Wallace v. Powell et al
MEMORANDUM (Order to follow as separate docket entry) re 1527 Unopposed MOTION for Settlement and Class Certification filed by All Plaintiffs, 09-357, All Plaintiffs, 09-286, All Plaintiffs, 09-291, All Plaintiffs, 09-630 Signed by Honorable A. Richard Caputo on 7/7/14. (jam)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
FLORENCE WALLACE, et al.,
CIVIL ACTION NO. 3:09-cv-286
ROBERT J. POWELL, et al.,
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
WILLIAM CONWAY, et al.,
CIVIL ACTION NO. 3:09-cv-0291
MICHAEL T. CONAHAN, et al.,
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
H.T., et al.,
CIVIL ACTION NO. 3:09-cv-0357
MARK A. CIAVARELLA, JR., et al.,
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
CIVIL ACTION NO. 3:09-cv-0630
MARK A. CIAVARELLA, JR., et al.,
Plaintiffs in this consolidated action comprising both individual cases and class
actions seek final approval of a settlement agreement (the “Settlement”) between Plaintiffs
and Defendants PA Child Care, LLC, Western PA Child Care, LLC, and Mid-Atlantic Youth
Services, Corp. (collectively “Provider Defendants”). (Doc. 1527.) The Settlement received
preliminary approval on November 27, 2013. Now, following the final approval hearing held
on June 10, 2014, Plaintiffs seek final certification of the Class for settlement, approval of
the Settlement, and an award of attorneys’ fees and costs. For the reasons that follow, the
Class will be certified, the Settlement will be approved, and attorneys’ fees and costs will
be awarded as requested.
This civil action arises out of the alleged conspiracy related to the construction of two
juvenile detention facilities, and subsequent detainment of juveniles in these facilities,
orchestrated by two former Luzerne County Court of Common Pleas judges, Michael
Conahan (“Conahan”) and Mark Ciavarella (“Ciavarella”). The juvenile detention facilities,
PA Child Care (“PACC”) and Western PA Child Care (“WPACC”),1 were both constructed
by Mericle Construction, Inc. Plaintiffs in this action, juveniles or the parents of juveniles
who appeared before Ciavarella, seek redress from the former judges, as well as the
individuals and business entities involved in the construction and operation of these
facilities, for the alleged unlawful conspiracy and resulting deprivations of Juvenile Plaintiffs’
The individual and class complaints assert, in part, the following causes of action
against Provider Defendants: (1) 42 U.S.C. § 1983 claims alleging a conspiracy to violate
Plaintiffs’ constitutional rights; (3) violations of the Racketeer Influenced and Corrupt
Organizations Act (“RICO”), 18 U.S.C. §§ 1961, et seq.; (3) conspiracy to violate RICO; (4)
state-law civil conspiracy; and (5) state-law false imprisonment.
The first of these consolidated cases, Wallace v. Powell, No. 09-CV-286, was filed
on February 13, 2009 against multiple Defendants, including Provider Defendants.
Although the case was originally filed as a class action, the Wallace complaint was
subsequently amended in May 2009 to proceed on behalf of a number of individual juvenile
and parent Plaintiffs. Shortly thereafter, Conway v. Conahan, No. 09-CV-291, and H.T. v.
Ciavarella, No. 09-CV-357, were filed as putative class actions, both naming Provider
Defendants, among others, as Defendants. Subsequently, Humanik v. Ciavarella, No. 09-
Under the Master Settlement Agreement, (Doc. 1448, Ex. B, Master Settlement
Agreement, “MSA,” ¶ I.B), “Provider Parties” means “PACC, WPACC, and
MAYS, and all related parties, successors, assigns, members, managers,
shareholders, directors, officers, employees, agents, and attorneys.”
CV-630, was filed on behalf of a single individual Plaintiff. Collectively, these four cases are
the “Civil Actions.”
The Conway and H.T. Plaintiffs filed the Master Complaint for Class Actions in June
2009. (Doc. 136.) At the same time, the Wallace and Humanik Plaintiffs filed the Master
Long Form Complaint for Individual Actions. (Doc. 134.)
With respect to Provider Defendants, they filed various motions to dismiss the
actions in 2010 and 2011. The most recent motion to dismiss filed by Provider Defendants
and resolved by the Court was granted in part and denied in part on November 30, 2011.
Shortly thereafter, on December 16, 2011, Plaintiffs and Robert K. Mericle and
Mericle Construction, Inc. (collectively, the “Mericle Parties”) filed a Joint Motion for
Preliminary Approval of Class Action Settlement (the “Mericle Settlement”). (Doc. 1005.)
On February 28, 2012, following a preliminary approval hearing, the Court issued an order
conditionally approving the Mericle Settlement. (Doc. 1084.) On November 19, 2012, the
Court held a final approval hearing on the Mericle Settlement. The Mericle Settlement was
granted final approval on December 14, 2012. (Doc. 1268.)
As to the non-settling
Defendants, including Provider Defendants, discovery remained ongoing at that time.
On February 1, 2013, Class Plaintiffs sought class certification for the litigation of all
issues of Provider Defendants’ liability to Plaintiffs pursuant to Federal Rule of Civil
Procedure 23(b)(3). (Doc. 1319.) By Memorandum and Order dated May 14, 2013, Class
Plaintiffs’ motion for class certification was granted. (Docs. 1409; 1410.)
Subsequently, on October 16, 2013, Plaintiffs and Provider Defendants filed a Joint
Motion for Preliminary Approval of Class Action Settlement. (Doc. 1448.) On November 27,
2013, following a preliminary approval hearing, the Court issued an order conditionally
certifying the Settlement Class, preliminarily approving the class action settlement, and
approving the notice plan as modified. (Doc. 1491.) On June 10, 2014, the Court held a
final Settlement approval hearing.
The Settlement Agreement
Under the terms of the Settlement Agreement, the parties agree to settle the Actions
to provide a final resolution of Plaintiffs’ claims against Provider Defendants.2 Solely for the
purposes of settlement, two settlement classes are established: (1) the “Juvenile Settlement
Class,” which consists of “all juveniles who appeared before former Luzerne County Court
of Common Pleas Judge Mark A. Ciavarella between January 1, 2003 and May 28, 2008
[the “Class Period”] who were adjudicated or placed by Ciavarella”; and (2) the “Parent
Settlement Class,” which is comprised of the parents and/or guardians of juveniles who
appeared before Ciavarella between January 1, 2003 and May 28, 2008, and, who in
connection with the juvenile’s appearance: “(i) made payments in their own names or had
wages, social security or other entitlements in their own names garnished or withdrawn; (ii)
The MSA defines the “Released Parties” as the “Provider Parties, the Zappala
Parties, and any entity or individual that is not a Non-Released Party.” (MSA, ¶
I.B.) The “Zappala Parties” are “Gregory R. Zappala (“Zappala”), Consulting
Innovations and Services, Inc., and Southwestern PA Child Care, LLC, and all
related parties, successors, assigns, members, managers, shareholders, directors,
officers, employees, agents, and attorneys (excluding Non-Released Parties).”
The “Non-Released Parties” are “Robert J. Powell; Powell Law Group P.C.;
Beverage Marketing of PA., Inc.; Pinnacle Group of Jupiter, LLC; Vision
Holdings, LLC; Mark A. Ciavarella, Jr.; Michael T. Conahan; and any of the
foregoing persons’ or entities’ current or former employees, related parties,
successors, or assigns (excluding the Provider Parties and Zappala parties)”.
paid costs, fees, interest and/or penalties in their own name; (iii) suffered any loss of
companionship and/or family integrity, . . . and who were not fully reimbursed as a result of
claims made in connection with the Mericle Settlement, . . .” (MSA, ¶ I.A.) The Juvenile
Settlement Class and the Parent Settlement Class are referred to collectively as the
“Settlement Classes,” and the members of the Settlement Classes are the “Settlement
Class Members.” (Id.)
Pursuant to the terms of the Settlement Agreement, Provider Defendants agree to
pay $2,500,000.00, which will be used to pay settlement costs and claims by Class
Members. (Id. at ¶ II.A.) Under the proposed Allocation Plan, basic benefits are available
to qualifying Juvenile Settlement Class Members and Parent Settlement Class Members.
Juvenile Settlement Class Benefits
Under the terms of the Allocation Plan, each qualifying Juvenile Settlement Class
Member (“Juvenile”) will receive settlement payment based on the following Settlement
Probation: Each qualifying Juvenile who never spent any time in
PACC, WPACC, or any other juvenile detention facility as a result of an
adjudication by former Judge Ciavarella during the period from January
1, 2003 through May 28, 2008 shall receive one (1) point.
Non-PACC/WPACC: Each qualifying Juvenile who was placed in a
detention facility as a result of an adjudication or placement by former
Judge Ciavarella during the period from January 1, 2003 through May
28, 2008, but who never spent any time in either PACC and/or WPACC,
shall receive two (2) points.
PACC/WPACC: Each qualifying Juvenile who was placed in PACC or
WPACC as a result of an adjudication or placement by former Judge
Ciavarella during the period from January 1, 2003 through May 28,
2008 shall receive five (5) points.
