VIRGINIA M. KENDALL, District Judge.
Pursuant to Federal Rule of Civil Procedure 23(e), Plaintiffs Elizabeth A. Craft and Bryan L. Pautsch, on behalf of their respective families and all persons similarly situated, and on behalf of the provisionally certified settlement class (collectively "Plaintiffs"), by and through their undersigned counsel, respectfully move this Court to enter an Order granting final approval of the Parties' Settlement Agreement (Dkt. 148-01) and all of the terms and conditions contained therein, and dismissing the above-captioned matter with prejudice. Defendant does not oppose the relief requested by this Motion.
Along with any oral argument that may be presented to the Court and evidence submitted in connection therewith at the Fairness Hearing, Plaintiffs hereby submit the following accompanying documents in support of this Motion
WHEREFORE, Plaintiffs respectfully request that the Court: (1) grant final certification of the Settlement Class to implement the Settlement; (2) grant final approval of the Parties' Settlement Agreement (Dkt. 148-01) and all of the terms and conditions contained therein and in all exhibits thereto; and (3) dismiss the above-captioned matter with prejudice.
Plaintiffs Elizabeth A. Craft and Bryan L. Pautsch, on behalf of their respective families and all persons similarly situated, and on behalf of the provisionally certified class (collectively "Plaintiffs"), respectfully submit this memorandum in support of their Motion for Final Approval and Judgment Approving Settlement and Dismissing Action With Prejudice. This Settlement
On September 20, 2017, the Court preliminarily approved the Settlement Agreement (including the Notice Plan) and provisionally approved the Settlement Class. Dkt. 153. Thereafter, Plaintiffs mailed notice directly to the Settlement Class Members, and created a Settlement website that provided additional resources to help Class Members evaluate the Settlement and submit claims. None of the 283 Settlement Class Members excluded themselves from the Settlement, objected to the Settlement, or provided a notice of intent to appear at the Fairness Hearing scheduled for January 22, 2018. One or both Settlement Class Representatives may attend the Fairness Hearing.
In short, the response of the Settlement Class, in addition to the significant monetary payments that the Settlement will provide, overwhelmingly supports final approval of the Settlement as "fair, reasonable, and adequate" under Rule 23 of the Federal Rules of Civil Procedure.
The factual background of this litigation and the Settlement is set forth in Plaintiffs' memorandum in support of their unopposed motion for preliminary approval (Dkt. 148). Briefly, Plaintiffs claim that HCSC, through its application of the RTC exclusion, violated fiduciary duties under the Employee Retirement Income Security Act of 1974 ("ERISA"), including duties to comply with the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (the "Parity Act"), incorporated into ERISA at 29 U.S.C. § 1185a. See Dkt. 106 (Second Am. Compl.) ¶¶ 2-3. HCSC stopped enforcing RTC exclusions in accordance with the effective date provided in the Final Rules implementing the Parity Act. Thereafter, the parties engaged in arms-length negotiations over a period of months that culminated in the Settlement Agreement, executed on August 16, 2017. The Settlement provides for monetary payments to Class Members whose RTC claims were denied based on RTC exclusions. As part of the Settlement, HCSC agreed to create a common fund of $5.25 million. Under the Plan of Allocation, each Settlement Class Member will receive a proportionate share of the fund after agreed deductions, based principally on the number of days for which he or she (or a covered beneficiary, see infra note 2) received mental health residential treatment during the class period. Dkt. 148-06.
Plaintiffs moved for certification of the proposed class and preliminary approval of the Settlement on August 18, 2017 (Dkt. 148), which the Court granted (Dkt. 153) (the "Preliminary Approval Order").
In the Preliminary Approval Order, the Court approved the appointment of Dahl Administration LLC ("Dahl") as Settlement Administrator, to provide the Notice of Settlement to the Settlement Class Members and carry out other responsibilities as provided for in the Settlement Agreement. Dkt. 153 ¶ 10. Pursuant to the Settlement Agreement, Dahl established Qualified Settlement Fund for which it acts as escrow agent. Dkt. 148-01 ¶ 9; Declaration of Kelly Kratz Regarding Settlement Administration Activities Completed as of December 28, 2017 (the "Second Kratz. Decl.," filed herewith) ¶ 4. In accordance with the Settlement Agreement, HCSC made an initial deposit of $25,000 into the Settlement Fund Account on October 2, 2017. Dkt. 148-01 ¶ 2(a); Second Kratz Decl. ¶ 5. This First Deposit covered costs associated with implementing the Notice Plan and the Settlement Fund Account, and related fees and costs incurred by Dahl in administering the Settlement prior to final approval. Second Kratz Decl. ¶ 6. The total cost of Dahl's administration services, including distribution of settlement amounts to Class Members, is expected to be approximately $9,692.00. Second Kratz Decl. ¶ 16. HCSC will fund the balance of the Settlement Fund (less the initial deposit) within ten business days after Final Judgment. The Settlement Fund will then be used to fund payments to Class Members according to the Plan of Allocation, after payment of attorneys' fees and costs, settlement costs, and Service Awards in the amounts approved by the Court. Dkt. 148-01 ¶¶ 14, 2(b).
