enriched if they did not adequately
compensate counsel responsible for generating the fund." In re AremisSoft
Corp. Sec. Litig., 210 F.R.D. 109, 128 (D.N.J. 2002). "While either the
lodestar or percentage-of-recovery method should ordinarily serve as the
primary basis for determining the fee, the Third Circuit has instructed
that it is sensible to use the alternative method to double check the
reasonableness of the fee." Prudential I, 962 F. Supp. at 578.
Although this Settlement is not strictly speaking a common fund case,
the Court finds it is analogous in that the fees and Class award would be
paid by the Defendants and a common fund has been established for the
Class. Moreover, in similar insurance sales practices class action
settlements, the courts in this Circuit have found that the
percentage-of-recovery method was the appropriate approach. Prudential
II, 148 F.3d at 333; Roy v. Indep. Order of Foresters, Civil Action No.
97-6225, at 52 (SRC) (Pl. Final Approval Brief, Greenberg Aff., Ex. A.).
The rationale for calculating fees on the percentage-of-recovery method
in a common fund case is that "it is consistent with the private
marketplace where contingent fee attorneys are routinely compensated on a
percentage of recovery method," and "it provides a strong incentive to
plaintiffs' counsel to obtain the maximum possible recovery in the
shortest time possible under the circumstances." Manners v. American
General Life Ins. Co., 1999 U.S. Dist. LEXIS 22880, at *86-87.
2. Application of the Percentage-of-Recovery Method
In assessing Class Counsel's requested fee, the Court will rely
primarily upon the percentage-of-recovery method, and will use the
lodestar method solely as a cross-check. Prudential I,
962 F. Supp. at 578. Utilizing the percentage-of-recovery method, the
court must first value the proposed settlement and then decide what
percentage of the settlement should be awarded as fees. GM Trucks,
55 F.3d at 822. In determining the value of the proposed settlement the
court must "determine a precise valuation of the settlement on which to
base its award." Id. Next, in determining the appropriate percentage to
award as fees, "the percentage of recovery customarily awarded in class
actions in the Third Circuit and elsewhere generally ranges from nineteen
to forty-five percent of the settlement fund." Roy v. Indep. Order of
Foresters, Civil Action No. 97-6225, at 54 (SRC) (Pl. Final Approval
Brief, Greenberg Aff., Ex. A.) (awarding 12.7% of the total recovery of
$114.2 million); see also Lucent II, 327 F. Supp. 2d at 439-42
(collecting data on fee awards in common fund cases demonstrating that
"more than twenty relatively recent class action decisions in the Third
Circuit reflect fee awards between 33 1/3% and 22.5%" and "where cases
involving comparable risks to the ones in this matter have settled for
more than $100 million, courts have typically awarded fees in the range
of 25% to 30%").
"Many courts, including several in the Third Circuit, have considered
25% to be the "benchmark" figure for attorney fee awards in class action
lawsuits, with adjustments up or down for significant case-specific
factors." In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231, 262
(D. Del. 2002) (gathering case law and awarding 22.5% in fees on a $10.01
million settlement fund). "`Courts typically decrease the percentage of
the fee as the size of the fund increases.'" In re Alloy, Inc. Sec.
Litig., 2004 U.S. Dist. LEXIS 24129, at *8 (S.D.N.Y. Dec. 2, 2004)
(quoting Karpus v. Borelli (In re Interpublic Secs. Litig.), 2004 U.S.
Dist. LEXIS 21429 at *33 (S.D.N.Y. Oct. 26, 2004) (setting the fee award
at 12 % of $96.4 million where plaintiffs' counsel had sought 17 %)).
"But there is no rule that a district court must apply a declining
percentage reduction in every settlement involving a sizable fund. Put
simply, the declining percentage concept does not trump the
fact-intensive Prudential/Gunter analysis." In re Rite Aid Corp. Secs.
Litig., 2005 U.S. App. LEXIS 1269, at *21-22 (3d Cir. Jan. 26, 2005).
Ultimately, however, the determination of a reasonable fee award is well
within the court's sound discretion. In re Alloy, Inc. Sec. Litig., 2004
U.S. Dist. LEXIS 24129, at *8.
As previously discussed*fn25 the value of the Settlement is "at least
$698.7 million, plus the value of injunctive relief and Part VIII ADR
Relief as well as legal fees, expenses and administrative costs." (Long
Decl. at 6). This amounts to approximately $771.9 million value to the
Class.*fn26 The requested attorneys' fees and expenses of $58.2 million
is approximately 7.58%*fn27 of the Settlement's benefit to the Class.
While this may seem reasonable it is not the end of this Court's fairness
3. The Gunter Analysis
In awarding attorneys' fees using the percentage-of-recovery method in
a common fund class action, the Court is guided by the standards set
forth in Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n. 1 (3d
Cir. 2000). Those standards include:
(1) the size of the fund and the number of persons
(2) the presence or absence of substantial objections
by class members to the fee amount;
(3) the skill and efficiency of counsel;
(4) the complexity and duration of the action;
(5) the risk of nonpayment;
(6) the amount of time that counsel spent on the
(7) awards in similar cases.
