Cappello et al v. Franciscan Alliance, Inc. et al
Filing
106
OPINION AND ORDER: GRANTS IN PART AND DENIES IN PART 26 MOTION to Appoint Counsel by Plaintiffs Lorraine Cappello, Jeffrey O'Barski and 65 MOTION to Appoint Counsel by Plaintiffs Lori Buksar, Jean L. Jewett, Lenore Owens. The Court APPOINTS Kessler Topaz Meltzer & Check, LLP and Cohen Milstein Sellers & Toll PLLC as Co-Interim Lead Class Counsel, as outlined in Opinion and Order. Signed by Magistrate Judge Michael G Gotsch, Sr on 2/28/2017. (lhc)
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
LORAINE CAPPELLO, et al. on behalf of
themselves and all others similarly situated,
Plaintiffs,
v.
FRANCISCAN ALLIANCE, INC., et al.,
Defendants.
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CAUSE NO. 3:16-CV-290-TLS-MGG
OPINION AND ORDER
Pending and ripe before the Court is the Motion to Appoint Interim Lead Counsel filed
by Plaintiffs Jean L. Jewett, Lenore Owens, and Lori Buksar (collectively “the Jewett Plaintiffs”)
on September 16, 2016. [DE 65]. Also before the Court is the Motion for Entry of Pretrial
Order No. 1 Appointment Interim Class Counsel filed by Plaintiffs Lorraine Cappello and Jeffrey
O’Barski (collectively “the Cappello Plainitiffs”) on August 9, 2016. 1 [DE 26]. Counsel for
each set of Plaintiffs seek appointment as Interim Lead Class Counsel for the entire putative
class in this consolidated ERISA “church plan” action against Defendant Franciscan Alliance,
Inc., et al. The Court then heard arguments from all parties on the competing requests for
appointment at a hearing on February 24, 2017. 2
1 The Cappello Plaintiffs’ instant motion to appoint counsel was technically resolved through an order issued by this
Court on September 8, 2016. [DE 41]. However, at a motion hearing on February 24, 2017, this Court granted the
Jewett Plaintiffs’ motion to reconsider its September 2016 appointment order. [DE 104]. Therefore, the Cappello
Plaintiffs’ motion remains under consideration in connection with the Jewett Plaintiffs’ instant motion.
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At the hearing on February 24, 2017, the Court also found the Jewett Plaintiffs’ motion for a Rule 16(b)
Preliminary Pretrial Conference premature and deemed it moot [DE 104]; granted Defendants’ oral motion to stay
all proceedings pending decisions in three relevant cases now before the United States Supreme Court [DE 105]; and
took under advisement Plaintiffs’ instant motions for appointment of interim lead class counsel addressed below
[DE 104].
I.
RELEVANT BACKGROUND
This consolidated action 3 stems from allegations that Defendant, Franciscan Alliance
Inc., et al. improperly claimed the “church plan” exemption from the Employee Retirement
Income Security Act of 1974 (“ERISA”). Plaintiffs allege that in so doing, Franciscan Alliance
has avoided providing protections to its employees and pension plan participants. More
specifically, Plaintiffs contend that Franciscan Alliance has failed to fund their pensions in
compliance with ERISA’s minimum funding obligations, to insure the benefits through the
federal benefit guaranty corporation, and to provide ERISA-required notices and information to
participants in the Franciscan Alliance Pension Security Plan.
On April 22, 2016, the Jewett Plaintiffs initiated their ERISA church plan class action
against Franciscan Alliance in the Northern District of Illinois represented by the law firms of
Cohen Milstein Sellers & Toll PLLC (“Cohen Milstein”) and Keller Rohrback, LLP. The Jewett
Plaintiffs served and received limited discovery requests, including the Franciscan Alliance Plan
documents, which led them to file their First Amended Complaint on August 10, 2016. The
Jewett Amended Complaint alleges twelve causes of action, including a constitutional claim
based on the Establishment Clause and a claim based on allegations that Franciscan Alliance
improperly required five years of service before employees would qualify as fully vested
participants in the Plan. With the agreement of all parties, the Northern District of Illinois issued
an order transferring Jewett to this Court on August 16, 2016. Jewett arrived in this District on
September 6, 2016.
