Doe MC-1 v. The University of Michigan et al

Filing 183

ORDER: (1) Granting Unopposed Motion to Establish the UM Survivors' Qualified Settlement Fund and to Appoint QSF Co-Administrators; and (2) Establishing the UM Survivors' Qualified Settlement Fund and to Appoint QSF Co-Administrators. Signed by District Judge Victoria A. Roberts. (LVer)

Case 2:20-cv-10568-VAR-EAS ECF No. 183, PageID.3794 Filed 09/16/22 Page 1 of 19

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
John Doe MC-1,
Plaintiff,

Case No. 2:20-cv-10568-VAR-EAS

v.

Hon. Victoria A. Roberts
Magistrate Judge Elizabeth A. Stafford

The University of Michigan, the
Regents of The University of Michigan,

Master Case Filing

Defendants.

ORDER: (1) GRANTING UNOPPOSED MOTION TO ESTABLISH THE
UM SURVIVORS’ QUALIFIED SETTLEMENT FUND AND TO APPOINT
QSF CO-ADMINISTRATORS; AND (2) ESTABLISHING THE UM
SURVIVORS’ QUALIFIED SETTLEMENT FUND AND TO APPOINT QSF
CO-ADMINISTRATORS
The Plaintiffs’ Co-Leadership Counsel, on behalf of Settlement Claimants,
petitioned the Court to establish the UM Survivors’ Qualified Settlement Fund and
to appoint ARCHER Systems LLC as Fund Administrator and ARX Management,
LLC as Investment Advisor. The Court considered Plaintiffs’ Unopposed Motion
and all other matters of record. The Court finds good cause to grant the motion and
ORDERS:
1.

UM2022 Qualified Settlement Fund is established as a Qualified

Settlement Fund within the meaning of Treasury Regulation § 1.468B-1 and
pursuant to the jurisdiction conferred on this Court by Treas. Reg. § 1.468B-1(c)(1).
2.

U.S. Bank will be the Custody Bank of the Fund (the “Custody Bank”).
1

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3.

ARCHER Systems, LLC, 1775 Saint James Place, Suite 200, Houston,

TX 77056 is appointed as the “Fund Administrator” of the Fund (as a “qualified
settlement fund”) within the meaning of section 1.468B-2(k)(3) of the Regulations
(“Administrator”) responsible for administering the Fund.
4.

ARX Management, LLC, 1730 E. Holly Ave #795, El Segundo, CA

90245 is appointed as the Investment Advisor of the Fund (as a “qualified settlement
fund”) within the meaning of section 1.468B-2(k)(3) of the Regulations
(“Administrator”) responsible for administering the Fund.
5.

ARCHER and ARX collectively are appointed as QSF Co-

Administrators of the Fund.
6.

The Fund must be treated at all times as a “qualified settlement fund”

within the meaning of §468B of the Internal Revenue Code of 1986, and Treas. Reg.
§§ 1.468B-1 through 1.468B-5, 26 C.F.R. §§ 1.468B-1 through 1.468B-5 (1992) and
be administered in accordance with the requirements of those Treasury
Regulations. The parties must treat the Fund as a qualified settlement fund for all
reporting purposes under the federal tax laws. It is the responsibility of the QSF
Co-Administrators to prepare and deliver any necessary documentation for
signature by all necessary parties, and to cause the appropriate filing to occur. All
expenses associated with compliance with this provision must be paid from the
Fund. The QSF Co-Administrators will be the “administrator” within the

2

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meaning of Treas. Reg. § 1.468B-2(k)(3). Consequently, the responsibility for the
filing of all informational and other tax returns necessary or advisable with respect
to the Fund (including without limitation the returns described in Treas. Reg. §
1.468B-2(k)) is the QSF Co-Administrators’. Such returns must reflect that all taxes
(including any estimated taxes, interest, or penalties) on the income earned on the
Fund must be paid out of the Fund.
7.

The Fund is immediately authorized to receive the payment of the

Immediately Allocable Amount1  from Defendants, and to hold that sum, subject to
the continuing jurisdiction of this Court, until the QSF Co-Administrators are
provided approved disbursement instructions in accordance with this Order.
8.

