The opinion of the court was delivered by: DENISE COTE, District Judge
The plaintiffs in this class action brought claims pursuant to
the Employee Retirement Income Security Act (ERISA),
29 U.S.C. § 1001, et seq., against AOL Time Warner, Inc. and related
companies ("AOL TW"), as well as six pension plans ("Plans") and their
administrative committees. Having reached a preliminary settlement and
distributed notice of such settlement to putative class members, the
plaintiffs and defendants jointly seek final approval of their settlement
agreement. Following a final settlement fairness hearing on April 8, 2005,
and having reviewed supplemental submissions of June 3, the class action
settlement is approved. BACKGROUND
Summary of Plaintiffs' Claims
Plaintiffs claim that the defendants violated ERISA Sections
404 and 502, 29 U.S.C. §§ 1104, 1132,
*fn1 by failing to
annualize their partial years of compensation when calculating
their pension benefits using the Plans' definition of "Average
Compensation," thereby underpaying them.
*fn2 Typical Plan
language describes a participant's average compensation as his
"average annual Compensation for the five consecutive calendar
years in which he receives Compensation which results in the
highest average." The Plans provide that
[f]or any period that is less than a full calendar
year, a Participant's compensation shall be
determined by multiplying the Compensation actually
received by the Participant for such period by a
fraction, the numerator of which is twelve and the
denominator of which is the number of months (with
any fraction of a month counted as a full month for
this purpose) in such period for which Compensation
was actually received.
A central dispute between the plaintiffs and defendants was
whether, according to the Plans, such annualization was required
only where an employee has participated in a plan for less than a full calendar year in total. The defendants contended that the
committees charged with administering the Plans had for decades
consistently interpreted the Plans' annualization provisions to
require annualization only in such circumstances.
Two of the named plaintiffs, Henry Spann ("Spann") and Carole
Munley ("Munley"), requested and received lump sum pension
payments when they concluded their employment with AOL TW. Spann
and Munley both signed a standard release required of all
employees electing to receive a lump sum pension distribution
("Release"), which stated "I understand that when I endorse the
check I receive for the amount of my payment, I will be releasing
the Plan, the Committee, the Trustees and my Employer from any
liability in connection with my participation in the Plan." Spann
claims that his lump sum payment was underpaid by approximately
$19,300, while Munley claims that her lump sum payment was
underpaid by approximately $1,100.
The other named plaintiff, Catherine Chiapparoli
("Chiapparoli"), elected to receive her pension funds as an
annuity, rather than in a lump sum. Consequently, she did not
sign a Release. Chiapparoli claims that her annuity pension
payments are underpaid by $88 per year.
The language of the Plans has subsequently been revised in an
effort to avoid the alleged ambiguities that led to this lawsuit.
The parties anticipate that as a result of the revisions, this
"problem" will not recur. The revisions confirm the defendants'
long-standing interpretations of the Plans' language.
On April 8, 2002, the plaintiffs filed a class action in the
Central District of California that was transferred to this
District on October 8. Apart from the topic of damages, discovery
was completed on October 31, 2003. The plaintiffs' first motion
for class certification was denied. See Spann v. AOL Time
Warner, Inc., 219 F.R.D. 307, 324 (S.D.N.Y. 2003). Following
negotiations, the plaintiffs and defendants arrived at a
stipulated settlement agreement on July 2, 2004 that was
subsequently amended in December (as amended, "Settlement
Agreement") and jointly proposed that a class be certified for
the purpose of settlement only. A preliminary approval hearing
was held on August 19, 2004. An Order of December 21, 2004
preliminarily approved the Settlement Agreement, approved the
proposed form of class notice ("Class Notice"), and certified a
class for settlement purposes only pursuant to Rule 23(b)(1),
Fed.R.Civ.P. A settlement fairness hearing was held on April
8, 2005. For reasons described below, a second fairness hearing
was scheduled for June 9, 2005.
Class Definition and Composition
The definition of the class certified for the purposes of
settlement recognized two subclasses, one for those who received
lump-sum distributions, and one for those who received an annuity. The definition is as follows:
Each and every participant in one or more of the
Plans whose pension benefit under one or more of the
Plans was or will be calculated based upon one or
more periods of Benefit Service that concluded during
the Class Period, and each of the spouses, designated
beneficiaries, executors, successors, alternative
payees under a qualified domestic relations order,
representatives or heirs of said participants. The
proposed settlement class is divided into two
subclasses, each of which includes at least one
hundred individuals.
Subclass One consists of those Class Members who
received a lump-sum distribution of pension
benefits from one or more of the Plans that was
calculated based upon a period of Benefit Service
that concluded during the Class Period. Named
plaintiffs Henry Spann and Carol Munley received
their pension benefits as lumpsum distributions.
Subclass Two consists of those Class Members who (a)
received or who are receiving a pension benefit in
the form of an annuity from one or more Plans that
was calculated based upon a period of Benefit Service
that concluded during the Class Period; or (b) have a
vested right to receive a pension benefit in the form
of an annuity from one or more of the Plans at some
date in the future that was calculated based upon a
period of Benefit Service that concluded during the
Class Period. Named Plaintiff Catherine Chiapparoli
receives her pension benefit monthly in the form of
an annuity.
(Emphasis supplied.) The Class Period is from January 1, 1989
through December 31, 1999.
At the August 19, 2004 preliminary approval hearing, counsel
proposed a settlement amount of $2.9 million, with at most
one-third, or approximately $1 million, being allocated to
attorney's fees, $10,000 for each of the three named plaintiffs
as incentive awards, post-approval administration fees of
$300,000, and attorney's costs and expenses of approximately $250,000, leaving
at least approximately $1.3 million to be distributed to the
Class. At the preliminary approval stage, the Class was divided
into the same two subclasses as now, although at the preliminary
approval hearing, defense counsel estimated that the total class
size was approximately 7,000, with 6,000 in Subclass One, and
only 1,000 in Subclass Two.
Defense counsel estimated that if the plaintiffs all prevailed
to the maximum extent on all of their claims, the total recovery
for the class would be approximately $12 million plus interest,
and that $10 million of this figure would be attributable to
Subclass One, and $2 million would be attributable to Subclass
Two. Plaintiffs' counsel proposed that the Settlement Fund of
approximately $1,300,000 be divided equally between the two
subclasses. This would ...