Gunter, 223 F.3d at 195 n. 1 (citations omitted). These factors "need not
be applied in a formulaic way" because "in certain cases, one factor may
outweigh the rest." Gunter, 223 F.3d at 195 n. 1. Each of these factors
supports the requested award.
(a) Size of Fund and Number of Persons Benefitted
The size of the settlement fund and the number of policyholders
benefitted by the settlement is one consideration in evaluating a request
for attorneys' fees and expenses. Gunter, 223 F.3d at 195 n. 1. As was
previously articulated, the general rule is that as the settlement fund
increases, the percentage awarded as a fee decreases. Prudential II,
148 F.3d at 339. The rationale for this concept is the belief that the
increase in recovery is "merely a factor of the size of the class and has
no direct relationship to the efforts of counsel." Id.
Here, the settlement fund contains the third largest class action
settlement for deceptive insurance sales practices, well behind
Prudential and MetLife. This Proposed Settlement involves about three
million policies and a settlement value of at least $698.7 million, plus
the value of injunctive relief, Part VIII ADR Relief, attorneys' fees and
expenses, and administrative costs. (See Perrott Aff., Ex. B at 2; Long
Decl. at ¶ 1). Plaintiffs seek a fee for Class Counsel that roughly
equals 7.58% of the settlement benefit. Viewing the value of the
settlement relief in relation to the percentage, this is significantly
lower than that found appropriate in Prudential and MetLife.
As set forth in footnote three above, the settlement in Prudential
involved in excess of eight million Class Members and a settlement value
of between $1.209 billion and $2.077 billion, see Prudential I,
962 F. Supp. at 495, 510, and MetLife's settlement involved in excess
of six million Class Members and a settlement value of $1.645 billion,
see MetLife, 1999 U.S. Dist. LEXIS 22688, at *30, 44-45. In Prudential,
7.5% was found appropriate, and in MetLife, 7% was approved. (See Chart,
infra at 94-95).
This factor favors the fee request based upon the way the Settlement is
structured guaranteeing relief to every permanent policy holder either
through GPR or CRP, and giving CRP relief to every term or disability
policyholder with a Delayed Coverage or Juvenile Smoker claim. Thus, based
on the size of the fund and the substantial guaranteed benefit to the
Class, this factor weighs in favor of a finding that the requested fees
and expenses are reasonable.
(b) Presence or Absence of Substantial Objections
The Class Notice disseminated to potential Class Members, and the
Publication Notice, advised Class Members that:
At the Fairness Hearing, Class Counsel will ask the
Court for an award of attorneys' fees and expenses
not to exceed $58.2 million in fees and expenses to
be paid by MassMutual. . . .
You will not be required to pay any portion of
these attorneys' fees, expenses or awards. Payment of
attorneys' fees and expenses to Class Counsel is in
addition to payment of benefits to Class Members and
will not reduce any funds or benefits to Class
Members and will not reduce any funds or benefits
being made available to you.
(Class Notice at 12 (emphasis in original)). The Notice also provided
that Class Members, who did not opt out, had the right to file an
objection with the Court and appear at the Fairness Hearing. Around
forty-five of the objections received by the Court asserted that the
attorneys' fees were excessive.
For good reason, the request for expenses was not an issue with
the objectors. As of September 2004, Class Counsel had spent over
$2.584 million in their own funds to pay the expenses that arose
through this litigation. Defendants do not object, and the Court
finds no reason to question the numbers reported to the Court by
way of Class Counsel's affidavits.
Having read and reread the objections, the Court overrules the
objections to the award of attorneys' fees for several reasons. First,
the Court received fewer than fifty objections to the requested
attorneys' fees out of the more than three million Class Members. Such a
small number of objections in relation to the size of the Class favors
approval of the request. See, e.g., In re Cendant Corp. Deriv. Action
Litig., 232 F. Supp. 2d 327, 338 (D.N.J. 2002). The majority of these
voiced disapproval as to the fee request as being excessive. Second, the
objectors overlook the enormous benefit to the Class that was achieved
through the perseverance and skill of Class Counsel. In addition, they
fail to acknowledge that the fee is being paid by MassMutual, the alleged
wrongdoer, and that it is not coming out of the settlement fund. The fees
and expenses are being paid over and above the GPR and CRP. Third, the
objections reflect a profound misunderstanding as to the contentious
character of this litigation over the past nine years and the significant
risk of non-recovery that was faced by Plaintiffs and Class Counsel. They
simply fail to recognize the strong likelihood that if these Class
Counsel had not undertaken this litigation that there would be no
settlement. Class Counsel have spent approximately nine years litigating
these cases against MassMutual, they have incurred substantial fees and
expenses, and they have not yet received a dime for all of their
exceptional work to date.
