Opinion
No. 4:97MD1179 CDP.
December 19, 2000.
MEMORANDUM AND ORDER
On December 15, 2000, I held a hearing to consider the fairness, reasonableness and adequacy of the settlement agreed to in these class-action cases. My Hearing Order dated August 28, 2000, preliminarily approved the class for purposes of settlement and directed that notice of the proposed settlement be sent to the class members. At the December 15 hearing, lead counsel for the plaintiff class appeared, as did counsel for defendant. Also attending were two counsel representing class members who have objected to the settlement, and one objecting class member appearing on his own behalf. I have also considered the written objections filed by several other class members. The parties made arguments and presented extensive written materials, including various declarations and exhibits.
For the reasons that follow, I will approve the settlement agreement. I begin this order by briefly summarizing a few of the arguments and issues presented at the hearing, and then will make my findings and conclusions. I have not attempted to discuss all the issues, and to the extent I have not done so, it is because I agree with the positions taken by lead counsel and defendant in their submissions.
The objectors argue that the class notice was not sufficient, that the settlement is underfunded and not adequate to protect the interests of all the members of the class, that administration of the settlement allows too much discretion on the part of plaintiffs' selected Claims Evaluator, and that the settlement is unfair because it contains the possibility that persons whose claims lack any merit at all would not receive any relief at all. The objectors invite me to either rewrite the settlement agreement, or to give "conditional" approval. "Conditional" approval, as they describe it, would mean my suggesting that I approve most of the agreement, but disapprove specific provisions, and my suggestion that I would approve the agreement if those specific provisions were changed as the objectors request. The objectors expect, of course, that this sort of "conditional" approval would then cause the parties to rewrite the settlement in the way the objectors want. I do not agree that it is necessary for me to attempt to order renegotiation of the settlement agreement. I believe that the settlement is fine in its current form, and I will overrule the objections and approve the agreement as negotiated between lead counsel and defendant, and as set forth in the class notice.
The settlement agreement in this case provides a means whereby electing class members can receive cash payments to remedy their claims; class members who have not chosen to elect that remedy will receive in-kind relief. The settlement has a minimum value of $55 million, and an actual value which appears to be significantly higher. Plaintiffs' counsel will select the agent who will evaluate the individual class members' claims and determine the individual relief, so there is no reason to fear that defendant could somehow manipulate the relief to reduce the value of the settlement. Additionally, any attorneys fees awarded will be paid by the defendant in addition to the settlement value, so no class members' claims will be reduced for payment of attorneys fees. In short, I believe that this is a very good settlement for all concerned, and I will approve it.
Lead counsel and defendant have a dispute regarding 54 persons who sought to opt out of the class but failed to comply with all the technical requirements of the class notice for doing so. I have carefully reviewed the issue raised, and believe that plaintiffs are correct in stating that I should accept these opt-outs, despite their technical non-compliance. In the vast majority of the cases, the problem is simply that the notices were received a day or two late, although from the evidence before me, I believe they were timely mailed. Several others were signed by counsel instead of by the individuals. I believe it is in the interests of justice to accept these opt-outs, and so these persons will not be bound by the determination of the class action.
At the hearing we had some discussion regarding whether objectors should now be allowed to opt out of the class, since I have overruled their objections. I will not allow this, as I do not believe it is in the interests of justice. Only one objector made an argument that it lacked sufficient information to determine whether to opt out, but that objector did make an appropriate election that should adequately protect its interests. This objector did not request that it be allowed to opt out at this late date, and I see no reason to allow either an opt out or a change of election after the deadline set in the class notice.
Defendant requests that the pleadings in these cases be deemed amended to conform to the proof adduced at the fairness hearing, so that the class definition can be deemed to be that set out in the settlement agreement, Hearing Order, and Class Notice. This is a reasonable request, and the pleadings will be deemed so amended.
Based on the evidence submitted to me and on the law, I make the following findings and conclusions:
1. This Court has subject matter jurisdiction over all claims of all Class Members asserted in the Action, subject matter jurisdiction to approve the Settlement Agreement, and personal jurisdiction over all parties to the Action, including all members of the Class.