As described by Kelly Kratz, the principal at Dahl responsible for this matter, Dahl mailed notice directly to the Settlement Class in accordance with the terms of the Settlement Agreement and the Preliminary Approval Order. Declaration of Kelly Kratz with Respect to Notice Mailing (Dkt. 159-1). On September 26 and 27, 2017, Dahl consolidated three Class Member data files to create a class mailing list containing 283 records ("Class List"). Dkt. 159-1 ¶ 4. The Class List included the participant name, participant identification number, participant address, beneficiary name, beneficiary address, and claim data (including treatment dates). Dahl worked with Plaintiffs' and Defendant's counsel to create a notice packet, which included the following documents approved by the Court in the Preliminary Approval Order: the Notice, a custom Claims Data Sheet, the Plan of Allocation, a Supplemental Documentation Form, and a Facility Form. Dkt. 159-1, Ex. A ("Notice Packet"). The Claims Data Sheet included the individualized claims data and an adjusted number of treatment days for each Settlement Class Member. Dkt. 159-1 at 17. To obtain the most current mailing addresses for Class Members, Dahl processed the addresses on the Class List through the National Change of Address database maintained by the United States Postal Service. Dkt. 159-1 ¶ 6. On October 5, 2017, Dahl sent the Notice Packet via USPS first class mail to the Settlement Class Members. Dkt. 159-1 ¶ 7. Dahl also created a toll-free telephone line for Class Member inquiries and published the settlement website (HCSC-CraftClassAction.com), which provides all documents included in the Notice Packet, the Complaint, Settlement Agreement, Preliminary Approval Order, a list of important dates, frequently asked questions and answers, and contact information for the Settlement Administrator (including an email address which permitted Class Members to submit supplemental documentation electronically). Dkt. 159-1 ¶ 8.
Counsel for the Parties, in consultation with Dahl, later discovered that in mailing the Notice on October 5, 2017, the mailing labels listed only the participants and not covered beneficiaries.
Of the 283 Notice Packets initially mailed on October 5, 2017, 21 Notice Packets were returned as undeliverable and were sent to a professional address search firm for tracing. Second Kratz Decl. ¶ 9. An updated address was received for 13 Settlement Class Members and Notice Packets were re-mailed to the updated addresses. Id. There were only eight instances in which Dahl, despite best efforts and multiple attempts, was unable, without social security numbers, to ascertain a valid current mailing address. Dkt. 160 ¶ 9; Second Kratz Decl. ¶ 9, 11. Pursuant to this Court's Order (Dkt. 162), HCSC provided Dahl with social security numbers for those eight Class Members, from which Dahl was able to locate three updated addresses and re-mail the Notice, leaving a total of five Class Members to whom the Notice was undeliverable despite best efforts as of December 28, 2017. Second Kratz Decl. ¶¶ 12-13.
Given that Plaintiffs fully implemented the Court-approved Notice Plan (Dkt. 148-05) and over 97% of the Settlement Class received direct notice of the Settlement, Rule 23's notice requirements and due process have been satisfied. See Schulte v. Fifth Third Bank, 805 F.Supp.2d 560, 595-96 (N.D. Ill. 2011) (finding notice complied with Rule 23 and due process where settlement administrator provided direct notice to 89.7% of the class, created a settlement website, and maintained a toll-free number for class members inquiries).
Pursuant to the Plan of Allocation, Dkt. 148-06, Settlement Class Members who received residential mental health treatment at an accredited RTC during the Class Period in excess of the number of treatment days reflected in the Claims Data Sheet (based on the data maintained by HCSC) could submit a Supplemental Documentation Form (Dkt. 148-06 at 3-4), together with documentation from the RTC verifying the patient/beneficiary's actual number of treatment days during the Class Period. As of the December 22, 2017 deadline, Dahl received supplemental documentation from 25 Class Members. Second Kratz Decl. ¶ 15.
HCSC's counsel has confirmed that: (a) pursuant to the Class Action Fairness Act, 28 U.S.C. § 1715 ("CAFA"), HCSC provided notice to the state attorney general in all 50 states, as well as to the Attorney General of the United States; and (b) no recipient of the CAFA notice has raised any objection to the Settlement. As a result, HCSC has complied with the Preliminary Approval Order (Dkt. 153 ¶ 12) and the Settlement Agreement (Dkt. 148-01 ¶ 32) in issuing CAFA Notice.
Plaintiffs filed their Motion for Attorneys' Fees Expenses and Incentive Awards (Dkt. 158) and accompanying papers on October 20, 2017, in accordance with the schedule in the Preliminary Approval Order (Dkt. 153 ¶ 19).
By the December 22, 2017 deadline, of the 283 Class Members: (a) not a single Class Member objected to the Settlement; (b) not a single Class Member opted out of the Settlement; and (c) no Class Member provided a notice of intent to appear at the January 22, 2018 Fairness Hearing. Second Kratz Decl. ¶ 14.