Parent Settlement Class Benefits
The Allocation Plan also provides that each qualifying Parent Settlement Class
Member (“Parent”) will receive settlement payment as follows:
Each qualifying Parent Settlement Class Member who, as a result of their
child’s adjudication or placement by former Judge Ciavarella during the period
from January 1, 2003 through May 28, 2008, (i) made payments to Luzerne
County or had wages, social security or other entitlements garnished or
withdrawn by Luzerene County; or (ii) had court-ordered services or pay courtordered costs, fees, interest, and/or penalties assessed against them or their
child, shall receive the actual amount of monies paid, garnished, or withdrawn.
Parent Settlement Class Members will be paid from the Settlement Fund, however,
only if they did not already receive full reimbursement as a result of the Mericle Settlement.
Moreover, the total amount of funds to be paid to Parent Settlement Class Members may
be reduced pro rata if the total exceeds the amount allocated to the Parent Settlement
The Cash Settlement Fund will be divided among qualifying Settlement Class
Members according to the Plan of Allocation. The Plan of Allocation provides that courtapproved costs and fees will be taken out of the Cash Settlement Fund first. The remaining
funds will then be divided into (1) the Juvenile Fund; (2) the Parent Fund; and (3) the
Juvenile Fund. Seventy percent (70%) of the amount remaining in the
Cash Settlement Fund will compromise the Juvenile Fund. Each
qualifying Juvenile Settlement Class Member will be assigned to a
Settlement Category and awarded a number of points as described
above. The total number of points for all Juvenile Settlement Class
Members will be divided in the Juvenile Fund to determine the monetary
value of each point. Each Juvenile Settlement Class Member will
receive the value of each point multiplied by his or her points, as
determined by his or her Settlement Category.
Parent Fund. Fifteen percent (15%) of the amount remaining in the
Cash Settlement Fund will comprise the Parent Fund. Each qualifying
Parent Settlement Class Member will be awarded a specific amount of
money based on the amount of payments documented in the Records
or in records provided by the Parent Settlement Class Members
showing payments made in their own names.
If the total amount of funds to be paid to the Parent Settlement Class
Members exceeds the total funds in the Parent Fund, Parent
Settlement Class Members will be awarded their pro-rata share of the
Parent Fund. If the total amount of funds to be paid to Parent
Settlement Class Members is less than the total funds in the Parent
Fund, the remaining funds will pour over to the Juvenile Fund.
Holdback Fund. Fifteen percent (15%) of the amount remaining in the
Cash Settlement Fund will comprise the Holdback Fund. The Holdback
Fund will remain in escrow until all final accounting is complete for the
Cash Settlement Fund. With written permission from the Court, the
Holdback Fund may be used to pay settlement costs and attorneys’
fees. The Holdback Fund will also be used to pay all costs of the
appeal process, described below, and all additional payments to
Settlement Class Members resulting from successful appeals. If the
funds remaining in the Holdback fund after payment of all costs, fees,
and appeals, total $75,000 or more (3% of the gross Cash Settlement
Fund), the remaining funds will be paid to the Juvenile Settlement Class
Members in proportion to the number of points assigned to each
Juvenile Settlement Class Member. If the funds remaining in the
Holdback Fund after payment of all costs, fees, and appeals, total less
than $75,000, Class Counsel will seek permission from the Court
regarding the distribution of the remaining funds.
(Doc. 1528, Ex. A, 7-8.)
Each Juvenile and Parent choosing to participate in the Settlement was required to
complete a Proof of Claim Form providing necessary information and a release for counsel
to obtain relevant records. Based upon the responses of each Claimant and supporting
documentation, the Claims Committee calculated the points for all Settlement Class
Members who timely submitted claim forms.
However, in the event a Claimant believes that the Claims Committee “wrongly
determined” his or her claim, the Settlement provides the Claimant with the option to appeal
to a Court-appointed Special Master for Allocation Appeals. Where an appeal is lodged by
a Claimant, the Notice of Settlement provides:
The Special Master will re-assess the Claims Committee’s decision. This
reassessment will include a complete review of your Proof of Claim Form, the
information available in the Records, and any additional written documenation
provided by you in support of your claim. If appropriate, the Special Master will
change the Settlement Category assigned by the Claims Committee or the
amount of your payment from the Cash Settlement Fund, and your award will
be adjusted under the terms of the Plan of Allocation.
(Doc. 1528, Ex. A, 8.) The Notice of Settlement further provides that the “determinations
by the Special Master are final and shall not be subject to any further review or appeal.” (Id.)
To fund this Allocation Appeal Process, Class Counsel request that 15% of the Cash
Settlement Fund not be distributed, but instead be held back in the Escrow Account for the
benefit of any successful Allocation Appellant and the costs associated with the Allocation
Appeal Process. The requested hold back amount is thus $265,054.74. As indicated
above, in the event that the hold back amount is not fully depleted, the balance will be
distributed in accordance with the terms of the Settlement Agreement.
In exchange for the relief provided under the Settlement Agreement, the named
Plaintiffs and the Settlement Class Members will release and dismiss all claims against
Provider Defendants. In addition, Settlement Class Members agree and covenant not to
sue PA Child Care, LLC, Western PA Child Care, LLC, and Mid-Atlantic Youth Service,
Corp., or any of their affiliates as defined in the Settlement Agreement, over any matter
which could have been alleged in these Civil Actions.
Notice of the Settlement was disseminated to potential Settlement Class Members
through a variety of means, including direct mailings, a toll-free call center, publication in
newspapers, and a website. With respect to direct mailings, Class Counsel mailed a total
of 3,795 copies of the Notice of Settlement and Proof of Claim Form to the last known
addresses of potential Class Members by first-class mail. Additionally, the toll-free call
center (the “Center”) established by Class Counsel, which was open to receive calls twenty-
four (24) hours a day, seven (7) days a week, answered over 1,559 calls regarding the
litigation and the terms of the Settlement. The Center was staffed with non-lawyer customer
service representatives trained to respond to particular questions regarding the terms of the
Settlement. And, when the Center’s customer service representatives were unable to
answer questions about the Settlement, they provided contact information to allow the
callers to speak with Class Counsel, and Class Counsel all returned calls and answered
questions from claimants and potential claimants about the settlement and the Proof of
Claim Form. Additionally, Class Counsel also caused the Notice of Settlement to be
published in the Times Leader and the Citizens’ Voice. Finally, Class Counsel maintained
a website containing information about the Settlement. Since December 3, 2013, the
website has received 2,552 visits.
Significantly, Plaintiffs’ counsel indicated at the Fairness Hearing that the Claims
Committee received 2,243 Proof of Claim Forms. And, of those Forms received, 2,157 will
be considered for payment, which amounts to a participation rate of ninety-six percent
(96%). In comparison, 2,019 Proof of Claims Forms were submitted for participation in the
Mericle Settlement, and only 1,614 were considered for payment, resulting in a participation
rate of eighty percent (80%).
Even though the Settlement Agreement has already been preliminarily approved,
there must still be a final determination as to whether to certify the class and grant final
approval of the Settlement. See In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods.
Liab. Litig., 55 F.3d 768, 797 (3d Cir. 1995). The Federal Rules of Civil Procedure provide
that class action settlements must be approved by the Court. See Fed. R. Civ. P. 23(e)
(“The claims, issues, or defenses of a certified class may be settled . . . only with the court's
approval.”); see also Ripley v. Sunoco, Inc., 287 F.R.D. 300, 306 (E.D. Pa. 2012).
However, “the ultimate inquiry into the fairness of the settlement under Fed. R. Civ. P. 23(e)
does not relieve the court of its responsibility to evaluate Rule 23(a) and (b) considerations.”
In re Cmty. Bank of N. Va., 418 F.3d 277, 299 (3d Cir. 2005).
As such, “before approving a class settlement agreement, ‘a district court first must
determine that the requirements for class certification under Rule 23(a) and (b) are met.’”
Sullivan v. DB Invs., Inc., 667 F.3d 273, 296 (3d Cir. 2011) (en banc) (quoting In re Pet
Food Prods. Liab. Litig., 629 F.3d 333, 341 (3d Cir. 2010)). Rule 23(a) of the Federal Rules
of Civil Procedure contains four threshold requirements which every putative class must
(1) the class is so numerous that joinder of all members is impracticable; (2)
there are questions of law or fact common to the class; (3) the claims or
defenses of the representative parties are typical of the claims or defenses of
the class; and (4) the representative parties will fairly and adequately protect
the interests of the class.
Fed. R. Civ. P. 23(a). These requirements are referred to as numerosity, commonality,
typicality, and adequacy of representation. If these four prerequisites are satisfied, “a
district court must then determine that the proposed class fits within one of the categories
of class actions enumerated in Rule 23(b).” Sullivan, 667 F.3d at 296. Plaintiffs seek
certification pursuant to Rule 23(b)(3), under which certification is proper where “the court
finds that the questions of law or fact common to class members predominate over any
questions affecting only individual members, and that a class action is superior to other
available methods for fairly and efficiently adjudicating the controversy.” Fed. R. Civ. P.
The “[f]actual determinations necessary to make Rule 23 findings must be made by
a preponderance of the evidence. In other words, to certify a class the district court must
find that the evidence more likely than not establishes each fact necessary to meet the
requirements of Rule 23.” In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 257-58 (3d Cir.
2009) (quoting In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 320 (3d Cir. 2008)).