2. This order applies to Ludwig v. General American Life Ins., No. 4:97CV1820 CDP, Chain v. General American Life Ins., No. 4:97CV1244 CDP, and Zimmon v. General American Life Ins., No. 97CV169 CDP.
3. The best notice practicable under the circumstances was provided to members of the Class and full opportunity was offered to the Class to participate in the Fairness Hearing. Notice in accordance with the Hearing Order was sent to over 251,000 class members, and was published in 13 newspapers. The parties established an Information Center telephone bank which answered calls from almost 14,000 class members and almost 400 insurance agents. Plaintiffs' counsel participated in the Information Center and through that center spoke to almost 3,000 class members. These results show that the notice in this case was the best practicable under the circumstances, and class members had full opportunity to participate or make their views known.
4. The requirements for class certification under Rule 23, Fed.R.Civ.P., and all other controlling law have been met:
a. Numerosity: The Class consists of approximately 250,000 persons or entities who (with certain exceptions described below) have or had an ownership interest in one or more permanent participating ordinary life insurance policies (participating whole life and/or participating universal life insurance policies), including any rider issued in conjunction therewith and/or endorsement attached thereto, issued or assumed by the Company in the United States (including its territories and commonwealths) during the Class Period by General American Life Insurance Company. For such universal life policies, the Class Period is from January 1, 1982 through December 31, 1996. For such whole life policies, the Class Period is from January 1, 1984 through December 31, 1996. The Class is ascertainable from the Company's records and other objective criteria, and the Class Members are so numerous that their joinder before the Court would be impracticable.
b. Commonality: Plaintiffs have alleged numerous questions of fact and law common to the Class, including whether defendant engaged in a nationwide common course of conduct regarding its sale of universal life and whole life policies involving (i) dividends, policy interest crediting and policy charge determinations; (ii) policy illustration practices; (iii) uniform sales practices relating to the sale of defendant's policies on the basis of the "vanishing premium" or "disappearing premium" concept; (iv) improper replacement or churning of existing policies into policies issued by General American; and (v) the sale of life insurance policies as "investment plans," "savings plans" and "retirement plans." Considering the allegations of the complaints, I find that these common questions of fact and law predominate over questions of fact and law affecting only individual members of the Class.
c. Typicality and Adequacy of Class Representation: Based on plaintiffs' allegations that defendant engaged in uniform conduct and made similar untrue or incomplete statements to members of the Class, I find that the claims of the representative plaintiffs are typical of the claims of the Class, and that the representative plaintiffs and their attorneys will fairly and adequately protect the interests of the Class, in that (i) the interests of the named plaintiffs and the nature of their alleged claims are consistent with those of all members of the Class, (ii) there appear to be no conflicts between or among the named plaintiffs and the Class Members, (iii) the named plaintiffs have been and appear to be capable of continuing to be active participants in both the prosecution and the settlement of the Actions, and (iv) the named plaintiffs and the Class Members are represented by qualified, reputable counsel who are experienced in preparing and prosecuting large, complicated class actions, particularly those involving the types of insurance sales practice claims alleged in the Actions.
5. I find that a resolution of the Actions in the manner proposed by the Settlement Agreement is superior to other available methods for a fair and efficient adjudication of the Actions. The settlement involves (a) General Policy Relief, which provides Class Members with opportunities to receive new death benefits free of charge, as well as payments or credits in the form of dividend interest benefits and dividend mortality benefits, and (b) a Claim Evaluation Process, which permits Class Members to obtain individualized forms of relief based on predetermined guidelines, which I have reviewed. I note that the Claim Evaluation Process offers an efficient, uniform means to identify and resolve complaints without burdening the courts or regulators. I also note that, because the Actions are being settled, rather than litigated, I need not consider manageability issues that might be presented by the trial of a nationwide class action involving the issues in this case. In making these findings, I have considered, among other factors, (a) the interests of Class Members in individually controlling the prosecution or defense of separate actions; (b) the impracticability or inefficiency of prosecuting or defending separate actions; (c) the extent and nature of any litigation concerning these claims already commenced; and (d) the desirability of concentrating the litigation of the claims in a particular forum.
6. Class Certified: Based on the foregoing findings, I certify the Class for settlement purposes only under Fed.R.Civ.P. 23(b)(3).