As described above, each Class Member's monetary payment has been determined pursuant to the Plan of Allocation. If this Court finally approves the Settlement, then following HCSC's funding the remainder of the Settlement Fund and after approved deductions under the Agreement, Dahl will issue checks as set forth in the Plan of Allocation. For any payment in which the ERISA plan participant and beneficiary are different persons (e.g., parent and child), the Settlement Administrator will make the check payable to the participant. See Dkt. 148-06 ¶ E (Plan of Allocation).
In the Preliminary Approval Order, the Court found that the Settlement Class satisfied the requirements for certification under Rule 23(a) by satisfying the elements of numerosity, commonality, typicality, and adequacy of representation. Dkt. 153 ¶ 6. The Court also found that the Settlement Class met the requirements for certification under Rule 23(b)(3) because: questions common to the Settlement Class predominate over individual issues; resolving this action by class action is the most efficient and effective approach; and the Settlement Class is ascertainable. Id. ¶ 7. Thus, the Court provisionally certified the Settlement Class. Id. ¶ 5. Nothing about the Settlement Class or the bases supporting class certification has changed since that time. Accordingly, the Court should grant final certification of the Settlement Class. See Kearney v. Hyundai Motor Am., No. SACV 09-1298-JST (MLGx), 2013 WL 3287996, at *3 (C.D. Cal. June 28, 2013) (adopting and incorporating the class certification findings from the court's preliminary approval decision into the final approval order).
Generally, courts look favorably upon settlement because "it promotes the interest of litigants by saving them the expense and uncertainties of trial, as well as the interests of the judicial system by making it unnecessary to devote public resources to disputes that the parties themselves can resolve with a mutually agreeable outcome." Hispanics United of DuPage Cnty. v. Vill. of Addison, Ill., 988 F.Supp. 1130, 1149 (N.D. Ill. 1997). Settlement is particularly advantageous in complex class actions. Id.; see also Isby v. Bayh, 75 F.3d 1191, 1196 (7th Cir. 1996) ("Federal courts naturally favor the settlement of class action litigation.").
A court reviewing a proposed class action settlement may approve it after a hearing and upon finding that the settlement is fair, reasonable, and adequate. FED. R. CIV. P. 23(e)(2); Isby, 75 F.3d at 1196. In making this limited inquiry, the court should view the settlement as a whole, rather than analyzing individual components, and "[j]udges should not substitute their own judgment as to optimal settlement terms for the judgment of the litigants and their counsel." Armstrong v. Bd. of Sch. Dirs. of City of Milwaukee, 616 F.2d 305, 314-15 (7th Cir. 1980), overruled on other grounds by Felzen v. Andreas, 134 F.3d 873 (7th Cir. 1998) (overruling cases within the Seventh Circuit, like Armstrong, that permitted non-parties to appeal from a decision of any kind in a class action).
The Seventh Circuit has identified several interrelated and substantive factors that courts should consider in deciding whether to grant final approval of a proposed class action settlement, including: (1) the strength of plaintiffs' case compared to the value of the proposed settlement; (2) the likely complexity, length, and expense of the litigation; (3) the amount of opposition to settlement among affected parties; (4) the opinions of competent counsel; and (5) the stage of proceedings and amount of discovery completed at the time of settlement. Synfuel Techs., Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 653 (7th Cir. 2006) (internal citations and quotations omitted). A court's inquiry into the reasonableness of the proposed settlement is necessarily case-specific; it need not consider or find every factor satisfied, because not all factors will be relevant in every settlement. See In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 456 (S.D.N.Y. 2004) (not all factors need weigh in favor of settlement; instead, the court should look at the totality of the factors in light of the specific circumstances involved) (internal citation omitted). The court should not convert the settlement hearing into a trial on the merits. Retsky Family Ltd. P'ship v. Price Waterhouse LLP, No. 97 C 7694, 2001 WL 1568856, at *1 (N.D. Ill. Dec. 10, 2001); see also Williams v. Gen. Elec. Capital Auto Lease, No. 94 C 7410, 1995 WL 765266, at *4 (N.D. Ill. Dec. 26, 1995) ("It is neither appropriate nor necessary to resolve the merits of the conflicting positions in the case in order to evaluate the fairness of the settlement.").
An analysis of these factors here demonstrates that this Settlement is fair, reasonable, and adequate and should be finally approved.