In the mean time, the Cappello Plaintiffs filed their church plan complaint against
Franciscan Alliance in this Court on May 12, 2016, represented by the law firms of Kessler
3
The Court consolidated the Jewett action (Cause No. 3:16-cv-591-TLS-MGG) into the Cappello action (Cause No.
3:16-cv-290-TLS-MGG) in its September Order. [DE 41 at 6]. No party has challenged the consolidation.
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Topaz Meltzer & Check, LLP (“Kessler Topaz”), Izard, Kindall & Raabe LLP, and Sopko,
Nussbaum, Inabnit & Kaczmarek. The Cappello complaint lacked the constitutional claim, the
vesting claim, and other claims raised by the Jewett Plaintiffs in their Amended Complaint. The
Cappello Plaintiffs engaged in no discovery, but filed their first motion to appoint interim lead
counsel on June 24, 2016. On June 30, 2016, this Court denied the Cappello Plaintiffs’ motion
without prejudice. [DE 25 at 1].
On August 9, 2016, with the expectation that the Jewett Plaintiffs were going to agree to
transfer their case to this District, the Cappello Plaintiffs filed their second motion to appoint
interim lead counsel. The Cappello Plaintiffs’ motion became ripe on September 2, 2016, with a
timely response from Defendants and their reply brief. The Jewett Plaintiffs filed their
competing motion for appointment of counsel on September 16, 2016. The Jewett motion
became ripe on October 6, 2016, after the Cappello Plaintiffs and Defendants filed response
briefs and the Jewett Plaintiffs filed a reply.
Briefing on both motions showed that Kessler Topaz, a Cappello firm, and Cohen
Milstein, a Jewett firm, have worked together on some other church plan cases and have
competed against each other for the position of lead counsel in others. The Cappello and Jewett
Plaintiffs also established that on occasion, counsel’s efforts to work together in other similar
cases had failed even on basic tasks such as preparing a consolidated amended complaint. As
such, the Cappello and Jewett Plaintiffs argued that either Cappello’s counsel or Jewett’s counsel
should be appointed here. Defendants expressed no preference for any firm, but explicitly
contended that its interests would be best served if only one firm were to be appointed.
Specifically, Defendants contended that appointment of more than one firm would magnify
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Defendants’ fee exposure and would complicate Defendants’ ability to coordinate effectively
with opposing counsel.
The arguments at the hearing before this Court on February 24, 2017, were similar, but
slightly modified from the briefing. Defendants held firm in their opposition to more than one
firm serving as Interim Lead Class Counsel. The Jewett Plaintiffs also maintained their position
that their lawyers were best suited to protect the interests of the class as a whole without any
assistance from the Cappello Plaintiffs’ counsel. Jewett’s counsel reiterated their history of
collaboration on “church plan” litigation including cases now before the United States Supreme
Court. 4 Jewett’s counsel also emphasized the challenges they have faced in the early stages of
this case trying to coordinate and collaborate with the Cappello Plaintiffs’ counsel.
The Cappello Plaintiffs, however, shifted their position and argued that the interests of
the class would be best protected if its lawyers at Kessler Topaz were appointed Co-Interim Lead
Class Counsel with the lawyers representing the Jewett Plaintiffs at Cohen Milstein. The
Cappello Plaintiffs supported its modified position by noting that both Kessler Topaz and Cohen
Milstein are eminently qualified firms in this type of litigation, that both firms have a history of
working together, and that the firms’ distinctive litigation strategies would work to the putative
class members’ benefit.
II.
