United States District Court, Southern District of New York
April 16, 2003
JOHN DUNCAN, ON BEHALF OF HIMSELF AND ALL OTHERS SIMILARLY SITUATED, PLAINTIFF, AGAINST THE UNITY LIFE AND ACCIDENT INSURANCE ASSOCIATION, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Robert L. Carter, United States District Judge
Plaintiffs, represented by Jaqueline Gadsden,*fn1 filed suit against defendants, Unity Life Insurance et al., alleging that defendants engaged in racially discriminatory practices in the marketing, sale, formation and administration of life insurance policies in violation of 42 U.S.C. § 1981 and 1982. The class consists of over 40,000 African-Americans who claim that their premiums were higher than those of Caucasians with similar insurance coverage, solely on account of the class members' race.
Originally filed in September, 2000, the parties began settlement negotiations in October, 2000, after plaintiffs had conducted extensive discovery and their own private investigation. After numerous, contentious meetings and telephonic conferences, the parties resolved their differences with respect to the material terms of the settlement in April, 2002. They now submit the Settlement Agreement for approval by the court and incorporation into this Opinion.
The proposed Settlement seeks to place the class members in the same position as similarly situated Caucasians by equalizing the death and maturity benefits in the following ways. First, defendants agree to cease collecting any racially discriminatory premiums from the class members. Second, class members with policies that have not matured will receive additional payments upon the realization of their policy benefits or, in the alternative, can choose an immediate cash payment. Third, class members whose policies matured after January 1, 1990, will have their benefits supplemented by additional payments. Fourth, class members whose policies were terminated will be allowed to reinstate their policies and be eligible to receive the same, improved benefits as those whose policies have not yet matured. Fifth, in the event a policy matures or of a death claim, a comprehensive search will be made of defendants' policies for any other policies held by the claimant/beneficiary. In total, the parties expect the settlement to provide $1,205,000.00 of relief to the class members.
The parties have also agreed that defendants would fund and establish a Notice and Outreach Program, run by a Settlement Administration Center, to inform the class of the remedies available to it. The main responsibility of the Administration Center is to mail packages with benefits statements, claim forms, and formal notices giving details of the settlement to each class member with a known address. Addresses were obtained by cross-referencing the names and addresses of the 41,649 policies against the National Change of Address system maintained by the United States Postal System, producing 17,185 policies with current addresses. (Glenn Aff. ¶ 7.)
In addition, the Center has attempted to notify those class members for whom no known address exists by publishing details of the settlement and a toll free information number in 11 newspapers whose readership is largely African-American, giving notice to 29 community centers and 409 churches in African-American communities, and establishing a website, www.unitysettlement.com. These attempts at notification were undertaken between 7-9 weeks before the deadline for class members to object or request to be excluded from the settlement. For those that call the toll free number, the Center has customer service representatives available weekdays, 9 A.M. to 5:30 P.M., to respond to questions by class members regarding their eligibility and benefits.
Following the negotiation and agreement to the proposed settlement, the parties agreed to attorneys' fees worth $284,180.00. This is slightly more than half of the actual fees of $530,000.00 incurred by plaintiffs' attorneys and only 17 percent of the value of the settlement.
Finally, of the more than 17,000 class members notified, only twelve*fn2 have chosen to opt out of the settlement and no objections have been filed.*fn3
I. The Settlement
The court should weigh the following factors to determine whether a settlement is fair, adequate, and reasonable: (i) the complexity, expense, and likely duration of the litigation; (ii) the reaction of the class to the settlement; (iii) the stage of the proceedings and the amount of discovery completed; (iv) the risks of establishing liability; (v) the risks of establishing damages; (vi) the risks of maintaining the class action through the trial; (vii) the ability of the defendants to withstand a greater judgment; (viii) the range of reasonableness of the settlement fund in the light of best possible recovery; and (ix) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974). When evaluating these factors, the absence of collusion and presence of `arm's length negotiations' by counsel, is essential to determining their fairness. Malchman v. Davis, 706 F.2d 426, 433 (2d Cir. 1983); In re Warner Communications Sec. Litig., 618 F. Supp. 735, 740 (S.D.N.Y. 1985) (Keenan, J.).
Plaintiffs' claims involve insurance policies issued as early as the beginning of the last century. Since many of the individuals responsible for the alleged race-based pricing are no longer available to testify, at trial plaintiffs would have had to rely exclusively on expert testimony regarding defendants' internal actuarial and underwriting procedures from several decades ago to establish proof of race-based pricing. It is clear to the court that the parties' reliance on the interpretation of this data would have made continued litigation very complex, time consuming, and expensive.
Several other factors also suggest that proceeding to trial entailed a high risk for plaintiff. As mentioned earlier, the sole reliance on documentary evidence and expert testimony would have turned a trial into an unpredictable `battle of the experts.' In addition, plaintiffs still were not certified as a class by the court, defendants had a strong statute of limitations defense, extensive motion practice was a foregone conclusion, and the possibility of a lengthy appeals process increased the likelihood of the dilution of any successful verdict as well as a substantial delay in relief for a class that consists of many elderly individuals. An unfavorable result in any of these instances would have either precluded plaintiffs from recovering or delayed any relief for years, increasing the desirability of a settlement. Maley v. Del Global Techs. Corp., 186 F. Supp.2d 358, 362 (S.D.N.Y. 2002) (McMahon, J.).