The first requirement for a class action is that the class is so numerous that joinder
of all members is impracticable. Fed. R. Civ. P. 23(a). “‘No single magic number exists
satisfying the numerosity requirement.” Logory v. Cnty. of Susquehanna, 277 F.R.D. 135,
140 (M.D. Pa. 2011) (quoting Florence v. Bd. of Chosen Freeholders, No. 05–3619, 2008
WL 800970 at *6 (D. N.J. Mar. 20, 2008)). However, the Third Circuit has opined that while
there is technically no minimum class size, “generally if the named plaintiff demonstrates
that the potential number of plaintiffs exceeds 40, the first prong of Rule 23(a) has been
met.” Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001).
Here, the Settlement Classes are comprised of thousands of members. As such, the
numerosity requirement is satisfied. See, e.g., Williams v. City of Phila., 270 F.R.D. 208,
215 (E.D. Pa. 2010) (numerosity requirement satisfied where putative class could number
in the hundreds or thousands); Zeno v. Ford Motor Co., 238 F.R.D. 173, 184 (W.D. Pa.
2006) (proposed class of 2,100 claimants sufficient to satisfy numerosity requirement of
To satisfy Rule 23(a)(2), there must be “questions of law or fact common to the
class.” Fed. R. Civ. P. 23(a). Plaintiffs must thus demonstrate that their claims “depend
upon a common contention,” the resolution of which “will resolve an issue that is central to
the validity of each one of the claims in one stroke.” Wal–Mart Stores, Inc. v. Dukes, - - U.S. - - -, 131 S. Ct. 2541, 2551, 180 L. Ed. 2d 374 (2011). “Commonality does not require
an identity of claims or facts among class members; instead, [t]he commonality requirement
will be satisfied if the named plaintiffs share at least one question of fact or law with the
grievances of the prospective class.” Johnston v. HBO Film Mgmt., Inc., 265 F.3d 178, 184
(3d Cir. 2001) (internal quotation marks omitted); see also Marcus v. BMW of N. Am., LLC,
687 F.3d 583, 597-98 (3d Cir. 2012). But, the Supreme Court recently indicated that
“[c]ommonality requires the plaintiff to demonstrate that the class members have suffered
the same injury.” Wal–Mart, 131 S.Ct. at 2551 (citations and internal quotation omitted).
That is, “[t]heir claims must depend upon a common contention. . . . That common
contention, moreover must be capable of classwide resolution- which means that
determination of its truth or falsity will resolve an issue that is central to the validity of each
one of the claims in one stroke.” Id.
The commonality requirement is sufficiently satisfied in this case. In particular, the
claims of the Juvenile Settlement Class and the Parent Settlement Class stem from the
construction, and subsequent operation, of two juvenile detention facilities. Specifically,
their claims turn on whether Defendants acted in conspiracy with Conahan and Ciavarella
to deprive Juvenile Plaintiffs of their constitutionally guaranteed rights, whether Defendants
organized an association-in-fact enterprise, and whether Defendants participated in the
affairs of an entity through a pattern of racketeering activity. These claims are capable of
classwide resolution, as they all “arise from the same nucleus of operative facts and involve
the same legal theories” against Provider Defendants. In re Processed Egg Prods. Antitrust
Litig., 284 F.R.D. 249 (E.D. Pa. 2012). Thus, the commonality prong of Rule 23(a)(2) is
Rule 23(a)(3) requires that “the claims or defenses of the representative parties are
typical of the claims or defenses of the class.” Fed. R. Civ. P. 23(a)(3). “The concepts of
typicality and commonality are closely related and often tend to merge.” Marcus, 687 F.3d
at 597 (citing Baby Neal v. Casey, 43 F.3d 48, 56 (3d Cir.1994)). “The typicality criterion
is intended to preclude certification of those cases where the legal theories of the named
plaintiffs potentially conflict with those of the absentees by requiring that the common claims
are comparably central to the claims of the named plaintiffs as to the claims of the
absentees.” Baby Neal, 43 F.3d at 57. “Factual differences will not render a claim atypical
if the claim arises from the same event or practice or course of conduct that gives rise to
the claims of the class members, and if it is based on the same legal theory.” Id. at 58
(citation omitted). When analyzing typicality, a court must compare the situation of the
proposed representative to that of the class as a whole by considering “the similarity of the
legal theory and legal claims; the similarity of the individual circumstances on which those
theories and claims are based; and the extent to which the proposed representative may
face significant unique or atypical defenses to her claims.” In re Schering Plough Corp.
ERISA Litig., 589 F.3d 585, 597 (3d Cir. 2009).
The claims of the Representative Plaintiffs, as identified in the Settlement
Agreement, are typical of the Juvenile Settlement Class Members and the Parent
Settlement Class Members. With respect to the Juvenile Settlement Class, the gravamen
of the Representative Plaintiffs’ claims is that, as a result of the alleged conspiracy,
Ciavarella and Conahan had an undisclosed financial interest and conflict-of-interest in
adjudicating children delinquent and sending them to placement. And, like all other Juvenile
Settlement Class Members, the Representative Plaintiffs were denied their constitutional
right to an impartial tribunal when they appeared before Ciavarella. As such, the legal
theories for all Juvenile Plaintiffs, that their adjudications were unconstitutional, will be the
same. Thus, the typicality requirement is satisfied as to the Juvenile Settlement Class.
The claims of the Parent Settlement Class Representatives are also typical of all
Parent Settlement Class Members. Specifically, all Parent Settlement Class Members
assert RICO claims based on the alleged conspiratorial conduct of Defendants, which
resulted in the payment of court fees, fines, interest, and penalties. As the legal theories
for all Parent Settlement Class Members will be the same, the typicality requirement for
class certification under Rule 23(a)(3) is satisfied.
Adequacy of Representation
Rule 23(a)(4) requires that “the representative parties will fairly and adequately
protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). “The adequacy requirement has
two components: (1) concerning the experience and performance of class counsel; and (2)
concerning the interests and incentives of the representative plaintiffs.” Dewey v.
Volkswagen Aktiengesellschaft, 681 F.3d 170, 181 (3d Cir. 2012) (citing In re Cmty. Bank
of N. Va., 418 F.3d at 303). Essentially, the adequacy inquiry considers whether “the
putative named plaintiff has the ability and the incentive to represent the claims of the class
vigorously, that he or she has obtained adequate counsel, and that there is no conflict
between the individual's claims and those asserted on behalf of the class.” Hassine v.
Jeffes, 846 F.2d 169, 179 (3d Cir. 1988) (citations omitted).
The qualifications and performance of class counsel under Rule 23(a)(4) is based
upon the factors set forth in Rule 23(g). See Sheinberg v. Sorensen, 606 F.3d 130, 132 (3d
Cir. 2010) (“Although questions concerning the adequacy of class counsel were traditionally
analyzed under the aegis of the adequate representation requirement of Rule 23(a)(4) . .
. those questions have, since 2003, been governed by Rule 23(g).”). That subsection lists
several non-exclusive factors that a district court must consider in determining “counsel's
ability to fairly and adequately represent the interests of the class,” Fed. R. Civ. P.
23(g)(1)(B), including: (1) “the work counsel has done in identifying or investigating potential
claims in the action,” (2) “counsel's experience in handling class actions, other complex
litigation, and the types of claims asserted in the action,” (3) “counsel's knowledge of the
applicable law,” and (4) “the resources that counsel will commit to representing the class.”
Fed. R. Civ. P. 23(g)(1)(A).
Here, Class Counsel has the experience, skill, and qualification necessary to conduct
this litigation. In particular, the individual attorneys in this action have extensive experience
in complex class action litigation involving mass actions and civil rights claims. Consistent
with their qualifications, Class Counsel, throughout this litigation, has demonstrated
considerable ability in prosecuting this case. Specifically, Class Counsel has performed
substantial work, and expended considerable time and resources, in presenting the facts
and complex legal issues implicated in this litigation, as Class Counsel has prepared
multiple complaints, responded to numerous motions to dismiss, engaged in mediation, and
reviewed discovery. Class Counsel has pursued this action vigorously and with great
dedication on behalf of all Plaintiffs. Thus, based on Class Counsel’s work to date in this
litigation, these attorneys have fairly and adequately represented the interests of the
Settlement Class Members.
With respect to the second prong of the adequacy inquiry, the Third Circuit has
“recognized that the linchpin of the adequacy requirement is the alignment of interests and
incentives between the representative plaintiffs and the rest of the class.” Dewey, 681 F.3d
at 183 (citations omitted). The adequacy requirement “is designed to ferret out” intra-class
conflicts, and to ensure that the named plaintiffs have the incentive to represent the claims
of the class. Id. at 184 (citations omitted). If any conflicts “undercut the representative
plaintiffs' ability to adequately represent the class” they are “fundamental,” such that class
representation is structurally faulty and Rule 23(a)(4) cannot be satisfied. Id. at 184-85.
