The opinion of the court was delivered by: METZNER
The parties have moved for court approval of a proposed settlement of three national class actions and for a reasonable counsel fee in what has been known as the "central station protection service" litigation.
In 1966 the Supreme Court affirmed a judgment in favor of the government in an action seeking relief for alleged violations of §§ 1 and 2 of the Sherman Act by Grinnell Corporation and three of its affiliates, American District Telegraph Company (ADT), Holmes Electric Protective Company (Holmes) and Automatic Fire Alarm Company of Delaware (AFA). 384 U.S. 563, 86 S. Ct. 1698, 16 L. Ed. 2d 778. The decree enjoined the defendants from violating the law and required divestiture by Grinnell of its affiliates. A final decree was entered by the district court on July 11, 1967.
As can easily be imagined, a slew of private actions were then instituted seeking treble damages from the four defendants. 68 such actions were filed in this court and all of them were assigned to me pursuant to Rule 2 of the General Rules of the Southern District of New York. In addition, 16 of the cases pending in other districts of the country were assigned to me for coordinated pretrial proceedings by the Judicial Panel on Multidistrict Litigation pursuant to 28 U.S.C. § 1407.
The cases fell into two categories. One consisted of plaintiffs who were competitors of the defendants and the other consisted of plaintiffs who were subscribers to defendants' services. It became apparent that coordinated or consolidated pretrial proceedings would be difficult in this litigation because the claims of one group required proof that might defeat the claims of the other. The competitor plaintiffs wanted to show that in the cities where they operated, the defendants exercise monopoly power to drive prices down in order to force those plaintiffs out of business. Subscriber plaintiffs, on the other hand, wished to show that the defendants used their monopoly power to fix an unreasonably high price for the services rendered. A great many of the subscriber plaintiffs were located in cities where competition existed.
23 of the 24 competitor cases have now been settled for a total of some $12,000,000. A subscriber suit by the United States government has likewise been settled. 56 other subscriber actions are still pending. 3 of these are the national class actions with which we are now concerned.
The Vine Street action is brought on behalf of all owners and operators of retail stores, shopping centers, office buildings, apartment houses, hotels and motels, theatres and other amusement buildings and private institutions situated throughout the United States. The Manhattan-Ward action is brought on behalf of all owners and operators of industrial and commercial manufacturing plants situated throughout the United States. The City of Detroit action is brought on behalf of all state, county, and local government and public bodies, and public schools and school districts situated throughout the United States. By definition these national class actions would embrace the claims of all pending subscriber actions except 3 state-wide class actions on behalf of governmental entities in those states which are excluded from the proposed settlement.
The proposed settlement is predicated upon an assumption that the actions are proper class actions. The parties had briefed and argued the class action issue and while the matter was sub judice the court was requested not to proceed with determination of the issue because the parties were engaged in settlement negotiations. The effect of the existence of this issue will be discussed later on in this opinion. The notice of settlement mailed to subscribers also included the material required by Fed. R. Civ. P. 23(c) (2) for exclusion and appearance by counsel.
The settlement offer contemplates the payment of $10,000,000 by the defendants to cover all 3 national class actions. Grinnell will contribute $3,850,000 toward the settlement in 3 installments through 1974. ADT will contribute $4,850,000 in 3 installments through 1974. Holmes will contribute $900,000 in 2 installments, payable on January 15, 1975 and January 15, 1976. AFA will contribute $400,000 payable in 2 installments on the same dates as Holmes. All deferred payments are to bear interest at 1% over the prime rate existing during the period.
The damage period covers 11 1/4 years from April 13, 1957 to July 11, 1968. The starting date is 4 years prior to the institution of the government enforcement action, which represents the usual statute of limitations period. Clayton Act § 4B.
Notice of this application was mailed to some 89,000 customers of defendants who had total billings of some $800,000,000 during the damage period. In addition, publication of the notice appeared for 3 consecutive weeks in both the Wall Street Journal (all regional editions) and the New York Times. 14,156 customers filed claims involving total billings of $330,525,000. $37,979,000 of these claims has been challenged either by the plaintiff or the defendants. In addition, the total billings included excise taxes of about $25,000,000.
The proposed settlement would thus afford a recovery of from 3.2% to 3.7% of total billings to customers who filed claims. The exact percentage will depend on the resolution of the contested claims and whether or not the amount of excise taxes is included in the computation.
