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376 F.3d 656 376 F.3d 656, RICO Bus.Disp.Guide 10,706 (Cite as: 376 F.3d 656) Briefs and Other Related Documents United States Court of Appeals, Seventh Circuit. Lynne A. CARNEGIE, on behalf of herself and all others similarly situated, Plaintiff-Appellee, v. HOUSEHOLD INTERNATIONAL, INC., et al., Defendants-Appellants. Nos. 04-8008, 04-8009. Submitted May 15, 2004. Decided July 16, 2004. Background: Recipients of income -tax refund anticipation loans (RALs) brought class actions against bank and tax preparers, alleging various claims including violation of Racketeer Influence and Corrupt Organizations Act (RICO). Following disapproval of proposed settlement in one of the actions, 260 F.Supp.2d 680, Bucklo, J., classes were certified to pursue RICO claims, see 220 F.R.D. 542. Defendants sought interlocutory appeals, which were consolidated. Holdings: The Court of Appeals, Posner, Circuit Judge, held that: (1) grant of interlocutory appeal was appropriate given novel issues; (2) judicial estoppel precluded defendants from challenging adequacy of class for settlement purposes, but not for litigation purposes; (3) fact that class contained millions of members did not, by itself, make litigation unmanageable; and (4) different district court's refusal to certify class in earlier action involving same defendants and same allegations was not preclusive, given defendants' earlier insistence in instant action that class treatment was appropriate. Affirmed. West Headnotes [1] Federal Courts 660.5 170Bk660.5 Most Cited Cases Grant of interlocutory appeal from class certification was appropriate given fact that case involved novel Page 1 issues whose prompt resolution was important to development of law of class actions as well as to resolution of instant case, namely, procedures and criteria for converting settlement class into litigation class when initial settlement is later disapproved, and bearing of doctrine of judicial estoppel on class action litigation. Fed.Rules Civ.Proc.Rule 23(f), 28 U.S.C.A. [2] Estoppel 68(2) 156k68(2) Most Cited Cases Judicial estoppel precluded defendants in consumer fraud class action, who had previously urged acceptance of large class size as appropriate for global settlement, from challenging, following disapproval of proposed settlement, adequacy of class for settlement purposes on ground that it was too vast; however, defendants could challenge class on ground that it was too large for litigation, as opposed to settlement. [3] Estoppel 68(2) 156k68(2) Most Cited Cases Reversal need not affect application of judicial estoppel. [4] Federal Civil Procedure 182.5 170Ak182.5 Most Cited Cases Fact that class certified in consumer fraud action involving income -tax refund anticipation loans (RALs) contained millions of members did not, by itself, make litigation unmanageable; if no settlement occurred and liability was found, separate proceedings could be held to determine entitlements of individual class members to relief. Fed.Rules Civ.Proc.Rule 23(c)(4)(A), 28 U.S.C.A. [5] Federal Civil Procedure 165 170Ak165 Most Cited Cases Tools available to district court to address problems created by presence in class action litigation of individual damages issues include: (1) bifurcating liability and damage trials with same or different juries; (2) appointing magistrate judge or special master to preside over individual damages proceedings; (3) decertifying class after liability trial and providing notice to class members concerning how they may proceed to prove damages; (4) creating subclasses; or (5) altering or amending class. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 376 F.3d 656 376 F.3d 656, RICO Bus.Disp.Guide 10,706 (Cite as: 376 F.3d 656) Page 2 [6] Federal Civil Procedure 173 170Ak173 Most Cited Cases District court could require defendants in class action to present their objections to class certification rather than requiring plaintiff to move for certification, given fact that court had earlier issued de facto certification of class for purposes of settlement, and fact that court explicitly placed on plaintiff burden of persuasion on validity of defendants' objections to certification. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [7] Judgment 746 228k746 Most Cited Cases Federal district court's refusal to certify nationwide class in Racketeer Influenced and Corrupt Organizations Act (RICO) suit alleging mail and wire fraud on part of tax preparers and lenders in connection with refund anticipation loans (RALs) was not preclusive in subsequent RICO action involving same allegations and same defendants, given defendants' change of position; defendants, who argued preclusion in opposing class certification in second action, had, at time of proposed settlement of that action which was later disapproved, insisted that class treatment of RICO claim in second action was entirely appropriate. 