Del Sesto et al v. Prospect CharterCARE, LLC et al
Filing
123
MEMORANDUM AND ORDER granting #77 Joint MOTION for Settlement Class Certification, Appointment of Class Counsel, and Preliminary Settlement Approval. So Ordered by Chief Judge William E. Smith on 5/17/2019. (Simoncelli, Michael)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
STEPHEN DEL SESTO, AS RECEIVER AND )
ADMINISTRATOR OF THE ST. JOSEPH
)
HEALTH SERVICES OF RHODE ISLAND
)
RETIREMENT PLAN, ET AL.
)
)
Plaintiffs,
)
)
v.
)
C.A. No. 18-328 WES
)
PROSPECT CHARTERCARE, LLC, ET AL., )
)
Defendants.
)
___________________________________)
MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
Before the Court is a joint motion pursuant to Rule 23 of the
Federal Rules of Civil Procedure seeking preliminary certification
of a settlement class, appointment of class counsel, and preliminary approval of a proposed settlement in this action.
The motion
is brought by Plaintiffs and Defendants CharterCARE Foundation
(“CCF”), CharterCARE Community Board (“CCCB”), St. Joseph Health
Services of Rhode Island (“SJHSRI”), and Roger Williams Hospital
(“RWH”) (collectively, “Settling Parties”).
Two other groups of
parties – the Diocesan Defendants1 and the Prospect Entities2
The Diocesan Defendants consist of the Roman Catholic Bishop
of Providence, a corporation sole, the Diocesan Administration
Corporation, and the Diocesan Service Corporation.
1
The Prospect Entities consist of Prospect Medical Holdings,
Inc.; Prospect East Holdings, Inc.; Prospect Chartercare, LLC;
2
(collectively, “Non-Settling Parties”) – have objected to preliminary approval.
The Court has carefully considered the parties’ arguments.
For the reasons that follow, the Joint Motion for Settlement Class
Certification, Appointment of Class Counsel, and Preliminary Settlement Approval by Plaintiffs and Defendants CharterCARE Foundation, St. Joseph Health Services of Rhode Island, Roger Williams
Hospital, and CharterCARE Community Board (ECF No. 77) (“Joint
Motion”) is GRANTED.
I.
Preliminary Approval Under Rule 23(e)
Rule 23(e)(2) permits the Court to approve a class action
settlement only if the proposed agreement is fair, adequate, and
reasonable. Fed. R. Civ. P. 23(e)(2); In re Pharma. Indus. Average
Wholesale Price Litig., 588 F.3d 24, 32 (1st Cir. 2009).
At the
preliminary approval stage, however, a less rigorous standard applies: the Court need only determine whether the settlement “appears to fall within the range of possible final approval.”
Trombley v. Bank of Am. Corp., Civil No. 08-cv-456-jd, 2011 WL
3740488, at *4 (D.R.I. Aug. 24, 2011); see also Armstrong v. Bd.
of Sch. Dirs. of City of Milwaukee, 616 F.2d 305, 314 (7th Cir.
1980), overruled in part on other grounds by Felzen v. Andreas,
Prospect Chartercare SJHSRI, LLC; and Prospect Chartercare RWMC,
LLC.
2
134 F.3d 873 (7th Cir. 1998).
Preliminary approval should not be
confused for a final finding of reasonableness or fairness.
The
first step is merely to “ascertain whether notice of the proposed
settlement should be sent to the class . . . .” 4 William B.
Rubenstein, Newberg on Class Actions § 13:13 (5th ed. 2018); see
also
Flynn
v.
N.Y.
Dolls
Gentlemen’s
Club,
No.
13
Civ.
6530(PKC)(RLE), 2014 WL 4980380, *1 (S.D.N.Y. Oct. 6, 2014) (“Preliminary approval requires only an initial evaluation of the fairness of the proposed settlement on the basis of written submissions
and an informal presentation by the settling parties.”) (quoting
Clark v. Ecolab, Inc., No. 07 Civ. 8623(PAC), 04 Civ. 4488(PAC),
06 Civ. 5672(PAC), 2009 WL 6615729, at *3 (S.D.N.Y. Nov. 27, 2009)
(quotation marks omitted)).