The Representative Plaintiffs fairly and adequately protected the interests of the
Juvenile Settlement Class and the Parent Settlement Class in this action. Here, the
interests of the Representative Plaintiffs are consistent with the Settlement Class Members,
and there appears to be no conflicts between or among the groups. As discussed, the
Representative Juvenile Plaintiffs were damaged as a result of Defendants’ allegedly
unlawful conduct, and the Representative Juvenile Plaintiffs would have to prove the same
wrongdoing as the Juvenile Settlement Class Members to establish Provider Defendants’
liability. Similarly, the Representative Parent Plaintiffs were damaged as a result of the
alleged conspiratorial conduct of Defendants, which resulted in the payment of court fees,
fines, interest, and penalties, and which would require all Parent Plaintiffs to demonstrate
the same wrongdoing to establish Defendants’ liability. Thus, as “the interests of the named
plaintiffs are not antagonistic to those of the class[es],” Marsden v. Select Med. Corp., 246
F.R.D. 480, 485 (E.D. Pa. 2007) (citing In re Cmty. Bank of N. Va., 418 F.3d at 303), and
nothing in the record suggests that the Representative Plaintiffs acted in conflict with the
Settlement Classes or failed to vigorously pursue the claims of all Class Members, see, e.g.,
Esslinger v. HSBC Bank Nev., N.A., No. 10-3213, 2012 WL 5866074, at *4 (E.D. Pa. Nov.
20, 2012), the adequacy requirement is satisfied by the Representative Plaintiffs.
Besides meeting the four threshold requirements under Rule 23(a), a proposed class
must also satisfy one of the three sub-parts of Rule 23(b). See In re Warfarin Sodium
Antitrust Litig., 391 F.3d 516, 527 (3d Cir. 2004). Here, Plaintiffs seek to maintain this class
action under Rule 23(b)(3), which allows for a class action to proceed if “questions of law
or fact common to class members predominate over any questions affecting only individual
members, and [ ] a class action is superior to other available methods for fairly and
efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). These requirements are
commonly separated into the “predominance” and “superiority” requirements. See In re
Cmty. Bank of N. Va., 418 F.3d at 308-09.
The predominance inquiry under Rule 23(b)(3) “‘tests whether proposed classes are
sufficiently cohesive to warrant adjudication by representation.’” Sullivan, 667 F.3d at 297
(quoting In re Ins. Brokerage Antitrust Litig., 579 F.3d 241, 266 (3d Cir. 2009)). “Parallel
with Rule 23(a)(2)'s commonality element, which provides that a proposed class must share
a common question of law or fact, Rule 23(b)(3)'s predominance requirement imposes a
more rigorous obligation upon a reviewing court to ensure that issues common to the class
predominate over those affecting only individual class members.” Id. (citing Ins. Brokerage,
579 F.3d at 266).
Thus, the Third Circuit “‘consider[s] the Rule 23(a) commonality
requirement to be incorporated into the more stringent Rule 23(b)(3) predominance
requirement, and therefore deem it appropriate to analyze the two factors together, with
particular focus on the predominance requirement.’” Id. (quoting Ins. Brokerage, 579 F.3d
at 266). And, Third Circuit precedent “provides that the focus of the predominance inquiry
is on whether the defendant's conduct was common as to all of the class members, and
whether all of the class members were harmed by the defendant's conduct.” Id. at 298.
In assessing predominance, “a court at the certification stage must examine each
element of a legal claim ‘through the prism’ of Rule 23(b)(3).” Marcus, 687 F.3d at 600
(quoting In re DVI, Inc. Sec. Litig., 639 F.3d 623, 630 (3d Cir. 2011)). Thus, “[a] plaintiff
must ‘demonstrate that the element of [the legal claim] is capable of proof at trial through
evidence that is common to the class rather than individual to its members.’” Id. (quoting
Hydrogen Peroxide, 552 F.3d at 311).
With respect to the 42 U.S.C. § 1983 claims brought by the Juvenile Settlement
Class Members, Juvenile Plaintiffs would have to demonstrate that Provider Defendants “(1)
acting under color of law, (2) violated the plaintiff[s’] federal constitutional or statutory rights,
(3) and thereby caused the complained of injury.” Elmore v. Cleary, 299 F.3d 279, 281 (3d
Cir. 2005) (citing Sameric Corp. of Del., Inc. v. City of Phila., 142 F.3d 582, 590 (3d Cir.
1998)). As to the “state actor” inquiry, proof of this element would focus solely on Provider
Defendant’s conduct. And, due to the alleged conspiratorial conduct, each member of the
Juvenile Settlement Class claims that they appeared before a partial tribunal, depriving
them of their constitutional rights. Because the § 1983 claims against Provider Defendants
rely on the same course of conduct, common proof of such conduct, and damage as a
result of that conduct, the predominance requirement of Rule 23(b)(3) is met for these
Next, “[t]he elements of a civil RICO claim under § 1962(c) are (1) the conducting of,
(2) an enterprise, (3) through a pattern, (4) of racketeering activity, (5) which results in injury
to the plaintiffs' business or property.” Tapp v. Proto, 718 F. Supp. 2d 598, 625 (E.D. Pa.
2010) (citing Sedima, S.P.R.L. v. Imrex Co., 473 U.S. 479, 496, 105 S. Ct. 3275, 87 L. Ed.
2d 346 (1985)). For a § 1962(d) claim, a plaintiff must establish “(1) an agreement to
commit the predicate acts of fraud, and (2) knowledge that those acts were part of a pattern
of racketeering activity conducted in such a way as to violate section 1962(a), (b), or (c).”
Rose v. Bartle, 871 F.2d 331, 366 (3d Cir. 1989) (citing Odesser v. Continental Bank, 676
F.Supp. 1305, 1312 (E.D. Pa. 1987)).
Proving the first element of the § 1962(c) RICO claims in this case would involve
common questions about the activities of Provider Defendants, and, whether Provider
Defendants participated or engaged in conduct with other Defendants. See Ins. Brokerage,
579, F.3d at 269. The second element also involves common legal and factual questions,
specifically whether an enterprise existed. See id. at 269-70. Likewise, proof of the third
and fourth elements would encompass common questions of law and fact, notably whether
activities that constitute racketeering were occurring through the enterprise, and whether
these racketeering activities were occurring in a pattern that could be established. See id.
at 270. And, “[w]hile establishing an injury is not as conducive to common proof,” “plaintiffs
have presented a plausible theory for proving a class-wide injury as a result of the
racketeering activities of the alleged enterprise.” Id. For the same reasons, the § 1962(d)
claim focuses on the conduct of Defendants, and whether Defendants “conspire[d] to violate
§ 1962(c).” Id. at 269. Thus, all elements of the alleged RICO violations involve common
questions of law and fact. Therefore, Plaintiffs adequately satisfy the predominance
requirement of Rule 23(b)(3).
According to Rule 23(b)(3), the considerations relevant to the superiority inquiry
(A) the class members' interests in individually controlling the prosecution or
defense of separate actions; (B) the extent and nature of any litigation
concerning the controversy already begun by or against class members; (C)
the desirability or undesirability of concentrating the litigation of the claims in
the particular forum; and (D) the likely difficulties in managing a class action.
Fed. R. Civ. P. 23(b)(3). “The superiority requirement asks a district court ‘to balance, in
terms of fairness and efficiency, the merits of a class action against those of alternative
available methods of adjudication.’” In re Cmty. Bank of N. Va., 418 F.3d at 309 (quoting
Georgine v. Amchem Prods., Inc., 83 F.3d 610, 632 (3d Cir. 1996), aff'd, 521 U.S. 591, 117
S. Ct. 2231, 138 L. Ed. 2d 689 (1997)).
And, when “confronted with a request for
settlement-only class certification, a district court need not inquire whether the case, if tried,
would present intractable management problems, see Fed. Rule Civ. Proc. 23(b)(3)(D), for
the proposal is that there be no trial.” Amchem, 521 U.S. at 620, 117 S. Ct. 2231.
A class resolution in the manner proposed in the instant Settlement is superior to
other available methods for resolution of this action against Provider Defendants. First,
proceeding as a class action in this case is far superior to allowing piecemeal litigation of
the exact same claims in countless lawsuits. See, e.g., Logory, 277 F.R.D. at 146 (quoting
Stanford v. Foamex L.P., 263 F.R.D. 156, 174 n.22 (E.D. Pa. 2009)). Second, where a
claim is small in comparison to the costs of prosecuting a lawsuit, a class action allows for
litigation costs to be spread among the injured parties. See Processed Egg Prods., 284
F.R.D. at 264. Indeed, “[a]ddressing the rights of those who would not otherwise be
appropriately incentivized to bring their own singular claims was precisely the aim of the
Advisory Committee in promulgating Rule 23(b)(3).” Logory, 277 F.R.D. at 146 (citing
Amchem, 521 U.S. at 617, 117 S. Ct. 2231). Third, this is an appropriate forum for
concentrating the claims of the Settlement Classes because the Court has subject matter
jurisdiction over the claims and personal jurisdiction over the parties. See Esslinger, 2012
WL 5866074, at *5. Lastly, the difficulties in managing a class action need not be
considered since the Settlement will avoid trial. See Amchem, 521 U.S. at 620, 117 S. Ct.
2231. For these reasons, the superiority requirement is satisfied.
Conclusion as to Class Certification for Settlement Purposes
Because all of the Rule 23(a) and (b)(3) requirements have been met, the Class will
be certified for settlement purposes.
“In the class action context, the district court obtains personal jurisdiction over the
absentee class members by providing proper notice of the impending class action and
providing the absentees with the opportunity to be heard or the opportunity to exclude
themselves from the class.” In re Prudential Ins. Co. Am. Sales Practice Litig. Agent
Actions, 148 F.3d 283, 326 (3d Cir. 1998) (citing Phillips Petroleum Co. v. Shutts, 472 U.S.