ANALYSIS
Federal Rule of Civil Procedure 23(g) governs the appointment of class and interim class
counsel in class action litigation. The designation of interim class counsel promotes more
orderly and efficient prosecution of complex litigation. See Annotated Manual for Complex
4
At the February 2017 hearing, the Court granted Defendants’ oral motion to stay all proceedings in this
consolidated class action because these same cases now before the United States Supreme Court could affect
litigation here. [See DE 105].
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Litigation § 10.22 (4th ed. 2011) (“Manual”). In determining lead counsel, the court should
“conduct an independent review (usually a hearing is advisable) to ensure that counsel appointed
to leading roles are qualified and responsible, that they will fairly and adequately represent all of
the parties on their side, and that their charges will be reasonable.” Id. The most important
factor is “achieving efficiency and economy without jeopardizing fairness to parties.” Id. §
10.221.
Rule 23(g)(2) specifically provides that “[w]hen one applicant seeks appointment as class
counsel, the court may appoint that applicant only if the applicant is adequate under Rule
23(g)(1) and (4).” However, in cases where “more than one adequate applicant seeks
appointment, the court must appoint the applicant best able to represent the interests of the
class.” Id. In reaching its decision,
the court must consider:
(i) the work counsel has done in identifying or investigating potential claims in
the action;
(ii) counsel’s experience in handling class actions, other complex litigation, and
the types of claims asserted in the action;
(iii) counsel’s knowledge of the applicable law; and
(iv) the resources that counsel will commit to representing the class.
Fed. R. Civ. P. 23(g)(1)(A). Additionally, a court “may consider any other matter pertinent to
counsel’s ability to fairly and adequately represent the interests of the class.” Fed. R. Civ. P.
23(g)(1)(B); Hodges v. Bon Secours Health Sys., Inc., No. CV RDB-16-1079, 2016 WL
4447047, at *1 (D. Md. Aug. 24, 2016) (applying Rule 23(g) selection criteria)
Here, both Cappello’s and Jewett’s counsel have demonstrated that they have
considerable experience in handling class actions, particularly related to ERISA cases. A small
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edge may go to Cohen Milstein and Keller Rohrback who have filed eighteen “church plan”
complaints compared to the twelve filed by Kessler Topaz and Izard Kindall. But this edge is
quite small given Kessler Topaz’s strong history in ERISA and other types of class actions. In
addition, Cohen Milstein and Kessler Topaz both claim uniquely qualified lawyers. While their
experiences are not identical, neither counsel has persuaded the Court that any distinctions in the
particular qualifications of individual lawyers at these firms will change the quality of
representation the firms are able to provide to the putative class members. In addition, the firms
here are admittedly big and powerful plaintiffs’ firms with resources to absorb the costs of
litigation no matter the outcome.
However, Jewett’s counsel contend that they have a better command over the applicable
law in this niche area of ERISA litigation. Jewett’s counsel may have more firsthand knowledge
of certain aspects of this area of law because they have been doing it since 2013, while
Cappello’s counsel only began “church plan” litigation in 2015. However, Cappello’s counsel
has had about two years to catch up and has even worked side-by-side with Jewett’s counsel on
other cases. As such, the Court is satisfied that Cappello’s counsel has mastered the law
applicable in the instant case and that they are more than sufficiently equipped to protect the
interests of the putative class at a level comparable to Jewett’s counsel.
Lastly, the Court must compare counsel’s efforts in identifying and investigating
potential claims available to this particular putative class. Arguably, Jewett’s counsel has done
more work in this area as evidenced by their discovery efforts and by the greater number of
claims in their Amended Complaint. Cappello’s counsel does not challenge these realities.
Nevertheless, the Court is not convinced that these “advantages” will make a substantial
difference in either counsel’s ability to represent this putative class.
