DUGAN et al v. TOWERS, PERRIN, FORSTER & CROSBY, INC. et al
MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MITCHELL S. GOLDBERG ON 9/24/2013. 9/24/2013 ENTERED AND COPIES E-MAILED.(sg, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
TOWERS, PERRIN, FORSTER & CROSBY,
INC., et al.,
ALAN H. DUGAN, et al.,
September 24, 2013
The parties in this consolidated action return to this Court on limited remand from the
United States Court of Appeals for the Third Circuit seeking preliminary approval of their
proposed settlement, along with a schedule to notify class members and eventually procure final
approval of the settlement after an appropriate hearing. Along with approval of the settlement,
they also seek preliminary certification of their proposed settlement class. For the following
reasons, the motion will be granted.
Factual Background and Procedural History
The facts surrounding this matter are set forth in the Court’s Memorandum Opinion
granting summary judgment to Defendants (Doc. No. 203), and will not be repeated here.
Briefly, this case concerns three complaints filed against Towers, Perrin, Forster & Crosby, Inc.
(“Towers Perrin”) by former employee-shareholders who sold their Towers Perrin shares back to
the company after 1971, but before the firm merged with Watson Wyatt to form Towers Watson
& Co., a publicly traded company. (Mem. Op. 2, 8-9.) For much of its history, Towers Perrin
was privately owned by its employees, who, upon promotion to “Principals,” were permitted to
purchase stock from the company at a greatly-reduced book value, as long as they agreed to
resell the shares to the firm at book value upon retirement. (Mem. Op. 2-3.) Because the book
value was much lower than the price the shares would have brought on the open market, the firm
was able to sell shares to the new Principals at affordable rates, and also ensure that it would
always have enough funds to repurchase the shares when the Principal’s employment came to an
end. (Mem. Op. 2-3 & n.3.) Former Principals who had already resold their shares lost out,
however, once the shares became publicly traded, and their value skyrocketed.
These cases all alleged that implicit in the sale-and-buyback arrangement was an
additional promise: that Towers Perrin would remain employee-owned. (Mem. Op. 9.) Plaintiffs
contended that in conducting what was essentially a public sale of the company, the current
Principals breached that agreement. (Mem. Op. 9.) This Court concluded that there was no such
promise, and granted summary judgment to Defendants. On appeal, and after consultation with
the Third Circuit’s Chief Mediator, the parties reached a settlement agreement. The agreement
provides for a gross settlement fund of $10 million plus interest, to be split among the proposed
class members according to the employee’s tenure and the number of shares he or she held at the
time of separation from the firm.
The Court must address both the preliminary certification of the proposed settlement
class and the preliminary approval of the proposed settlement. Because it makes little sense to
assess the reasonableness of the settlement without reference to a defined class, the former will
be discussed first.
A. Preliminary Certification of the Settlement Class
Plaintiffs seek only the certification of a settlement class, not a litigation class, but that
does not relieve the Court of the responsibility to ensure that the proposed class satisfies the
Federal Rules of Civil Procedure. As a general matter, “[s]ettlement classes must satisfy the Rule
23(a) requirements of numerosity, commonality, typicality, and adequacy of representation.” In
re Gen. Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litig., 55 F.3d 768, 778 (3d
Cir. 1995). In addition, the class must satisfy the relevant requirements of F.R.C.P. 23(b), though
obviously the court “need not inquire whether the case, if tried, would present intractable
management problems.” Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997).
Plaintiffs seek to certify a class consisting of “all former Towers Perrin Principals . . .
who retired or otherwise terminated their service with Towers Perrin and ceased to be Principals
on or after January 1, 1971 and on or prior to June 1, 2005,” with several exceptions. (Br. in
Support of Mot. 4.) The proposed class excludes any Principals who: (1) received or will receive
any consideration arising from the merger with Watson Wyatt, (2) participated in the Voluntary
Separation Program,1 (3) signed a release of claims in favor of Towers Perrin in connection with
the sale of stock back to the firm, (4) were employees of Towers Perrin or Watson Wyatt at the
time of the merger, or (5) are current employees of Towers Watson. (Br. in Support of Mot. 4-5.)