797, 811-12, 105 S. Ct. 2965, 86 L. Ed. 2d 628 (1985)). Rule 23 contains two distinct notice
provisions. See id. at 326. First, Rule 23(c)(2) requires that class members be given the
best notice practicable, including individual notice to all members who can be identified
through reasonable efforts. Fed. R. Civ. P. 23(c)(2).3 Second, Rule 23(e) requires all class
members to be notified of the terms of any proposed settlement. Fed. R. Civ. P. 23(e). This
“notice is designed to summarize the litigation and the settlement” and “to apprise class
members of the right and opportunity to inspect the complete settlement documents,
papers, and pleadings filed in the litigation.” Prudential, 148 F.3d at 327 (citation omitted).
Here, the Notice of the Provider Defendant Settlement contained the information
The notice, in clear and concise language, must state:
(i) the nature of the action; (ii) the definition of the class certified; (iii)
the class claims, issues, or defenses; (iv) that a class member may enter
an appearance through an attorney if the member so desires; (v) that the
court will exclude from the class any member who requests exclusion;
(vi) the time and manner for requesting exclusion; and (vii) the binding
effect of a class judgment on members under Rule 23(c)(3).
Fed. R. Civ. P. 23(c)(2).
required by Rules 23(c)(2) and 23(e). Specifically, the Notice detailed the nature of the
action, the definitions of the Juvenile Settlement Class and the Parent Settlement Class,
the claims of the Settlement Classes, the terms of the Settlement Agreement, and the right
to object or request exclusion from the terms of the Settlement. The Notice also informed
members of their opportunity to be heard at the fairness hearing, to enter an appearance
through an attorney of their choice, and that the Settlement would be binding on members
that did not opt out.
Additionally, Plaintiffs’ efforts to notify the Settlement Class Members satisfied the
requirements of Rule 23 and due process. The Notice was sent to potential Settlement
Class Members by first-class mail based on the last known addresses of these individuals
from the database used to administer the Mericle Settlement. Notice was also published
in two local newspapers, and information about the proposed Settlement was available
through a detailed website. Based on the extensive individual notice, as well as the
published notice, the notice requirements of both Rule 23 and the Due Process Clause
have been satisfied. See Zimmer Paper Prods., Inc. v. Berger & Montague, P.C., 758 F.2d
86, 90 (3d Cir. 1985) (“first-class mail and publication regularly have been deemed
adequate under the stricter notice requirements . . . of Rule 23(c)(2).”).
Fairness of the Settlement
Certified federal class actions may only be settled with court approval. See Fed. R.
Civ. P. 23(e). While the approval of a class action settlement is committed to the sound
discretion of the district court, “it can endorse a settlement only if the compromise is fair,
adequate, and reasonable.’” Eichenholtz v. Brennan, 52 F.3d 478, 482 (3d Cir. 1995)
(quoting Walsh v. Great. Atl. & Pac. Tea Co., 726 F.2d 956, 965 (3d Cir. 1983)).
The Third Circuit has identified nine factors, known as the Girsh factors, to be
considered when determining whether a proposed class action settlement is fair,
reasonable, and adequate. See Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975). These
(1) The complexity, expense, and likely duration of the litigation; (2) the
reaction of the class to the settlement; (3) the stage of the proceedings and the
amount of discovery completed; (4) the risks of establishing liability; (5) the
risks of establishing damages; (6) the risks of maintaining the class action
through the trial; (7) the ability of the defendants to withstand a greater
judgment; (8) the range of reasonableness of the settlement fund in light of the
best possible recovery; and (9) the range of reasonableness of the settlement
fund to a possible recovery in light of all the attendant risks of litigation.
Warfarin, 391 F.3d at 534-35 (citing Girsh, 521 F.3d at 157). “The settling parties bear the
burden of proving that the Girsh factors weigh in favor of approval of the settlement.” Pet
Food, 629 F.3d at 350 (citing Gen. Motors, 55 F.3d at 785).
Complexity, Expense, and Duration of Litigation
The first Girsh factor “captures the probable costs, in both time and money, of
continued litigation.” Warfarin, 391 F.3d at 535-36. This litigation was commenced well over
five years ago, and it encompasses a Class Period dating back to 2003. In order to prepare
this action to proceed to trial against Provider Defendants, Plaintiffs would be required to
expend considerable financial resources drafting and responding to further motions. And,
as recognized by Plaintiffs, this case raises complex legal issues with respect to the RICO
and § 1983 claims. Additionally, a trial on the merits would require hours of attorney
preparation and the expenditure of hundreds of thousands of dollars. Likewise, even if this
case proceeded to trial against Provider Defendants, a “complicated, lengthy trial,” would
ensue, and the “inevitable . . . post-trial motions and appeals would not only further prolong
the litigation but also reduce the value of any recovery to the class.” Warfarin, 391 F.3d at
536. As such, the first Girsh factor weighs in favor of approving the Settlement.
Reaction of the Class to the Settlement
“The second Girsh factor ‘attempts to gauge whether members of the class support
the settlement.’” Warfarin, 391 F.3d at 536 (quoting Prudential, 148 F.3d at 318). The Third
Circuit has noted that a vast disparity between the number of potential class members who
received notice of a proposed settlement and the number of objectors “creates a strong
presumption that this factor weighs in favor of the Settlement.” In re Cendant Corp. Litig.,
264 F.3d 201, 235 (3d Cir. 2001). Similarly, “[c]ourts have generally assumed that ‘silence
constitutes tacit consent to the agreement.’” Gen. Motors, 55 F.3d at 812 (quoting Bell Atl.
Corp. v. Bolger, 2 F.3d 1304, 1313 n.15 (3d Cir. 1993).
The reaction of the class strongly favors approval of the Settlement. Here, following
extensive notice, both to potential Settlement Class Members individually and by general
publication, none of the Settlement Class Members objected to the proposed Settlement.
Furthermore, only ten (10) Settlement Class Members opted out of the Settlement. The
lack of objections and the low number of opt outs demonstrate a general acceptance of the
Settlement by Class Members. See, e.g., Stoetzner v. U.S. Steel Corp., 897 F.2d 115,
118–19 (3d Cir.1990) (approving settlement where “only” 29 objections were made in a
281–member class); Alexander v. Washington Mut., Inc., No. 07-4426, 2012 WL 6021098,
at *8 (E.D. Pa. Dec. 4, 2012) (reaction of class favored approval of settlement where only
five class members opted out and no formal objections were filed to the settlement); Ripley
v. Sunoco, Inc.,287 F.R.D.300, 312 (E.D. Pa. 2012) (reaction of the class favored approval
of settlement where “less than 1 percent of the eligible class members opted out of the
settlement”). Also indicative of overwhelming support by the Class is that, when compared
to the Mericle Settlement, more than 200 additional Proof of Claim Forms were submitted
for payment with respect to the Provider Settlement. Yet, despite this increase, less
Settlement Class Members opted out of the instant Settlement than the Mericle Settlement.
The second Girsh factor thus strongly counsels in favor of settlement approval.
Stage of the Proceedings and Amount of Discovery Completed
The third Girsh factor “captures the degree of case development that class counsel
had accomplished prior to settlement,” and allows the court to “determine whether counsel
had an adequate appreciation of the merits of the case before negotiating.” Warfarin, 391
F.3d at 537 (citation, quotations, & alterations omitted); see also Gen. Motors, 55 F.3d at
813 (“Given the purpose of this inquiry, . . . it is . . . appropriate to measure the stage by
reference to the commencement of proceedings either in the class action at issue or in
some related proceeding.”).
When analyzing this Girsh factor, courts also examine whether the settlement
resulted from arm's-length negotiations. See In re Corel Corp. Sec. Litig., 293 F. Supp. 2d
484, 491 (E.D. Pa. 2003). When the settlement results from arm's-length negotiations, the
court will “afford[ ] considerable weight to the views of experienced counsel regarding the
merits of the settlement.” McAlarnen v. Swift Transp. Co., Inc., Civ. A. No. 09–1737, 2010
WL 365823, at *8 (E.D. Pa. Jan. 29, 2010); see also Corel Corp. Sec. Litig., 293 F. Supp.
2d at 491 (“Courts generally recognize that a proposed class action settlement is
presumptively valid where, as in this case, the parties engaged in arm's length negotiations
after meaningful discovery.”); In re Gen. Instrument Sec. Litig., 209 F.Supp.2d 423, 431
(E.D. Pa. 2001) (“Significant weight should be attributed to the belief of experienced counsel
that the settlement is in the best interests of the class.”).
The Settlement was preliminarily approved in November 2013, almost five years after
the commencement of this litigation. During that period, considerable time, effort, and
money was expended by both parties, including the production and review of over 200,000
pages of documents and hundreds of Plaintiff Fact Sheets. Moreover, numerous pleadings
and motions were filed, and responded to, by Plaintiffs and Provider Defendants. As such,
at this stage of the proceedings “‘the parties certainly had a clear view of the strengths and
weaknesses of their cases.’” McCoy v. Health Net, Inc., 569 F. Supp. 2d 448, 461 (D. N.J.
