McClendon, et al v. Continental Can Co., et al

Filing 29

OPINION & ORDER ADOPTING REPORT AND RECOMMENDATIONS OF SPECIAL MASTER re, 25 Report and Recommendations - Special Master, 27 Report and Recommendations - Special Master, The Clerk shall reopen the case; The Clerk shall serve this Order and Opin ion approving the Reports and Recommendations of the Special Master upon the above attorneys for the class members and for Defendants; If any interested party has any objections to any aspect of the current Reports and Recommendations, as approved a nd adopted in this Opinion, he or she shall advise the Court in writing within 30 days of the date of this Order and a hearing on the objections will be held; Absent any such objection, the Court's approval and adoption of the current Reports and Recommendations of the Special Master shall become final and the Court will enter the orders implementing the Recommendations. Signed by Judge Dickinson R. Debevoise on 3/26/2015. (anr)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
CECIL MCLENDON, et al.,
Plaintiffs,

Civil Action No. 83-1340 (DRD)

v.
THE CONTINENTAL GROUP, INC., et al.,
Defendants.

ALBERT J. JAKUB, et al.,
Plaintiffs,

Civil Action No. 89-4009

v.
THE CONTINENTAL GROUP, INC., et al.,
Defendants.

ROBERT GAVALIK, et al.,
Plaintiffs,

Civil Action No. 89-4066

v.
THE CONTINENTAL GROUP, INC., et al.,

ORDER and OPINION APPROVING
REPORTS AND RECOMMENDATIONS
OF SPECIAL MASTER

Defendants.

APPEARANCES:
Rose A. Wehner, Esq.
Law Office of Rose A. Wehner PC
1 North LaSalle Street, 44th Floor
Chicago, IL 60602
Attorney for Plaintiffs, Cecil McLendon, et al.

John G. Jacobs, Esq.
Jacobs Kolton, Chartered
55 West Monroe Street
Suite 2970
Chicago, IL 60603
Attorney for Plaintiffs, Cecil McLendon, et al.
Roslyn Litman, Esq.
The Litman Law Firm
One Oxford Center, 34th Floor
Pittsburgh, PA 15219-1407
Attorney for Plaintiffs, Albert J. Jakub, et al. and Robert Gavalik, et al.
Martha Helmreich, Esq.
Pietragallo Gordon Alfano Bosick & Raspanti, LLP
The Thirty-Eighth Floor
One Oxford Centre
Pittsburgh, PA 15219
Attorney for Plaintiffs, Albert J. Jakub, et al. and Robert Gavalik, et al.
Fred H. Bartlit, Jr., Esq.
Don Scott, Esq.
Bartlit Beck Herman Palenchar & Scott LLP
Courthouse Place
54 West Hubbard Street, Suite 300
Chicago, IL 60654
Attorney for Defendants
Timothy J. Thalken, Esq.
Fraser Stryker PC LLO
500 Energy Plaza
409 South 17th Street
Omaha, NE 68102
Attorney for Defendants
George L. Priest
350 Livingston Street
New Haven, CT 06511
Special Master

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Debevoise, Senior U.S. District Judge
INTRODUCTION
This action was settled through a Settlement Agreement dated December 19, 1990,
pursuant to which settlement monies were distributed in accordance with a Plan of Distribution.
Special Master George L. Priest supervised the extraordinarily complex distribution process,
complicated by the length of time required to effect distributions, the necessity to apply for FICA
tax refunds, dispersal and deaths of class members.
The Special Master has now filed three Reports and Recommendations that require Court
approval:
1. Second Supplemental Report and Recommendation of the
Special Master with Regard to the Waiver of Certain Settlement
Payments;
2. Second Supplemental Report of the Special Master with Respect
to Certain Class Members Overpaid During the Distribution of the
Settlement;
3. Report and Recommendation of the Special Master with Regard
to the Termination of the Settlement.

I. WAIVER OF PAYMENTS
The Special Master filed a Report and Recommendation on August 31, 2009, with regard
to the waiver by class members and participants in the Special Offer of Settlement of payments
from the Settlement Fund to that date. In that Report, the Special Master reported those class
members and offer participants who had voluntarily waived receipt of payments from the
Settlement Fund as well as those who could not be located and whose shares either of the initial
award; of the first, second or third residual awards; of the FICA refund payment; or of the Special
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Offer of Settlement award, as appropriate, should be waived and returned to the Settlement Fund.
With respect to those class members in these categories entitled to residual awards, the Special
Master also recommended waiver of their share of the fourth residual distribution, though that
amount could not be determined until after approval of the Recommendation and calculation of
the fourth residual award.