Effective upon the deposit of the Immediately Allocable Amount into

the Fund, all Released Claims (as defined in the Settlement Releases) by or on behalf
of each Plaintiff Releasing Person must be fully and finally released and
extinguished in accordance with the Settlement Releases executed by each Plaintiff
Releasing Person, and any and all liability of the UM Released Persons with respect
to the Released Claims of each Plaintiff Releasing Person must be fully and finally
released and extinguished. In addition, upon the deposit of the Immediately
Allocable Amount into the Fund, neither UM Defendants nor any of the UM

1

Unless otherwise defined herein, capitalized terms have the meaning ascribed to them in the
parties’ May 19, 2022 Private Master Settlement Agreement.

3

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Released Persons will have any responsibility for the management, investment,
disbursement, treatment, administration, or other handling of the Immediately
Allocable Amount or its proceeds, or any liability arising from or relating in any way
to the investment, management, disbursement, treatment, administration, or other
handling of the Fund. Without in any way limiting the foregoing, upon the deposit
of the Immediately Allocable Amount into the Fund, the UM Defendants and the
UM Released Persons will be fully and completely released with respect to all
matters arising after such deposit with respect to the Released Claims and the
Immediately Allocable Amount (or the proceeds thereof), including but not limited
to, the management, investment, disbursement, treatment, administration, or other
handling of the Immediately Allocable Amount or its proceeds.
9.

The Fund is authorized to effect qualified or non-qualified assignments

of any resulting structured settlement liability or deferred compensation agreement
as directed in writing by Claimants or Plaintiffs’ Counsel.
10.

The QSF Co-Administrators are authorized to distribute all funds,

including attorney fees and litigation expenses to counsel for Claimants along with
their co-counsel, consistent with their existing contingency fee contracts including
the use of structured attorney fees.
11.

The QSF Co-Administrators, upon completion and final distribution of

all monies paid into the Fund, are authorized to take appropriate steps to wind down

4

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the fund and thereafter discharge the QSF Co-Administrators from any further
responsibility with respect to the Fund. The QSF Co-Administrators may, but are
not obligated to, seek a final order of discharge from this Court.
12.

No bond shall be required, provided that all monies received by the

Fund, which include all principal and interest earned thereon, shall be deposited in
a custody account held at U.S. Bank (the “Custody Bank”), a financial institution
doing business in Minneapolis, MN, for the benefit of and titled in the legal name of
the Settlement Fund and invested in instruments/securities comprised of (a) any
obligations of, or any obligations guaranteed as to principal and interest, by the
United States of America or any agency or instrumentality thereof; (b) cash
equivalent securities including SEC registered money market funds and
collateralized money market accounts; (c) short-term investment-grade securities;
and/or (d) deposit and similar interest-bearing, or non-interest bearing accounts, and
certificates of deposit subject to Federal Depository Insurance Corporation
protections as available, which may be held within the custody account or at the
issuer bank. The Custody Bank shall follow the instructions of the Investment
Advisor, pursuant to these terms and conditions, such that a safety of principal
investment policy is implemented. Notwithstanding the foregoing, the Custody Bank
shall not be allowed to distribute any income or principal from the Settlement Fund
except upon instructions of the Investment Advisor, or, if requested, upon the order

5

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of this Court upon the joint motion of the parties. The Investment Advisor retains
the right to remove the Custody Bank, and may designate a replacement bank, upon
the written consent of Plaintiffs' Counsel. In the event of such replacement, the terms
and conditions of this Paragraph - including, without limitation, those addressing
bond requirements, investments, and distributions from the Settlement Fund-shall
apply to any such replacement bank. The Investment Advisor is not liable for any
losses as a result of investing the Deposit as directed by the Court. Any such losses
are not recoverable from the parties, and the parties and their counsel will have no
responsibility for The Investment Advisor performance. Receipt and/or investment
of the Deposit must be confirmed to Plaintiffs' Counsel by The Investment Advisor
as soon as practicable by account statement or other reasonable method.
13.

