ORMOND et al v. ANTHEM, INC. et al

Filing 550

ORDER DECERTIFYING ERISA SUBCLASS AND GRANTING WITHDRAWAL OF DANIEL J. CESCATO AS A CLASS REPRESENTATIVE - Plaintiffs' Motion To Decertify ERISA Subclass and Withdraw Daniel J Cescato as Named Plaintiff (Dkt. 495 ) is GRANTED. Signed by Judge Tanya Walton Pratt on 5/4/2012. (JD)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

MARY ORMOND, et al., On Behalf of
Themselves and All Others Similarly
Situated,,
Plaintiffs,
vs.
ANTHEM., INC., et al., ,
Defendants.

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1:05-cv-1908-TWP-TAB

ORDER DECERTIFYING ERISA SUBCLASS AND GRANTING WITHDRAWAL OF
DANIEL J. CESCATO AS A CLASS REPRESENTATIVE

On September 29, 2009, Judge David Hamilton certified an “ERISA Subclass” (in
addition to a principal class) in this matter. His order read, in relevant part, as follows:
For the reasons explained above, the court grants in part plaintiffs’ motion
for class certification and certifies as a plaintiff class:
All former members of Anthem Insurance residing in Ohio, Indiana,
Kentucky and Connecticut who received cash compensation in connection
with the demutualization of Anthem Insurance on November 2, 2001, and
the communities comprised of them and their spouses, if any, excluding:
(i) all employers located in Ohio and Connecticut that maintained
Anthem group health insurance policies on their respective
employees and retirees and that received demutualization
compensation (the “Grandfathered Groups”);
(ii) Defendants, their predecessors and successors in interest;
(iii) the officers and directors of Defendants, their predecessors
and successors;
(iv) counsel of record in this action and their respective parents,
spouses and children; and
(v) judicial officers who enter an order in this action, and their
respective parents, spouses and children.

