Del Sesto et al v. Prospect CharterCARE, LLC et al
Filing
162
MEMORANDUM OF DECISION Entering Final Approval of the Settlement pursuant to #123 Order on Motion for Preliminary Approval of the Settlement. So Ordered by Chief Judge William E. Smith on 9/30/2019. (Jackson, Ryan)
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,
)
)
C.A. No. 18-328 WES
v.
)
)
PROSPECT CHARTERCARE, LLC, ET AL., )
)
Defendants.
)
___________________________________)
MEMORANDUM OF DECISION
WILLIAM E. SMITH, Chief Judge.
Before
settlement
the
Court
reached
is
a
request
between
for
Plaintiff
final
approval
Stephen
Del
of
a
Sesto
(“Receiver”), as state appointed receiver and administrator of the
St.
Joseph
Health
Services
of
Rhode
Island
Retirement
Plan
(“Plan”), Named Plaintiffs Gail J. Major, Nancy Zompa, Ralph
Bryden, Dorothy Willner, Caroll Short, Donna Boutelle, and Eugenia
Levesque, individually and on behalf of others similarly situated
(collectively, “Plaintiffs”), and Defendants St. Joseph Health
Services
of
Rhode
Island
(“SJHSRI”),
Roger
Williams
Hospital
(“RWH”), CharterCARE Community Board (“CCCB”), and CharterCARE
Foundation (“CCF”)(collectively, the “Settling Defendants”).
1
Two
groups of defendants -- the Diocesan Defendants 1 and the Prospect
Entities 2 (collectively, the “Non-Settling Defendants”) -- object
to approval of the settlement.
Following preliminary approval of the settlement, a fairness
hearing was held on August 29, 2019.
At the conclusion of that
hearing, the Court GRANTED final approval of the settlement.
Docket Min. Entry for Aug. 29, 2019.
See
This memorandum addresses
the reasons for the Court’s decision and also certifies the class,
class representatives, and class counsel. 3
I.
Background
This action stems from alleged underfunding of a retirement
plan for nurses and other hospital workers employed by SJHSRI.
Am. Compl. ¶ 54, ECF No. 60.
According to the amended complaint,
the Plan, which has 2,729 participants, is insolvent.
Id.
After
the Plan was placed into receivership in 2017, the Receiver and
several
named
participants,
individually
and
on
behalf
of
a
purported class of plan participants, filed a twenty-three-count
1
The Diocesan Defendants consist of the Roman Catholic Bishop of
Providence, a corporation sole, the Diocesan Administration
Corporation, and the Diocesan Service Corporation.
2
The Prospect Entities include Prospect CharterCARE, LLC, Prospect
CharterCARE SJHSRI, LLC, Prospect CharterCARE RWMC, LLC, Prospect
East Holdings, Inc., and Prospect Medical Holdings, Inc.
3 This memorandum addresses only the merits of this settlement
agreement. Plaintiffs’ Motion for Attorneys’ Fees in connection
with the settlement, ECF No. 78, is currently being reviewed by
the Special Master appointed by the Court on September 5, 2019.
See Order Appointing Special Master, ECF No. 152.
2
complaint
violations
in
this
of
Court
the
against
Employee
several
Retirement
defendants,
Income
alleging
Security
Act
(“ERISA”) for failure to meet minimum funding requirements and
breach of fiduciary duty, as well as various state law claims.
See generally Am. Compl.
A number of defendants have agreed to settle with Plaintiffs,
resulting in two separate settlement agreements.
This memorandum
addresses
Plaintiffs
the
settlement
agreement
between
and
Defendants SJHSRI, RWH, CCCB, and CCF, ECF No. 77-2 (“Settlement
B”). 4
Pursuant to Settlement B, the Receiver will be transferred
$4.5 million for deposit into the Plan assets by CCF and its
insurer.
See Settlement B 13; Joint Motion for Settlement Class
Certification,
Appointment
of
Class
Counsel,
and
Settlement Approval 8 (“Joint Mot.”), ECF No 77-1.
Preliminary
In exchange,
Plaintiffs and Defendants SJHSRI, CCCB, and RWH will release CCF
and the Rhode Island Foundation 5 from liability.
Agreement B 13.
In addition, the Receiver will transfer to CCF
any rights he holds in CCF.
Plaintiffs
See Settlement
and
See Joint Mot. 8.
Settling
Defendants
sought
preliminary
approval of the settlement, to which the Non-Settling Defendants
objected.
