Stockwell et al v. Hamilton et al
Filing
224
OPINION and ORDER Granting 216 Motion to Approve Settlement. Proposed Judge due by 5/25/2020. Signed by District Judge Linda V. Parker. (RLou)
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DOUGLAS W. STOCKWELL and
INTERNATIONAL UNION OF
OPERATING ENGINEERS LOCAL 324,
Plaintiffs,
Civil Case No. 15-11609
Honorable Linda V. Parker
v.
JOHN M. HAMILTON and
WILLIAM ROUGH,
Defendants.
and
JOHN M. HAMILTON,
Plaintiff,
Civil Case No. 19-11566
Honorable Linda V. Parker
v.
OPERATING ENGINEERS’ LOCAL
PENSION FUND and BOARD OF
TRUSTEES OF THE OPERATING ENGINEERS’
LOCAL 324 PENSION FUND,
Defendants.
__________________________________/
OPINION AND ORDER GRANTING
MOTION TO APPROVE SETTLEMENT
In 2015, Douglas Stockwell and the International Union of Operating
Engineers Local 324 (“Local 324”) initiated a lawsuit against John M. Hamilton
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and William Rough, seeking reimbursement of the legal fees the Operating
Engineers’ Local 324 Pension Fund (“Fund”) advanced to defend Mr. Hamilton
and other Fund trustees in connection with certain federal investigations. In 2019,
Mr. Hamilton sued Local 324 and the Fund’s Board, seeking a declaration that the
Fund is obligated to advance attorneys’ fees to him pursuant to an agreement
between himself, the Fund, and the Fund’s Board. The heart of the disputes arise
under the Employment Retirement Income Security Act (ERISA), 29 USC Section
1001 et seq. After contentious litigation, spanning almost five years, and over
twenty-two (22) months of negotiations before the Honorable Nancy G. Edmunds
and David R. Grand, the parties agreed to settle these lawsuits and two related
matters.1 (See ECF No. 216-1.) The matter is presently before the Court on a
motion for approval of the Settlement Agreement. (ECF No. 216.)
Under the Settlement Agreement, the Fund will recover approximately $1.6
million in exchange for inter alia mutual releases barring future claims by Fund
participants and beneficiaries and Local 324 members against Mr. Hamilton or Mr.
Rough. To effectuate this bar, Local 324 and the Fund served notice of the
agreement on 22,741 Fund participants and beneficiaries and Local 324 members
and offered them the opportunity to assert written objections to the agreement.
1
Those matters are: Trustees of the Operating Engineers’ Local 324 Pension Fund
v. Federal Insurance Company, AAA no. 01-18-0000-9316 and United States v.
Hamilton, No. 19-mc-51805 (E.D. Mich. filed Dec. 13, 2019).
2
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One objection was received from Fund participant and Local 324 member James
Arini. On April 21, 2020, the Court conducted a telephonic motion at which
counsel for the parties and Mr. Arini addressed the Court.
Courts in the Sixth Circuit approve settlement agreements when they
represent a prudent, fair, and reasonable resolution for all interested parties and
non-parties. Int’l Union v. Ford Motor Co., No. 05-cv-74730, 2006 WL 1984363,
at *21 (E.D. Mich. July 13, 2006), aff’d sub nom. Int’l Union v. Gen. Motors
Corp., 497 F.3d 615 (6th Cir. 2007). While the present matters are not class
actions under Rule 23 of the Federal Rules of Civil Procedure, the Court finds the
guidance for evaluating settlement agreements in such matters to be a useful guide
here. As one judge in this District has observed:
“In assessing the settlement, the Court must determine
‘whether it falls within the range of reasonableness, not
whether it is the most favorable possible result in the
litigation.” ’ In re Domestic Air Transp. Antitrust Litig.,
148 F.R.D. 297, 319 (N.D. Ga. 1993) (quoting Fisher
Bros. v. Cambridge-Lee Indus., 630 F. Supp. 482, 489
(E.D. Pa. 1985). An appropriate range of reasonableness
“recognizes the uncertainties of law and fact in any
particular case and the concomitant risks and costs
necessarily inherent in taking any litigation to
completion.” Frank v. Eastman Kodak Co., 228 F.R.D.
