SMITH et al v. BB&T CORPORATION et al
Filing
36
MEMORANDUM OPINION AND ORDER signed by JUDGE CATHERINE C. EAGLES on 05/06/2019, that the motion for final approval of the settlement agreement, Doc. 446 , is GRANTED and the settlement of the Class Action is approved as adequate and as fair and reasonable to the Plan and the Settlement Class. Judgment will be entered concomitantly. (See case 15CV732 for 446 Motion) (Garland, Leah)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA
ROBERT SIMS, et al.,
Plaintiffs,
v.
1:15-CV-732
BB&T CORPORATION, et al.,
Defendants.
BREWSTER SMITH, JR., et al.,
Plaintiffs,
v.
1:15-CV-841
BB&T CORPORATION, et al.,
Defendants.
MEMORANDUM OPINION AND ORDER
Catherine C. Eagles, District Judge.
The plaintiffs seek court approval of a settlement agreement with the defendants
and dismissal of this ERISA class action with prejudice. In December 2018, the Court
granted preliminary approval and ordered notice of the settlement be issued to putative
class members. No class member filed an objection to the proposed settlement. The
Court held a fairness hearing on May 1, 2019. After considering the record, the proposed
settlement agreement, the supporting memorandum and exhibits, and the statements of
counsel during the fairness hearing, the Court finds that the settlement has met the
requirements of Rule 23 and is fair, reasonable, and adequate. The motion will be
granted.
I.
Procedural History
In September 2015, plaintiff Robert Sims and others sued BB&T Corporation, its
employee benefits plan committee, board of directors, compensation committee,
investment advisor, and certain employees for violations of the Employee Retirement
Income Security Act of 1974. Doc. 1.1 In October 2015, plaintiff Brewster Smith and
others filed a similar lawsuit. Complaint, Smith v. BB&T Corp, No. 1:15-CV-841, Doc. 1
(M.D.N.C. Oct. 8, 2015). The Court consolidated the two cases in November 2015. Doc.
33. After motions to dismiss were resolved, largely but not entirely in the plaintiffs’
favor, see Docs. 58, 150, the Court certified a class in August 2017 of:
All current and former participants and beneficiaries of the [Plan] from
January 1, 2007 through the date of judgment, who were injured by the
conduct alleged in the Second Amended Complaint, excluding the
Defendants.
Doc. 223 at 2, 12 (alteration in original).
After discovery, see Doc. 266, the Court granted in part and denied in part the
defendants’ motion for summary judgment. Doc. 369. Several claims remained for trial.
Doc. 369 at 8–9, 13–15, 16–18, 19, 22, 25–26 (denying summary judgment on claims
1
All docket citations are to the Sims docket, No. 15cv732, unless noted otherwise.
2
based on acts or omissions between September 2009 and September 2012, fees paid to
Sterling, excessive fees and underperforming mutual funds, the Bank Investment
Contract, failure to monitor, certain prohibited transactions, and a claim for other
equitable relief).
The parties engaged in ongoing mediation, see Doc. 188; Doc. 439 at 2, and less
than a week before trial, the parties advised the Court that they reached a settlement of all
claims. Minute Entry 10/25/2018. Class Counsel filed a consent motion on November
30, 2018, for preliminary approval of a settlement agreement that would settle all
remaining claims, Doc. 436, which the Court granted. Doc. 439. The Court also ordered
notice to be sent to class members, setting a deadline for objections of 30 days before the
fairness hearing, i.e., April 1, 2019. Id. at ¶ 4. Later, the Court granted a joint motion by
the parties to amend the class action settlement agreement to clearly exclude the BB&T
defendants by amending the Settlement Class to comprise:
[A]ll persons who participated in the Plan and had an Active Account at
any time during the Class Period, including any Beneficiary of a deceased
person who participated in the Plan at any time during the Class Period,
and/or Alternate Payee, in the case of a person subject to a Qualified
Domestic Relations Order who participated in the Plan at any time during
the Class Period. Excluded from the Settlement Class are the BB&T
Defendants.
Doc. 443 (emphasis on added text). Class Counsel also filed a motion for attorney’s fees.
Doc. 444. No class members objected to any aspect of the proposed settlement or to the
motion for attorney’s fees.