Lastly, as for objector Beckett's argument, at the Fairness Hearing and
in his written objection, that the Court should pay the attorneys' fees
in installments, or "stage" the fees, the Court finds no merit in the
objection. (See Tr. at 81-82; Beckett Obj., Plante Aff. #2). While that
has been done in other settlements, in Prudential and Duhaime, where
there was significant post-settlement monitoring or an uncapped ADR
process, neither of those are of concern here. Here, the settlement value
is known to within a very narrow range, as explained by Plaintiffs'
expert actuary Mr. Long.
Moreover, the vast majority of courts have provided for the full fee to
be paid at once in other insurance sales practices settlements. See,
e.g., Snell, 2000 U.S. Dist. LEXIS 1336640, at *61-62 (awarding $6.6
million fee request); MetLife, MDL No. 1091 (W.D. Pa. July 26, 2000)
(Greenberg Aff., Ex. C, Docket Entry # 32) ($120 million fee award
authorized for payment in full); Manners, 1999 U.S. Dist. LEXIS 22880, at
*95 (approving $19.5 million in fees and expenses); Roy, at 45-46 (Pl.
Final Approval Brief, Greenberg Aff., Ex. A); Lee v. US Life Corp., Civil
Action No. 1:97CV-55-M (W.D. Ky. July 2, 1999) (Greenberg Aff., Ex. H),
at 64; Karst v. Franklin Life Ins. Co., 1999 U.S. Dist. LEXIS 22666, at
*91; Elkins, 1998 U.S. Dist. LEXIS 1557, at *107 (approving request for
$5 million in attorneys' fees and expenses). The Court also adds that
these Class Counsel have a strong track record of following such
settlements through to the end. (Friedman Decl. ¶ 149). See In re the
Prudential Ins. Co. of Am. Sales Practices Litig. ("Prudential III"),
106 F. Supp. 2d 721, 734 (D.N.J. 2000) (noting performance of Class
Counsel in zealously representing the Class "[e]ven in the time since the
settlement in this matter was finally approved").
In sum, the Court adopts the reasoning set forth in the Brief of
Plaintiffs and Class Counsel in Opposition to Objections to Requested
Incentive Awards and Attorneys' Fees. (See Docket Entry # 125). Thus,
this factor also supports the presumption that the requested fee is
(c) Skill and Efficiency of Counsel
The purpose of a fee award "is to ensure `that competent counsel
continue to undertake risky, complex, and novel litigation.'" In re
Safety Components, Inc. Sec. Litig., 166 F. Supp. 2d 72, 96 (D.N.J.
2001) (quoting Gunter, 223 F.3d at 198). The subject litigation against
MassMutual began in 1995. Many cases alleging deceptive insurance sales
practices against MassMutual*fn28 and other insurance companies*fn29
failed over the years, either on dispositive motions or at the class
certification stage. Given such a poor track record of success in this
type of case, Class Counsel had to exercise great skill and dedication in
jumping these hurdles with such success that MassMutual was willing to
discuss a nationwide settlement with Class Counsel so as to resolve these
cases. This opinion has already set forth the history of the litigation
against MassMutual and sees no reason to repeat it, but to say that it
underscores the high caliber performance and industriousness of Class
Counsel in this litigation and shows that purposes of awarding attorneys'
fees in such cases will have been fulfilled.
In addition, the Court notes the significance that, in this case, Class
Counsel did not begin negotiating their fee until all of the settlement
terms for the Class had been fully negotiated. (Pl. Fee Brief at 1.) See
Prudential I, 962 F. Supp. at 577, aff'd, 148 F.3d at 335 (noting that
parties properly negotiated settlement before negotiating attorneys'
fees); cf. Prandini v. National Tea Co., 557 F.2d 1015 (3d Cir. 1977)
(rejecting a settlement agreement which contained an award of attorneys'
fees, holding class counsel should not simultaneously negotiate both a
settlement and the attorneys' fees).
(d) Complexity and Duration of Litigation
In Gunter, the Third Circuit stated that "[t]he complexity and duration
of the litigation is the first factor a district court can and should
consider in awarding fees." Gunter, 223 F.3d at 197. It is axiomatic that
if the litigation were short and sweet a proportionally large fee award
would be a windfall to Class Counsel. This is not the situation here.
As previously set forth, this Settlement is the culmination of multiple
cases, one of which started almost eight years ago and had a trial date
set. The other cases have also sustained a long duration of hotly
contested litigation. Liability, damages and class certification were
issues that arose in these cases for which Class Counsel had to
strategize and overcome. In addition, the settlement negotiations lasted
about one year and were tenuous, at best, right up until the end.
Overall, this factor supports the fee request.