18 U.S.C.A. § § 1341, 1343, 1961 et seq. *658 Scott R. Lassar (submitted), Sidley Austin Brown & Wood, Anton R. Valukas, Jenner & Block, Chicago, IL, for Petitioners. Ronald L. Futterman, Futterman Chicago, IL, for Respondent. & Howard, Before CUDAHY, POSNER, and ROVNER, Circuit Judges. POSNER, Circuit Judge. [1] We have consolidated for decision petitions, filed by two groups of defendants in a consumer-finance class action litigation, for leave to appeal an order by the district court certifying a plaintiff class. Fed.R.Civ.P. 23(f) authorizes us to entertain such interlocutory appeals. The rule does not state criteria for the exercise of this discretionary authority. But the case law teaches that the more novel the issue presented by the appeal and so the less likely that the district court's resolution of it will stand, the more important the resolution of the issue is either to the particular litigation or to the general development of class action law, and the more likely the prompt resolution of the issue is to expedite the litigation and prevent a coercive settlement, the stronger the case for allowing the appeal. E.g., In re Bridgestone/Firestone, Inc., 288 F.3d 1012, 1016 (7th Cir.2002); Blair v. Equifax Check Services, Inc., 181 F.3d 832, 834-35 (7th Cir.1999); Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 164 (3d Cir.2001); Prado-Steiman v. Bush, 221 F.3d 1266, 1278 (11th Cir.2000); Waste Management Holdings, Inc. v. Mowbray, 208 F.3d 288, 294 (1st Cir.2000). The issues that the petitions ask us to consider, in the setting of a class of millions, concern, first, the procedures and criteria for converting a settlement class into a litigation class when having initially been approved the settlement is later disapproved, and, second, the bearing of the doctrine of judicial estoppel on class action litigation. These are novel issues whose prompt resolution is important to the development of the law of class actions as well as to the resolution of the present case. The petitions to appeal are therefore granted. The merits of the appeals have been fully briefed and we can therefore proceed to decide them without requiring further briefing. The litigation arose out of refund anticipation loans made jointly by the defendants, who for simplic ity we'll refer to as "the bank" and "the tax preparer." When the tax preparer files a refund claim with the Internal Revenue Service on behalf of *659 one of its customers, the customer can expect to receive the refund within a few weeks unless the IRS decides to investigate the return. Even a few weeks is too long for the most necessitous taxpayers, and so the bank will lend the customer the amount of the refund for the period between the filing of the claim and the receipt of the refund. The annual interest rate on such a "refund anticipation loan" (RAL) will often exceed 100 percent. Although the bank is the lender, the tax preparer arranges the loan. It is contended that the customer is told neither that the bank pays the tax preparer a fee for having generated the loan nor that the tax preparer receives an ownership interest in the loan. Beginning in 1990 a number of class-action suits were brought against the defendants on behalf of a total of 17 million refund-anticipation borrowers, charging violations of various state and federal laws, including RICO. The basic claim is that the defendants lead the borrowers to believe that the tax preparer is their fiduciary, much as if they had hired a lawyer or an accountant to prepare their income tax returns, as affluent people do, whereas, unbeknownst to them, the tax preparer is engaged in self-dealing. This conduct is alleged to constitute a scheme to defraud in violation of the federal mail-and wire- © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 376 F.3d 656 376 F.3d 656, RICO Bus.Disp.Guide 10,706 (Cite as: 376 F.3d 656) fraud statutes. Violations of those statutes are "predicate offenses" that can form the basis of a RICO charge. In 1999 the named plaintiff in one of the suits entered into a settlement agreement with the bank and the tax preparer. This was to be a "global" settlement: the members of all the classes would divide up a $25 million fund put up by the defendants in exchange for the release of all claims arising out of the RALs. The district judge approved the settlement and enjoined (with one exception) the other RAL class actions, Zawikowski v. Beneficial National Bank, No. 98 C 2178, 2000 WL 1051879 (N.D.Ill. July 28, 2000), but we reversed, Reynolds v. Beneficial National Bank, 288 F.3d 277 (7th Cir.2002), on the ground that the district judge had failed to scrutinize the fairness of the settlement adequately. We were concerned that the settlement might have been the product of collusion between the defendants, eager to minimize their liability, and the class lawyers, eager to maximize their fees. The district judge to whom the case was reassigned on remand concluded that the settlement had indeed been unfair and disapproved it. 260 F.Supp.2d 680 (N.D.Ill.2003). There was no appeal. The proceedings continued in the district court, with both the named plaintiff and the class counsel replaced. Although no class had formally been certified in the earlier proceedings, rather than require the new plaintiff to move for certification the judge asked the defendants for their objections to certification, and they responded. She agreed with some of the objections, rejected others, and, in effect, certified the same class that had been contemplated by the rejected settlement, which is to say all RAL borrowers (with a few exceptions) whose claims weren't barred by the statute of limitations. But she limited the certification to prosecution of just the RICO claim, plus one breach of contract claim involving the law of only one state. [2][3] The defendants object mainly to the procedure the judge employed and to the brevity with which she pronounced the class manageable despite its vast size. In the previous round of this protracted litigation the defendants had urged the district court to accept the giant class as appropriate for a global settlement, had prevailed in their urging, and so are now precluded by the doctrine of judicial estoppel, see, e.g., *660New Hampshire v. Maine, 532 U.S. 742, 121 S.Ct. 1808, 149 L.Ed.2d 968 (2001), from challenging its adequacy, at least as a settlement class (the significance of this qualification will appear in Page 3 due course). It is true that we reversed the district court's approval of the settlement, but a reversal need not affect the application of judicial estoppel. In re Cassidy, 892 F.2d 637, 641 (7th Cir.1990); Hall v. GE Plastic Pacific PTE Ltd., 327 F.3d 391, 398-99 (5th Cir.2003); U.S. Philips Corp. v. Sears Roebuck & Co., 55 F.3d 592, 597 (Fed.Cir.1995); cf. 18B Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4477 (2d ed.2002). The reason lies in the purpose of the doctrine. The canonical statement of that purpose is that it is "to protect the integrity of the judicial process." E.g., New Hampshire v. Maine, supra, 532 U.S. at 749-50, 121 S.Ct. 1808; United States v. Christian, 342 F.3d 744, 747 (7th Cir.2003). But we have been a little more precise. We have said that "a party who prevails on one ground in a lawsuit cannot turn around and in another lawsuit repudiate the ground. If repudiation were permitted, the incentive to commit perjury and engage in other litigation fraud would be greater. A party envisaging a succession of suits in which a change in position would be advantageous would have an incentive to falsify the evidence in one of the cases, since it would be difficult otherwise to maintain inconsistent positions." McNamara v. City of Chicago, 138 F.3d 1219, 1225 (7th Cir.1998) (citations omitted). In other words, "the purpose of the doctrine ... is to reduce fraud in the legal process by forcing a modicum of consistency on a repeating litigant." Ladd v. ITT Corp., 148 F.3d 753, 756 (7th Cir.1998); see also Bethesda Lutheran Homes & Services, Inc. v. Born, 238 F.3d 853, 858 (7th Cir.2001). The antifraud policy that animates the doctrine si fully engaged when a party obtains a judgment on a ground that it later repudiates, even if his opponent, the loser in that first case, is able, obviously at some expense to itself but also placing a demand on judicial resources, to get the judgment reversed. Anyway the defendants benefited from the temporary approval of the settlement, which they used to enjoin other RAL litigation against them; and having reaped a benefit from their pertinacious defense of the class treatment of the case for purposes of settlement they cannot now be permitted to seek a further benefit from reversing their position. It is true that we went on to say in McNamara that "the doctrine of judicial estoppel requires ... that the party sought to be estopped have obtained a favorable judgment or settlement on the basis of a legal or factual contention that he wants to repudiate in the current litigation. Otherwise it would be inconsistent with the rule that permits inconsistent pleadings." 138 © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 376 F.3d 656 376 F.3d 656, RICO Bus.Disp.Guide 10,706 (Cite as: 376 F.3d 656) F.3d at 1225. But the defendants did obtain a judgment. The fact that it was reversed on appeal has nothing to do with a party's right to explore inconsistent alternative positions in the early stages of a lawsuit. [4] The defendants are correct, however, that a class might be suitable for settlement but not for litigation. The class might be unmanageable if the case were actually tried yet manageable as a settlement class because the settlement might eliminate all the thorny issues that the court would have to resolve if the parties fought out the case. Amchem Products, Inc. v. Windsor, 521 U.S. 591, 620, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). But although the district judge might have said more about manageability, the defendants have said nothing against it except that there are