The QSF Co-Administrators and/or their respective attorneys must be

indemnified by the Claimants and held harmless by Claimants against reasonable
expenses, costs and fees (including attorney fees), judgment, awards, and liabilities
of all kinds incurred by the QSF Co-Administrators from any and all claims made
by any person or entity that attempts to assert a right of payment, reimbursement or
garnishment against the Fund, except to the extent that it is finally determined by
this Court that the QSF Co-Administrators, and/or its respective attorneys was/were
negligent or acted with willful misconduct in connection with the administration of

6

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this Fund. Neither the UM Defendants nor any of the UM Released Persons shall
have any liability or responsibility whatsoever with respect to the indemnity
described in this Paragraph, nor will they have any other liability or responsibility
to indemnify or hold harmless the QSF Co-Administrators and/or their respective
attorneys against any expenses, costs, fees (including attorney fees), judgment,
awards, or liabilities of any kind.
14.

Pursuant to Treas. Reg. § 1.468B-1(c)(1), the Court must exercise

continuing jurisdiction over the Fund and must be the designated venue by operation
of law for any and all disputes which may arise related to the Fund, the Fund’s
administration, and any disbursements and/or payments therefrom.
15.

The Individual Plaintiff’s Counsel for the Claimants whom they

represent must be solely responsible for the investigation and resolution of Probate
Complications and/or Other Complications for their respective Claimants as
applicable and shall coordinate with the QSF Co-Administrators to provide clear and
timely instructions for payment to the applicable parties for full satisfaction of the
applicable Probate Complications and/or Other Complications. ARCHER must
review and approve all documents for compliance with this Agreement prior to the
distribution of funds by the QSF Co-Administrators.
16.

Without in any way limiting the qualifications and duties of the QSF

Co-Administrators, the Lien Administrator, or the Bankruptcy Coordination

7

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Administrator2, the QSF Co-Administrators, the Lien Administrator, and the
Bankruptcy Coordination Administrator must work with each other and Individual
Plaintiff’s Counsel to address any Complications relating to an Action, AndersonRelated Claim, Settled Claim, Settlement Release, or Allocated Share, including but
not limited to: (i) the Lien Administrator’s identification, resolution, payment,
and/or satisfaction of any Lien Complications; (ii) the Bankruptcy Coordination
Administrator’s performance of a bankruptcy analysis and resolution procedure to
identify and resolve any Bankruptcy Complications; and (iii) the QSF CoAdministrators’ payment of applicable third party probate, bankruptcy, and/or other
interests as directed by Individual Plaintiff’s Counsel for the Claimants they
represent in connection with resolution of Probate Complications and/or Other
Complications, and the Bankruptcy Coordination Administrator in connection with
resolution of Bankruptcy Complications. As part of their duties, the QSF CoAdministrators, the Bankruptcy Coordination Administrator, and the Lien
Administrator are entitled to hire agents or third parties to assist with their
respective duties, including attorneys who specialize in lien, probate, or bankruptcy
matters, with the fees and costs for such agents or third parties deemed part of the
administration of the Qualified Settlement Fund; provided, however, that the QSF

2

Co-Leadership Counsel filed a Motion on August 2, 2022 requesting the Court appoint ARCHER
Systems, LLC as the Bankruptcy Coordination Administrator and the Lien Administrator over this
Settlement.

8

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Co-Administrators, the Bankruptcy Coordination Administrator, and/or the Lien
Administrator must supervise and remain responsible for the work of any agents or
third parties whom they hire.
17.

If any proceeds that an individual Claimant receives as a result of the

Parties’ MSA, or any Action or Allocated Share are or become subject to a Lien
Complication or Other Complication, then, in advance of payment to that respective
Claimant by the QSF Co-Administrators from the Qualified Settlement Fund, the
QSF Co-Administrators must hold in the U.S. Bank Custody Account, and not
distribute to that respective Claimant from the Qualified Settlement Fund, funds
equal to the amount of any and all Lien Complications or Other Complications (a
“Lien or Other Complication Holdback Amount”), established and communicated
by the Lien Administrator. QSF Co-Administrators must use the Lien or Other
Complication Holdback Amount to satisfy any Lien Complications or Other
Complications of a given Claimant as directed by the Lien Administrator and the
Individual Plaintiff’s Counsel, and must not distribute the remainder (if any) to the
respective Claimant until directed to do so by the Lien Administrator and the
Individual Plaintiff’s Counsel when each Lien Complication and Other
Complication asserted by each such Lienholder has been resolved or waived.

9

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18.