The Special Master filed a First Supplemental Report and

Recommendation on September 30, 2009, with respect to additional class members fitting these
categories. The Court approved both Reports and Recommendations, and those monies waived
were added to the amounts distributed from the Settlement Fund in the fourth and final residual
award to the members of the class entitled to that award. The Special Master determined that,
after reserves for future distribution expenses, each class member entitled to a fourth residual
award would receive .0142 percent of his or her initial award. This fourth residual award, along
with reserves for fees and costs, would then exhaust the Settlement Fund.
In addition to the class members referenced in these earlier Reports, there are a number of
class members to whom the Office of the Special Master is unable to pay the fourth and final
residual award, typically either because the class member or his or her heirs or beneficiaries could
not be located or because that class member or beneficiary has declined to accept or to cash the
Settlement Fund check. There is also one Special Settlement participant in this category. The
Report documents those individuals and recommends that those Settlement Fund shares be
considered as having been waived to the benefit of the class. The Report also documents the
fourth residual shares of those class members, entitled to such awards, that were earlier declared
waived by Order of the Court.

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All members of the class and all Special Offer of Settlement participants who could be
located have been sent their appropriate shares of the Settlement Fund as approved by the Court.
The monies waived, if the Recommendation of the Special Master is approved, will be employed
to pay outstanding statements from the many professionals, accountants and attorneys, who have
executed this settlement. As reported earlier to the Court, the Special Master asked each attorney
and the accountant for the class to submit a fixed maximum fee for services in implementing the
fourth residual distribution and completion of the settlement. The Special Master reserved those
amounts for future payment. In many, though not in all, cases, the amounts reserved were
insufficient and some of the attorneys and especially the accountant for the class, McGladrey,
cannot be paid the full amount for the services they have rendered the class. These waived monies
will contribute toward those payments, but will not be adequate to satisfy them.
Part I of this Report of the Special Master addresses the waiver or partial waiver of the
fourth residual distribution by McLendon class members or their heirs or beneficiaries not
documented in the earlier Reports of the Special Master. The extraordinary effort to locate 120
class members is listed in Part I and Part II of the Special Master’s Report and is described in 31
single-spaced typewritten pages. This included searching not only for the class members but also
searching for his or her heirs or assignees who might be entitled to all or a portion of his or her
award. In each case, the amount of the fourth residual distribution or portion of the fourth residual
distribution, the owner of which could not be found, would be deemed to be waived. This
information is set forth in Parts I and II of the Report. Part II of the Report of the Special Master
addresses waivers by Jakub/Gavalik class members or heirs or beneficiaries. In each of these
cases, the class member or heir or beneficiary was paid the initial payment; the first, second and
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third residual payments; and the FICA refund payment, where appropriate. Thus, in the Waiver
Report and Recommendation, only the fourth residual payment, or some share of that payment, is
recommended as having been waived. Part III of the Report of the Special Master addresses the
case of one participant in the Special Offer of Settlement whose payment is recommended to be
waived. Part IV of the Report supplements the Special Master’s Reports and Recommendations
of August 31, 2009, and September 30, 2009, by reporting the amounts of the final residual
distribution (amounts that could not be determined earlier) waived pursuant to those
Recommendations which, as mentioned, were approved by the Court.
For the reasons stated in his Waiver Report, the Special Master recommends that the Court
declare that the various awards to class members and settlement participants listed in the Report
be considered as having been waived, and that those monies be retained for the payment of further
Settlement Fund expenses.
II. OVERPAYMENTS
As part of the preparation to make a final distribution the Special Master submitted a Report
and Recommendation and a Final Supplemental Report and Recommendation with Respect to
Certain Class Members Overpaid during the Distribution of the Settlement Fund. Three classes
of class members received overpayments: (i) class members whose Continental payroll records
failed to indicate a recall or receipt of a pension; (ii) a small number of individuals whom the
accountants overpaid because of administrative errors; and (iii) recalled workers whose claims the
Court resolved by an Order dated September 1, 1997.
In each case when an overpayment was detected the class member was contacted by the
attorneys for the class or the Special Master and repayment requested. Except in one case,
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repayment was impractical. Upon agreement of counsel for the class and the Special Master,
agreements were subsequently reached with each affected class member to return to the Settlement
Fund all overpaid amounts placed into the pension fund and to deduct the pre-tax amounts overpaid
from subsequent pre-tax residual awards, with the promise of the Special Master’s Office that it