(e) Risk of Non-Payment
Class Counsel undertook these cases against Defendants solely on a
contingent basis. Not only did they expend a large amount of time
representing Plaintiffs, but they also paid out millions of their own
dollars in expenses so they could depose witnesses, obtain experts, and
pay for other litigation costs. Class Counsel did not have the assistance
of a governmental agency pursuing Defendants, rather they had to pursue
these large well-funded Defendants on their own. See Lucent II,
327 F. Supp. 2d at 436 (commenting that lead counsel had "achieved
results without the aid of a governmental investigation"). As previously
set forth, many of the deceptive insurance sales practices cases against
Defendants and other insurers failed. So, despite years of litigation,
albeit with some progress, Class Counsel persevered facing a significant
risk of non-payment.
As the court stated in Lucent II, "the intrinsically speculative nature
of this contingent fee case enhances the risk of non-payment and bolsters
the Court's analysis under this factor." Lucent II,
327 F. Supp. 2d at 438. Thus, this factor also supports approval of the
(f) Amount of Time that Counsel Devoted to Case
As evidenced by the 63,037.35 hours spent by Class Counsel in these
cases, an enormous amount of time was devoted to prosecuting these
cases. (See Affidavits Accompanying Fee Brief). Over the course of
years, it is reasonable that so much time would have been spent on these
complex cases, particularly given the excellent counsel of Defendants and
their contested nature. The $58.2 million requested fee is the total fee
Class Counsel will receive, despite the continuing responsibilities they
will have in responding to Class Member inquiries, assisting the Claim
Evaluator, consulting on individual cases, and any post-judgment
proceedings and appeals. Therefore, this Court finds that this factor
likewise supports approval
(g) Awards in Similar Cases
In evaluating Class Counsel's request for approximately 7.58% of the
total settlement value to the Class, the Court must consider awards in
similar cases. Gunter, 223 F.3d at 195 n. 1; Lucent II,
327 F. Supp. 2d at 439. In an effort to provide policyholders and Class
Members with an exacting analysis of the fairness of the requested
attorneys' fees, the Court has compiled and considered the following
common fund cases involving similar claims of deceptive insurance sales
practices that also utilized the percentage-of-recovery method:
CASE RECOVERY PERCENT AWARDED
In re the Prudential Ins. $1.8 billion 7.5%
(found Co. of Am. Sales Practices
appropriate) Litig. ("Prudential III"), Civil Action
No. 95-4704, 106 F. Supp. 2d 721 (D.N.J.
July 18, 2000)
In re Metropolitan Life Ins. Co. $1.645 billion 7% Misc.
Sales Practices Litig., Docket
No. 96-179 (W.D. Penn. July 26,
Manners v. American General $169 million 11.5%
Life Ins. Co., Civil Action No.
3-98-0266, 1999 U.S. Dist. LEXIS
22880 (M.D. Tenn. Aug. 11, 1999)
Roy v. Indep. Order of $114.2 million 12.7%
Foresters, Civil Action No.
97-6225 (D.N.J. Aug. 3, 1999)
Garst v. Franklin Life Ins. $90.1 million 14.5%
Co., No. 97-C-0074-S, 1999
U.S. Dist. LEXIS 22666 (N.D.
Ala. June 28, 1999)
In re Mfrs. Life Ins. Co. $555.1 million 6.5%
Premium Litig., MDL No. 1109,
Master File No. 96-CV-230,
1998 U.S. Dist. LEXIS 23217
(S.D. Cal., Dec. 21, 1998)
Elkins v. Equitable Life $278.8 million 1.7%*fn30
Ins. Co., Civil Action No.
96-296-CIV-T-17B, 1998 U.S.
Dist. LEXIS 1557 (M.D.
Fla. Jan. 28, 1998)
Michels v. Phoenix Home Life $100 million 9%
Ins. Co., Index No. 5318-95,
1997 N.Y. Misc. LEXIS 171
(N.Y. Sup. Ct., Albany County
Jan. 3, 1997)
Willson v. New York Life $300 million 7%
Ins. Co., Index No. 94/127804,
1995 N.Y. Misc. LEXIS 652 (N.Y.
Sup. Ct., N.Y. County Nov. 8,
At this point in the analysis, were the Court to ignore the precedent,
namely the 25% "benchmark" for a fee award, In re Warfarin Sodium
Antitrust Litig., 212 F.R.D. at 262, and the 19%-45% range generally
applied in class actions, Roy, Civil Action No. 97-6225, at 54, and were
the Court to rely solely on a review of these recent insurance sales
practices settlement shown on the above chart, the Court could conclude
that an award of even 9.5% would be appropriate given the tremendous
value of this Settlement to the Class Members. However, Plaintiffs only
seek 7.58% in attorneys' fees and expenses, and as in Prudential, this
Court will not award more than that to which the parties agreed.
Plaintiffs argue, and this Court agrees, that the 7.58% is well within
the range permitted in the this district and the Third Circuit, and
virtually identical to the 7.5% that Judge Wolin found appropriate in
Prudential III, 106 F. Supp. 2d at 734 & n. 9 (but awarding only 4.8%
because that is what the parties had agreed to).