See generally Joint Mot.; Diocesan Defs. Response in
4
Final approval of the other settlement, “Settlement A,” is
currently pending before this Court.
5
The Rhode Island Foundation is a custodian for CCF’s investment
assets. See Joint Mot. 4 n.4.
3
Opp. To Joint Mot., ECF No. 80;
Mot., ECF No 81.
Prospect Entities Opp. To Joint
On May 17, 2019, the Court preliminarily approved
the settlement and directed the settling parties to give notice to
the purported class.
See Order Granting Preliminary Approval 13,
16, ECF No. 123.
Plaintiffs and Settling Defendants now seek final approval of
the settlement.
One class member objects on the basis that the
$4.5 million amount transferred to the Plan is insufficient.
The
Non-Settling Defendants also reiterate their objections to the
settlement, which will be explained in further detail below.
II.
Discussion
a. Jurisdiction
In order to approve the settlement, the Court must first
determine that it has jurisdiction over the dispute.
A federal
court has subject matter jurisdiction under 28 U.S.C. § 1331 so
long as “the plaintiff’s well-pleaded complaint. . . exhibit[s],
within its four corners, either an explicit federal cause of action
or a state-law cause of action that contains an embedded question
of federal law that is both substantial and disputed.”
R.I.
Fishermen’s All. v. R.I. Dept. of Envtl. Mgmt., 585 F.3d 42, 48
(1st Cir. 2009); see 28 U.S.C. § 1331. Plaintiffs’ complaint
alleges four claims which arise under ERISA -- a federal statute.
Moreover, Plaintiffs must meet statutory and constitutional
requirements for standing as part of the threshold jurisdictional
4
analysis.
See In re Deepwater Horizon, 739 F.3d 790, 798 (5th
Cir. 2014).
As to statutory standing, the civil enforcement
provision under ERISA, 29 U.S.C. § 1132, allows claims by plan
participants,
beneficiaries,
and
fiduciaries
fiduciary duty and equitable relief.
& (3).
Plan,
breach
of
See 29 U.S.C. § 1132(a)(2)
The named plaintiffs are all current participants of the
and
the
purported
beneficiaries of the Plan.
the
for
Receiver
is
an
class
includes
participants
Am. Compl. ¶¶ 3-9, 35.
ERISA
fiduciary
because
and
Furthermore,
he,
as
Plan
administrator, “exercises discretionary control or authority over
the plan’s management, administration, or assets[.]”
Mertens v.
Hewitt Assoc., 508 U.S. 248, 251 (1993); 29 U.S.C. § 1102(a).
Constitutional standing under Article III requires an injury
in fact, a causal connection between the injury and the defendant’s
conduct, and the likelihood that a favorable outcome will redress
the injury.
(1992).
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61
While an injury must be particularized and concrete,
“[t]his does not mean, however, that the risk of real harm cannot
satisfy the requirement of concreteness.”
Spokeo, Inc. v. Robins,
136 S.Ct. 1540, 1549 (2016).
“At the pleading stage, general
factual
resulting
allegations
of
conduct may suffice[.]”
Deepwater
Horizon,
739
injury
from
the
defendant’s
Lujan, 504 U.S. at 561; see In re
F.3d
at
804
(“[I]t
is
sufficient
for
standing purposes that the plaintiffs seek recovery for an economic
5
harm that they allege they have suffered because for each class
member we must assume arguendo the merits of his or her legal claim
at the Rule 23 stage.”) (internal citation omitted).
In the amended complaint, Plaintiffs allege that the Plan is
“grossly underfunded” because the Plan’s sponsor did not make
required contributions for many years, particularly from 2010 to
2016, and that Defendants knew that the sponsor of the Plan faced
liabilities well exceeding its assets as of 2014.
63, 448.
Am. Compl. ¶
Plaintiffs also allege that, “[a]s a result of SJHSRI’s
failure to fund the Plan in accordance with ERISA’s minimum funding
standards, Plaintiffs pensions will be lost or at least severely
reduced.” 6
Id. ¶ 458.
Given that the Court must accept these
allegations as true at this stage of the proceedings, the Court is
satisfied that Plaintiffs have alleged an injury sufficient for
standing.