The Court concludes that preliminary approval is warranted
here.
The proposed terms of the settlement are set forth in the
Settling Parties’ settlement agreement, ECF No. 77-2 (“Settlement
Agreement”).
The gravamen of this proposal is that Plaintiff
Stephen Del Sesto3, as Receiver and Administrator of the St. Joseph
Health Services of Rhode Island Retirement Plan (“Plan”), will be
transferred $4.5 million for deposit into the Plan assets.
id. at 13.
insurer.
3
See
These proceeds will be transferred by CCF and its
See Joint Mot. 8.
In exchange, the Plaintiffs and
Mr. Del Sesto is also referred to herein as the “Receiver.”
3
Defendants SJHSRI, CCCB, and RWH will release CCF and the Rhode
Island Foundation4 from liability.
See Settlement Agreement 13.
In addition, the Receiver will transfer to CCF any rights he holds
in CCF.
See id.
On their face, these terms appear fair, reason-
able, and adequate with respect to the proposed class, subject to
this Order’s other terms.
See Fed. R. Civ. P. 23(e)(2).
The
proposed settlement also appears to have been negotiated at arm’s
length by highly experienced and informed counsel.
Accordingly,
the Court concludes that the proposed settlement “fall[s] within
the range of possible final approval[,]” Trombley, 2011 WL 3740488,
at *4, and it therefore qualifies for preliminary approval.
II.
Settling Parties’ Request for a Good Faith Finding Under
R.I. Gen. Laws § 23-17.14-35
In 2018, the Rhode Island General Assembly established cer-
tain ground rules for settlements that are unique to this litigation.
Those rules are codified in R.I. Gen. Laws § 23-17.14-35,
which states:
The following provisions apply solely and exclusively to judicially approved good-faith
settlements of claims relating to the St.
Joseph Health Services of Rhode Island
retirement plan, also sometimes known as the
St. Joseph Health Services of Rhode Island
pension plan:
(1)
A release by a claimant of one joint
tortfeasor, whether before or after
The Rhode Island Foundation is a custodian for CCF’s investment assets.
4
4
judgment, does not discharge the other
joint tortfeasors unless the release so
provides, but the release shall reduce
the claim against the other joint tortfeasors in the amount of the consideration paid for the release.
(2)
A release by a claimant of one joint
tortfeasor relieves them from liability
to make contribution to another joint
tortfeasor.
(3)
For purposes of this section, a goodfaith settlement is one that does not exhibit collusion, fraud, dishonesty, or
other wrongful or tortious conduct intended to prejudice the non-settling
tortfeasor(s), irrespective of the settling or non-settling tortfeasors' proportionate share of liability.
The Settling Parties have requested that the Court declare the
Settlement Agreement to be a “good faith settlement” as defined in
this statute.
See Joint Mot. 13-14.
Such a determination is not
required for the Court to grant preliminary approval under Rule 23
and the Court declines to make such a ruling here.
The Settling
Parties’ request is, however, denied without prejudice and may be
renewed in connection with any final fairness determination.
III. Certification
Counsel
of Class, Class Representatives,
and Class
To qualify for preliminary certification, a proposed settlement class must satisfy the requirements of Federal Rule of Civil
Procedure Rule 23(a) and one of the three categories in Rule 23(b).
See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 621 (1997).
5
Rule
23(a) permits one or more members of a class to represent all class
members’ interests if
(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).
The Settling Parties also seek certifica-
tion under Rule 23(b)(1)(B), which requires a demonstration that
prosecuting separate actions would risk creating “adjudications
with respect to individual class members that . . . would be
dispositive of the interests of the other members not parties to
the individual adjudications or would substantially impair or impede their ability to protect their interests[.]”