would not seek repayment of the cash overpayment should subsequent residual awards not equal
the amount of the overpayment. The accountants agreed to repay to the Settlement Fund any
amounts that remained overpaid following recoupment through residual awards and FICA tax
refunds, including through the final fourth residual award.
The Report set forth the exact amounts of residual awards retained in the Settlement Fund
or subsequently paid out to each of these class members. The Report in redacted form was sent
to each affected class member or, if deceased, to his or her successor on September 1, 2009,
providing Notice of the filing of the Report and of the hearing scheduled for October 5, 2009, to
hear the report. Following the determination of the final fourth residual award, the Special Master
undertook to inform each class member who had been overpaid or who had satisfied the initial
overpayment of the final accounting and to file a Supplemental Report memorializing for each
affected class member the final overpayment calculation.
The First Supplemental Report and Recommendation reported responses received by the
Office of the Special Master through September 29, 2009. No class member or class member
relative objected to the Report and Recommendation.
The Second Supplemental Report relates the status of each affected class member’s
overpayment through the fourth and final residual distribution in this settlement, as required by
the October 6, 2009, Order of the Court. The fourth residual distribution equaled .0142 percent
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of each class member’s initial award. Where there were remaining overpayments, the class
member’s fourth residual award was retained in the Settlement Fund, in partial recoupment.
These various recoupments were anticipated prior to the calculation of the monies available for
the fourth residual distribution and were added to the amounts sent to members of the class in that
distribution.
The Second Report listed each class member who received an overpayment, set forth his
or her third residual distribution, the amount he or she was overpaid, the amount of his or her
fourth residual distribution, and the amount of the remaining overpayment after crediting the
amount of the fourth residual distribution.
Several class members were overpaid as a result of clerical errors of the accountants, who
agreed to reimburse the class for these amounts after receiving credit for the repayment from the
class member’s fourth residual distribution. The Report lists the affected class members, the
amount of his or her overpayment through the third residual distribution, his or her fourth residual
distribution, and the remaining overpaid award. The Report also lists the overpayments that are
subject to a previous Order of the Court.
As stated above, collection of the balance of the overpaid amounts was impractical, and
upon agreement of counsel for the class and the Special Master, agreements were subsequently
reached with each overpaid class member to return to the Settlement Fund all overpaid amounts
placed into the person’s fund and to deduct the pre-tax amounts overpaid from subsequent pre-tax
residual awards, with the promise of the Special Master’s Office that it would not seek repayment
of the cash overpayment should subsequent residual awards not equal the amount of the
overpayment.
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III. TERMINATION OF THE SETTLEMENT
Suit was filed in this litigation in Gavalik, supra, in 1981; in Jakub, supra, in 1982; and in
McLendon, supra, in 1983. Each lawsuit alleged violations of § 510 of the Employee Retirement
Income Security Act (ERISA), 29 U.S.C. § 1140, and of the Racketeer Influenced and Corrupt
Organizations Act (RICO), 18 U.S.C. § 1961, et seq. Two lengthy trials were conducted and
appeals followed both. In 1987, the Third Circuit Court of Appeals ruled that the defendants’
Liability Avoidance Plan as implemented at Plants 72 and 478 Pittsburgh constituted a violation
of ERISA. Gavalik v. Continental Can Co., 812 F.2d 834 (3d Cir. 1987), cert. denied, 108 S.Ct.
495 (1987). In 1989, this Court found that the defendants’ implementation of the Liability
Avoidance Program at Plant 73 St. Louis constituted the determining factor in the layoffs of 315
class members. McLendon v. Continental Group, 749 F.Supp. 582 (D.N.J. 1989), aff’d 908 F.2d
1171 (3d Cir. 1990). The cases were consolidated before the Honorable H. Lee Sarokin and,
subsequently, the undersigned.
The parties settled the case, without a concession of liability, on December 19, 1990, for
the sum of $415 million, a settlement which, after careful consideration, this Court approved.
Subsequent amendments to the Settlement Agreement provided for payments to additional
Continental Can employees not members of the class, but potentially affected by the Continental
program.
The attorneys for the class believed that the settlement monies, from which, according to
the terms of the Settlement Agreement, full income taxes were withheld, constituted personal
injury damages and, thus, should be exempt from income taxation under the Internal Revenue
Code. Negotiations, including litigation reaching four separate Courts of Appeal, were concluded
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with a settlement with the Internal Revenue Service of a partial, though substantial, return of
withheld taxes to affected class members or their successors.
In sum, the total of $418,047,492.52 was disbursed to class members and Special
Settlement participants or successors; another $7,110,888.00 in tax refunds. All class members
and Special Settlement Participants or their successors, with the exception of those that could not
be located or who otherwise waived payment, have been paid.
There were additional achievements of the litigation.