See Dezelan v. Voya Ret. Ins. Annuity Co., No. 3:16-
cv-1251, 2017 WL 2909714, at *5 (D. Conn. July 6, 2017)(“Generally,
a
plaintiff
has
standing
to
bring
an
ERISA
claim
where
the
plaintiff alleges a causal connection between defendants’ actions
and
actual
harm
to
an
ERISA
plan
in
which
the
plaintiff
participates.”)(citing LaRue v. DeWolff, Boberg & Assoc., Inc.,
552 U.S. 248, 255-56 (2008)(recognizing that an ERISA claim for
6
The Plaintiffs further allege that when the Plan was placed
into receivership, there was a request that “the Rhode Island
Superior Court approve a virtually immediate 40% across-the-board
reduction in benefits.” Am. Compl. ¶ 54.
6
breach of fiduciary duty “does not provide a remedy for individual
injuries
distinct
from
plan
injuries”
and
stating
that
“[m]isconduct by the administrators of a defined benefit plan will
not affect an individual’s entitlement to a defined benefit unless
it creates or enhances the risk of default by the entire plan.”)).
Therefore, the Court finds that it has jurisdiction over the
subject matter and parties in this dispute.
b. Final Approval Under Rule 23(e)
A Court may approve a settlement in a class action only upon
a finding that the settlement is “fair, reasonable, and adequate.”
Fed.
R.
Civ.
P.
23(e)(2).
Some
of
the
factors
in
this
consideration include:
(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.
Baptista v. Mutual of Omaha Ins. Co., 859 F. Supp. 2d 236, 240-41
(D.R.I. 2012) (citing City of Detroit v. Grinnell Corp., 495 F.2d
448, 463 (2d Cir. 1974)). However, although “[t]he case law offers
‘laundry lists of factors’ pertaining to reasonableness. . . ‘the
ultimate decision by the judge involves balancing the advantages
7
and
disadvantages
of
the
proposed
settlement
as
against
the
consequences of going to trial or other possible but perhaps
unattainable variations on the proffered settlement.’”
Bezdek v.
Vibram USA, Inc., 809 F.3d 78, 82 (1st Cir. 2015) (quoting Nat’l
Ass’n
of
Chain
Drug
Stores
v.
New
England
Carpenters
Health
Benefits Fund, 582 F.3d 30, 44 (1st Cir. 2009)).
Additionally, “[i]f the parties negotiated at arm’s length
and
conducted
sufficient
discovery,
presume the settlement is reasonable.”
the
district
court
must
Id. (quoting In re Pharm.
Indus. Average Wholesale Price Litig., 588 F.3d 24, 32-33 (1st
Cir.
2009)).
“[T]he
lack
of
any
serious
objection
to
the
settlement agreement from members of the class weighs in favor of
approving the settlement.”
Medoff v. CVS Caremark Corp., No. 09-
cv-554-JNL, 2016 WL 632238, at *6 (D.R.I. Feb. 17, 2016); see WalMart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 118 (2d Cir.
2005) (“If only a small number of objections are received, that
fact
can
be
viewed
as
indicative
of
the
adequacy
of
the
settlement.”)(internal citation omitted).
The Court finds that this settlement has been entered into in
good faith and that its terms are fair, adequate, and reasonable.
See Fed. R. Civ. P. 23(e).
Without question, this case involves
the determination of complex legal questions which would be costly
and time-consuming to litigate through trial.
See Kemp-DeLisser
v. Saint Francis Hospital and Medical Center, No. 15-CV-1113(VAB),
8
2016 WL 6542707, at *7 (D. Conn. Nov. 3, 2016)(“Many courts
recognize the particular complexity of ERISA breach of fiduciary
duty cases such as this one.”)
Indeed, hundreds of pages of
briefing have already been filed at this stage of the litigation.
Furthermore, Plaintiffs have provided evidence demonstrating
that
hundreds
of
class
members
support
the
settlement.
See
Declaration of Christopher Callaci, ECF No. 141; Affidavit of
Arlene Violet, ECF No. 142; Declaration of Jeffrey W. Kasle, ECF
No. 143.
Only one member of the purported class of more than 2,700
members has objected on the basis that the amount of money to be
transferred to the Receiver is only half of the money which should
have gone into the Plan. 7
No. 128.
See Response in Opp. to Settlement, ECF
However, as Plaintiffs have acknowledged, given the
complexity of this case and lack of settled law with respect to
the claims asserted against CCF, Plaintiffs are not without risk
in proving liability should the case move forward.
See Pl. Mem.
in Supp. of Mot. for Final Approval 9, 27, ECF No. 139.
In light
of that risk, the settlement amount appears to be reasonable.