174, 186 (W.D.N.Y. 2005) (quoting Newman v. Stein,
464 F.2d 689, 693 (2d Cir. 1972)). Under this standard,
“[a] just result is often no more than an arbitrary point
between competing notions of reasonableness.” In re
Corrugated Container Antitrust Litig. (II), 659 F.2d
1322, 1325 (5th Cir. 1981).
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Ford Motor Co., 2006 WL 1984363, at *21. Courts in the Sixth Circuit find eight
factors relevant in considering whether a class action settlement is fair, adequate,
and reasonable:
“(1) the risk of fraud or collusion; (2) the complexity,
expense and likely duration of the litigation; (3) the
amount of discovery engaged in by the parties; (4) the
likelihood of success on the merits; (5) the opinions of
class counsel and class representatives; (6) the reaction of
absent class members; and (7) the public interest.”
Moulton v. U.S. Steel Corp., 581 F.3d 344, 349 (6th Cir. 2009) (quoting UAW v.
Gen. Motors Corp., 497 F.3d at 631). “The district court enjoys wide discretion in
assessing the weight and applicability of these factors.” Granada Investments, Inc.
v. DWG Corp., 962 F.2d 1203, 1205-06 (6th Cir. 1992); see also Ford Motor Co.,
2006 WL 891151, at *14 (“The court may choose to consider only those factors
that are relevant to the settlement at hand and may weigh particular factors
according to the demands of the case.”).
Here, the Settlement Agreement is the byproduct of serious, informed, and
non-collusive negotiations between the parties. Beginning in May 2018, the
parties engaged in multiple months of settlement negotiations overseen by two
respected judicial officers in this District. Counsel met with Magistrate Judge
Grand and/or Judge Edmunds for at least seven formal settlement conferences, and
met independently outside those conferences, to forge the present agreement.
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The Settlement Agreement does not favor any one party but represents a
compromise among them all. The amount the Fund will recover under the
Settlement Agreement reflects forty percent (40%) of what it hoped to recover if
the 2015 matter proceeded to trial. This is substantial, particularly when
considering the significant attorneys’ fees that would have been expended if a trial
was necessary. Moreover, despite the fact that the 2015 litigation is approaching
its fifth anniversary, the parties had significant additional discovery to complete
and additional motions to file, which would have further reduced any recovery at
trial and possibly required further litigation funding by Local 324.
There also is uncertainty as to whether Local 324 or the Fund would prevail
at trial. Moreover, a judgment could result in additional lengthy disputes regarding
enforceability, collectability, and insurance coverage. If Mr. Hamilton prevailed,
he, and possibly the insurance carriers, could seek reimbursement of defense costs
under the indemnification agreements with Local 324 and the Fund.
Mr. Arini raises several objections to the Settlement Agreement. He
contends that the amount to be recouped by the Fund is insufficient, that Local 324
should receive reimbursement for the $820,000 it contributed to fund the 2015
litigation, and that Local 324 lacked the authority to release its members’ rights to
sue Mr. Hamilton and Mr. Rough. Mr. Arini further argues that by releasing
members’ rights, the Settlement Agreement violates the Labor Management
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Reporting and Disclosure Act of 1959 (“Landrum-Griffin Act”), 29 U.S.C. §§ 401531. The Court appreciates Mr. Arini’s objections. Nevertheless, they do not
convince the Court that it should refrain from approving the Settlement
Agreement.