The "strength of plaintiffs case on the merits balanced with the amount offered in the settlement" is the "most important factor relevant to the fairness of a class action settlement." Synfuel Techs., Inc., 463 F.3d at 653 (internal citations omitted). In making this assessment, a court should "quantify the net expected value of continued litigation to the class" by estimating "the range of possible outcomes and ascrib[e] a probability to each point on the range," and finally discount the outcomes to the present using a reasonable interest rate tailored to the facts of the case. Reynolds v. Beneficial Nat'l Bank, 288 F.3d 277, 284-85 (7th Cir. 2002). Even though "[a] high degree of precision cannot be expected in valuing a litigation, especially regarding the estimation of the probability of particular outcomes," the Seventh Circuit has found that courts should derive a "ballpark valuation" from which to assess the reasonableness of the settlement. Id. at 285 (finding that a judge should "translate [his or her] intuitions about the strength of the plaintiffs' case, the range of possible damages, and the likely duration of the litigation" into "numbers that would permit a responsible evaluation of the reasonableness of the settlement."). "Because the essence of settlement is compromise, courts should not reject a settlement solely because it does not provide a complete victory to the plaintiffs." In re AT&T Mobility Wireless Data Servs. Sales Litig., 270 F.R.D. 330, 347 (N.D. Ill. 2010) (internal citations omitted).
Plaintiffs actively pursued their claims. Their principal goals included: ending the exclusion of coverage for treatment of mental illness in RTCs; and obtaining fair, reasonable, and adequate relief for Class Members whose claims for mental health treatment in RTCs were denied due to RTC exclusions. Plaintiffs strongly believe in the merits of their claims, although they are mindful of the risks of litigation through trial and potential appeals, and the uncertain prospect of achieving a better result for Class Members than that offered by this Settlement.
In accordance with the effective date for the Final Rules implementing the Parity Act, HCSC stopped enforcing RTC exclusions, which has obviated the need for further litigation to obtain certain relief for Settlement Class Members (as well as other participants and beneficiaries of HCSC-administered plans) to the extent they have had any subsequent claims for RTC treatment. Further, the Settlement provides a substantial monetary recovery for every Settlement Class Member (who does not opt out and is able to be contacted by the Settlement Administrator). Under the Plan of Allocation, each Settlement Class Member who was a plan participant will receive a proportionate share of the Settlement Fund (after agreed deductions) based on the number of days for which s/he (or the covered beneficiary) received residential mental health treatment during the Class Period. The minimum payment is expected to be several thousand dollars.
Predicting what if any recovery Settlement Class Members may have obtained following a trial and one or more potential appeals involves uncertainty, although several factors should be considered in line with circuit precedent. First, a risk discount is necessary to address the possibility of: (1) a defense verdict at trial; (2) an ultimate denial of class certification; and/or (3) a successful appeal of any plaintiffs' trial verdict. Second, even in the event of a final judgment of liability, a reprocessing remedy could have injected further uncertainties and delays. Third, the supplemental documentation process under the Settlement opens up a possible recovery for RTC visits not reflected in HCSC's claims data; Settlement Class Members who submitted supplemental documentation under the Settlement likely would face added procedural and/or substantive hurdles to any litigated recovery in connection with those claims.
For Settlement Class Members who paid out of pocket for residential treatment, the estimated recovery of aggregate visit-level charges is roughly 31%.
Although it defies reliable prediction to stack the discount rates for these successive stages in pursuit of a final recovery, Class Counsel believe based on longstanding experience in litigating and valuing similar ERISA claims that a rate of return exceeding 31% of aggregate visit-level charges is a highly favorable outcome compared to any potential recovery through further judicial and/or administrative proceedings. An aggregate discount rate at or exceeding 70% is realistic for the three, or possibly four, stages of additional proceedings. The visit-level charges reflected in HCSC's claims data total approximately $10.47 million. Multiplying that potential recovery by this discount rate yields an estimated claim value of $3.14 million. Under the Settlement, even before accounting for supplemental claims, the expected recovery of visit-level charges totals $3.2 million; the final recovery of such charges will be higher after accounting for supplemental claims. Moreover, all Settlement Class Members (including those who did not incur visit-level charges) stand to receive at least a base distribution under the Settlement, accounting for the likely prospect that some members were prevented from obtaining residential treatment altogether based on the RTC exclusion.
Such a return also compares favorably to, and even exceeds other class action settlements approved by courts. Williams v. Rohm & Haas Pension Plan, 658 F.3d 629, 634 (7th Cir. 2011) (settlement recovered 24.3% of maximum damages); Mehling v. New York Life Ins. Co., 248 F.R.D. 455, 462 (E.D. Pa. 2008) (20% recovery); In re Corel Corp. Sec. Litig., 293 F.Supp.2d 484, 489-90 (E.D. Pa. 2003) (finding that "[t]here is a range of reasonableness applicable to any given case," "the appropriate amount is not susceptible to a mathematical formula yielding a particular sum," and approving a settlement amounting to 15% of maximum provable damages); In re WorldCom, Inc. ERISA Litig., No. 02-4816, 2004 WL 2338151, at *6-*7 (S.D.N.Y. Oct. 18, 2004) (recovered 7% of maximum damages); Boyd v. Coventry Health Care Inc., 299 F.R.D. 451, 463 (D. Md. 2014) (3.2% of maximum damages, with an average of $180 per class member); Cullen v. Whitman Med. Corp., 197 F.R.D. 136, 144 (E.D. Pa. 2000) (17% recovery was "an amount significantly higher than the proportion of damages obtained in settlement agreements approved by other courts"); Moore v. Comcast Corp., No. 08-773, 2011 WL 238821, at *4 (E.D. Pa. Jan. 24, 2011) (finding a settlement of $5 million for a class of approximately 35,000 to be "reasonable considering that defendants denied, and continue to deny, liability" and that "each class member will be compensated pro rata, depending on the amount estimated to be lost based on a formula included in the plan of allocation").