Therefore, this factor overwhelmingly favors approval of the
4. Application of the Lodestar Recovery Method
Although the Court is satisfied that its fees calculation is reasonable
in light of the Gunter factors and awards in similar cases, the Court
will nonetheless double-check its result by applying the lodestar
method. The Court shall check its percentage-of-recovery calculation
against a lodestar method calculation to be sure that the percentage
awarded does not amount to an unreasonable hourly fee. See GM Trucks,
55 F.3d at 822. To determine an attorney's lodestar award the Court
multiplies "the number of hours he or she reasonably worked on a client's
case by a reasonable hourly billing rate for such services given the
geographical area, the nature of the services provided, and the
experience of the lawyer." Gunter, 223 F.3d at 195 n. 1. The Court may
then multiply the lodestar calculation to take into account the risks of
non-recovery, to provide a reward for an extraordinary result, or to
encourage counsel to continue to undertake important litigation. Safety
Components, 166 F. Supp. 2d at 102. "The Third Circuit has held that
the lodestar may be increased or decreased by the Court after considering
(1) `the contingent nature of success' and (2) `the quality of the
attorney's work.'" In re Residential Doors Antitrust Litig., 1998 U.S.
Dist. LEXIS 4292, at *30 (quoting Lindy Bros. Builders, Inc. v. Am.
Radiator & Standard Sanitary Corp., 487 F.2d 161, 168 (3d Cir. 1973));
see also Gunter, 223 F.3d at 195 n. 1.
Each firm involved in this matter has provided the Court with a
summary*fn31 of their firm's professional time, including the name of
each person who worked on the case, his or her current hourly billing
rate, and the number of hours expended on this matter. At the outset, the
Court recognizes that this is significant in that counsel have provided
the Court with affidavits listing everyone that worked on the case and
their time and rate, thus allowing the Court to apply a blended rate in
determining the multiplier. See, e.g., In re Rite Aid Corp. Secs.
Litig., 2005 U.S. App. LEXIS 1269, at *32 ("In performing the lodestar
cross-check, the district courts should apply blended billing rates that
approximate the fee structure of all the attorneys who worked on the
matter."). In Rite Aid, the Third Circuit vacated the district court's
award of attorney's fees and remanded because the Court failed to apply a
blended rate for all the attorneys that had worked on the matter. Id.
("Had the hourly rates been properly blended, taking into account the
approximate hourly billing rates of the partners and associates who worked
on the case, the multiplier would have been a higher figure, alerting the
trial court to reconsider the propriety of its fee award." (footnote
To summarize, the firm of Lite DePalma Greenberg & Rivas, LLC provided
services in Varacallo v. Massachusetts Mutual Life Ins. Co., Docket No.
ESX-L-3403-97 (Superior Court of New Jersey, Law Division, Essex
County), and other sales practices cases against MassMutual over the past
eight years (Russo v. MassMutual, CV 96-0368 (Supreme Court, Tompkins
County, New York), Gass v. MassMutual, Civil Action No. CV-2000-05-1010
(Court of Common Pleas, Summit County, Ohio), Elliot v. MassMutual, Case
No. 333733 (Superior Court, Pima County, Arizona), and the present
action). (Affidavit of Bruce D. Greenberg, in Support of Joint Petition
for Award of Attorneys' Fees and Reimbursements of Expenses and Class
Representatives' Incentive Award "Greenberg Fee Aff." at 2, Docket Entry
# 32). Through September 15, 2004, this firm spent 3,947.8 hours on this
litigation, which results in a total lodestar of $1,586,410.25. (Id.).
Through September 14, 2004, the firms of Leach Coughlin Stoia Geller
Rudman & Robbins LLP and Milberg Weiss Bershad & Schulman LLP*fn32
spent 19,859.50 hours on this litigation, which results in a total
lodestar of $5,141,410.50. (Affidavit of John J. Stoia, Jr. and Barry A.
Weprin in Support of Joint Petition for Award of Attorneys' Fees and
Reimbursement of Expenses and Class Representatives' Incentive Award
("Stoia Fee Aff.") at 2, Docket Entry # 32).
Through September 15, 2004, the firm of Finkelstein & Krinsk LLP spent
6,316.35 hours on this litigation (including this action and Karges),
which results in a total lodestar for this firm's professional time of
$2,438,894.25. (Affidavit of Howard D. Finkelstein in Support of Joint
Petition for Attorneys' Fees and Expenses ("Finkelstein Fee Affid.") at
2, Docket Entry # 32).
The firm of Specter Specter Evans & Manogue, P.C., from August 22,
1996 through September 15, 2004, spent 7,390.70 hours on this litigation
(including this action, Varacallo and Gass) amounting to a lodestar of
$2,575,450.00 for this firm's professional time. (Affidavit of Joseph N.
Kravec, Jr. in Support of Joint Petition for Award of Attorney Fees and
Reimbursement of Expenses and Class Representatives' Incentive Award
("Kravec Fee Aff.") at 2, Docket Entry # 32).