Any payment for a Lien determined by the Lien Administrator to be

owed to any Lienholder to satisfy any Lien Complication must be paid directly from
the QSF at the direction of the QSF Co-Administrators.
19.

A Bankruptcy Claimant’s Bankruptcy Complications shall not be

deemed to be resolved unless and until such time as the Bankruptcy Coordination
Administrator obtains, and provides a copy to the UM Defendants of, either: (i) a
written representation and warranty from a duly authorized bankruptcy trustee on
behalf of or with respect to the Bankruptcy Claimant’s bankruptcy estate that either
(x) the Bankruptcy Claimant’s bankruptcy estate has no interest in the Bankruptcy
Claimant’s Action, Anderson-Related Claim, and Allocated Share, or (y) that the
Bankruptcy Claimant’s bankruptcy estate is, pursuant section 544 of the Bankruptcy
Code, abandoning the Bankruptcy Claimant’s Action, Anderson-Related Claim, and
Allocated Share to the Bankruptcy Claimant, (in which case the Bankruptcy
Claimant shall subsequently ratify their earlier-executed Settlement Release and
provide the ratification to the Lien Administrator); or (ii) a Settlement Release or
substantially similar document executed by the applicable bankruptcy trustee on
behalf of or with respect to the Bankruptcy Claimant’s bankruptcy estate, and
approved by a United States bankruptcy court, ratifying the Bankruptcy Claimant’s
previously signed Settlement Release and forever releasing the UM Released
Persons from all Anderson-Related Claims and any Bankruptcy Complications with

10

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respect to both the Bankruptcy Claimant and the Bankruptcy Claimant’s bankruptcy
estate, as if the Bankruptcy Claimant’s originally executed Settlement Release had
been fully executed and/or approved by the applicable bankruptcy trustee and
approved by a United States bankruptcy court at the time the Bankruptcy Claimant
originally executed his, her, or its Settlement Release.
20.

The QSF Co-Administrators must distribute the Bankruptcy

Claimant’s Allocated Share, in accordance with instructions from the applicable
bankruptcy

trustee

as

communicated

by

the

Bankruptcy

Coordination

Administrator, in the event that a Settlement Release or substantially similar
document is executed by the applicable bankruptcy trustee on behalf of or with
respect to the Bankruptcy Claimant’s bankruptcy estate, and such Settlement
Release or substantially similar document is approved by the applicable United
States bankruptcy court.
21.

The QSF Co-Administrators are prohibited from distributing any

portion of a Bankruptcy Claimant’s Allocated Share unless and until such time as
that Bankruptcy Claimant’s Bankruptcy Complications have been fully resolved and
the Bankruptcy Coordination Administrator has obtained, and provided a copy to the
UM Defendants of, the documents described in Paragraph 19.
22.

If the Bankruptcy Coordination Administrator is unable to resolve a

Bankruptcy Claimant’s Bankruptcy Complications by obtaining the documents
described in Paragraph 19 within twelve (12) months of the payment of the
11

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Settlement Amount, then: the Bankruptcy Coordination Administrator must
provide to the UM Defendants copies of at least two written communications (no
less than two months apart) from the Bankruptcy Coordination Administrator to
both the applicable bankruptcy trustee and the Office of the United States Trustee
for the District in which the bankruptcy occurred providing notice of the
Bankruptcy Claimant’s Action, Anderson-Related Claim, and Allocated Share, and
certify that the Bankruptcy Coordination Administrator received no response to
such communications; upon the UM Defendants’ receipt of those two written
communications and the certification that the Bankruptcy Coordination
Administrator received no response to the communications, the QSF CoAdministrators may distribute to the Bankruptcy Claimant that individual
Bankruptcy Claimant’s Allocated Share, less a “Bankruptcy Holdback Amount,”
defined as the greater of (a) 40% of that individual Bankruptcy Claimant’s Allocated
Share or (b) the total amount of debt that was discharged in that individual
Bankruptcy Claimant’s bankruptcy proceedings; and shall continue to hold in
escrow that individual Bankruptcy Claimant’s Bankruptcy Holdback Amount.
23.