As one of the attorneys pointed out at the motion hearing, the sign of a good
compromise is that neither side is fully satisfied. Undoubtedly it would be optimal
for the Fund and its participant and beneficiaries if all of the costs that had been
advanced to Mr. Hamilton and others were recovered. However, there was no
guarantee that this would be the result if the Fund and Local 324 pursued this
litigation to trial. Moreover, pursing this optimal relief would come at significant
expense and risk.
A percentage of the Local 324 membership may not be pension fund
participants. Nevertheless, Local 324 had the authority to decide that this litigation
was appropriate and in the best interests of its members and to forgo
reimbursement of the amount it paid to support the litigation.
Contrary to Mr. Arini’s assertions, Local 324 had the authority to bind its
members to the Settlement Agreement provided the release of their statutorily
protected rights is “clear and unmistakable” and the union did not act in bad faith
or arbitrarily. See Dotson v. Arkema, Inc., 397 F. App’x 191, 194 (6th Cir. 2010);
Int’l Longshore & Warehouse Union v. Columbia Grain, Inc., 714 F. App’x 660,
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662 (9th Cir. 2017) (citing Vaca v. Sipes, 386 U.S. 171, 177, 190-91; NLRB v.
Allis-Chalmers Mfg. Co., 388 U.S. 175, 180 (1967)). Mr. Arini does not claim that
the release is unclear or ambiguous and the Court finds no indication that Local
324 is acting in bad faith or arbitrarily. Moreover, Mr. Arini’s claims, if any,
would be barred by ERISA’s six-year statute of repose as Mr. Hamilton’s role as a
fiduciary with respect to Local 324 and the Fund ended more than seven years ago.
See Durand v. Hanover Ins. Grp. Inc., 806 F.3d 367, 376 (6th Cir. 2015) (citing 29
U.S.C. § 1113 and explaining that “ERISA specifies a three- or six-year limitations
period for claims of breach of fiduciary duty.”).
Because Mr. Arini’s potential claims are time-barred, the Court does not
believe the Settlement Agreement violates his rights under the Landrum-Griffin
Act (hereafter also “Act”). In other words, the Landrum-Griffin Act does not
protect a union member’s right to bring an untimely claim. Moreover, the Court
concludes that the Act does not apply to the claims waived in the agreement.
“ ‘The LMRDA was the product of congressional concern with widespread
abuses of power by union leadership.’ ” Babler v. Futhey, 618 F.3d 514, 520 (6th
Cir. 2010) (quoting Sheet Metal Workers’ Int’l Assoc. v. Lynn, 488 U.S. 347, 352
(1989)) (internal quotation marks omitted). The Act contains a “Bill of Rights” for
union members “ ‘designed to guarantee every union member equal voting rights,
rights of free speech and assembly, and a right to sue.’ ” Id. (quoting United
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Steelworkers of Am. v. Sadlowski, 457 U.S. 102, 109 (1982)). “In providing these
protections, ‘Congress sought to further the basic objective of the LMRDA:
ensuring that unions are democratically governed and responsive to the will of
their memberships.’ ” Id. (quoting Lynn, 488 U.S. at 352) (additional quotation
marks, citation, and brackets omitted). The Supreme Court has held that union
members cannot establish a violation of the statute where their claims are
“inconsistent with the LMRDA’s ‘overriding objective’ of democratic union
governance.” Lynn, 488 U.S. at 353 (quoting Finnegan, 456 U.S. at 441). The
disputes here pertain to the ERISA rights of pension fund participants to sue for, or
settle, breach of fiduciary claims thereunder. The claims waived by union
members in the Settlement Agreement have nothing to do with democratic union
governance.
For these reasons, the objections Mr. Arini raises do not impact this Court’s
conclusion that the Settlement Agreement is prudent, fair, and reasonable.
Accordingly,
IT IS ORDERED that the motion for approval of the Settlement Agreement
is GRANTED.
IT IS FURTHER ORDERED that the parties shall submit a proposed
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Judgment within fourteen (14) days of this Opinion and Order.
IT IS SO ORDERED.
s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: May 11, 2020
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