Rule 23(e) requires that a class action may be compromised only with the approval of the court. Approval should be given if the settlement is fair, reasonable and adequate. The settlement hearing should not be turned into a trial or a rehearsal of the trial. Newman v. Stein, 464 F.2d 689, 692 (2d Cir. 1972). The evaluation of the proposed settlement in this type of litigation against this standard requires an amalgam of delicate balancing, gross approximations and rough justice. Saylor v. Lindsley, 456 F.2d 896, 904 (2d Cir. 1972).
In Protective Committee v. Anderson, 390 U.S. 414, 20 L. Ed. 2d 1, 88 S. Ct. 1157 (1968), the Court said at pages 424-25:
"Further, the judge should form an educated estimate of the complexity, expense, and likely duration of such litigation, the possible difficulties of collecting on any judgment which might be obtained, and all other factors relevant to a full and fair assessment of the wisdom of the proposed compromise. Basic to this process in every instance, of course, is the need to compare the terms of the compromise with the likely rewards of litigation."
The very purpose of a compromise is to avoid determination of sharply contested issues and to dispense with wasteful litigation. In re Prudence, 98 F.2d 559 (2d Cir. 1938). At the same time the court must weigh the relative advantages and disadvantages of the positions of the respective parties. In Florida Trailer & Equipment Co. v. Deal, 284 F.2d 567, 571 (5th Cir. 1960), the court said:
"But the very uncertainties of outcome in litigation, as well as the avoidance of wasteful litigation and expense, lay behind the Congressional infusion of a power to compromise. This is a recognition of the policy of the law generally to encourage settlements."
In addition to considering the strength of the case for the plaintiffs against the amount offered in settlement, the court must weigh the judgment of counsel for plaintiffs, the extent of support from interested parties, and the presence or absence of good faith bargaining. State of West Virginia v. Chas. Pfizer & Co., 314 F. Supp. 710, 741 (S.D.N.Y. 1970), aff'd, 440 F.2d 1079 (2d Cir.), cert. denied, 404 U.S. 871, 92 S. Ct. 81, 30 L. Ed. 2d 115 (1971).
Objections to the proposed settlement come from a very small number of claimants, only one of whom had previously filed an individual lawsuit. 150 of the 14,000 claimants were represented by attorneys in filing their claims, and only 5 of these attorneys object to the settlement. Their clients represent 1/2 of 1% of the billings for all claimants.
At the first pretrial conference called to coordinate the pretrial proceedings for all 84 cases, the court appointed a committee of 3 attorneys (the "Troika"), selected by counsel for all subscriber plaintiffs, to represent those plaintiffs in future proceedings. Such a committee was designed to afford greater efficiency in presenting or defending against motions and in the conduct of discovery. 2 of these 3 attorneys represent plaintiffs (some with multiple installations) who have joined the class as claimants and do not object to the settlement. They also represent other clients who have filed claims. 11 of the individual subscriber plaintiffs have filed claims in the proposed settlement. Only 36 of the individual plaintiffs have opted out and their cases remain pending in addition to the 3 statewide governmental class actions. I understand that these 39 cases represent $50,000,000 of billings. I point out these facts as an indication of the views of attorneys who have lived with this litigation for a number of years and are fully familiar with the discovery as it exists today.
That discovery is huge. It consists of everything that was produced in the government suit (documents, depositions, and transcript of the trial, as detailed in 236 F. Supp. at 247), documents produced and depositions of the defendants taken in the Sentinel case in the Eastern District of Pennsylvania (this was a competitor case which was settled before trial), and the tremendous amount of information furnished to subscriber plaintiffs in the consolidated pretrial proceedings in this court. One interrogatory alone, propounded by the Troika, required 3,000 pages for its answer. All of the above material was placed in a depository originally leased at 205 Pearl Street in this city. The court personally visited those premises and observed the volume and organization of the material in some 260 filing drawers and open shelves.
The main objections to the settlement are voiced by a law firm in Philadelphia on behalf of 20 claimants who had total billings of $270,000 during the damage period. Parenthetically, counsel for the class plaintiffs is also from Philadelphia, where the national class actions and 3 other individual subscriber cases were originally filed. Objecting counsel admits that he has expertise in the field of antitrust litigation and that some of the claimants he represents are substantial businesses. 3 1/2 years after the statute of limitations has run this firm appears and projects an astronomical estimate of what is involved in this case. An example of this magnifying glass approach is found in counsel's reference to $800,000,000 in total billings for the 11 1/4 year damage period as a basis to be used in ...