As defined, preliminary certification of the class is appropriate. Plaintiffs estimate that
the proposed settlement class includes 1,050 individuals, a number that satisfies the requirement
that the class be “so numerous that joinder of all members is impracticable.” F.R.C.P. 23(a)(1);
As explained in the opinion granting summary judgment, the Voluntary Separation Program
was instituted in 2006 following the announcement that Towers Perrin was considering a public
sale in an effort to encourage Principals “to retire at normal age” rather than remain with Towers
Perrin in hopes that a sale would boost the value of their shares. Principals who participated in
the program received book value for their shares, along with $200,000 and the right to purchase
discounted shares of Towers Perrin stock if an initial public offering occurred within three years
of their retirement. (Mem. Op. 7.)
see also Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001) (“[G]enerally if the named
plaintiff demonstrates that the potential number of plaintiffs exceeds 40, the first prong of Rule
23(a) has been met.”); Mehling v. N.Y. Life Ins. Co., 246 F.R.D. 467, 474 (E.D. Pa. 2007)
Furthermore, common questions of law and fact exist between the individual class
members. F.R.C.P. 23(a)(2). The primary issue in this litigation is whether, in selling and
repurchasing the stock from class members, Towers Perrin made an enforceable promise to keep
the firm employee-owned. And as our earlier opinion indicated, each class member received a
similar “Stock Offer Letter” upon being promoted to a Principal, which set forth the “terms on
which Towers Perrin offered to sell stock to Principals.” (Mem. Op. 4.) Thus, this litigation
includes common legal questions, the answers to which require reference to an essentially
common set of facts. This provides the “necessary glue among class members to make
adjudicating the case as a class worthwhile.” Newton v. Merrill Lynch, Pierce, Fenner & Smith,
Inc., 259 F.3d 154, 182 (3d Cir. 2001).
“The concepts of commonality and typicality are broadly defined and tend to merge.”
Barnes v. Am. Tobacco Co., 161 F.3d 127, 141 (3d Cir. 1998) (quoting Baby Neal v. Casey, 43
F.3d 48, 56 (3d Cir. 1994)) (internal quotation marks omitted). The named plaintiffs’ claims are
typical if they “arise from the same event or practice or course of conduct that gives rise to the
claims of the class members,” and are based on the same legal theory. Id. Here, the named
Plaintiffs’ claims satisfy the typicality requirement for essentially the same reason that they
satisfy the commonality requirement. Each named Plaintiff asserts claims based on an alleged
promise made by Towers Perrin in the conduct of its stock sale-and-buyback program. The class
members’ claims arise from the same course of conduct. Thus, F.R.C.P. 23(a)(3) is satisfied.
Finally, F.R.C.P. 23(a)(4) requires that the “representative parties will fairly and
adequately protect the interests of the class.” This requirement seeks to ferret out “conflicts of
interest between named parties and the class they seek to represent,” and is satisfied if the
representative “possess[es] the same interest[s] and suffer[s] the same injur[ies] as the class
members.” Amchem, 521 U.S. at 625-26 (quoting East Texas Motor Freight Sys., Inc. v.
Rodriguez, 431 U.S. 395, 403 (1977)) (internal quotation marks omitted). The named Plaintiffs
in this case plainly satisfy this requirement, in that their claims are typical of the absent class
members’ claims, and there are no apparent conflicts of interest. See Mehling, 246 F.R.D. at 475.
Further, the attorneys for the class have proven themselves equal to the task, vigorously litigating
this case from start to finish. In other words, they “clearly possess the expertise to litigate this
matter effectively, as evidenced by the quality, timeliness and professional nature of their work
before this court.” In re Ikon Office Solutions, Inc., 209 F.R.D. 94, 103 (E.D. Pa. 2002).