If the Bankruptcy Coordination Administrator is unable to resolve a

Bankruptcy Claimant’s Bankruptcy Complications within eighteen (18) months of
the payment of the Settlement Amount, then: the Bankruptcy Coordination
Administrator must provide to the UM Defendants copies of at least one additional

12

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written communication from the Bankruptcy Coordination Administrator to both the
applicable bankruptcy trustee and the Office of the United States Trustee for the
District in which the bankruptcy occurred providing notice of the Bankruptcy
Claimant’s Action, Anderson-Related Claim, and Allocated Share, and certify that
the Bankruptcy Coordination Administrator received no response to such
communications; upon the UM Defendants’ receipt of that additional
communication

and

the

certification

that

the

Bankruptcy

Coordination

Administrator received no response to the communication, the QSF CoAdministrators may distribute to the Bankruptcy Claimant 90% of that individual
Bankruptcy Claimant’s Allocated Share; and must continue to hold in escrow 10%
of that individual Bankruptcy Claimant’s Allocated Share.
24.

If the Bankruptcy Coordination Administrator is unable to resolve a

Bankruptcy Claimant’s Bankruptcy Complications within twenty-four (24) months
of the payment of the Settlement Amount, then: the Bankruptcy Coordination
Administrator must provide to the UM Defendants copies of at least one additional
written communication from the Bankruptcy Coordination Administrator to both the
applicable bankruptcy trustee and the Office of the United States Trustee for the
District in which the bankruptcy occurred providing notice of the Bankruptcy
Claimant’s Action, Anderson-Related Claim, and Allocated Share, and certify that
the Bankruptcy Coordination Administrator received no response to such

13

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communications; upon the UM Defendants’ receipt of that additional
communication

and

the

certification

that

the

Bankruptcy

Coordination

Administrator received no response to the communication, the QSF CoAdministrators may distribute to the Bankruptcy Claimant the remaining 10% of that
Bankruptcy Claimant’s Allocated Share. In all events, each individual Bankruptcy
Claimant’s executed Settlement Release must remain fully binding and enforceable.
25.

In lieu of the procedure outlined in paragraphs 19 through 24, the UM

Defendants, in their sole discretion, may accept a proposal by Plaintiffs’ Co- Lead
Counsel, through insurance or an indemnity agreement by ARCHER, to indemnify
and hold harmless the UM Defendants from liability for any claim related to a
Bankruptcy Complication.
26.

The Individual Plaintiff’s Counsel for the Claimants whom they

represent has the responsibility to identify and resolve, and to protect the UM
Released Persons from, all Probate Complications and/or Other Complications of
the Claimants they represent, and Plaintiffs’ Counsel further agree that the
Individual Plaintiff’s Counsel for the Claimants whom they represent shall have such
duties. Such responsibilities include, but are not limited to: conducting appropriate
inquiries to identify all Probate Complications and Other Complications; reporting
to the UM Defendants and the QSF Co-Administrators which Claimants are Probate
Claimants; and taking all steps necessary and proper to resolve each Probate
Claimant’s Probate
14

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Complications and each Claimant’s Other Complications. ARCHER must review
and approve all documents for compliance with this Agreement prior to the
distribution of funds by the QSF Co-Administrators.
27.

A Probate Claimant’s Probate Complications must not be deemed to be

resolved unless and until such time as the Individual Plaintiff’s Counsel for the
Claimants they represent obtains and provides to ARCHER: (i) a Settlement Release
or substantially similar document executed by the executor, administrator, or other
duly authorized personal representative of the Probate Claimant’s estate ratifying the
originally executed Settlement Release, and forever releasing the UM Released
Persons from all Anderson-Related Claims and any Probate Complications with
respect to that Probate Claimant’s estate; and (ii) if required by the laws and
procedures applicable to the Probate Claimant’s estate, an order from a probate court
or other court with jurisdiction over the administration of the Probate Claimant’s
estate approving of the Probate Claimant’s Settlement Release.
28.

The QSF Co-Administrators are prohibited from distributing any

portion of a Claimant’s Allocated Share unless and until such time as any Probate
Complications and any Other Complications have been fully resolved, Individual
Plaintiff’s Counsel has obtained, and provided a copy to the UM Defendants and
ARCHER, of the documents described in Paragraph 27, and the QSF CoAdministrators have received payment instructions from Individual Plaintiff’s

15

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Counsel for distribution of funds to satisfy the resolved Probate Complications
and/or Other Complications.
29.