With the substantial aid of

Professors Judith Resnick and John H. Langbein, the Court approved the implementation of several
procedures of important assistance in the administration of class action settlements, for spouses of
class members, and for class actions that run, as has this litigation, over lengthy periods of time:
1. an Order providing for the notification of former spouses of class members or
settlement participants, giving them the opportunity to file state-court approved
child support or marital orders against the settlement shares of a class member.
In this case, many hundreds of former spouses filed unpaid child support or marital
orders that were levied by this Order against class member shares;
2. an Order providing for the designation by a class member of beneficiaries to
receive subsequent payments from the settlement fund in case of a class member’s
death without the necessity of opening an estate; and
3. an Order providing that successors of a deceased class member could declare
their status as heirs, again without the necessity of opening an estate.
It is the understanding of the undersigned that each of these Orders and processes approved by the
Court is unique to this litigation and, after the settlement is complete, will be more generally
publicized in the legal community, to the benefit of future class action litigation.
The litigation and the settlement could not have been completed without the extraordinary
efforts of the attorneys for the class. The Special Master is generous in his expression of
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appreciation of the efforts of those who contributed to the Settlement and the implementation of
the Settlement. Many attorneys worked on the case but of particular note are the class attorneys
Daniel P. McIntyre and the late Robert Plotkin with regard to the litigation and John G. Jacobs,
Rose Wehner, Roslyn Litman and Martha Helmreich with regard to both the litigation and the
settlement. The accountant for the class, now McGladrey LLP, especially Frank Barkan and Sue
Mouck, have immensely contributed to the settlement, as did the economists David Wise and
Kenneth I. Wolpin. The defense attorneys, the late George F. Heiden and Fred H. Bartlit, Jr.,
substantially facilitated the settlement.
The implementation of the settlement and the distribution of settlement fund amounts was
aided by countless persons who worked at the Office of the Special Master. It goes without saying
that the Special Master, George L. Priest, performed indispensable continuing services during the
entire period when the Settlement Fund was being distributed. Numerous difficult problems arose
as the vast number of employees were allocated their appropriate shares.
Attached as an Appendix to the Report is a proposed order releasing all participants in this
litigation and settlement from any claims or liabilities related to their participation and providing
for the destruction of documents related to the litigation and the files, including personal files, of
all participants in the litigation. The Master recommends that the Court approve and enter this
order.
At this moment, there is a small amount of money remaining in the Settlement Fund,
insufficient to pay in full the outstanding costs and fees of the attorneys and accountant for the
class, but sufficient to pay the amounts reserved. By an earlier Order of this Court, the attorneys
and accountant for the class were asked to submit binding promises with respect to fees and costs
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for the remainder of the settlement, in particular, for the fourth and final residual distribution,
amounts for which the Special Master created reserves. Several of the attorneys and especially
the accountant have incurred costs and fees exceeding the amounts reserved. The Court’s Order
provided that the amounts exceeding the reserves be paid proportionately from remaining
Settlement Fund assets. Once all of the costs and fees have been determined, the Special Master
will report to the Court the disposition of the final Settlement Fund assets.
CONCLUSION
The Court has reviewed each of the foregoing Reports and Recommendations that were
filed on February 17, 2015. Pursuant to Fed. R. Civ. P. 53(f)(1), the Court approves the same and
adopts as rulings of the Court (i) the Second Supplemental Report and Recommendation of the
Special Master with Respect to the Waiver of Certain Settlement Payments, (ii) the Second
Supplemental Report of the Special Master with Respect to Certain Class Members Overpaid
during the Distribution of the Settlement, and (iii) the Report and Recommendation of the Special
Master with Regard to the Termination of the Settlement.
The attorneys for the class members and for the Defendants were furnished copies of the
previous Reports and Recommendations which dealt with the waiver of certain Settlement
Payments and with the overpayment of certain Settlement participants and the subsequent
agreement not to pursue the balance of the overpayments if the recipients applied payments
subsequent to the agreement toward the balance of the overpayments. These matters were the
subject of these earlier Reports and Recommendations of which detailed notice was given and
which were the subject of a hearing and Court approval. The Court and the attorneys for the

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parties conclude that these earlier notices and hearings constitute compliance with Fed. R. Civ. P.
53(f) with respect to the current three Reports and Recommendations. Based on the foregoing,
IT IS on this 26th day of March, 2015,
ORDERED that the Clerk shall reopen the case; and it is further
ORDERED that the Clerk shall serve this Order and Opinion approving the Reports and
Recommendations of the Special Master upon the above attorneys for the class members and for
Defendants; and it is further
ORDERED that, if any interested party has any objections to any aspect of the current
Reports and Recommendations, as approved and adopted in this Opinion, he or she shall advise
the Court in writing within 30 days of the date of this Order and a hearing on the objections will
be held; and it is finally
ORDERED that, absent any such objection, the Court’s approval and adoption of the
current Reports and Recommendations of the Special Master shall become final and the Court will
enter the orders implementing the Recommendations.

s/Dickinson R. Debevoise
DICKINSON R. DEBEVOISE
U.S.S.D.J.
Dated: March 26, 2015

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