2008) (quoting Bonett v. Educ. Debt Servs., Inc., No. 01-6528, 2003 WL 21658267, at *6
(E.D. Pa. May 9, 2003)). The third Girsh factor therefore weighs in favor of settlement
Risks of Establishing Liability
“The fourth Girsh factor ‘examines what the potential rewards (or downside) of
litigation might have been had class counsel decided to litigate the claims rather than settle
them.’” Sullivan, 667 F.3d at 322 (quoting Cendant, 264 F.3d at 237). “[T]he more risks that
Plaintiffs may face during litigation the stronger this factor favors approving a settlement.”
Esslinger, 2012 WL 5866074, at *9 (citing Prudential, 148 F.3d at 319). “The inquiry
requires a balancing of the likelihood of success if ‘the case were taken to trial against the
benefits of immediate settlement.’” In re Safety Components, Inc. Sec. Litig., 166 F. Supp.
2d 72, 89 (D. N.J. 2001) (quoting Prudential, 148 F.3d at 319).
As previously noted, Plaintiffs face a difficult task of proving all elements of their
claims should these actions proceed to trial. While Plaintiffs did not provide, in detail, the
risks of establishing liability in this case, this is understandable in this case “[g]iven that the
litigation [will] continue against other defendants, [and] the parties may [have been] reluctant
to disclose fully and candidly their assessment of the proposed settlement's strengths and
weaknesses that led them to settle separately.” Processed Egg Prods., 284 F.R.D. at 271
(quoting David F. Herr, The Manual for Complex Litigation § 21.651, at 505 (4th ed. 2011)).
In addition, possible appeals, summary judgment motions, and trial still remain if the
Settlement is not approved. Thus, as “this case involves difficult factual and legal issues
which would have translated into protracted litigation and accumulating expenses, in both
time and money,” In re. Ins. Brokerage Antitrust Litig., 282 F.R.D. 92, 104 (D.N.J. 2012), this
factor weighs in favor of approval.
Risks of Establishing Damages
This factor “attempts to measure the expected value of litigating the action rather
than settling it at the current time.” Cendant, 264 F.3d at 239 (quoting Gen. Motors, 55 F.3d
at 816). “This factor, like the last, involves a balancing of risks.” In re CertainTeed Corp.
Roofing Shingle Prods. Liab. Litig., 269 F.R.D. 468, 488 (E.D. Pa. 2010).
In this case, even if Plaintiffs were able to establish liability, they would still be tasked
with proving the appropriate amount of damages against Provider Defendants. For Juvenile
Plaintiffs that only seek presumed damages with respect to the § 1983 claims, proving
damages may not present a daunting task. However, Juvenile Plaintiffs seeking more than
presumed damages may face significant obstacles in establishing individual damages. The
issue of individualized damages could very well lead to a “battle of the experts” with no
guarantee whom the jury would believe. See Cendant, 264 F.3d at 236. Furthermore, even
if damages are established, post-trial motions and appeals present increased risk to the
recovery of damages.
In the instant case, the risks of establishing damages factor is neutral. Although
some Plaintiffs may face difficulty in establishing individualized or special damages,
establishing presumed damages suffered by the Juvenile Settlement Class as a whole
would not present the same risks. As such, this factor does not weigh for or against
Risks of Maintaining the Class Action through Trial
The sixth Girsh factor “measures the likelihood of obtaining and keeping a class
certification if the action were to proceed to trial” in light of the fact that “the prospects for
obtaining certification have a great impact on the range of recovery one can expect to reap
from the class action.” Sullivan, 667 F.3d at 322. “The value of a class action depends
largely on the certification of the class because, not only does the aggregation of the claims
enlarge the value of the suit, but often the combination of the individual cases also pools
litigation resources and may facilitate proof on the merits.” Gen. Motors, 55 F.3d at 817.
However, a “district court retains the authority to decertify or modify a class at any time
during the litigation if it proves to be unmanageable.” Id. (citing Prudential, 148 F.3d at 321).
Here, as noted, the Classes have already been certified for all issues of liability.
Nevertheless, the Third Circuit has recognized that “[t]here will always be a ‘risk’ or
possibility of decertification, and consequently the court can always claim this factor weighs
in favor of settlement.” Prudential, 148 F.3d at 321.
Ability of Defendants to Withstand a Greater Judgment
The seventh Girsh factor considers “whether the defendants could withstand a
judgment for an amount significantly greater than the settlement.” Warfarin, 391 F.3d at
537-38 (citation, quotations, & alteration omitted). Here, Plaintiffs retained a forensic
accountant, Stephen J. Scherf (“Scherf”), to assess and review Provider Defendants’
financial records and its ability to withstand a judgment greater than that provided by the
Settlement. (Doc. 1528, Ex. N.) Scherf opines “within a reasonable degree of professional
certianty that the payment of $2.5 million was fair and reasonable given the financial
condition and equity value of the Provider Defendants after consideration of the significant
third party debt obligations totaling $20,036,722 (comprised of a mortgage to PACC of
$7,616,653, a mortgage to WPACC of $12,195,069 and a line of credit to Mays of
$225,000).” (Id.) Scherf also concludes that “the payout over the time periods provided
above are fair and reasonable given the Provider Defendants’ financial obligations.” (Id.)
Based on this evidence, the seventh Girsh factor weighs in favor of approval.
Range of Reasonableness of the Settlement in Light of the Best Possible
Recovery and the Attendant Risks of Litigation
“The last two Girsh factors evaluate whether the settlement represents a good value
for a weak case or a poor value for a strong case. The factors test two sides of the same
coin: reasonableness in light of the best possible recovery and reasonableness in light of
the risks the parties would face if the case went to trial.” Warfarin, 391 F.3d at 538 (citing
Prudential, 148 F.3d at 322). “Notably, in conducting the analysis, the court must guard
against demanding too large a settlement based on its view of the merits of the litigation;
after all, settlement is a compromise, a yielding of the highest hopes in exchange for
certainty and resolution.” Sullivan, 667 F.3d at 324.
To assess the reasonableness of a settlement in a case, such as this, seeking
primarily monetary relief, a court should compare “‘the present value of the damages
plaintiffs would likely recover if successful, appropriately discounted for the risk of not
prevailing . . . with the amount of the proposed settlement.’” Warfarin, 391 F.3d at 538
(quoting Prudential, 148 F.3d at 322).
The Settlement provides for $2,500,000.00 to be distributed to the Settlement Class,
less attorneys’ fees and costs. Although Plaintiffs do not set forth an exact estimation of
the damages they would likely recover if successful, Plaintiffs discuss the obstacles that
must be surmounted before any damages may be awarded.
These hurdles could
substantially reduce, if not eliminate, any recovery by Plaintiffs. Additionally, Plaintiffs
retained an ethics expert, Professor Lynn A. Baker, to offer an opinion as to fairness and
reasonableness of the Settlement. Professor Baker has served as an ethics expert in
multiple large-dollar, large-group settlements. Professor Baker, based upon her experience,
opines that all of the components of the Settlement Agreement were fair, reasonable, and
appropriate under the circumstances.
Here, “while the exact maximum possible recovery in this case may be unclear, the
extensive risks of litigation are not.” Esslinger, 2012 WL 5866074, at *10 (finding eighth and
ninth Girsh factors favored settlement approval despite lack of exact estimation as to likely
recovery). Based on these attendant risks, the final two Girsh factors weigh in favor of
approval of the Settlement.
In addition to the Girsh factors, courts in the Third Circuit also consider the following
factors outlined in Prudential:
the maturity of the underlying substantive issues, as measured by experience
in adjudicating individual actions, the development of scientific knowledge, the
extent of discovery on the merits, and other facts that bear on the ability to
assess the probable outcome of a trial on the merits of liability and individual
damages; the existence and probable outcome of claims by other classes and
subclasses; the comparison between the results achieved by the settlement
for individual class or subclass members and the results achieved-or likely to
be achieved-for other claimants; whether class or subclass members are
accorded the right to opt out of the settlement; whether any provisions for
attorneys' fees are reasonable; and whether the procedure for processing
individual claims under the settlement is fair and reasonable.
Prudential, 148 F.3d at 323.
In this case, none of the Prudential factors weigh against approval, and three (3)
factors weigh in favor of settlement: (1) whether members are accorded the right to opt out;
(2) whether any provisions for attorneys’ fees are reasonable; and (3) whether the
procedure for processing individual claims under the Settlement is fair and reasonable. As
noted, the Settlement Class Members were given the opportunity to opt out. The attorneys’
fees sought by Class Counsel, as discussed below, are reasonable in light of the time
expended litigating this action. And, finally, the procedure for processing individual claims
under the Settlement is fair and reasonable, and the procedure has been explained clearly
in forms available to Settlement Class Members.
Summary of Girsh and Prudential Factors
After consideration of the Girsh factors and the relevant Prudential factors, I conclude
that the Settlement is fair, reasonable, and adequate under Rule 23(e). As discussed, a few
factors do not weigh in favor of settlement. Not every factor need weigh in favor of
settlement, however, in order for the Settlement to be approved. See Cendant, 264 F.3d
at 242-43 (affirming final settlement approval when not all factors weighed in favor of
Because the ultimate balance of the Girsh and Prudential factors when
considered together weigh in favor of settlement, the Settlement will be approved.