The Court con-
cludes that these criteria have been satisfied.5
No party has objected to preliminary certification of the
class, its representatives, or its counsel on the grounds that
they do not satisfy the Rule 23 criteria. As explained below, the
Non-Settling Parties’ other objections are preserved and will be
considered, if asserted, at a later time.
5
6
First, there are 2,729 Plan participants, rendering joinder
of all members of the proposed settlement class impracticable.
See Wistow Decl. Ex. 4 at 22:7, ECF No. 65-4.
Second, the issues raised by Plaintiffs’ claims present issues of law and fact common to the class.
These include, but are
not limited to: (1) the Plan participants’ rights under the Plan
and whether those rights were violated by any defendant (2) whether
SJHSRI, RWH and/or CCF committed fraud or fraudulently transferred
assets; and (3) the extent of CCCB’s rights in CCF and whether
those rights could be transferred to the Receiver as part of another settlement in this litigation.
Third, the claims of the named plaintiffs arise from the same
set of events and allegations as those of the other proposed class
members. The defendants’ conduct also allegedly affected the named
plaintiffs in the same manner as the proposed class members.
Con-
sequently, the Court finds there is typicality among the proposed
class representatives’ claims and the claims of the proposed class.
Fourth, the proposed class representatives are aligned with
the proposed class members.
There is no evidence that named
plaintiffs have any interests that conflict with those of other
class members.
In addition, the retainer agreements for the pro-
posed class counsel sets forth each representative’s duty to act
fairly and in the best interests of the class and provides that
class counsel will not advise or represent any client concerning
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any dispute about how to allocate any aggregate settlement proceeds.
See Wistow Decl. Exs. 12-18.
The Court thus concludes
that the proposed representatives will fairly and adequately protect the interests of the class.
As for the criteria set forth in Rule 23(b)(1)(B) for socalled “limited fund” class actions, Plaintiffs’ claims under the
Employee Retirement Income Security Act of 1974 (“ERISA”), 29
U.S.C. § 1001 et seq., are “paradigmatic examples of claims appropriate for certification as a Rule 23(b)(1) class . . . .”
In
re Schering Plough Corp. ERISA Litig., 589 F.3d 585, 604 (3d Cir.
2009).
The Court agrees with the Plaintiffs that, as a practical
matter, the same is true of their non-ERISA claims as they are
premised on trust law principles.
See, e.g., Meyer v. Citizens &
Southern Nat’l Bank, 106 F.R.D. 356, 362 (M.D. Ga. 1985) (“[A]n
adjudication either that the Defendant did breach its duty in
management of the [trust fund] or that it did not would as a
practical matter be dispositive of the interests of all other
beneficiaries whose trusts hold participating units in the [trust
fund]”).
Lastly, the Court recognizes that the proposed class counsel
are highly qualified and able to carry out their corresponding
duties.
Among other things, counsel are experienced in complex
litigation, appear to have engaged in significant pre-suit investigation, and presented the proposed settlement to the Rhode Island
8
Superior Court in related receivership proceedings to obtain that
court’s required approval.
For the foregoing reasons, the Court preliminarily certifies
– for the purposes of this settlement only – the following class:
All participants of the St. Joseph Health Services of Rhode Island
Retirement Plan (“the Plan”), including (1) all surviving former
employees of St. Joseph Health Services of Rhode Island Inc. who
are entitled to benefits under the Plan; and all representatives
and beneficiaries of deceased former employees of St. Joseph Health
Services of Rhode Island Inc. who are entitled to benefits under
the Plan.
The Court also preliminarily appoints plaintiffs Gail
J. Major, Nancy Zompa, Ralph Bryden, Dorothy Willner, Caroll Short,
Donna Boutelle, and Eugenia Levesque as settlement class representatives and preliminary appoints Wistow, Sheehan & Loveley,
P.C. as class counsel.
IV.
Notice to Potential Class Members
Rule 23(e)(1) requires that the Court “direct notice in a
reasonable manner to all class members who would be bound by the
proposal . . . .”
The Court has reviewed the Settling Parties’
proposed “Notice of Class Action Partial Settlement,” see ECF No.