Thus, a comparison of the strength of Plaintiffs' claims with the amount offered by the Settlement readily supports final approval.
Like the previous factor, this factor requires the Court to weigh the benefits of settlement, including the avoidance of further risk, against the range of outcomes for Plaintiffs in litigating the suit to completion. At the outset of this litigation, there was no evidence that HCSC had interest in a class settlement. Throughout the litigation, HCSC maintained its positions regarding class certification, liability, and class members' entitlement to a remedy — denying all three. Plaintiffs had to defend against motions to dismiss for failure to state a claim and knew that continuing to litigate these novel claims under the Parity Act would involve substantial risk, considerable expense, and a lengthy passage of time — years of discovery, extensive motions practice, related hearings, presentation of evidence and argument at trial, and possible appeals. See, e.g., In re Austrian and German Bank Holocaust Litig., 80 F.Supp.2d 164, 174 (S.D.N.Y. 2000) (recognizing that "[m]ost class actions are inherently complex and settlement avoids the costs, delays and multitude of other problems associated with them" and "[s]ettlements of such complex matters are favored by courts"); In re NASDAQ Market-Makers Antitrust Litig., 187 F.R.D. 465, 477 (S.D.N.Y. 1998) ("[C]lass actions have a well deserved reputation as being most complex." (internal citation omitted)).
In contrast, the Settlement Agreement delivers a real and substantial remedy to every Settlement Class Member in a prompt and efficient manner without the substantial risk, delay, or expense inherent in continuing to prosecute Plaintiffs' claims against HCSC through class certification, summary judgment, trial, and appeal. This factor favors final approval of the Settlement. See NEWBERG ON CLASS ACTIONS, § 13:52 (5th ed. Dec. 2017 Update) ("The settlement of complex cases saves significant public and private resources," and "while the judicial system always favors settlement, it especially welcomes settlement in complex cases such as class suits, and even more so, the more complex the class action."); In re AT&T Mobility Wireless Data Servs. Sales Tax Litig., 789 F.Supp.2d 935, 961 (N.D. Ill. 2011) ("A dollar recovered today is worth more than a dollar recovered in the future . . . Were the Class Members required to await the outcome of a trial and inevitable appeal, however, they would not receive benefits for many years, if indeed they received any at all.").
The absence of objections to a proposed class settlement raises a strong presumption that the settlement terms are favorable to the class. See Retsky Family Ltd. P'ship v. Price Waterhouse LLP, No. 97 C 7694, 2001 WL 1568856, at *3 (N.D. Ill. Dec. 10, 2001); In re Mexico Money Transfer Litig., 164 F.Supp.2d 1002, 1020-21 (N.D. Ill. 2000) ("99.9% of class members have neither opted out nor filed objections . . . This acceptance rate is strong circumstantial evidence in favor of the settlements."); American Int'l Grp., Inc. v. ACE INA Holdings, Inc., Nos. 07 CV 2898, 09 C 2026, 2012 WL 651727, at *6 (N.D. Ill. Feb. 28, 2012) ("Out of a class of over thirteen hundred class members, only three . . . have objected, and just one has excluded itself from the class . . . This indicates that the class members consider the settlement to be in their best interest.").
The Settlement Class here included 283 unique records of participants and beneficiaries. By the December 22, 2017 deadline, (i) not a single Settlement Class Member objected to the Settlement; (ii) not a single Class Member opted out of the Settlement; and (iii) no Settlement Class Member provided a notice of intent to appear at the January 22, 2018 Fairness Hearing. Second Kratz Decl. ¶ 14. Moreover, Class Counsel noted a positive response to the Settlement from Settlement Class Members who called or emailed with questions. A number of Settlement Class Members who contacted Class Counsel expressed gratitude for the advocacy on behalf of their families as well as the prospect of a monetary distribution. The lack of any opposition and generally favorable response from Settlement Class Members bolster this Court's preliminary determination that the Settlement is fair, reasonable, and adequate and entitle it to final approval. See Retsky Family Ltd. P'ship, 2001 WL 1568856, at *3; AT&T Mobility, 789 F. Supp. 2d at 964-65 ("[I]t is illuminative that only a tiny fraction of the Class Members saw fit to opt out or to object.").