Within 15 days of the Special Masters determination of each Claimant’s

final Allocated Share of the Immediately Allocable Amount3, the Special Masters
must provide to the UM Defendants a report of each Claimant’s Allocated Share
pursuant to the Michigan Court’s Protective Order, ECF Nos. 73, 131, 156, in John
Doe MC-1 v. the University of Michigan and the Regents of the University of
Michigan, Case No. 20-cv-10568-VAR-EAS; further, each Claimant’s Allocated
Share, including each Claimant’s amounts and identifiers, may be shared with
authorized persons under that Protective Order, including but not limited to the
Insurers and their counsel as defined in that Protective Order. In addition, within 90
days from the payment of the Settlement Amount, and on a monthly basis thereafter,
ARCHER (as the Bankruptcy Administrator and Lien Administrator) will provide
to the UM Defendants an audit report that will identify and report on the status of,
with respect to each Claimant, all Lien Complications, Bankruptcy Complications,
Probate Complications, and Other Complications; or alternatively, affirmatively
state that such Lien Complications, Bankruptcy Complications, Probate

3

A Claimant’s Allocated Share is not final until after any and all appeal rights (any Claimant may
contest, if desired, his, her, or its Allocated Share, through notice and opportunity to be heard)
have been exhausted as outlined in the MSA.

16

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Complications, and Other Complications do not exist or have been resolved, as a
prerequisite to such Claimant receiving an Allocated Share.
30.

In some circumstances, Claimants may elect a structured settlement

annuity. Likewise, Plaintiffs’ Individual Counsel may elect to place all or a portion
of their contingent legal fees into one of several types of tax-advantaged investments
as Plaintiffs’ Individual attorneys have the ability to defer fees until a later taxable
year.4 To facilitate Claimant structured settlements or attorney fee structure(s), if
any, the Fund, by and through the QSF Fund Administrator, may purchase and assign
structured settlements whether “qualified”5 or “non-qualified”6. Any “qualified”
structured settlement must be issued by a life insurance company that holds an issuer
credit rating equivalent to a National Association of Insurance Commissioners NAIC
1 designation.
31.

The Fund Administrator has the right to rely upon any

affidavit, certificate, letter, notice, electronic mail, or other document provided
to the Fund Administrator and in the Fund Administrator’s reasonable

4

See Childs v. Commissioner, 103 T.C. 634 (1994), aff’d, 89 F.3d 856 (11th Cir. 1996).

5

Structured Settlement Payments are assigned to a qualified assignee by entering into qualified assignments of such
structured settlement payments within the meaning of Section 130(c) of the Internal Revenue Code. The qualified
assignee shall, respecting each person who is to receive periodic payments under a settlement agreement, purchase
one or more qualified funding assets within the meaning of Section 130(d) of the Internal Revenue Code to fund any
structured settlement payments assigned to the qualified assignee.

3

A non-qualified assignment does not rely upon nor must it comply with Internal Revenue Code Section 104 and/or
130 to effect such assignment. See P.L.R. 200836019.

17

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judgment believed to be genuine and sufficient. By way of example, this may
include but is not limited to, wire instructions, IRS Form W-9, Plaintiffs’
Individual Counsel communications, payment instructions, fee deferment
instructions, and the like.
32.

The monies to be held in the Fund are the sole property of the Fund.

Until such time as funds are distributed from the Fund, the Claimants have no right
to demand or receive any portion of the escrowed funds and have no right to
mortgage, pledge, or encumber the same in any manner. This Order must be
construed, to the fullest extent possible, so as to prevent the Claimants from being
in constructive receipt, as determined under federal income tax principles, of any
amounts held by the Fund.
33.

Upon completion of all Fund agreements and final distribution of all

monies to be paid into the Fund, the Fund Administrator must take appropriate steps
to wind down the Fund and be discharged from any further responsibility with
respect to the Fund.
34.

The Fund Administrator will obtain a Federal Taxpayer Identification

Number for the Fund upon the execution of an order by the Court establishing the
Fund.

18

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IT IS ORDERED.
s/ Victoria A. Roberts
Victoria A. Roberts
United States District Judge
Dated: 9/16/2022

19