The class claims shall be those pled for the Depressed Price Class: breach
of fiduciary duty, negligence, and breach of contract. The plaintiff class
shall be represented by named plaintiffs Mary E. Ormond, Daniel J.
Cescato, and Kevin T. Heekin. The court also certifies a subclass
consisting of those plaintiff class members who received proceeds from
the demutualization because they were participants in employee benefit
plans covered by the federal Employee Retirement Income Security Act
(ERISA), 29 U.S.C. § 1001 et seq. The subclass shall be represented by
plaintiff Daniel J. Cescato.
(Dkt. 195 at 32-33) (emphasis added). On July 1, 2011, this Court rejected Defendants’ ERISA
preemption defense, finding that it had “no merit.” (Dkt. 446 at 48). Based on that ruling,
Plaintiffs have now moved the Court to decertify the “ERISA Subclass.” (Dkt. 495).
Specifically, because the ERISA preemption defense will not be an issue at trial, the Court
should decertify the ERISA Subclass and allow Daniel Cescato (who no longer wishes to be a
class representative) to withdraw from the case as a named Plaintiff.
Defendants counter that this request is inappropriate for three reasons. First, it is
untimely. Second, it ignores the possibility that the ERISA defense could be reinstated on
appeal. And, third, the request to allow Mr. Cescato to withdraw is baseless and would prejudice
Defendants, especially since they deposed him and plan to call him to testify at trial. The Court
finds that Plaintiffs have the better argument. Accordingly, the Court will decertify the ERISA
Subclass and will allow Mr. Cescato to withdraw as a named Plaintiff and class representative.
Discussion
A class, once certified, is not necessarily etched in stone. The Federal Rules of Civil
Procedure allow a court to alter or amend a class certification at any time necessary prior to
entering final judgment. Fed. R. Civ. P. 23(c)(1)(C). It is not unusual for the definition of a class
to be modified; in fact, a district court has an obligation to reassess its class certification as a
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case develops and to redefine a class, create subclasses, or decertify a class when necessary.
Boucher v. Syracuse University, 164 F.3d 113, 118 (2d Cir. 1999).
With that in mind, the Court addresses each of Defendants’ three arguments. First, the
timing of this request is not of particular concern. Perhaps Plaintiffs could have moved a bit
quicker in seeking decertification following the Court’s summary judgment order on July 1,
2011. But, to be candid, the Court viewed its ruling rejecting the ERISA preemption defense as a
foreshadow that the ERISA Subclass would ultimately be amended or decertified. Second, the
Court is not persuaded by Defendants’ contention that they would be prejudiced if the ERISA
subclass was decertified, and they later prevailed on appeal and their ERISA defense was found
to be applicable. If there is an appeal, and if defendants are successful, and if the case is
remanded, this Court can amend the class definition to conform to the Seventh Circuit’s dictates.
The final issue is whether the Court should allow Mr. Cescato to withdraw as a named
Plaintiff and class representative. Defendants claim that they intend to call Mr. Cescato as a
witness at trial because his deposition testimony was inconsistent with arguments made by
Plaintiffs. Specifically, on the subject of whether mutual members would prefer receiving cash
from the demutualization, Mr. Cescato’s testimony directly contradicted one of Plaintiff’s
retained experts witness. Plaintiffs counter by arguing that Cescato no longer wishes to be a class
representative; there are still two other class representatives; and the need for him to serve as a
representative has diminished, if not vanished, given the elimination of the ERISA Subclass.
In support of Cescato’s wish to withdraw, Plaintiffs highlight a statement made in
Organization of Minority Vendors, Inc. v. Illinois Central-Gulf R.R., 1987 WL 8997 (N.D. Ill.
April 2, 1987). In that lawsuit, a class representative sought to voluntarily withdraw and allow
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other class representatives who remained to pursue the case. Id. at *1. In a one page order,
Magistrate Judge Lefkow (now a district court judge) wrote that “[a]bsent a good reason . . . a
plaintiff should not be compelled to litigate if it doesn’t wish to.” Id.
Defendants rely heavily on In re Harcourt Brace Jovanovich, Inc. Securities Litigation,
838 F.Supp. 109 (S.D.N.Y. 1993), where the court ruled that three class representatives could
not voluntarily withdraw from their named plaintiff status absent a showing of no prejudice.
Specifically, in Harcourt, a magistrate judge found that the investment histories of the named
plaintiffs were discoverable. Id. at 111. In response to that ruling, the plaintiffs both pursued an
appeal to the district court judge and sought the approval of an amendment to the class order
withdrawing three of the class representatives. Id. at 111-112. The district court judge upheld
the determination that the plaintiffs’ investment histories were discoverable and denied the
withdrawal of the three named plaintiffs, noting that the plaintiffs had not shown a lack of
prejudice. Id. at 115. Specifically, the defendants had objected to the withdrawal because their
defense to the class claim had to be prepared by defending the claims of the individual class
representatives. Id. The court did allow for the issue to be revisited at a later date following
discovery, leading to the conclusion that the decision not to allow the withdrawal was, in part, to
allow the discovery of the investment histories of the three named-plaintiffs at issue. Id.
Harcourt is distinguishable for two reasons. First, discovery has been completed in this
case. Defendants claim that the discovery gained from Cescato and his testimony at trial are an
integral part of their defense. If he is unable to testify at trial, then all of that effort will be for
naught. Moreover, Mr. Cescato’s absence will require them to rely on his deposition testimony
instead of live testimony. Plaintiffs counter by arguing that (1) discovery was not wasted
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because it was conducted prior to the rejection of Defendants’ ERISA defense, which was the
primary reason for Cescato’s addition as a class representative; and (2) the relevance – and, in
turn, the admissibility – of Mr. Cescato’s testimony is questionable. The second distinguishing
feature between this case and Harcourt is that trial is fast-approaching in this case. Thus, the
Court does not have the benefit of time to revisit the request by Plaintiff to amend the class
certification order to eliminate Mr. Cescato as a class representative. Like so many discretionary
decisions a district court is faced with, this one boils down to whether a party is truly prejudiced
by the requested action.
In this instance, the Court finds no certain prejudice to allowing Mr. Cescato to withdraw
as a named Plaintiff and class representative. There is no certainty that his testimony will be
relevant. But, assuming it is (and if he is outside the subpoena power of the Court), his testimony
can come in through his deposition. In the opinion of this Court, Judge Lefkow’s statement rings
true: no plaintiff should be forced to remain a plaintiff involuntarily unless a compelling reason
exists. Here, one does not.
Conclusion
For the reasons explained in this entry, Plaintiffs’ Motion To Decertify ERISA Subclass
and Withdraw Daniel J Cescato as Named Plaintiff (Dkt. 495) is GRANTED.

05/04/2012
IT IS SO ORDERED this day: _________________

________________________
Hon. Tanya Walton Pratt, Judge
United States District Court
Southern District of Indiana
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Distribution to:
Matthew Thomas Albaugh
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

Peter R. Kahana
BERGER & MONTAGUE, P.C.
[e-mail]

Dennis Paul Barron
[e-mail]

Kevin M. Kimmerling
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

Michael F. Becker
THE BECKER LAW FIRM CO., L.P.A.
[e-mail]

Cari C. Laufenberg
KELLER ROHRBACK L.L.P.
[e-mail]

Peter R. Bisio
HOGAN LOVELLS US LLP
[e-mail]

Adam K. Levin
HOGAN LOVELLS US LLP
[e-mail]

Todd S Collins
BERGER & MONTAGUE, P.C.
[e-mail]

Neil F Mara
BERGER & MONTAGUE, P.C.
[e-mail]

T. David Copley
KELLER ROHRBACK, L.L.P.
[e-mail]

H. Laddie Montague Jr
BERGER & MONTAGUE P.C.
[e-mail]

Edward O'Donnell DeLaney
DELANEY & DELANEY LLC
[e-mail]

Anne Kramer Ricchiuto
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

Kathleen Ann DeLaney
DELANEY & DELANEY LLC
[e-mail]

Lynn L. Sarko
KELLER ROHRBACK, L.L.P.
[e-mail]

Thomas M. Fisher
INDIANA OFFICE OF THE
ATTORNEY GENERAL
[e-mail]

Christopher G. Scanlon
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]

Craig A. Hoover
HOGAN LOVELLS US LLP
[e-mail]
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Paul A. Wolfla
FAEGRE BAKER DANIELS LLP Indianapolis
[e-mail]
Eric Hyman Zagrans
[e-mail]

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