The opinion of competent counsel in the case is relevant to whether a settlement is fair, reasonable, and adequate under Rule 23. Synfuel Techs., Inc. v. DHL Express (USA), Inc., 463 F.3d 646, 653 (7th Cir. 2006); Armstrong v. Bd. of Sch. Dirs. of City of Milwaukee, 616 F.2d 305, 325 (7th Cir. 1980) ("While the court, of course, should not abdicate its responsibility to review a class action settlement merely because counsel support it, the court is entitled to rely heavily on the opinion of competent counsel."), overruled on other grounds by Felzen v. Andreas, 134 F.3d 873 (7th Cir. 1998). In finding counsel "competent," the Court may rely on its experiences with counsel who have appeared before it, and its observations of the quality of representation provided by counsel as well as any affidavits highlighting the qualifications and accomplishments of counsel. Isby v. Bayh, 75 F.3d 1191, 1200 (7th Cir. 1996).
Both parties in this case are represented by experienced counsel with extensive backgrounds in ERISA and related healthcare class actions, and all have accepted the proposed Settlement as satisfying the fair, reasonable, and adequate standard. Their considered opinion favors approval of the Settlement.
"The stage of the proceedings at which settlement is reached is important because it indicates how fully the district court and counsel are able to evaluate the merits of plaintiffs' claims." Armstrong, 616 F.2d at 325. The "label of `discovery' is not what matters," but rather "the pertinent inquiry is what facts and information have been provided" to support evaluation and approval of the Settlement Agreement. AT&T Mobility, 789 F.Supp. 2d at 967; see also Schulte v. Fifth Third Bank, 805 F.Supp.2d 560, 588 (N.D. Ill. 2011) noting that "the fact that Class Counsel negotiated a fair settlement is evidence that [they] had enough information to effectively represent the class.").
Here, Class Counsel fully understood the strengths and weaknesses of the claims, as well as the potential risks, expense, and duration of future litigation. See supra Section IV.B; In re Mexico Money Transfer Litig., 164 F. Supp. 2d at 1021-22 (noting that at the time of settlement, plaintiffs' counsel had analyzed the strengths and weaknesses of available claims and "had ample opportunity to reach an informed judgment concerning the merits of the proposed settlements"); Isby, 75 F.3d at 1200 (noting that "while settlement discussions began at an early stage in the litigation, [the court] was satisfied that the discovery and investigation conducted by class counsel prior to entering into settlement negotiations was extensive and thorough") (internal citations omitted). Based on litigating motions to dismiss, some initial discovery, and months of settlement negotiations, both parties were aware of the interests to be served by an amicable end to this case and had a firm basis on which to assess the Settlement. Moreover, this case focused intensively on legal questions surrounding how to interpret the applicable law and regulations, which allowed both parties to evaluate the claims and defenses sooner than might be possible in other cases. Thus, this factor weighs in favor of final approval.
As described in their memorandum in support of the fee petition, Plaintiffs ask that the Court award attorneys' fees and costs to Class Counsel equal to 30% of the settlement amount, or $1.575 million. Dkt. 158-2. This requested percentage award is consistent with awards for common fund settlements in ERISA and other complex federal class actions of similar size in the Seventh Circuit, and is justified by the substantial monetary relief that Class Counsel obtained for the Class as well as Class Counsel's significant effort undertaken and risk assumed in advancing novel claims under the Parity Act. Dkt. 158-2 at 8-12. Additionally, the fee award will result in Class Counsel receiving, at most, a modest risk multiplier over their lodestar. Dkt. 158-2 at 13-14.
Finally, Plaintiffs request that the Court confirm its preliminary approval of an incentive award of $15,000 for each of the two named Plaintiffs—awards well within the normal range of those in similar class actions within this Circuit, and fully justified given the time and uncommon emotional demands this litigation placed on each family. Dkt. 158-2 at 14-15. Accordingly, Plaintiffs request that, in granting final approval for the Settlement, the Court approve their request for attorneys' fees, costs, and service awards. HCSC does not oppose either request.
For the foregoing reasons, Plaintiffs respectfully request that the Court: (1) grant final certification of the Settlement Class to allow implementation of the Settlement; (2) grant final approval of the Parties' Settlement Agreement (Dkt. 148-01) and all of the terms and conditions contained therein and in all exhibits thereto; (3) and dismiss the above-captioned matter with prejudice.
I, Kelly Kratz, being duly sworn and deposed, state as follows:
1. I am a Principal at Dahl Administration, LLC ("Dahl"), a nationally-recognized firm that has provided notice and claims administration services for class actions involving product liability, insurance, fraud, property, employment and discrimination related claims. I have experience in all areas of settlement administration including notification, claims processing and distribution.
2. Dahl is the Settlement Administrator for the above-captioned action and is responsible for carrying out certain of the terms of the Settlement Agreement ("Settlement Agreement"), ECF No. 148-01, as ordered by the Court in its Order Preliminarily Approving Settlement and Approving Notice of Proposed Settlement and Fairness Hearing ("Preliminary Approval Order"), ECF No. 153, dated September 20, 2017. I am responsible for supervising the services provided by Dahl with respect to this settlement. I have personal knowledge of the facts stated herein.