Attorneys’ Fees and Costs
Under Rule 23(h) of the Federal Rules of Civil Procedure, “[i]n a certified class action,
the court may award reasonable attorney’s fees and nontaxable costs that are authorized
by law or by the parties’ agreement.” Fed. R. Civ. P. 23(h). A district court must conduct a
“thorough judicial review of fee applications . . . for all class action settlements.” In re Rite
Aid Corp. Sec. Litig., 396 F.3d 294, 299 (3d Cir. 2005) (quoting Prudential, 148 F.3d at 333
(internal quotations omitted)).
In assessing attorneys' fees, courts typically apply either the
percentage-of-recovery method or the lodestar method. The
percentage-of-recovery method is generally favored in common fund cases
because it allows courts to award fees from the fund “in a manner that rewards
counsel for success and penalizes it for failure.” Prudential, 148 F.3d at 333
(internal quotations omitted). The lodestar method is more typically applied in
statutory fee-shifting cases because it allows courts to “reward counsel for
undertaking socially beneficial litigation in cases where the expected relief has
a small enough monetary value that a percentage-of-recovery method would
provide inadequate compensation” or in cases where the nature of the
recovery does not allow the determination of the settlement's value required
for application of the percentage-of-recovery method. Id. Regardless of the
method chosen, we have suggested it is sensible for a court to use a second
method of fee approval to cross-check its initial fee calculation. Id.
Id. As such, the percentage-of-recovery method will be employed to determine the proper
fee to award Class Counsel, and then the lodestar will be utilized as a cross-check to
ensure the reasonableness of the award. See id.
Application of the Percentage-of-Recovery Method
Class Counsel requests a combined award of common benefit attorneys’ fees and
expenses of $732,968.36 under the percentage-of-recovery method. The Third Circuit has
instructed a district court to consider ten factors when undertaking a percentage-of-recovery
analysis: (1) the size of the fund created and the number of beneficiaries; (2) the presence
or absence of substantial objections by members of the class to the settlement terms and/or
fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the
complexity and duration of the litigation; (5) the risk of nonpayment; (6) the amount of time
devoted to the case by plaintiffs' counsel; (7) awards in similar cases; (8) the value of
benefits attributable to the efforts of class counsel relative to the efforts of other groups,
such as government agencies conducting investigations; (9) the percentage fee that would
have been negotiated had the case been subject to a private contingent fee arrangement
at the time counsel was retained; and (10) any innovative settlement terms. In re Diet
Drugs, 582 F.3d 524, 541 (3d Cir. 2009) (citations omitted). The award factors, however,
“‘need not be applied in a formulaic way’” because each case is different, “‘and in certain
cases, one factor may outweigh the rest.’” Rite Aid, 396 F.3d at 301 (quoting Gunter v.
Ridgewood Energy Corp., 223 F.3d 190, 195 n.1 (3d Cir. 2000)).
Size of the Fund and Number of Beneficiaries
The Settlement Agreement establishes a common fund of $2,500,000.00 and notice
has been disseminated to over 3,000 individuals. In general, as the size of the settlement
fund increases the percentage of the award decreases. See Prudential, 148 F.3d at 339.
“The basis for this inverse relationship is the belief that ‘[i]n many instances the increase [in
recovery] is merely a factor of the size of the class and has no direct relationship to the
efforts of counsel.’“ Id. (citing In re First Fid. Bancorporation Sec. Litig., 750 F. Supp. 160,
164 n.1 (D. N.J. 1990)). As explained below, Class Counsel’s requested fees in this case
represent less than thirty percent (30%) of the common benefit fund, well within the range
of reasonable fees, on a percentage basis, in the Third Circuit. See, e.g., Sakalas v. Wilkes
Barre Hosp. Co., No. 11-546, 2014 WL 1871919, at *5-8 (M.D. Pa. May 8, 2014) (approving
award of twenty-seven percent (27%) of the common fund); Craig v. Rite Aid Corp., No. 082317, 2013 WL 84928, at *12-13 (M.D. Pa. Jan. 7, 2013) (approving award of thirty-two
percent (32%) of the fund). And, with respect to the Mericle Settlement, I approved a
combined award of attorneys’ fees and costs of $4,335,000.00, which amounted to 24.4%
of the $17,750,000.00 common benefit fund. Accordingly, this factor weighs in favor of
finding the fee request reasonable.
Presence or Absence of Substantial Objections by Class
As discussed above with respect to the Girsh factors, no objections were filed to the
Settlement by any Settlement Class Member. Similarly, no objections have been filed to
Class Counsel’s fee application. “The absence of objections supports the reasonableness
of the fee request.” Frederick v. Range Resources-Appalachia, LLC, No. 08-288, 2011 WL
1045665, at *10 (W.D. Pa. Mar. 17, 2011) (citing In re Rent-Way Sec. Litig., 305 F. Supp.
2d 491, 514-15 (W.D. Pa. 2003)); In re Amer. Inv. Life Ins. Co. Annuity and Mktg. & Sales
Practices Litig., 263 F.R.D. 226, 244 (E.D. Pa. 2009) (“small number of objections and the
objections' lack of merit indicate that the class is satisfied with the fee award”). This factor
also weighs in favor of the requested award of attorneys’ fees.
Skill and Efficiency of the Attorneys Involved
The quality of representation of Class Counsel considers “‘the quality of the result
achieved, the difficulties faced, the speed and efficiency of the recovery, the standing,
experience and expertise of the counsel, the skill and professionalism with which counsel
prosecuted the case and the performance and quality of opposing counsel.’” In re Ikon
Office Solutions, Inc., Sec. Litig., 194 F.R.D. 166, 194 (E.D. Pa. 2000) (quoting In re
Computron Software, Inc., 6 F. Supp. 2d 313, 323 (D. N.J. 1998)). As set forth in greater
detail above, Class Counsel is highly experienced, as the individual attorneys in this action
have litigated numerous complex class actions involving mass actions and civil rights
claims. Additionally, Class Counsel’s ability to successfully negotiate the Settlement
“demonstrates the significant skill and expertise of counsel.” In re Processed Egg Prods.
Antitrust Litig., No. 08-2002, 2012 WL 5467530, at *3 (E.D. Pa. Nov. 9, 2012). Likewise,
counsel for Provider Defendants has extensive experience defending complex litigation and
class actions. Thus, this factor supports the reasonableness of the fee award.
Complexity and Duration of the Litigation
The Third Circuit has stated that “complex and/or novel legal issues, extensive
discovery, acrimonious litigation, and tens of thousands of hours spent on the case by class
counsel” are “the factors which increase the complexity of class litigation.” In re Cendant
Corp., PRIDES Litig., 243 F.3d 722, 741 (3d Cir. 2001). These factors all support the
requested fee award. Class Counsel participated in mediation, engaged in discovery, and
submitted numerous, well-researched filings. Equally significant is the complex nature of
this litigation, and the alleged judicial corruption scheme for which these actions seek
redress. Furthermore, the litigation proceeded against Provider Defendants for well over
four years prior to the parties agreeing to the terms of the Settlement. Therefore, the
complexity and duration of the litigation supports the requested fee award.
Risk of Nonpayment
“This factor allows courts to award higher attorneys’ fees for riskier litigation.”
Esslinger, 2012 WL 5866074, at * 13. Here, Class Counsel undertook this complex civil
rights/RICO litigation on a contingent fee basis without any guarantee of payment. Class
Counsel, in litigating this case, incurred hundreds of thousands of dollars in costs and
expenses while facing the risk of not being reimbursed. The risk of nonpayment, therefore,
weighs in favor of granting the requested fee award. See, e.g., Processed Egg Prods., 2012
WL 5467530, at *4 (“any contingency fee arrangement includes a risk of non-payment”);
Ripley, 2012 WL 2402632, at *12 (“it follows, therefore, that there was a risk of nonpayment
under a contingency arrangement”).
Amount of Time Devoted by Class Counsel
According to the motion for attorneys’ fees, attorneys, paralegals, and staff at Anapol
Schwartz, along with the Dyller Law Firm, expended 2,280.37 hours working towards the
settlement with Provider Defendants. (Doc.1535, Ex. L.) Additionally, since fees were
awarded under the Mericle Settlement, attorneys and paralegals at Hangley Aronchick
Segal Pudlin & Schiller expended 1,196.4 hours litigating this action, 1,015.3 hours of which
were unrelated to the Mericle Settlement. (Id. at Ex. M.) Attorneys at the Juvenile Law
Center expended 725.56 hours prosecuting this litigation since November 1, 2012 (the first
date after fees were awarded in connection with the Mericle Settlement), and 651.18 of
these hours were unrelated to the Mericle Settlement. (Id. at Ex. N.) Lastly, from November
1, 2012, attorneys and paralegals at Caroselli Beachler McTiernan & Conboy, LLC
expended 1,275 hours on the prosecution of this litigation; however, it is unclear from
Plaintiffs’ submissions the number of these hours that were unrelated to the Mericle
Settlement. (Id. at K.) Upon reviewing the declarations submitted by Class Counsel,
Counsel spent thousands of hours litigating claims in this action unrelated to the Mericle
Settlement. Furthermore, the amount of time spent on this case prior to final approval of
the Settlement reflects the complexity of Plaintiffs' claims, not the inefficiency of their
counsel. And, the hours spent working on this matter prevented those individuals from
litigating other cases. This factor thus favors granting the motion for attorneys' fees.