The firm of Bonnett, Fairbourn, Friedman & Balint, P.C. spent a total
of 25,523.3 hours on this litigation through September 15, 2004.
(Affidavit of Andrew S. Friedman in Support of Joint Petition for
Attorneys' Fees and Expenses ("Friedman Fee Aff.") at 2, Docket Entry #
32). The total lodestar for these services is $7,917,274.00. (Id.).
In sum, this analysis results in a total lodestar of $19,659,439.50.
Dividing that lodestar into the requested fee award, $58,200,000, less
Class Counsel's expenses already advanced by Class Counsel,
$2,584,468.09, yields a fee multiplier of approximately 2.83. A 2.83
multiplier is reasonable under the circumstances. The Third Circuit has
even recognized that multipliers "ranging from one to four are frequently
awarded in common fund cases when the lodestar method is applied."
Prudential II, 148 F.3d at 341 (quoting 3 Newberg § 14.03 at 14-5).
Plaintiffs point out that the multiplier will eventually be lower because
Class Counsel would incur additional time after the September date which
served as a cutoff date, such as final approval briefing, attending the
Fairness Hearing, and assisting with claim administration. (Pl. Fee Brief
Considering the complexity of this litigation, and the considerable
effort and skill which Class Counsel has exhibited in achieving this
Settlement, the Court believes that the requested fee and expense award
of $58.2 million is reasonable.
5. Reimbursement of Expenses
As part of the $58.2 million for attorneys' fees and expenses, Class
Counsel seeks reimbursement of expenses of $2,584,468.09 incurred in
handling this litigation.*fn33 This total is based on submissions from
the five firms who represented the Plaintiffs in these cases.*fn34 The
relevant details regarding these expenses are set forth in the separate
affidavits submitted by Class Counsel on behalf of each of their firms.
To summarize, however, the expenses are for: (1) litigation fund
contributions, (2) class notice expenses, (3) court reporters, (4)
Lexis/Westlaw/online library research, (5)
experts/consultants/investigators, filing/document fees, (6) witness
fee/service of process, (7) meals, hotels and transportation, (8)
messengers and express services, (9) photocopying, document
imaging/scanning/coding, (10) postage, (11) special secretarial/word
processing, and (12) telephone and facsimile. Such fees have been held to
be reasonably incurred in the prosecution of such litigation. See Yong
Soon Oh v. AT&T Corp., 224 F.R.D. 357, 369 (D.N.J. 2004).
The Court is satisfied that the affidavits and briefs of Class Counsel
demonstrate that the requested expenses "were adequately documented and
reasonably and appropriately incurred in the prosecution of the case." In
re Cendant, 232 F. Supp. 2d at 343; see also Abrams v. Lightolier,
Inc., 50 F.3d 1204, 1225 (3d Cir. 1995); Cullen v. Whitman Med. Corp.,
197 F.R.D. 138, 151 (E.D. Pa. 2000) (finding that photocopying expenses,
telephone and facsimile charges, postage, and messenger and express mail
service charges were reasonably incurred in prosecuting the weighty
lawsuit.). None of the amounts appear to be excessive and all were
incidental to the litigation. In fact, their expenses will be more
because they only listed those through mid-September. However, they are
only seeking $58.2 million for attorneys' fees and expenses, and will not
be receiving any additional reimbursement. Moreover, the $2,584,468.09 in
expenses amounts to less than 1% of the settlement value. Accordingly,
their request for reimbursement of expenses is approved.
In sum, the Court determines that the fees and expenses awarded here
appropriately reflect a careful analysis of all the Gunter factors under
the percentage-of-recovery approach and its cross-check under the
lodestar methodology, particularly given the separate nature of the fee
and settlement negotiations. The Court finds that the fee negotiations
were conducted in good faith, free of any collusion, and provide a
substantial benefit to the Class since the fees will not be paid out of
the settlement fund. Given all of the facts and circumstances peculiar to
this case, the award here is sufficiently appropriate for this particular
case. For all of the reasons stated above, the Court will therefore
approve the proposed fee and expense award of $58.2 million.