3. I submit this Declaration to inform the parties and the Court of the following settlement administration activities to date: (i) receipt of the initial payment into the Settlement Fund Accounts
4. In accordance with the Settlement Agreement, Dahl established a Qualified Settlement Fund for which it acts as escrow agent.
5. On October 2, 2017, HCSC made First Deposit of $25,000 into the Settlement Fund Account.
6. This First Deposit covered the costs associated with implementing the Notice Plan, the Settlement Fund Account, and other fees, costs, and time incurred by Dahl in administering the Settlement prior to final approval.
7. The mailing labels for the original Notice sent to the 283 Settlement Class Members on October 5, 2017 listed only participants and not covered beneficiaries.
8. Pursuant to this Court's Order (ECF No. 162), on November 22, 2017, Dahl sent a supplemental Notice with updated deadlines (ECF No. 160-2) to all Settlement Class Members listed beneficiaries, and notified all Settlement Class Members who received the original Notice (i.e. the participants) of the updated schedule for the Fairness Hearing.
9. Of the 283 Notice Packets initially mailed on October 5, 2017, 21 Notice Packets were returned as undeliverable and were sent to a professional address search firm for tracing. An updated address was received for 13 Settlement Class Members and Notice Packets were re-mailed to the updated addresses. Updated addresses could not be found for eight (8) Class Members, and therefore Notice Packets could not be re-mailed.
10. As of December 28, 2017, none of the 13 re-mailed Notice Packets were returned as undeliverable,
11. Despite best efforts and multiple attempts in manually tracing the eight (8) undeliverable Notice Packets, Dahl was unable to ascertain a valid current mailing address for the Class Members and thus was not successful in serving the Notice.
12. Using social security numbers provided pursuant to Court Order (ECF No. 162), Dahl was able to locate 3 addresses and re-mail the Notice.
13. As of December 28, 2017, there are a total of five (5) Class Members to whom the Notice was undeliverable.
14. As of the December 22, 2017 postmark deadline, Dahl did not receive any opt outs, objections, or notices of intent to appear at the Fairness Hearing from Settlement Class Members.
15. As of the December 22, 2017 postmark deadline, Dahl received supplemental documentation from 25 Settlement Class Members.
16. Dahl's estimated fees and expenses for this settlement are $9,692.00. This amount includes all settlement administration services performed to date, settlement administration activities remaining, and distribution of payments to Settlement Class Members.
I declare under penalty of perjury, that the foregoing is true and correct to the best of my knowledge. Executed this
This matter is before the Court on Plaintiffs' motion for final approval of the proposed class action settlement and entry of final judgment. Plaintiffs, individually and on behalf of the proposed Settlement Class, and Defendant Health Care Service Corporation, a Mutual Legal Reserve Company ("HCSC"), have entered into a Settlement Agreement ("Settlement Agreement") that settles the above-captioned litigation. The Court, having considered the Motion for Final Approval, the Settlement Agreement together with all exhibits and attachments thereto, the record, and all other matters submitted to it at the Fairness Hearing on January 22, 2018, and finding no just reason for delay in entry of this Final Order and Judgment Approving Settlement and Dismissing Action with Prejudice ("Final Approval Order and Judgment") and good cause appearing therefore,
It is hereby ORDERED, ADJUDGED, AND DECREED as follows:
1. The Court has jurisdiction over the subject matter and personal jurisdiction over the Parties to the Action, including the Settlement Class Members.
2. The Settlement Agreement and all of its exhibits (Dkt. No. 148-01) are incorporated in this Final Approval Order and Judgment, including the definitions and terms set forth therein.
3. Federal Rule of Civil Procedure 23(e)(2) requires the Court to find that the Settlement Agreement is "fair, adequate, and reasonable, and not a product of collusion." Mirfashi v. Fleet Mortg. Corp., 450 F.3d 745, 748 (7th Cir. 2006) (internal citation omitted).
4. The Court finds that the Settlement Agreement was not a product of fraud or collusion, and satisfies Rule 23(e) after considering (i) the complexity, expense, and likely duration of the Action; (ii) the stage of the proceedings and amount of discovery completed; (iii) the factual and legal obstacles to prevailing on the merits; (iv) the possible range of recovery; (v) the respective opinions of the Parties, including Plaintiffs, Class Counsel, Defendant, and Defendant's Counsel; and (vi) any objections submitted by Settlement Class Members.
5. The Court, therefore, finds that the Settlement Agreement is in the best interests of Settlement Class Members, is fair, reasonable, and adequate within the meaning of Federal Rule of Civil Procedure 23, and GRANTS final approval of the Settlement Agreement and all of the terms and conditions contained therein.
6. Federal Rule of Civil Procedure 23(c)(2)(B) requires that Settlement Class Members be provided "the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort."