Additionally, as explained below, the Non-Settling Defendants
do not object to Settlement B on the basis that it is the product
of bad faith or collusion.
On the contrary, as the Court noted in
7
The allegations against CCF in the complaint turn on an alleged
improper transfer of approximately $8.2 million in charitable
funds to CCF in a 2015 cy pres proceeding. Am. Compl. ¶ 390, 40009.
9
its preliminary approval order, this settlement appears to be the
product of arm’s length negotiations by highly experienced and
informed
counsel
after
significant
document
exchange
by
the
parties.
Order Granting Preliminary Approval 4; see Pl. Mem. in
Supp. of Mot. for Final Approval 37.
For these reasons, the Court finds that Settlement B is the
product of good faith and is fair, reasonable, and adequate.
c. Non-Settling Defendants’ Objections
The Non-Settling Defendants have objected to final approval
of the settlement on several grounds. A number of these objections
turn on an unsettled legal question regarding whether ERISA applies
to the Plan or whether the Plan is exempt from ERISA as a “church
plan.”
See Diocesan Defs. Opp. To Final Settlement Approval
(“Diocesan Opp.”) 2, ECF No. 136;
Prospect Defs. Opp. To Final
Settlement Approval 3 n. 2 (“Prospect Opp.”), ECF No. 138; see
also Pl. Mem. in Supp. of Mot. for Final Approval 19. More directly
related to the settlement, the Non-Settling Defendants also argue
that R.I. Gen. Laws § 23-17.14-35 (“Settlement Statute”), a statute
specifically enacted to apply to settlements arising out of claims
brought by participants of the Plan, is preempted by ERISA or is
unconstitutional. 8
Diocesan Opp. 2-3; Prospect Opp. 3 n.2.
8
The Settlement Statute allows a settling tortfeasor to avoid
liability for contribution if the settlement has been judicially
approved and is the product of good faith. R.I. Gen. Laws § 2317.14-35. The Settlement Statute reads, in full:
10
The Court is satisfied that it need not address questions
related to the applicability of ERISA in order to approve this
settlement.
settlement
issue).
See Kemp-DeLisser, 2016 WL 65427, at *7-8 (approving
prior
to
Similarly,
constitutionality
or
determining
the
Court
potential
ERISA
church-plan
need
preemption
not
of
exemption
determine
the
the
Settlement
Statute, and therefore expressly declines to rule on these issues
at this time.
The Court’s approval of this settlement shall be
without prejudice to the Non-Settling Defendants’ right to assert
these arguments later in this litigation or in future proceedings.
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 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 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 good-faith
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.
11
d. Certification of Class, Class Representatives, and Class
Counsel
The
Settling
certification
of
Parties
the
also
class,
counsel under Rule 23.
ask
class
the
Court
to
grant
representatives,
and
final
class
In order to meet the standard for class
certification, the purported class must meet the requirements
under Rule 23(a) and one of the categories of Rule 23(b).
Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 621 (1997).
See
A class
satisfies Rule 23(a) 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 class 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).
Moreover, Rule 23(b)(1)(B) requires a
purported class to demonstrate that separate actions by individual
members “would create a risk of. . . adjudications with respect to
individual class members that, as a practical matter, 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 outlined its reasons for finding these factors to
have been met in the order granting preliminary approval of the
settlement.
9.
See Order Granting Preliminary Settlement Approval 5-
The Court is satisfied that its analysis of these factors has
12
not
changed
for
Additionally,
the
purposes
of
Non-Settling
final
settlement
Defendants’
approval.
objections
do
not
relate to certification of the class, its representatives, or its
counsel.
Accordingly, for purposes of this settlement only, the Court
certifies the following class: All participants of the St. Joseph
Health Services of Rhode Island Retirement Plan, including all
surviving former employees of St. Joseph Health Services of Rhode
Island
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 who are entitled to
benefits under the Plan.
Furthermore, the Court appoints Gail J.
Major, Nancy Zompa, Ralph Bryden, Dorothy Willner, Caroll Short,
Donna
Boutelle,
representatives
and
and
Eugenia
Wistow,
Levesque
Sheehan
counsel.
13
&
as
settlement
Lovely,
P.C.
as
class
class
III. Conclusion
For the reasons stated herein, the court GRANTS final approval
of
Settlement
B
and,
for
purposes
of
this
settlement
only,
certifies the class, class representatives, and class counsel.
IT IS SO ORDERED.
William E. Smith
Chief Judge
Date: September 30, 2019
14
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