The Class consists of all persons and entities ("Class Members") who had, at any time during the Class Period, as set forth in paragraph 4(a) above, an ownership interest in one or more permanent participating ordinary life insurance policies (participating whole life insurance policies, and/or participating universal life insurance policies), including any rider issued in conjunction therewith and/or endorsement attached thereto, issued or assumed by the Company in the United States (including its territories and commonwealths) with an Issue Date during the Class Period (collectively, the "Policies"), except for the following:
a. policies issued on Form Nos. 10072, 81026, 81027, or 84WL in classes where the dividends are experience rated by payor;
b. policies issued on Form Nos. 40006, 10003, or policies with externally indexed crediting rates;
c. policies terminated prior to January 1, 1988;
d. variable policies which are issued pursuant to a registration statement filed with the United States Securities and Exchange Commission or pursuant to a private placement; or
e. certain corporate owned life insurance ("COLI").
The Class certified by this Court does not include (unless such persons or entities are Class Members by virtue of their ownership interest in other Policies):
i. any person or entity who, while represented by legal counsel, signed a document that releases General American from any claims concerning any Policy;
ii. any person or entity who has or had ownership of a Policy that is timely and properly excluded from the Class pursuant to Section VIII. of the Settlement Agreement;
iii. any person or entity who has or had ownership of a policy, where a death benefit was paid or is payable under the base coverage due to the death of all of the insureds before the Eligibility Date (as defined in the Settlement Agreement);
iv. any person or entity that has pending as of the date this Order is entered any lawsuit, arbitration or court-supervised alternative dispute resolution proceeding arising out of the same facts or transactions, in whole or in part, as alleged in the Actions;
v. any person or entity that has completed adjudication or a mutually agreed to arbitration or mediation of a claim against General American where the claim arises out of the same facts or circumstances, in whole or in part, that are the subject of the Actions;
vi. any insurance company that has or had ownership of a policy pursuant to an absolute assignment effected as part of an exchange under Section 1035 of the Internal Revenue Code; any person who is a current or former director or officer of General American; or
vii. any person or entity that is not a resident of the United States as of the Notice Approval Date and has or had an ownership interest in a terminated policy.
The Court finds that, for the sole purpose of settlement, and without an adjudication of the merits, the Class is sufficiently well-defined and cohesive.
7. Findings Regarding Proposed Settlement: I find that (a) the proposed settlement resulted from extensive arm's-length negotiations and was concluded only after counsel for plaintiffs had conducted adequate discovery (including review of approximately 90,000 pages of documents produced by defendant and 78 compact disks and floppy disks containing marketing and sales material, deposing General American officers and employees and consultation with independent experts about the issues raised by plaintiffs' claims), and only after counsel for General American conducted a thorough examination and evaluation of the relevant law, facts and allegations to assess the merits of plaintiffs' claims, including reviewing numerous documents produced by plaintiffs and their counsel and deposing all of the class representative plaintiffs; and (b) the proposed settlement evidenced by the Settlement Agreement is fair, reasonable, adequate, consistent and in compliance with all applicable legal requirements, and is in the best interests of the parties and the Class.
Accordingly,
IT IS HEREBY ORDERED that the parties' proposed settlement agreement, filed with this Court on August 24, 2000, and preliminarily approved by order dated August 28, 2000, is finally approved.
IT IS FURTHER ORDERED that all objections to the settlement are overruled.
IT IS FURTHER ORDERED that the motions to intervene of James Henderson and Karen Shapiro [#156, #157] are denied.
IT IS FURTHER ORDERED that all persons listed in Exhibit A as well as those listed in section 1 of Plaintiffs' and Defendant's Joint Submission of Requests for Exclusion filed with the Court on December 15, 2000, are deemed to have timely and properly elected to be excluded from the Class, and said persons will not be bound by the settlement in this case.
IT IS FURTHER ORDERED that the complaints are deemed amended to conform to the proof so that the class definition is that contained in this Order, the Settlement Agreement, the Hearing Order, and the Class notice.
IT IS FURTHER ORDERED that a hearing on plaintiffs' claims for attorneys fees will be held on Thursday, February 1, 2001, at 9:30 a.m., Thomas F. Eagleton Courthouse, 111 So. 10th Street, Courtroom 14 South.
A separate Judgment in accord with this order is entered this same date.