7. The Court finds that the Notice Plan (Dkt. 148-05) and claims submission procedures (Dkt. 148-06) set forth in the Settlement Agreement, which it previously approved, complied in all respects with the requirements of the Federal Rules of Civil Procedure, the United States Constitution (including the Due Process Clause), the rules of this Court, and applicable law. The Notice (Dkt. 160-2), which the Court approved (Dkt. 153 at ¶ 11), has been given in an adequate and sufficient manner to all Settlement Class Members who could be identified through reasonable effort. The Notice given constitutes the best notice practicable under the circumstances, and was reasonably calculated to apprise interested parties of the pendency of the Action, the nature of the claims, the definition of the Settlement Class, the scope and binding effect of the release, and their opportunity to exclude themselves from the Settlement Class or present objections to the Settlement.
8. The Notice Plan permitted Settlement Class Members to access information and documents about the case to inform their decision about whether to opt out of or object to the Settlement.
9. Settlement Class Members were given the opportunity to exclude themselves from the Settlement Class through submission of an Opt-Out Notice. None of the Settlement Class Members who received the Notice opted out of the Settlement.
10. Pursuant to Federal Rule of Civil Procedure 23, the Court finally certifies, for settlement purposes only, the Settlement Class defined as follows:
11. The Court has appointed Zuckerman Spaeder LLP, Psych-Appeal, Inc., and Miner, Barnhill & Galland, P.C. as Class Counsel. Dkt. 153 at 9.
12. The Court has reviewed the application for an award of fees and expenses submitted by Class Counsel and the exhibits, memoranda of law, and other materials submitted regarding that application (Dkt. 158). On the basis of its review of the foregoing, the Court hereby awards $1.575 million in attorneys' fees, to be distributed to Class Counsel by the Settlement Administrator from the Settlement Fund as set forth in the Settlement Agreement (Dkt. 148-01 at ¶ 17).
13. The Court has appointed Elizabeth Craft and Bryan Pautsch to serve as Settlement Class Representatives of the Settlement Class. Dkt. 153 at ¶ 8.
14. The Court has reviewed the application for service awards to the Settlement Class Representatives submitted by Class Counsel and the exhibits, memoranda of law, and other materials submitted regarding that application (Dkt. 158). On the basis of its review of the foregoing, the Court hereby approves of service awards in the amount of $15,000 to Elizabeth Craft and $15,000 to Bryan Pautsch to be paid by the Settlement Administrator from the Settlement Fund as set forth in the Settlement Agreement (Dkt. 148-01 at ¶ 16).
15. This Order shall not be offered or received against HCSC, or any other Released Parties, as evidence of or construed as or deemed to be evidence of any presumption, concession or admission by any person or entity with respect to the truth of any fact alleged by Plaintiffs or the validity of any claim that has been or could have been asserted in the Action or in any litigation, or the deficiency of any defense that has been or could have been asserted in the Action or any litigation, or of any liability, negligence, fault, breach of duty or wrongdoing of any Released Party.
16. This Order shall not be used for any purpose in this or any other matter or proceeding other than as may be necessary to enforce the terms of the Settlement Agreement or this Final Approval Order and Judgment.
17. The Action is dismissed with prejudice, with each Party to bear its own costs and attorneys' fees except as provided by the terms of the Settlement Agreement and this Order.
18. Every Settlement Class Member who did not timely and validly opt-out and exclude himself or herself from the Settlement Class fully, finally, and forever releases any and all Released Claims in accordance with the terms of the Settlement Agreement.
19. The terms of the Settlement Agreement, including all exhibits thereto and to this Final Approval Order and Judgment, shall be forever binding on the Settlement Class.
20. In the event that the Settlement Agreement is terminated pursuant to the terms of the Settlement Agreement, (a) the Settlement Agreement and this Order shall become void, shall have no further force or effect, and shall not be used in any Action or any other proceedings for any purpose other than as may be necessary to enforce the terms of the Settlement Agreement that survive termination; (b) this matter will revert to the status that existed before execution of the Settlement Agreement; and (c) no term or draft of the Settlement Agreement or any part of the Parties' settlement discussions, negotiations or documentation (including any briefs filed in support of preliminary or final approval of the Settlement) shall (i) be admissible into evidence for any purpose in any Action or other proceeding other than as may be necessary to enforce the terms of the Settlement Agreement that survive termination, (ii) be deemed an admission or concession by any Party regarding the validity of any Released Claim or the propriety of certifying any class against HCSC, or (iii) be deemed an admission or concession by any Party regarding the truth or falsity of any facts alleged in the Action or the availability or lack of availability of any defense to the Released Claims.
21. Without affecting the finality of this Final Approval Order and Judgment in any way, this Court will retain exclusive continuing jurisdiction over all Parties, the Settlement Administrator and Settlement Class Members with regard to implementation of the Settlement Agreement, disposition of the Settlement Fund, and enforcement and administration of this Order and the Settlement Agreement, including the release provisions thereof. The Court may order any appropriate legal or equitable remedy necessary to enforce the terms of this Final Approval Order and Judgment and/or the Settlement.
22. The Court finds there is no just reason for delay and DIRECTS the Clerk to enter judgment pursuant to Federal Rule of Civil Procedure 54 immediately.
SO ORDERED.