3
Class Counsel filed a consent motion for final approval of the settlement on April
17, 2019, two weeks before the scheduled fairness hearing. In support of the motion,
Class Counsel provided a memorandum from Gallagher Fiduciary Advisors, LLC, the
independent fiduciary who reviewed the settlement on behalf of the BB&T employee
retirement plan. Doc. 446-1. Gallagher concluded, after reviewing the proposed
settlement, documents from the litigation, and interviewing counsel for the plaintiffs, that
the settlement resulted from an arms-length negotiation and was reasonable. Id.
Class Counsel also attached to the motion an affidavit from the project manager at
Analytics Consulting LLC, who stated that Analytics received data for the addresses of
72,632 Settlement Class Members from the defendants and mailed notices to these
addresses. Doc. 446-2 at ¶¶ 5–6. Analytics also verified that the Notices and Claims
Form were published on a Settlement website maintained by Class Counsel. Id. at ¶ 5.
Analytics confirmed that USPS provided 928 updated addresses and returned 2,802
notices as undeliverable, of which Analytics was able to locate 2,119 new addresses
through Experian. Id. at ¶ 7. Analytics also maintained a toll-free phone number,
receiving 1,660 calls and resulting in 33 additional notices mailed. Id. at ¶ 8. As of April
15, Analytics had received 9,032 completed Claim Forms out of 30,611 former
participants. Id. at ¶¶ 6, 9. The settlement does not require the 42,021 current Plan
participants to submit a claim form to receive settlement payments. Id. at ¶ 6; Doc. 436-2
at pp. 19–20 ¶¶ 6.5, 6.6.
4
At the fairness hearing held on May 1, 2019, Class Counsel stated the
Administrator received a total of 11,509 claim forms from former Plan participants by the
April 22, 2019, deadline, which is over one third of the 30,611 former participants
identified and considered a high percentage in these matters. While individual recoveries
will vary according to the settlement formula, the average recovery will be approximately
$342. The parties also filed materials confirming compliance with notice requirements to
state and federal government officials under the Class Action Fairness Act, 28 U.S.C.
§ 1715, see Docs. 448, 448-1, 448-2, and an amended attorney’s expenses request. See
Docs. 449, 449-1, 449-2. No class member filed any objections to the terms of the
settlement or the request for attorneys’ fees.
II.
The Proposed Settlement Agreement
The proposed settlement agreement provides for a Gross Settlement Amount2 of
$24 million. Doc. 436-2 at p. 6 ¶ 2.28. From this and subject to court approval, Class
Counsel may receive up to $8 million in attorney’s fees and $1.1 million for litigation
costs and expenses, and each of ten representative plaintiffs may receive up to $20,000.
Id. at p. 22 ¶ 7.1, p. 4 ¶¶ 2.13, 2.14; p. 16 ¶ 5.8. The remaining $14.7 million, less
administrative expenses and a contingency reserve, will be distributed to class members
in amounts proportional to their average quarterly balance during the Class Period. Id. at
pp. 16-17 ¶ 5.8; p. 18 ¶ 6.4.2.
2
All capitalized terms used herein have the Definitions in the Settlement Agreement, Doc. 436-2
at Article 2, as amended by the Court’s January 31, 2019 Order, Doc. 443, which is incorporated
herein by reference.
5
The agreement requires the defendants to solicit requests for proposals and hire an
independent consultant to evaluate the Plan’s investment options and make other
recommendations. Id. at pp. 25–27 (Article 10). The defendants must also participate in
ERISA fiduciary training, which they may pay for out of Plan assets but not the
settlement fund, and the defendants must also rebate certain fees to the Plan. Id. at pp.
26–27 ¶¶ 10.3, 10.4.
The proposed settlement defines a Class Period of September 4, 2009 through
October 25, 2018, Doc. 436-2 at p. 4 ¶ 2.12, and includes two categories of Class
Members that will recover: (i) “Current Participant[s]” who had an active account during
the Class Period and a balance of greater than $0 in the Plan as of October 25, 2018, id. at
p. 4 ¶ 2.19; and (ii) “Former Participant[s]” who had an active account during the Class
Period but did not have a balance greater than $0 as of October 25, 2018. Id. at p. 5
¶ 2.26. Current Participants automatically receive their settlement payments into their
retirement accounts, id. at pp. 19–20 ¶¶ 6.5, 6.6 whereas Former Participants must timely
submit a claim form to receive a settlement check. Id. at p. 3 ¶ 2.5, p. 20 ¶ 6.7.
However, not all class members will recover, as the settlement provides that distributions
will not be made of $5.00 dollars or less because this amount would “cost more in
processing than its value.” Id. at p. 18 ¶ 6.4.3.
