International Union of Operating Engineers, Stationary Engineers Local 39 Pension Trust Fund v. The Bank of New York Mellon Corporation et al

Filing 54

NOTICE REGARDING FACTORS TO BE EVALUATED FOR ANY PROPOSED CLASS SETTTLEMENT. Signed by Judge Alsup on December 14, 2011. (whalc2, COURT STAFF) (Filed on 12/14/2011)

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1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 12 13 No. C 11-03620 WHA INTERNATIONAL UNION OF OPERATING ENGINEERS, STATIONARY ENGINEERS LOCAL 39 PENSION TRUST FUND, individually and on behalf of all others similarly situated, 14 15 16 17 18 19 Plaintiffs, v. THE BANK OF NEW YORK MELLON CORPORATION, THE BANK OF NEW YORK MELON, THE BANK OF NEW YORK COMPANY, INC., THE BANK OF NEW YORK, and THE BANK OF NEW YORK MELLON TRUST COMPANY, NATIONAL ASSOCIATION, 20 Defendants. / 21 22 23 NOTICE REGARDING FACTORS TO BE EVALUATED FOR ANY PROPOSED CLASS SETTLEMENT For the guidance of counsel, please keep in mind the following factors that will typically be considered in determining whether to grant preliminary approval to a class settlement: 24 1. 25 Is the plaintiff an adequate representative with standing? Is plaintiff motivated to and 26 qualified to act on behalf of those he or she seeks to represent? Are there shortcomings in the 27 plaintiff that would be advanced to defeat a class certification motion? What is the litigation 28 history, criminal history, and relationship to plaintiff’s counsel? In an employment case, how ADEQUACY OF REPRESENTATION. long did the plaintiff work for the employer? The opinion of the lead plaintiff as to the fairness 1 of the settlement to absent class members must be provided to the Court, along with an opinion 2 by counsel. Adequacy of counsel is not a substitute for adequacy of the representative. If a 3 settlement proposal is made prior to formal class certification, there is a risk that the class claims 4 have been discounted, at least in part, by the risk that class certification will be denied. All 5 counsel should explain whether this risk was discussed and/or considered in the negotiations 6 and, if so, why the rights of non-parties should be prejudiced merely because the particular 7 “representative” (or his or her counsel) might be deemed inadequate or other requirements of 8 Rule 23 might be unsatisfied. 9 DUE DILIGENCE. Has class counsel performed due diligence (discovery and investigation) to learn the 11 For the Northern District of California United States District Court 10 2. strength and best-case dollar amount of the class claim, including preparation of a final expert 12 class damage report? Please remember that when one undertakes to act as a fiduciary on 13 behalf of others (here, the proposed class), one must always perform adequate due diligence 14 before acting. 15 3. 16 In the proposed settlement, what will absent class members give up versus what will they COST-BENEFIT FOR ABSENT CLASS MEMBERS. 17 receive in exchange, i.e., a cost-benefit analysis? If the recovery will be a full recovery, then 18 much less will be required to justify the settlement than for a partial recovery, in which case the 19 discount will have to be justified. This will require an analysis of the specific proof, such as a 20 synopsis of any conflicting evidence on key fact points. It will also require a final class-wide 21 damage study or a very good substitute, in sworn form. If little discovery has been done to see 22 how strong the claim is, it will be hard to justify a discount on the mere generalized theory of 23 “risks of litigation.” A coupon settlement will rarely be approved. Where there are various 24 subgroups within the class, what will be the plan of allocation of the settlement fund and why? 25 4. THE RELEASE. 26 The release should be limited only to the claims certified for class treatment. Language 27 releasing claims that “could have been brought” is too vague. The specific statutory or common 28 law claims to be released should be spelled out. Class counsel must justify the release as to each 2 1 claim released, the probability of winning, and its estimated value if fully successful. Does the 2 settlement contemplate that claims of absent class members will be released even for those 3 whose class notice is returned as undeliverable? Usually, the Court will not extinguish claims of 4 individuals known to have received no notice (and/or for whom there is no way to send them a 5 settlement check). 6 5. 7 Typically, defendants vigorously oppose class certification and/or argue for a narrow EXPANSION OF THE CLASS. 8 class. In settling, however, defendants often seek to expand the class, either geographically 9 (i.e., nationwide) or claim-wise (including claims not in the complaint) or person-wise (e.g., multiple new categories). Such expansions will be viewed with suspicion. If an expansion 11 For the Northern District of California United States District Court 10 is to occur it must come with an adequate plaintiff and one with standing to represent the add-on 12 scope and with an amended complaint, not to mention due diligence as to the expanded scope. 