millions of class members. That *661 is no argument at all. The more claimants there are, the more likely a class action is to yield substantial economies in litigation. It would hardly be an improvement to have in lieu of this single class action 17 million suits each seeking damages of $15 to $30. The rejected settlement capped damages at thes e amounts for single and multiple RALs respectively, and while the amounts may be too low they are indicative of the modest stakes of the individual class members. The realistic alternative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30. But a class action has to be unwieldy indeed before it can be pronounced an inferior alternative--no matter how massive the fraud or other wrongdoing that will go unpunished if class treatment is denied--to no litigation at all. [5] Often, and possibly in this case as well, there is a big difference from the standpoint of manageability between the liability and remedy phases of a class action. The number of class members need have no bearing on the burdensomeness of litigating a violation of RICO. Whether particular members of the class were defrauded and if so what their damages were are another matter, and it may be that if and when the defendants are determined to have violated the law separate proceedings of some character will be required to determine the entitlements of the individual class members to relief. Fed.R.Civ.P. 23(c)(4)(A); Allen v. International Truck & Engine Corp., 358 F.3d 469 (7th Cir.2004); Bell Atlantic Corp. v. AT&T Corp., 339 F.3d 294, 307 n. 16 (5th Cir.2003); In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124, 141 (2d Cir.2001); Robinson v. Metro -North Commuter R.R., 267 F.3d 147, 168-69 (2d Cir.2001). That prospect need not Page 4 defeat class treatment of the question whether the defendants violated RICO. Once that question is answered, if it is answered in favor of the class, a global settlement along the lines originally negotiated (though presumably with different dollar figures) will be a natural and appropriate sequel. And if there is no settlement, that won't be the end of the world. Rule 23 allows district courts to devise imaginative solutions to problems created by the presence in a class action litigation of individual damages issues. Those solutions include "(1) bifurcating liability and damage trials with the same or different juries; (2) appointing a magistrate judge or special master to preside over individual damages proceedings; (3) decertifying the class after the liability trial and providing notice to class members concerning how they may proceed to prove damages; (4) creating subclasses; or (5) altering or amending the class." In re Visa Check/MasterMoney Antitrust Litigation, supra, 280 F.3d at 141. We did note in our previous decision an unremarked conflict of interest between those class members who took out one or two refund anticipation loans and those who took out more than two and would thus, because of the $30 cap that we just mentioned, receive no compensation for the additional harm that they suffered. 288 F.3d at 282. But we went on to say that "in light of the modesty of the stakes even of class members who had multiple refund anticipation loans and the expense of subdividing the class (and how many subdivisions would be necessary to reflect the full range of damages?), we are not disposed to regard this particular defect in the settlement as fatal." [6] The defendants argue that by requiring them to present their objections to class certification rather than requiring the plaintiff to move for certification, the district judge improperly altered the burden of proof on the question whether the *662 class should be certified. Not so. Although the plaintiff class had not formally been certified in the earlier proceedings, that was indeed a formal defect--a technical oversight that was surprising but from a practical standpoint inconsequential. The case had been settled as a class action, notices had been sent, objections had been considered and rejected--all on the assumption that a class had been certified. This was de facto certification, albeit of a settlement class only, and that was enough, we think, to empower Judge Bucklo, in the exercise of her discretion to manage litigation before her in an efficient and expeditious manner, to require the defendants to list their objections to the certification of a litigation class, © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 376 F.3d 656 376 F.3d 656, RICO Bus.Disp.Guide 10,706 (Cite as: 376 F.3d 656) especially since she was explicit that the burden of persuasion on the validity of the objections would remain on the plaintiffs. They carried the burden easily. Remember that the defendants themselves had argued that the class was appropriate for settlement purposes. That did not conclude the question whether it was appropriate for litigation if the settlement fell through, as we have explained and as the district judge recognized. But