Under Article 8 of the agreement, Class Members agree to release all related
parties of all related claims regardless of whether they discover facts related to the claims
after the settlement is finalized. Doc. 436-2 at pp. 23–24 ¶¶ 8.1–8.3. The released parties
6
include all defendants, their insurers, related corporations, agents, and other associated
entities. Id. at p. 7 ¶ 2.38. The Released Claims include all potential claims arising under
any law and out of actions during the Class Period, September 4, 2009, to October 25,
2018. Id. at pp. 7–8 ¶ 2.39. This includes claims arising out of the approval of the
settlement agreement or the amounts that Class Members recover under the agreement.
Id. However, the agreement provides that the release shall not “preclude any action to
enforce the terms of this Settlement Agreement in accordance with the procedures set
forth” in the agreement. Id. at p. 23 ¶ 8.2. Class Counsel alone have standing to enforce
the settlement agreement, and Class Counsel have the “full and sole discretion to take
whatever action they deem appropriate, or to refrain from taking any action, in response
to such request.” Id. at p. 30 ¶ 13.5. Class Counsel also agree to monitor and enforce the
agreement without additional fees. Id.
III.
Final Class Action Settlement Approval
“It has long been clear that the law favors settlement.” United States v. Manning
Coal Corp., 977 F.2d 117, 120 (4th Cir. 1992). This is particularly true in class actions.
Sullivan v. DB Invest., Inc., 667 F.3d 273, 311 (3d Cir. 2011); In re PaineWebber Ltd.
P’ships Litig., 147 F.3d 132, 138 (2d Cir. 1998) (noting the “strong judicial policy in
favor of settlements, particularly in the class action context”); Reed v. Big Water Resort,
LLC, No. 2:14-cv-01583-DCN, 2016 WL 7438449, at *5 (D.S.C. May 26, 2016) (quoting
same); William H. Rubenstein, 5 Newberg on Class Actions § 13.44, n.1 (5th ed. 2018)
(gathering cases).
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The Court should approve a class settlement if it is “fair, reasonable, and
adequate.” Fed. R. Civ. P. 23(e)(2). “In applying this standard, the Fourth Circuit has
bifurcated the analysis into consideration of fairness, which focuses on whether the
proposed settlement was negotiated at arm’s length, and adequacy, which focuses on
whether the consideration provided the class members is sufficient.” Beaulieu v. EQ
Indus. Servs., Inc., No. 5:06-CV-00400-BR, 2009 WL 2208131, at *23 (E.D.N.C. July
22, 2009) (citing In re Jiffy Lube Sec. Litig., 927 F.2d 155, 158–59 (4th Cir. 1991)). The
Court acts as a fiduciary of the class members. Sharp Farms v. Speaks, 917 F.3d 276,
293–94 (4th Cir. Feb. 28, 2019).
A four-factor test is applied to determine the fairness of a proposed settlement:
“(1) the posture of the case at the time settlement was proposed, (2) the extent of
discovery that had been conducted, (3) the circumstances surrounding the negotiations,
and (4) the experience of counsel in the area [of law at issue].” Jiffy Lube, 927 F.2d at
159; see also U.S. Airline Pilots Ass’n v. Velez, No .3:14-cv-00577-RJC-DCK, 2016 WL
1615408, at *4 (W.D.N.C. Apr. 22, 2016) (applying same).
The Court assesses the adequacy of the settlement through the following factors:
“(1) the relative strength of the plaintiffs’ case on the merits, (2) the existence of any
difficulties of proof or strong defenses the plaintiffs are likely to encounter if the case
goes to trial, (3) the anticipated duration and expense of additional litigation, (4) the
solvency of the defendants and the likelihood of recovery on a litigated judgment, and (5)
the degree of opposition to the settlement.” Jiffy Lube, 927 F.2d at 159; Beaulieu, 2009
8
WL 2208131, at *26 (applying factors). “The most important factors in this analysis are
the relative strength of the plaintiffs’ claims on the merits and the existence of any
difficulties of proof or strong defenses.” Sharp Farms, 917 F.3d at 299.
Under Rule 23, the Court also considers whether the proposed settlement treats
class members equitably relative to each other. See Fed. R. Civ. P. 23(e)(2)(D). Any
differential treatment requires an obvious justification. 4 Newberg On Class Actions
§ 13:59 (5th ed. 2018).
IV.
