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Cavalieri v. General Electric Co.

August 5, 2009


The opinion of the court was delivered by: Gary L. Sharpe U.S. District Judge



Before the court is plaintiffs' motion for final approval of a class action settlement and plan of allocation of settlement proceeds, an award of attorneys' fees and expenses, and an award of service awards to the named plaintiffs (Dkt. No. 150.) For the reasons stated below, the court approves the plaintiffs' motion.


In this consolidated action, plaintiffs essentially allege that defendants violated their fiduciary duties, under ERISA Sections 405, 409, 502(a)(2) and (3), 29 U.S.C. §§ 1105, 1109 and 1132(a)(2) and (3), by selecting and maintaining GE stock as an investment alternative for participant and company matching contributions when it was not economically prudent. Plaintiffs allege that defendants had a duty to inform plaintiffs about the risks of the investments but defendants failed to fulfill that duty. Plaintiffs claim they suffered damages as a result of defendants' breach. Defendants responded with motions to dismiss and for summary judgment but, before the resolutions of those motions, and after mediation, the parties reached a settlement. On February 5, 2009, the court entered an order granting the pre-approval of the proposed settlement agreement. Subsequently, the court held a fairness hearing pursuant to Fed.R.Civ.P. 23(e)(2) and heard from the parties' counsel. The plaintiffs now seek final approval of the settlement.



With respect to class certification requirements, numerosity, commonality, typicality, and adequacy of representation must be satisfied. Cent. States Se. and Sw. Areas Health and Welfare Fund, 504 F.3d 229, 244 (2d Cir. 2007). Here, the court determines the thousands of members of the class have common questions of law or fact regarding the alleged breaches of fiduciary duty by the defendants and that their claim arises from the same course of events. Id. In addition, the court determines there is no antagonism between the plaintiffs' interest and the interests of the class, and the class has been adequately represented by experienced counsel. Id. The court determines the class action "is superior to other methods for the fair and efficient adjudication of the controversy." Id. at 245 (quotations and citations omitted). Thus, the requirements of Fed.R.Civ.P. 23(a) have been satisfied. In addition, the court agrees with defendants that the class may be certified as a non-opt-out class under Rule 23(b)(1). See In re AOL Time Warner ERISA Litigation, 2006 WL 2789862, at *3-4 (S.D.N.Y. 2006). Thus, the court determines the requirements for class certification have been met.

Settlement's Fairness

As to the fairness of the settlement, "[a] court determines a settlement's fairness by looking at both the settlement's terms and the negotiating process leading to settlement." Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005). "A presumption of fairness, adequacy, and reasonableness may attach to a class settlement reached in arm's-length negotiations between experienced, capable counsel after meaningful discovery." Id. (internal quotations and citations omitted). The settlement of complex class action litigation is favored by the courts. Id.

Here, the settlement was reached after extensive arm's-length negotiation, which was overseen and assisted by an experienced mediator, the Honorable Daniel B. Weinstein, a retired California state court judge, and all parties were represented by experienced counsel. The parties exchanged materials detailing their strengths and, after several months of continuous negotiation, the parties executed the settlement agreement. Thereafter, satisfying the provisions of the pertinent ERISA Prohibited Transaction Exemption (68 Fed.Reg. 75632), an independent fiduciary reviewed the settlement and ultimately concluded the settlement was reasonable. Accordingly, the court determines the proposed settlement meets the procedural fairness requirement.

Nonetheless, when considering whether to approve a class action settlement, a district court must carefully scrutinize the settlement to ensure its fairness, adequacy and reasonableness, and that it was not a product of collusion. D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001). The Second Circuit has identified the following nine factors for the courts to consider in determining whether to approve a class action settlement: (1) the complexity, expense and likely duration of the litigation, (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed, (4) the risks of establishing liability, (5) the risks of establishing damages, (6) the risks of maintaining the class action through the trial, (7) the ability of the defendants to withstand a greater judgment, (8) the range of reasonableness of the settlement fund in light of the best possible recovery, and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. Wal-Mart Stores, 396 F.3d at 117.

Here, the court determines that this case involves complex legal issues under ERISA and that bringing this case to trial would be costly and time-consuming. In re AOL Time Warner ERISA, 2006 WL 2789862, at *5-9. The court also determines that the low number of objections submitted by the class plays in favor of the settlement. Id. The court also notes that the parties have engaged in sufficient investigation of the facts which is reflected by their thorough briefing of their claims. Id. In addition, the court has evaluated the risks to the class's recovery by further litigation of this ERISA case. Id. The court also notes that although neither party contends that defendants are incapable of withstanding greater judgment, that does not "indicate that the settlement is unreasonable or inadequate." Id. Finally, the court also notes that the $10.15 million cash award for former participants of the relevant plan plus the value of structural changes GE will make under the settlement, totaling $40.15 million in ...

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