77-2, Ex. 1 (“Class Notice”), and agrees with class counsel that
it summarizes the proposed settlement’s terms and the rights of
the
recipients
in
sufficiently
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“plain,
easily
understood
language.”
Joint Mot. 37.
The Court therefore finds that the
form and content of the proposed notice is reasonable and adequate.
V.
Objections of Non-Settling Parties
As explained at the outset, the Non-Settling Parties have
objected to the Settlement Agreement on several grounds, including
but not limited to that:
1.
The Plan is subject to ERISA and therefore the Pension Benefit Guaranty Corporation is a necessary
party;
2.
The federal courts have exclusive jurisdiction over
ERISA, thus the Receiver cannot administer the Plan
in a state court receivership;
3.
As the Receiver’s actions are governed by ERISA,
any attempt by him to settle under state law is
preempted and therefore unlawful;
4.
R.I. Gen. Laws § 23-17.14-35 is preempted and/or
unconstitutional;
5.
Class counsel’s proposed attorneys’ fees are unreasonable or unsupported.6
See generally Diocesan Defs.’ Resp. in Opp’n to Joint Mot.,
ECF No. 80; Joint Opp’n of Defs. Prospect Medical Holdings, Inc.,
Prospect East Holdings, Inc., Prospect Chartercare, LLC, Prospect
6
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In granting preliminary approval of the Settlement Agreement, the
Court makes no findings, and expressly declines to rule, on the
Non-Settling Parties’ objections.
The Court’s preliminary ap-
proval of the Settlement Agreement is without prejudice to the
Non-Settling Parties’ rights to assert their objections at the
time of the final fairness hearing pursuant to the terms of this
Order.
V.
Final Approval Hearing and Related Procedures
In accordance with the foregoing, the Court hereby further
ORDERS:
1.
On August 29, 2019, at 10:00 a.m. in Courtroom 3 of the
United States District Court for the District of Rhode Island, One
Exchange Terrace, Providence, Rhode Island, or at such other date
and time later set by Court order, this Court will hold a final
approval hearing on the fairness, adequacy, and reasonableness of
the Settlement Agreement to determine whether (i) final approval
of settlement as embodied by the Settlement Agreement should be
granted, and (ii) Plaintiffs’ counsel’s application for attorneys’
fees for representing the settlement class should be granted, and
if so, in what amount.
Chartercare SJHSRI, LLC, and Prospect Chartercare RWMC, LLC, ECF
No. 81.
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2.
No later than August 15, 2019, which is fourteen (14)
days prior to the final approval hearing, Plaintiffs must file
papers in support of final class action approval of the Settlement
Agreement and respond to any written objections.
3.
The Settling Parties other than the Plaintiffs may (but
are not required to) file papers in support of final class action
approval of the Settlement Agreement, so long as they do so no
later than August 15, 2019.
4.
The Non-Settling Parties may (but are not required to)
file papers in opposition or in support of final class action
approval of the Settlement Agreement, so long as they do so no
later than August 15, 2019.
5.
The Court approves the proposed notice plan set forth in
the Settlement Agreement and its exhibits for giving notice to the
settlement class (i) directly, by first class mail, per the Class
Notice attached to the Settlement Agreement as Exhibit 1; and (ii)
by publishing the Joint Motion with all exhibits thereto, including
but not limited to the Settlement Agreement, on the website maintained by the Receiver as more fully described in the Settlement
Agreement.
The Court hereby directs the Settling Parties, and
specifically the Receiver, to complete all aspects of the notice
plan no later than May 31, 2019, in accordance with the terms of
the Settlement Agreement.
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6.
The Settling Defendants will file with the Court by no
later than August 15, 2019, which is fourteen (14) days prior to
the final fairness hearing, proof that the Class Notice was provided by any Settling Parties to the appropriate state and federal
officials
pursuant
to
the
Class
Action
Fairness
Act,
28 U.S.C. § 1715, if required.
7.
Members of the preliminarily-approved settlement class
do not have the right to exclude themselves or “opt-out” of the
settlement.