Awards in Similar Cases
“In the Third Circuit, fee awards in common fund cases generally range from 19%
to 45% of the fund.” Esslinger, 2012 WL 5866074, at *15 (citing Bredbenner v. Liberty
Travel, Inc., No. 09–905, 2011 WL 1344745, at *15 (D. N.J. Apr. 8, 2011)). “Many courts,
including several in the Third Circuit, have considered 25% to be the ‘benchmark’ figure for
attorney fee awards in class action lawsuits, with adjustments up or down for significant
case-specific factors.” In re Warfarin Sodium Antitrust Litig., 212 F.R.D. 231, 262 (D. Del.
2002) (gathering case law and awarding 22.5% in fees on a $10.01 million settlement fund).
And, courts in the Third Circuit have found a thirty percent (30%) fee reasonable in cases
raising violations of constitutional rights. See, e.g., Delandro v. Cnty. of Allegheny, No. 06927, 2011 WL 2039099, at *14 (W.D. Pa. May 24, 2011) (“the Court finds that a percentage
of thirty percent (30%) . . . is in fact identical to, the percentage awarded in a number of
other strip-search class action settlements in this Circuit”); Boone v. City of Phila., 668 F.
Supp. 2d 693, 714 (E.D. Pa. 2009) (“30% fee percentage is commensurate with other
strip-search class actions”). Therefore, the combined award of attorneys’ fees and costs
amounting to approximately twenty-nine percent (29%) of the Settlement fund is
Value of Benefits Attributed to Class Counsel
The eighth factor the Court must consider is the degree to which the benefits of the
settlement are attributable to Plaintiffs' counsel as opposed to the efforts of other actors,
such as, for example, government investigators. See In re Diet Drugs, 582 F.3d at 541.
While government investigation uncovered the alleged conspiracy orchestrated by
Ciavarella and Conahan which resulted in the indictment of the former judges, “[t]here is no
contention . . . that the settlement could be attributed to work done by other groups, such
as government agencies.” Esslinger, 2012 WL 5866074, at *14. This factor supports the
Negotiated Fee in a Contingent Fee Arrangement
In private contingency fee cases, attorneys routinely negotiate agreements for
between thirty percent (30%) and forty percent (40%) of the recovery. See In re Ins.
Brokerage Antitrust Litig., 282 F.R.D. 92, 123 (D. N.J. 2012); In re Ikon Office Solutions, Inc.
Sec. Litig., 194 F.R.D. 166, 194 (E.D. Pa. 2000). The requested fee is below this range.
Innovative Settlement Terms
In their submission, Class Counsel did not identify any particularly “innovative” terms
in the Settlement Agreement. Thus, this factor neither weighs against nor for the proposed
fee request. See, e.g, McDonough v. Toys “R” Us, Inc ., 834 F. Supp. 2d 329, 345 (E.D.
Pa. 2011) ( “In the absence of any innovative terms, this factor neither weighs in favor or
against the proposed fee request.”).
“The lodestar crosscheck is intended to gauge the reasonableness of the attorneys'
fee award as a whole.” Milliron v. T–Mobile, USA, Inc., 423 F. App'x 131, 136 (3d Cir. 2011).
In performing the lodestar cross-check, the court multiplies “the number of hours reasonably
worked on a client's case by a reasonable hourly billing rate for such services based on the
given geographical area, the nature of the services provided, and the experience of the
attorneys.” Rite Aid, 396 F.3d at 305. Then, the court may apply a multiplier to “account for
the contingent nature or risk involved in a particular case and the quality of the attorneys'
work.” Id at 305–06. If the multiplier that must be used in order to obtain the result reached
by application of the percentage-of-recovery method “is too great, the court should
reconsider its calculation under the percentage-of-recovery method.” Id. at 306. But,
because the cross-check is not the primary analysis in common fund cases, it does not
require “mathematical precision [ ] or bean-counting.” Id. In evaluating the hours reasonably
spent on the case, the court does not have to “review actual billing records” but can “rel[y]
on summaries submitted by the attorneys.” See id.
Here, as best can be determined from Counsel’s submissions, the lodestar for work
performed by Counsel since November 1, 2012 unrelated to the Mericle Settlement is
$1,618,843.00.4 Based on the approximate number of hours spent prosecuting this action
since November 1, 2012 that are not related to the Mericle Settlement, the hourly billable
As stated, this figure is an estimation because Counsel did not indicate the number
of hours worked by attorneys and paralegals at Caroselli Beachler McTiernan &
Conboy, LLC since November 1, 2012 that were unrelated to the Mericle
rate for Counsel of record is approximately $300.00.5 In assessing whether the hourly
billable rate is reasonable, courts should apply “blended billing rates that approximate the
fee structure of all the attorneys who worked on the matter.” Rite Aid, 396 F.3d at 306. The
hourly rate should be reasonable in light of “the given geographical area, the nature of the
services provided, and the experience of the attorneys.” Id. at 305. While the requested
hourly rates are higher than those typically approved in cases in the Scranton-Wilkes-Barre
area, see, e.g., Supinski v. UPS, Inc., No. 06-CV-0793, 2012 WL 2905458, at *2 (M.D. Pa.
July 16, 2012) (awarding hourly rate of $250.00); Carey v. City of Wilkes-Barre, No. 05-CV2093, 2011 WL 1900169, at *2 (M.D. Pa. May 19, 2011) (awarding hourly rate of $225.00),
a higher hourly billable rate is acceptable in light of the extensive experience that Class
Counsel collectively shares and the complex legal services it provided in this case.
Moreover, this hourly rate is consistent with the rate awarded to Counsel in connection with
the Mericle Settlement. See Wallace v. Powell, 288 F.R.D. 347, 376 (M.D. Pa. 2012)
(lodestar cross-check demonstrated hourly billing rate of $308.00).
And, using a lodestar of $1,618,843.00, the award of $732,968.36 in combined fees
and expenses yields a multiplier of significantly less than one. Thus, the lodestar crosscheck supports the requested fee award.
Additionally, the requested fee when considered in combination with the Mericle
Settlement supports a finding that the fee sought pursuant to the Provider Settlement is
reasonable. With respect to the $17,750,000.00 Mericle Settlement, Counsel sought a
This assumes that all hours worked by attorneys and paralegals at Caroselli
Beachler McTiernan & Conboy, LLC since November 1, 2012 were unrelated to
the Mericle Settlement.
combined award of attorneys’ fees and costs of $4,335,000.00, and, at that time, Counsel
had spent 34,900.48 hours prosecuting this matter. See Wallace, 188 F.R.D. at 373-76.
Combined with the Provider Settlement, the claims against Mericle and Provider Defendants
have settled for $20,250,000.00, and Counsel fees of $5,067,968.36 amounts to
approximately twenty-five percent (25%) of the aggregate settlement value. Moreover,
Counsel’s lodestar for the period before the Mericle Settlement was $10,754,199.35. See
Wallace, 188 F.R.D. at 376.
And, Counsel’s most recent submission indicates that
attorneys, paralegals, and staff have expended at least 5,479.33 hours litigating this matter
since November 1, 2012, with a lodestar for this time frame of $1,697,837.00. Thus, the
aggregate lodestar for both settlement totals $12,452,036.35 for 40,739.81 hours worth of
work, which amounts to an hourly rate of approximately $306.00. Thus, the fee requested
here is also reasonable when considered in connection with the fee sought and awarded
under the Mericle Settlement.
Reimbursement of Costs and Expenses
In addition to an award of attorneys’ fees, Plaintiffs’ counsel seeks reimbursement
of expenses in the amount of $107,968.36. The Federal Rules of Civil Procedure provide
that a court “may award reasonable attorney's fees and nontaxable costs” to Plaintiffs'
counsel. Fed. R. Civ. P. 23(h). “Reimbursement is particularly appropriate in situations
where, as here, no class members have objected to it.” Processed Egg Prods., 2012 WL
5467530, at *7. Here, Plaintiffs’ counsel are requesting a combined award of attorneys’
fees and costs, meaning all expenses will be paid and then the remainder of the
$732,968.36 will be considered the total fee. As this request is reasonable, Plaintiffs’
motion for an award of fees and costs will be approved.
Allocation of Fees
Lastly, the motion seeks to allow Lead Counsel to allocate the fee among counsel
entitled to share the award. “Generally, a district court may rely on lead counsel to
distribute attorneys’ fees among those involved.” Milliron, 423 F. App’x at 134. Allocation
of fees in this manner is rationale because counsel “are most familiar with the work done
by each firm and each firm's overall contribution to the litigation,” and this process
“conserves the time and resources of the courts.” Processed Egg Prods., 2012 WL
5467530, at *7 (citation omitted). Co-Lead Counsel will therefore be permitted to distribute
the fee award to those attorneys who assisted in creation of the Settlement fund. Of
course, should all counsel not agree with Co-Lead Counsel’s allocation of fees, the ultimate
allocation will then be made by the Court. See In re Diet Drugs Prods. Liab. Litig., No. 9920593, 2002 WL 32154197, at *24 (E.D. Pa. Oct. 3, 2002).
For the above stated reasons, the Settlement Class will be certified, the Settlement
will be approved, and the requested attorneys’ fees and costs will be awarded.
An appropriate order follows.
July 7, 2014
/s/ A. Richard Caputo
A. Richard Caputo
United States District Judge
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