Analysis
All four fairness factors favor approval here. Class Counsel have extensive
experience in ERISA and class action litigation. See Doc. 445 at 9; Doc. 445-1 at ¶¶ 3–
10; Doc. 445-3 at ¶ 3. BB&T vigorously defended against the plaintiffs’ claims, which
were likewise prosecuted zealously. The settlement was reached after extensive
adversarial litigation, including two motions to dismiss, a contested motion for class
certification, motions for summary judgment, and discovery that also included motions.
Class Counsel declares that the parties exchanged over 275,000 pages of documents and
deposed 6 experts and 25 fact witnesses during discovery. Doc. 445-2 at ¶¶ 18, 20, 28.
There is no evidence or indication that those negotiations were anything but adversarial
and arm’s length.
The proposed settlement treats class members equitably relative to each other. See
Fed. R. Civ. P. 23(e)(2)(D). While no distributions will be made of $5.00 or less, the
justification for this different treatment is obvious, as this de minimis recovery would
9
“cost more in processing than its value,” Doc. 436-2 at p. 18 at ¶ 6.4.3, and thus would
increase administrative costs and diminish recovery to class members overall while
providing marginal benefits to the few class members.
The record also supports the conclusion that the settlement is adequate. There is
no doubt that the parties will incur substantial additional litigation expense if this matter
were to proceed to trial. The Court had set aside approximately two weeks for the trial,
which would require the full-time attendance of several lawyers and back-up assistance
from others, as well as administrative support, and there would be substantial expenses
associated with travel and hotels for counsel and expert witnesses.
The proposed settlement provides that administrative fees and a contingency
reserve will be deducted from the settlement fund before distribution, in addition to
attorney’s fees, expenses, and the service awards. Doc. 436-2 at p. 16 ¶ 5.8. At the
Court’s request, the parties provided the Court with an estimated of these costs, including
approximately $150,000 for the Settlement Administrator, Analytics; $35,000 for the
independent Fiduciary, Gallagher Fiduciary Advisors, LLC; and an estimated $50,000 for
the Plan’s current recordkeeper to pull records necessary to administer the settlement; at
the fairness hearing, counsel confirmed that these amounts had been adequate.
As noted, there is an average recovery of approximately $342 per class member,
though individual recovery will vary depending on the class member’s account size.
Some class members may recover as much as $10,000. The settlement amount is
substantial in light of the tens of thousands of class members who will recover damages.
10
As for strength of the merits of plaintiffs’ case, multiple claims survived summary
judgment but that does not necessarily mean success at trial or on appeal. See, e.g.,
Tussey v. ABB, Inc., 746 F.3d 327 (8th Cir. 2014); Tibble v. Edison Int’l, 843 F.3d 1187
(9th Cir. 2016). The Court has developed deep familiarity with this case through the
extensive motions practice over the years it has been pending and concurs with Class
Counsel’s evaluation that while there was substantial evidence to support the plaintiffs’
claims, there were several obstacles, both legal and factual, to ultimate recovery. The
settlement amount reasonably takes into account the strengths and weaknesses of
plaintiffs’ case, as well as the likelihood that the defendants would appeal a full recovery
at trial, thus delaying any benefit to the class members, and that the settlement includes
non-monetary terms beneficial to the class that might not be included in any recovery at
trial.
The recovery for the class is substantial and adequate, in view of the risks and
costs of proceeding to trial. Class Counsel assert and the record supports that the $24
million in monetary compensation represents 19% of the total investment and
recordkeeping damages sought by the plaintiffs. See Doc. 445 at 12 (citing Doc. 413 at
46–47, 67–96 and estimating $124 million in total damages). Non-monetary relief and
tax benefits add an additional value of almost $15 million to the settlement class. Id. at
13–14 & n.4.
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Class Counsel have not expressed any concerns as to the solvency of the
defendants or their ability to recover if they were to proceed to trial. Nor is there a basis
for any such concerns on the record.
Overall, the record and materials submitted by Class Counsel, the report of the
independent fiduciary, and the absence of any objections by class members support the
conclusion that the proposed settlement is fair, reasonable, and adequate, and it should be
approved. The Court so finds.
V.
Conclusion
The motion for final approval of the settlement agreement, Doc. 446, is
GRANTED and the settlement of the Class Action is approved as adequate and as fair
and reasonable to the Plan and the Settlement Class. Judgment will be entered
concomitantly.
SO ORDERED, this the 6th day of May, 2019.
________________________________
UNITED STATES DISTRICT JUDGE
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