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First, Jewett’s counsel admittedly conducted limited discovery while their case was
pending before the Northern District of Illinois. Indeed, they possess Franciscan Alliance’s Plan
documents, which are central to this case and would be produced promptly once formal
discovery begins. Yet any advantage that possession of the documents may have incurred is now
meaningless because Defendants agreed at the February 2017 hearing to deliver the same Plan
documents to Cappello’s counsel by March 27, 2017. [See DE 105 at 1].
Second, the narrower scope of the Cappello Plaintiffs’ complaint actually demonstrates
how Cappello’s counsel would provide a benefit to the putative class members that could
meaningfully complement the work of Jewett’s counsel. Rule 23(g) forces this Court to keep the
interests of the putative class members front and center. See also Manual, § 10.221. In class
actions, excessive advocacy can delay resolution of the class members’ legitimate claims and
reduce their recovery. On the other hand, insufficient advocacy may speed up resolution of the
class members’ claims, but could prevent recovery on viable claims not raised.
Here, Cappello’s counsel and Jewett’s counsel all know the full range of potential claims
and have developed somewhat different litigation strategies related to those claims with the hope
of maximizing the class members’ recovery and influencing ERISA law for all employees in the
future. The putative class members should not be denied the full range of benefits available to
them through these differing strategies. Indeed, the class members would be best served if
represented by both Cappello’s and Jewett’s counsel. Moreover, Cappello’s and Jewett’s
counsel would create an inherent system of check and balances to ensure a proper balancing of
the issues affecting their class action.
Therefore, especially at this early stage of litigation, the Court is inclined to appoint CoInterim Lead Class Counsel for Plaintiffs. Defendants’ concerns about duplication of fees and
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the burden of coordinating with more than one law firm can also be overcome. First, the Court
sees no reason to name five law firms as co-counsel. Instead, the Court will appoint Kessler
Topaz and Cohen Milstein as Co-Interim Lead Class Counsel based on the parties’
representations during the hearing. Second, the appointment need not be permanent should the
situation change in the course of litigation. This is especially true if Co-Counsel’s billings start
to get out of hand. To keep tabs on fees, the Court will order Co-Counsel to file quarterly time
records. Third, Plaintiffs’ counsel at the February 2017 hearing indicated a willingness to agree
that one firm can represent all Plaintiffs. Therefore, the Court will order Co-Counsel to identify
a single attorney to serve as point of contact with Defendants in order to eliminate the risk of
burdensome coordination.
As the Court may revisit this decision at any time during the preliminary phase of this
litigation and will revisit it when naming permanent lead counsel, it would behoove both Kessler
Topaz and Cohen Milstein to comply fully with both the terms and the spirit of this Opinion and
Order. The Court will certainly take the performance of the firms into consideration when
designating permanent lead counsel.
III.
CONCLUSION
Based on its Rule 23(g) analysis, the Court GRANTS IN PART and DENIES IN PART
the Cappello Plaintiffs’ and the Jewett Plaintiffs’ motions to appoint interim lead class counsel.
[DE 26 & 65]. The Court APPOINTS Kessler Topaz Meltzer & Check, LLP and Cohen
Milstein Sellers & Toll PLLC as Co-Interim Lead Class Counsel under the following conditions:
(1)
Co-Counsel shall inform Defendants’ counsel which single attorney will
serve as their point of contact by March 15, 2017.
(2)
Co-Counsel shall file time records for fees and expenses incurred in
prosecution of this case on a quarterly basis. Co-Counsel’s first billing report
should accompany the parties’ joint status report due 21 days after the United
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States Supreme Court issues its opinions in Advocate Health Care v. Stapleton,
No. 16-74; St. Peter’s Healthcare v. Kaplan, No. 16-86; and Dignity Health v.
Rollins, No. 16-258. [See DE 105 at 1–2]. The Court expects very limited, or
possibly no, billing to be generated while this case is stayed.
SO ORDERED.
Dated this 28th day of February 2017.
s/Michael G. Gotsch, Sr.
Michael G. Gotsch, Sr.
United States Magistrate Judge
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