13 The settlement dollars must be sufficient to cover the old scope plus the new scope. Personal 14 and subject-matter jurisdiction over the new individuals to be compromised by the class 15 judgment must be shown. 16 6. 17 A settlement that allows for a reversion of settlement funds to the defendant(s) is a red REVERSIONS. 18 flag, for it runs the risk of an illusory settlement, especially when combined with a requirement 19 to submit claims that may lead to a shortfall in claim submissions. CLAIM PROCEDURE. 20 7. 21 A settlement that imposes a claim procedure rather than cutting checks to class members 22 for the appropriate amount may impose too much of a burden on class members, especially if the 23 claim procedure is onerous, or the period for submitting is too short, or there is a likelihood of 24 class members treating the notice envelope as junk mail. The best approach is to calculate 25 settlement checks from defendant’s records (plus due diligence performed by counsel) and to 26 send the checks to the class members along with a notice that cashing the checks will be deemed 27 acceptance of the release and all other terms of the settlement. 28 3 1 8. ATTORNEY’S FEES. 2 To avoid collusive settlements, the Court prefers that all settlements avoid any agreement 3 as to attorney’s fees and leave that to the judge. If the defense insists on an overall cap, then the 4 Court will decide how much will go to the class and how much will go to counsel, just as in 5 common fund cases. Please avoid agreement on any division, tentative or otherwise. 6 A settlement whereby the attorney seems likely to obtain funds out of proportion to the benefit 7 conferred on the class must be justified. 8 9. DWINDLING OR MINIMAL ASSETS? 9 If the defendant is broke or nearly so with no prospect of future rehabilitation, a steeper discount may be warranted. This must be proven. Counsel should normally verify a claim of 11 For the Northern District of California United States District Court 10 poverty via a sworn record, thoroughly vetted. 12 10. TIMING OF PROPOSED SETTLEMENT. 13 In order to have a better record to evaluate the foregoing considerations, it is better to 14 develop and to present a proposed compromise after class certification, after diligent discovery 15 on the merits, and after the damage study has been finalized. On the other hand, there will be 16 some cases in which it will be acceptable to conserve resources and to propose a resolution 17 sooner. For example, if the proposal will provide full recovery (or very close to full recovery) 18 then there is little need for due diligence. The poorer the settlement, the more justification will 19 be needed and that usually translates to more discovery and due diligence; otherwise, it is best to 20 let non-parties fend for themselves rather than foist a poor settlement on them. Particularly when 21 counsel proposes to compromise the potential claims of others in a low-percentage recovery, the 22 Court will insist on detailed explanation of why the case has turned so weak, an explanation that 23 usually must flow from discovery and due diligence, not merely generalized “risks of litigation.” 24 Counsel should remember that merely filing a putative class complaint does not authorize them 25 to compromise the rights of absent parties. If counsel believe settlement discussions should 26 precede a class certification, a motion for appointment of interim class counsel must first 27 be made. 28 4 1 11. A RIGHT TO OPT OUT IS NOT A CURE-ALL. 2 A borderline settlement cannot be justified merely because class members may opt out if Once the named parties reach a settlement in a purported class action, they are always solidly in 5 favor of their own proposal. There is no advocate to critique the proposal on behalf of absent 6 class members. That is one reason that Rule 23(e) insists that the district court vet all 7 class settlements. 8 12. 9 If the proposed settlement by itself is not good enough for the named plaintiff, why 10 should it be good enough for absent class members similarly situated? Class litigation proceeded 11 For the Northern District of California they wish. The Court has an independent duty to assess whether it is reasonable and adequate. 4 United States District Court 3 well for many decades before the advent of requests for “incentive payments,” which too often 12 are simply ways to make a collusive or poor settlement palatable to the named plaintiff. A 13 request for an incentive payment is a red flag. INCENTIVE PAYMENTS. 14 13. 15 Is the notice in plain English, plain Spanish, and/or plain Chinese (or the appropriate NOTICE TO CLASS MEMBERS. 16 language)? Does it plainly lay out the salient points, which are mainly the foregoing points in 17 this memorandum? Will the method of notice distribution really reach every class member? 18 Will it likely be opened or tossed as junk mail? How can the envelope design enhance the 19 chance of opening? Can notice be supplemented by e-mail notice? 20 21 22 * * * Finally, for an order denying proposed preliminary approval, see Kakani v. Oracle Corp., No. C 06-06493 WHA, 2007 WL 1793774 (N.D. Cal. June 19, 2007). 23 24 25 Dated: December 14, 2011. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 26 27 28 5

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