In addition to meeting the Rule 23(a) requirements, the proposed class can be properly
certified under Rule 23(b)(3). Our earlier opinion sets out the controlling nature of the common
questions of law and fact in this litigation: the claims of all class members rise or fall together.
This is more than enough to satisfy the predominance inquiry, which merely tests whether a class
action “would achieve economies of time, effort, and expense, and promote uniformity of
decision as to persons similarly situated.” F.R.C.P. 23(b)(3) advisory committee notes to 1966
amendment; see also Sullivan, 667 F.3d at 297. Given the common threads tying all the class
members’ claims together, class adjudication is plainly superior to hundreds of individual cases
challenging essentially the same conduct. This is even truer in the settlement class context, since
minor differences in individual claims that might create practical problems at trial are less
important when the proposal is that there be no trial. See Sullivan, 667 F.3d at 303-04.
Therefore, the Court will grant Plaintiffs’ motion for preliminary certification of the settlement
B. Preliminary Approval of the Proposed Settlement
Under the Federal Rules of Civil Procedure, “[t]he claims, issues, or defenses of a
certified class may be settled, voluntarily dismissed, or compromised only with the court’s
approval.” F.R.C.P. 23(e). This requirement exists to allow the court to protect absent class
members who will be bound by the settlement, but did not have an opportunity to participate in
its negotiation. Rodriguez v. Nat’l City Bank, 2013 WL 4046385 at *5 (3d Cir. Aug. 12, 2013);
Sullivan, 667 F.3d at 319. While the ultimate approval of a class settlement turns on whether the
court finds the proposal “fair, reasonable, and adequate,” F.R.C.P. 23(e)(2), preliminary approval
may be granted as long as the proposal does not “disclose grounds to doubt its fairness or other
obvious deficiencies such as unduly preferential treatment of class representatives or segments of
the class, or excessive compensation for attorneys, and whether it appears to fall within the range
of possible approval.” Mehling, 246 F.R.D. at 472 (quoting Thomas v. NCO Fin. Sys., 2002 WL
1773035 at *5 (E.D. Pa. July 31, 2002)) (internal quotation mark omitted).
The settlement in this case is fairly simple. Towers Perrin will make a single payment of
$10 million into a claims fund to be administered by an outside fiduciary. Court-approved
attorney’s fees, expenses, and administrative costs will be paid from this fund, leaving a net
amount for class members of approximately $6 million. Class members will be given notice of
the settlement and the opportunity to submit a proof of claim. The proceeds from the fund will
then be split among the class members who submitted valid claims according to a formula that
accounts for the number of shares the class member sold back to the firm at the time of his or her
separation, as well as the member’s tenure.2
At this stage, the settlement appears within the bounds of reasonableness warranting
preliminary approval. While the $10 million recovery reflects but a fraction of the increased
value from the public sale, Plaintiffs were fighting an uphill battle by the time the settlement was
reached. This Court had granted summary judgment as to all claims against all Defendants,
leaving Plaintiffs with a substantial chance of receiving no recovery at all. Plaintiffs faced an
uncertain outcome in the Third Circuit, followed by more litigation in this Court, if they hoped to
obtain a favorable judgment. This lengthy process would have resulted in significant cost and
delay. When compared to the relatively immediate and certain recovery promised by the
settlement, there is good reason to think that the recovery is fair. In addition, the participation of
the Third Circuit’s mediator suggests an arms-length negotiation, rather than collusion for the
benefit of attorneys or named plaintiffs. See Mehling, 246 F.R.D. at 473 (granting preliminary
approval to class settlement that was “the result of a hard-fought and lengthy negotiation process
overseen by [a] Magistrate Judge”). Class counsel’s requested compensation, which Plaintiffs’
represent will be no more than $3 million (not including expenses), or 30% of the total fund, also
falls within the bounds of reasonableness. See id. at 472 n.4 (granting preliminary approval to
class settlement that provided for attorney’s fees of not more than 33% of the gross settlement
More specifically, a given class member’s recovery will be calculated by multiplying the net
settlement fund by a fraction that accounts for the number of “share years” the member
accumulated in comparison to the body of claimants as a whole. The amount of “share years”
accumulated by a member is equal to the number of years the member was a Towers Perrin
Principal multiplied by the number of shares the member sold back to Towers Perrin at the time
he or she left the firm.