B. Incentive Awards for Named Plaintiffs
Plaintiffs' application for an incentive award of $10,000 to be paid to
each of the named Plaintiffs is granted in part and denied in part. The
Court is mindful that "`[a]n incentive award is meant to compensate the
named Plaintiff for any personal risk incurred by the individual or any
additional effort expended by the individual for the benefit of the
lawsuit.'" Dornberger v. Metro. Life Ins. Co., 203 F.R.D. 118, 124
(S.D.N.Y. 2001) (quoting Berrios v. Sprint Corp., 1998 U.S. Dist. LEXIS
22833, at *9 (S.D.N.Y. 1998)); see also Roberts v. Texaco,
979 F. Supp. 185, 187-88 (S.D.N.Y. 1997) (approving an incentive
award for a named plaintiff who "provided valuable assistance to counsel
in prosecuting the litigation"). "An incentive payment to come from the
attorneys' fees awarded to plaintiff's counsel need not be subject to
intensive scrutiny, as the interests of the corporation, the public, and
the defendants are not directly affected." In re Cendant Corp.,
232 F. Supp. 2d at 344. Since that is not the case here, and the
requested incentive awards would be paid solely from the Claim Review
Process fund, depleting the financial resources for Class Members, this
Court carefully reviews this request to ensure its fairness to the
The Settlement Agreement provides that "Class Counsel for Plaintiffs
may petition the Court for incentive awards of up to $10,000.00 per
Plaintiff to be paid to some or all of the Plaintiffs in the actions
being resolved pursuant to this settlement. . . . to compensate the class
representatives for efforts and risks taken by them on behalf of the
Class. Any incentive awards made by the Court shall be paid solely from
the CRP fund and under no circumstances shall MassMutual be responsible
for paying such an incentive award from its own funds." (S.A. § XI(E)).
Plaintiffs have thus petitioned the Court for an award of $10,000 for
each of the named Class Representatives.
The Court finds ample authority in this and other circuits for the
approval of incentive awards. See, e.g., Godshall v. Franklin Mint Co.,
2004 U.S. Dist. LEXIS 23976, at *21 (E.D. Pa. Dec. 1, 2004) (granting
special award of $20,000 to each named plaintiff for their work as class
representatives); In re Linerboard Antitrust Litig., 2004 U.S. Dist.
LEXIS 10532, 56-58 (E.D. Pa. June 2, 2004) (awarding $25,000 for each of
the five class representatives); Tenuto v. Transworld Sys., 2002 U.S.
Dist. LEXIS 1764, at *13-14 (E.D. Pa. Jan. 31, 2002) (granting award of
$2,000); Dornberger, 203 F.R.D. at 124-125 (approving an award of $10,000
for Dornberger and $1,500 for the eight sub-class representatives);
Cullen v. Whitman Med. Corp., 197 F.R.D. 136, 145 (E.D. Pa. 2000)
("courts routinely approve incentive awards to compensate named
plaintiffs for the services they provided and the risks they incurred
during the course of the class action litigation."); In re Residential
Doors Antitrust Litig., 1998 U.S. Dist. LEXIS 4292 (E.D. Pa. April 2,
1998) (awarding an incentive award of $10,000 to each of the four Class
representatives); In re Plastic Tableware Antitrust Litig., 1995 U.S.
Dist. LEXIS 18166, at *7 (E.D. Pa. Dec. 4, 1995) (granting award of
$3,000); Cook v. Niedert, 142 F.3d 1004, 1016 (7th Cir. 1999) (affirming
award of $25,000 to named plaintiff); In re Lease Oil Antitrust Litig.,
186 F.R.D. 403, 449 (S.D. Tex. 1999) (granting awards of between $1,000
and $10,000); In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297,
357 (N.D. Ga. 1993) (granting award of $2,000 to plaintiffs that produced
documents and awarding $5,000 to plaintiffs that were also deposed). The
Court notes that while the amount requested, $10,000, is comparable to
incentive awards granted by courts in this and other circuits, see,
e.g., Bogosian v. Gulf Oil Corp., 621 F. Supp. 27 (E.D. Pa. 1985)
(awarding $20,000); Brotherton v. Cleveland, 141 F. Supp. 2d 907 (S.D.
Ohio 2001) (awarding $50,000), incentive awards will not be freely
distributed without a substantial basis to demonstrate that the
individual provided services for the Class and incurred risks during the
course of the litigation. According to the affidavit of Mr. Kravec, Class
Representatives Paul Varacallo, K. Werner Gass and Jeremiah B. Walsh
devoted a considerable amount of time and effort in assisting counsel in
prosecuting this matter. (Kravec Fee Aff. at 3). They provided day long
deposition testimony of themselves and, in Mr. Varacallo's case, certain
family members, they produced documents, reviewed pleadings and kept in
regular contact with counsel to apprise themselves of and to comment on
each stage of the litigation. (Id.). In addition, each Class
Representative was actively involved in reviewing and commenting on the
Proposed Settlement. (Id.). In addition to filing a case in New Jersey
Superior Court, on March 25, 1997, Plaintiff Paul Varacallo submitted a
Certification in support of the successful opposition of plaintiff and
the certified New Jersey class to MassMutual's motion for summary
judgment. (Greenberg Fee Aff. at 3). Mr. Gass also actively pursued an
action against MassMutual in the Ohio Court of Common Pleas, filed on May
4, 2000. Plaintiff Jeremiah B. Walsh was named as a trial witness in the
Varacallo Superior Court case. (Greenberg Fee Affid. at 3). In addition
to the foregoing, he had his deposition taken on a very snowy day on
which he traveled from his home in Ocean County to Newark. (Id.).
