Casey v. Coventry Healthcare of Kansas, Inc.

Filing 142

ORDER DENYING APPROVAL OF CLASS SETTLEMENT. Signed on 9/26/11 by District Judge Greg Kays. (Francis, Alexandra)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
WESTERN DIVISION
MARY CASEY, on behalf of herself and
all others similarly situated,
Plaintiff,
v.
COVENTRY HEALTHCARE
OF KANSAS, INC.,
Defendant.

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Case No. 08-00201-CV-W-DGK

ORDER DENYING APPROVAL OF CLASS SETTLEMENT
Before the Court is Plaintiff’s unopposed Motion and Memorandum Requesting Final
Approval of the Class Action Settlement, Incentive Award to the Class Representative, and
Award of Attorney’s Fees, Costs and Expenses to Class Counsel (the “Settlement Agreement”)
(Doc. 134). In the motion, Plaintiff individually and on behalf of a settlement class seeks the
Court’s approval of the parties’ proposed settlement. Having carefully considered the parties
arguments, including the supplemental memorandum filed by the parties (Doc. 138) and the
parties’ comments made in the September 22, 2011 Fairness Hearing, the motion is DENIED.
Rule 23(e) mandates judicial review of any “settlement, voluntary dismissal, or
compromise” of the “claims, issues, or defenses of a certified class.” Fed. R. Civ. P. 23(e). The
court is responsible for determining that the settlement terms are fair, adequate, and reasonable
and must act as a fiduciary, “serving as a guardian of the rights of absent class members.” In re
Wireless Telephone Federal Cost Recovery Fees Litig., 396 F.3d 922, 932 (8th Cir. 2005). In
determining whether a settlement is fair, adequate, and reasonable, a district court is required to
consider four factors: (1) the merits of the plaintiff’s case, weighed against the terms of the

settlement; (2) the defendant’s financial condition; (3) the complexity and expense of further
litigation; and (4) the amount of opposition to the settlement.

Id.

“The most important

consideration in deciding whether a settlement is fair, reasonable, and adequate is ‘the strength of
the case for plaintiffs on the merits, balanced against the amount offered in settlement.’” Id. at
933 (quoting Petrovic v. Amoco Oil Co., 200 F.3d 1140, 1150 (8th Cir. 1999)). Ultimately, the
court must examine whether the interests of the class are better served by settlement than by
further litigation. In re Wireless, 396 F.3d at 932.
The Court appreciates the parties’ good-faith efforts to reach a settlement in this case and
finds a significant portion of the Settlement Agreement to be fair, adequate, and reasonable. In
particular, the Court has no objection to the award of attorney’s fees, the incentive award to the
class representative, or a settlement agreement that limits Defendant’s liability to $1.4 million.
Furthermore, this is not a case of a collusive settlement or a “reverse auction,” see Reynolds v.
Beneficial National Bank, 288 F.3d 277, 282-83, (7th Cir. 2002), and nothing in this Order
should be read as a criticism of any of the attorneys in this case.
The Court’s concern with the Settlement Agreement is that it provides only a small
percentage of the Class with any recovery, and most of the settlement funds revert to the
Defendant. The Settlement Agreement provides, in relevant part, that “Coventry covenants and
promises to pay up to $1.4 million dollars to eligible Settlement Class Members . . . in
accordance with the terms of the Settlement Agreement” (Doc. 134). The cash actually received
by the Class, however, is significantly less. As the parties noted in their “Additional Information
for the Court’s Consideration” (Doc. 138) and in the Fairness Hearing, under the proposed
Settlement Agreement as implemented, only 6% of class members recover any money, a total of
$346,396, while the other 94% of class members receive no monetary award and more than $1

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million reverts to Defendant. Given the relative strength of the Plaintiff’s case as evidenced in
the partial summary judgment order, and the possibility of a large recovery for the class if
Plaintiff prevails at trial, the Court finds the settlement is not fair to the Class as a whole.
The Court is concerned that providing reimbursement to only 6% of class members is
inadequate, particularly where other methods exist for ensuring that a larger portion of the
settlement proceeds are actually paid to class members. While the Court understands Coventry’s
interest in limiting its liability, a settlement whereby 94% of class members receive no monetary
compensation while three-fourths of the fund set aside for class members reverts back to
Defendants is not fair, adequate, and reasonable.
Accordingly, the Motion for Final Approval of the Class Action Settlement, Incentive
Award to the Class Representative, and an Award of Attorney’s Fees, Costs and Expenses to
Class Counsel is DENIED. The Court encourages the parties to confer on an alternate settlement
agreement that addresses the Court’s concerns. Should the parties reach a revised agreement, the
Court will promptly consider it once it has been filed with the Court.
IT IS SO ORDERED.
Date: September 26, 2011
/s/

Greg Kays
GREG KAYS, JUDGE
UNITED STATES DISTRICT COURT

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