Thus, the Court finds no reason at this stage to doubt the fairness of the settlement, and
will grant preliminary approval. Of course, prior to deciding whether to grant final approval, the
Court will hold a fairness hearing and consider the views of objectors, if any. See Manual for
Complex Litig. (Fourth) § 21.643 (2004).
Having granted preliminary certification of the settlement class, along with preliminary
approval of the settlement itself, the Court “must direct notice in a reasonable manner to all class
members who would be bound by the proposal.” F.R.C.P. 23(e)(1). Due process requires that the
notice be “reasonably calculated, under all the circumstances, to apprise interested parties of the
pendency of the action and afford them an opportunity to present their objections.” Mullane v.
Cent. Hanover Bank & Trust Co., 339 U.S. 306, 314 (1950). Further, F.R.C.P. 23(c)(2)(B)
requires that in a Rule 23(b)(3) action, the class must receive “the best notice that is practicable
under the circumstances.” In the context of a class settlement, the substance of the notice “must
inform class members of (1) the nature of the litigation; (2) the settlement’s general terms; (3)
where complete information can be located; and (4) the time and place of the fairness hearing.”
In re Cendant Corp. Sec. Litig., 109 F. Supp. 2d 235, 254 (D.N.J. 2000); see also F.R.C.P.
After reviewing the proposed notice, the Court concludes that it satisfies due process in
form and substance. Plaintiffs propose notification by “mailing the Notice to each Class Member
for whom Towers Watson has a mailing address and publishing the Notice on a website
maintained by the Claims Administrator.” (Br. in Support of Mot. 18.) Individual notice by firstclass mail is the best notice practicable in this case, and has long been considered to satisfy due
process in the class-action context. See Phillips Petrol. Co. v. Shutts, 472 U.S. 797, 812 (1985)
(concluding that a procedure in which “a fully descriptive notice is sent first-class mail to each
class member, with an explanation of the right to ‘opt-out,’ satisfies due process”); In re Agent
Orange Prod. Liability Litig., 818 F.2d 145, 167-69 (2d Cir. 1987) (finding notice mailed to
more than 70,000 veterans in Agent Orange registry, plus publication, sufficient); Wright and
Miller, Federal Practice and Procedure § 1786 & n.43 (citing several cases involving mailed
notice). Further, publication on a website devoted to the litigation will allow class members an
alternative route to receive notice.
Substantively, the sixteen page notice adequately informs the class members of all the
information required by F.R.C.P. 23(c)(2)(B). It covers the nature of the case and the claims,
defines the class, and indicates to the class member that he or she can seek to be excluded from
the class, can file objections, or can seek assistance from an independent attorney. It also
explains in detail the nature of the settlement and the formula that will ultimately be used to
allocate payments. Finally, it includes spaces to notify members of their right to participate in a
final fairness hearing on a particular date. The Court will therefore approve the notice and
manner of service.
The Plaintiffs return to this Court seeking approval for a $10 million dollar settlement
after having lost on summary judgment less than a year ago. Although this recovery is far less
than Plaintiffs originally sought, the procedural posture of the case, along with the threat of
further lengthy and costly litigation, make the settlement reasonable on its face. In addition, the
proposed class is properly defined, and satisfies the requirements of F.R.C.P. 23. Accordingly,
Plaintiffs’ motion for preliminary certification of the settlement class and preliminary approval
of the settlement will be granted. The Court’s Order follows.
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?