Lastly, Varacallo and Walsh were the only Class Representatives that
attended the Fairness Hearing. (Tr. at 7).
Plaintiff Dr. Donald Wofford devoted a considerable amount of time and
effort in assisting counsel in prosecuting this matter, including
preparing for deposition, producing documents, reviewing pleadings,
conducting factual investigations and keeping in regular contact with
counsel to apprise himself of and to comment on each stage of the
litigation. (Stoia Fee Aff. at 2-3). Dr. Wofford was also a named
Plaintiff in a case against MassMutual in the California Superior Court.
Further, Dr. Wofford was actively involved in reviewing and commenting on
the Proposed Settlement. (Id.).
Plaintiffs William A. Karges, Jr. and Jeffrey M. Weiner, Esq. devoted a
considerable amount of time and effort in assisting counsel in
prosecuting this matter including providing multiple days of deposition
testimony of both themselves and staff members, producing documents and
reviewing pleadings. (Finkelstein Fee Aff. at 3). In addition, both
Plaintiffs were actively involved in developing the litigation strategy,
assisting and analyzing evidence, and reviewing and commenting on the
Proposed Settlement. (Id.). Mr. Karges and Mr. Weiner were also involved
in another case against MassMutual, filed on June 22, 1999 in the
Superior Court of California.
Plaintiff Steven E. Feldman's involvement includes investing the time
to file the Complaint in this matter, and standing ready to be deposed,
produce documents, answer interrogatories, and otherwise serve as a class
representative. (Pl. Fee Brief at 32-33). The Court has not received any
evidence that Mr. Feldman had any involvement in any other action against
Defendants other than participating in this class action Settlement.
Generally, the Class Representatives performed considerable work
advancing the litigation. "Like the attorneys in this case, the class
representatives have conferred benefits on all other class members and
they deserve to be compensated accordingly." In re Linerboard Antitrust
Litig., 2004 U.S. Dist. LEXIS 10532, at *56 (E.D. Pa. June 2, 2004).
However, the Court finds that the involvement of each of the Class
Representatives is not equal and any incentive award should not be
distributed evenly as they requested.
Thus, the Court concludes that Plaintiffs Paul Varacallo, K. Werner
Gass, Dr. Donald Wofford, William A. Karges, Jr., and Jeffrey M. Weiner,
Esq. worked very closely with Counsel throughout the entire litigation of
this matter and were invaluable to bringing about this Settlement. Their
request for a $10,000 incentive award is reasonable and that request is
granted. Plaintiffs Jeremiah B. Walsh and Steven E. Feldman, however, had
only minimal involvement. Mr. Feldman only participated in this
Settlement; he was not deposed and was not required to produce
documents. Mr. Walsh, on the other hand, attended a deposition, produced
documents, and attended the Fairness Hearing in this Court, thus any
incentive award to him should be greater. While the Court finds that the
latter two Class Representatives were minimally involved in this
litigation, they were, nevertheless, necessary in obtaining this
Settlement. Therefore, the Court will award $3,000 to Mr. Walsh and
$1,000 to Mr. Feldman.
For the reasons explained above, this Court grants final class
certification under Rules 23(a), (b)(2), and (b)(3), and finds that the
Settlement is fair, adequate and reasonable and determines the parties
motions for final approval of the Settlement [114 & 116] are GRANTED.
This Court has issued with this Opinion a Final Judgment and Order
certifying the Class, approving the Settlement and dismissing with
prejudice the claims in this Action in accordance with the Settlement
Additionally, as set forth in the Court's Final Order Approving Class
Action Settlement, all Class Members who have not been timely excluded
from the Class are permanently barred and enjoined from participating in
any other action that is in any way related to the Released
Plaintiffs' request for an award of attorneys' fees and reimbursement
of Class Counsel's expenses  is GRANTED. The Court awards attorneys'
fees and reimbursement of the expenses to Class Counsel in the amount of
$58.2 million to be paid by MassMutual. Also, as set forth in the
Settlement Agreement, Class Counsel would have the sole discretion to
allocate and distribute the award of fees and expenses among all of the
counsel who acted on behalf of the Class. (See S.A. at § XI(B)).
Plaintiffs' request for $10,000 incentive awards for each of the named
Plaintiffs  is GRANTED in part and DENIED in part. The request of
Plaintiffs Paul Varacallo, K. Werner Gass, Dr. Donald Wofford, William
A. Karges, Jr., and Jeffrey M. Weiner, Esq. is GRANTED and they will each
receive $10,000 from the Claim Review Process fund. The request of
Plaintiffs Jeremiah B. Walsh and Steven E. Feldman for $10,000 is DENIED
in part. As set forth above, Jeremiah B. Walsh will receive $3,000 and
Steven E. Feldman will receive $1,000 from the Claim Review Process
Lastly, as explained in the Court's Final Order Approving Class Action
Settlement, and stated in the Final Judgment, filed herewith, this Court
retains continuing jurisdiction over this action.