A settlement, however, must not only be desirable, it must be fair and reasonable. In this case, plaintiffs began investigating defendants in 1999, obtained discovery in 2000 after filing suit, and conducted difficult negotiations for over a year before agreeing to the proposed settlement agreement. The substantial period of time the parties spent investigating and negotiating suggests that both parties knew the relative strengths and weaknesses of their claims. This knowledge and the presence of arm's length negotiations create the presumption that the settlement is fair. Chatelain v. Prudential-Bache Sec., 805 F. Supp.2d 209, 212 (S.D.N.Y. 1992) (Lowe, J.).
The relief of course is highly relevant and this settlement, while it excludes punitive damages and damages for emotional distress, effectively puts plaintiffs in the position they would have occupied but for the discriminatory premiums. The satisfactory quality of the relief is further indicated by the fact that only 12 class members have opted out of the settlement and no real objections to the settlement were filed. D'amato v. Deutsche Bank, 236 F.3d 78, 86 (2d Cir. 2001). Balanced against the possibility of unsuccessful litigation, this settlement leaves plaintiffs significantly closer to full relief than before they filed suit.
The effectiveness of the settlement is greatly enhanced by the reasonable and diligent efforts the parties have made to notify the class members of its terms. The court recognizes that the parties had the difficult task of locating many individuals whose addresses or names have changed, or that may have passed away. While the parties were not successful in notifying every class member, their efforts to notify those class members for whom an address could not be found satisfies the requirements of due process, as they were reasonably calculated to inform those affected by the settlement. Weigner v. City of New York, 852 F.2d 646, 649 (2d Cir. 1988).
II. Class Certification
The parties seek to have the class certified for the settlement in accordance with Rule 23, F.R.Civ.P. The rule states that:
One or more members of a class may sue or be sued as
representative parties on behalf of all only if (1)
the class is so numerous that joinder of all members
is impracticable, (2) there are questions of law or
fact common to the class, (3) the claims or defenses
of the representative parties are typical of the
claims or defenses of the class, and (4) the
representative parties will fairly and adequately
protect the interests of the class.
The proposed settlement class clearly fits all four criteria. The class has over 40,000 members making joinder impracticable. The plaintiffs allege that defendants engaged in a pattern or practice of discrimination that had similar effects on all of the class members. The representative's claims are typical of the other class members, there are no conflicts of interest, and the representative's counsel is a nationally recognized expert in bringing class actions.
III. Attorneys' Fees
In determining the reasonableness of plaintiffs' request for attorneys' fees, the court must consider the following factors: (1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of the litigation; (4) the quality of the representation; (5) the requested fee in relation to the settlement; and (6) public policy considerations. Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 50 (2d Cir. 2000). While both the lodestar and percentage methods are available to the court, the trend in the Second Circuit is to calculate attorneys' fees by taking a percentage from the common fund. See Goldberger, 209 F.3d at 50; In re American Bank Note Holographics, Inc., 127 F. Supp.2d 418, 431 (S.D.N.Y. 2001) (McMahon, J.).
Plaintiffs' counsel spent 1,027 hours on this litigation, many of them engaged in exhaustive review of defendants' actuarial tables. Counsels' grasp of this voluminous and complex information was essential to its ability to play a strong hand at the bargaining table and achieve an overwhelmingly positive settlement for the class. Despite the strength of their case, however, a favorable outcome of this litigation was by no means assured for plaintiffs or their counsel. To begin with, counsel was working on a contingency fee basis and as discussed supra, plaintiffs' case was fraught with difficulties if brought to trial. This substantial risk though is to be rewarded by the invaluable result, a tangible remedy for past racial discrimination.
Plaintiffs' counsel seeks a total of $284,180.00 in attorneys' fees and expenses. This figure is a mere 17% of the value of the settlement and the court notes the percentage is significantly less than those awarded in other settlements in this district. Steiner v. Williams, No. 99 Civ. 10186, 2001 WL 604035, at *7 (S.D.N.Y. May 31, 2001) (Martin, J.) (awarding attorneys' fees worth 30% of the common fund); Maley, 186 F. Supp.2d at 370 (granting attorneys' fees worth 33.33% of the common fund); Baffa v. Donaldson, No. 96 Civ. 0583, 2002 WL 1315603, at *2 (S.D.N.Y. June 17, 2002) (Batts, J.) (awarding attorneys' fees worth 30% of the common fund).
The court certifies the class, approves the settlement agreement between the parties in its entirety and hereby incorporates the agreement into this Opinion. The court also grants plaintiffs' attorneys a fee of $284,280.00 and expenses worth $69,445.75.
IT IS SO ORDERED