Consequently, all settlement class members will be
bound by all determinations and judgments concerning the Settlement Agreement.
8.
Settlement class members who wish to object to Settle-
ment Agreement or to Plaintiffs’ Counsel’s Motion for Award of
Attorneys’ Fees, must do so by the July 30, 2019 (the “Objection
Deadline”) which is sixty (60) calendar days after the deadline
for notice to be sent pursuant to this Order.
9.
To object to the Settlement Agreement, or to Plaintiffs’
Counsel’s Motion for Award of Attorneys’ Fees, settlement class
members must follow the directions in the Class Notice and file a
written objection with the Court by the Objection Deadline. In a
written objection, a settlement class member must state his or her
full name, address, and home or cellular telephone number(s), pursuant to which the settlement class member may be contacted.
The
member must also state the reasons for the member’s objection, and
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whether the member intends to appear at the final fairness hearing
on his or her own behalf or through counsel. Any documents supporting the objection must also be attached to the objection.
Any
and all objections shall identify any attorney that assisted or
provided advice as to the case or such objection.
No objection
will be considered unless all the information described above is
included.
Copies of all papers filed with the Court must be
simultaneously delivered to counsel for all parties by mail utilizing the United States Postal Service First Class Mail, to the
addresses listed in the Class Notice, or by email to the email
addresses listed in the Class Notice.
10.
If a settlement class member does not submit a written
comment on the proposed Settlement Agreement or the application of
Class Counsel for attorneys’ fees in accordance with the deadline
and procedure set forth in the Class Notice and this Order, and if
the settlement class member wishes to appear and be heard at the
final fairness hearing, the settlement class member must file a
notice of intention to appear with the Court and serve a copy upon
counsel for all parties in the manner provided in Paragraph 9, no
later than the Objection Deadline, and comply with all other requirements that may be established by the Court for such an appearance.
11.
Any settlement class member who fails to timely file
a written objection with the Court and notice of his or her intent
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to appear at the final fairness hearing in accordance with the
terms of this Order and as detailed in the Class Notice, and who
fails at the same time to provide copies to counsel for all parties, shall not be permitted to object to the Settlement Agreement
or to Plaintiffs’ Counsel’s Motion for Award of Attorneys’ Fees at
the final fairness hearing; shall be foreclosed from seeking any
review of the Settlement Agreement by appeal or other means; shall
be deemed to have waived the member’s objections; and shall be
forever barred from making any such objections.
All members of
the settlement class will be bound by all determinations and judgments in this action, whether favorable or unfavorable to the
settlement class.
12.
If the Settlement Agreement is not approved or consum-
mated for any reason whatsoever, the Settlement Agreement and all
proceedings in connection with the Settlement Agreement will be
without prejudice to the right of all parties to assert any right
or position that could have been asserted as if the Settlement
Agreement had never been reached or proposed to the Court.
In
such an event, the Settling Parties will return to the status quo
ante in this action and the certification of the preliminarily
approved settlement class will be deemed vacated. The certification of the class for settlement purposes will not be considered
as a factor in connection with any subsequent class certification
decision.
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13.
Counsel for the Settling Parties are hereby authorized
to use all reasonable procedures in connection with the approval
and administration the Settlement Agreement that are not materially inconsistent with this Order or the Settlement Agreement,
including making, without further approval of the Court, minor
changes to the form or content of the Class Notice, and other
exhibits that they jointly agree are reasonable and necessary.
The Court reserves the right to approve the Settlement Agreement
with such modifications, if any, as may be agreed to by the Settling Parties without further notice to the members of the settlement class.
VI.
Conclusion
For the forgoing reasons, the Joint Motion for Settlement
Class Certification, Appointment of Class Counsel, and Preliminary
Settlement Approval by Plaintiffs and Defendants CharterCARE Foundation, St. Joseph Health Services of Rhode Island, Roger Williams
Hospital, and CharterCARE Community Board (ECF No. 77) (ECF No.
77) is GRANTED.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: May 17, 2019
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