it was some indication that there were issues appropriate for determination on a class basis. The defendants argue that the named plaintiff has not been shown to be an adequate representative of the class, but the district judge thought otherwise on sufficient grounds. The defendants also argue that class certification is barred by collateral estoppel, and this argument requires a fuller discussion. [7] In re Bridgestone/Firestone, Inc., Tires Products Liability Litigation, 333 F.3d 763 (7th Cir.2003), holds that a judicial finding that a class should not be certified is, at least in some circumstances, entitled to collateral estoppel effects; and in Buford v. H & R Block, Inc., 168 F.R.D. 340 (S.D.Ga.1996), aff'd, 117 F.3d 1433 (11th Cir.1997) (per curiam), a federal district judge refused to certify a nationwide class action charging, just as in this case, that our defendants' practices with respect to RALs violated RICO. The judge recognized that the question whether RICO was violated was separate from the question whether the targets of the violation had been injured by the violation. 18 U.S.C. § 1964(c); Holmes v. Securities Investor Protection Corp., 503 U.S. 258, 267-68, 112 S.Ct. 1311, 117 L.Ed.2d 532 (1992). The predicate acts in the RICO claim are violations of the mail-and wire-fraud statutes, and these statutes are violated by a "scheme or artifice to defraud," 18 U.S.C. § § 1341, 1343, whether or not the scheme succeeds and therefore causes injury. E.g., United States v. Tadros, 310 F.3d 999, 1006 (7th Cir.2002); United States v. Coffman, 94 F.3d 330, 333- 34 (7th Cir.1996); United States v. Daniel, 329 F.3d 480, 486 (6th Cir.2003). The separation of liability and injury issues is illustrated by the suggestion in Moore v. PaineWebber, Inc., 306 F.3d 1247, 1255-56 (2d Cir.2002), that in a suit charging "uniform misrepresentations" the question whether they were indeed misrepresentations would be appropriate for class treatment, with the question of reliance, and damages suffered, by individual class members left for satellite proceedings. See also In re Prudential Ins. Co. of America Sales Practices Litigation, 148 F.3d 283 (3d Cir.1998). Page 5 The judge in Buford thought, however, that the issue of violation would be swamped by issues concerning whether the borrowers had been deceived-- had relied on the fraud, and thus had been injured, whether directly, as in American Chiropractic Ass'n, Inc. v. Trigon Healthcare Inc., 367 F.3d 212, 233 (4th Cir.2004); Bank of China v. NBM LLC, 359 F.3d 171, 178 (2d Cir.2004); *663Byrne v. Nezhat, 261 F.3d 1075, 1109-10 (11th Cir.2001), and Summit Properties Inc. v. Hoechst Celanese Corp., 214 F.3d 556 (5th Cir.2000), or perhaps, as in Systems Management, Inc. v. Loiselle, 303 F.3d 100, 104 (1st Cir.2002), indirectly. Those issues would have to be resolved separately for each class member. In deciding that therefore the case was inappropriate for class treatment, the judge was applying the presumption against class action certification in RICO cases that has been articulated by the Fifth Circuit in Sandwich Chef of Texas, Inc. v. Reliance Nat'l Indemnity Ins. Co., 319 F.3d 205, 219 (5th Cir.2003). We are dubious about such a presumption. The question whether RICO was violated can be separated from the question whether particular intended victims were injured, and thus can--or so a district court could determine without being thought to have abused its discretion--be resolved in a single proceeding with the issue of injury parceled out to satellite proceedings, as is frequently done in class action tort iltigation, see, e.g., Exxon Co. v. Sofec, Inc., 54 F.3d 570, 575-76 (9th Cir.1995); In re Bendectin Litigation, 857 F.2d 290, 308-13 (6th Cir.1988), of which the RAL class litigation is a species. The adequacy of the judge's reasoning in Buford is not important, however, if, as the defendants contend, his ruling is entitled to collateral estoppel effect. But they overread Bridgestone/Firestone to hold that any ruling denying class certification is binding in future litigation. Our decision was more nuanced. See 333 F.3d at 767-69. For example, we pointed out that the binding effect of such a ruling would depend on whether the class members who would be affected by it had been adequately protected by the class representatives and class counsel in the proceeding in which the ruling was made. The judge in Buford discussed the issue of adequacy at some length, however, 168 F.R.D. at 352-55, and we are not disposed to reexamine his ruling. But it is too late for the defendants to plead collateral estoppel when, though knowing of the Buford decision, which was issued in 1996 and affirmed the following year, they insisted until last year, when the district court on remand from our decision threw out the settlement, that class treatment of the RICO claim was entirely © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 376 F.3d 656 376 F.3d 656, RICO Bus.Disp.Guide 10,706 (Cite as: 376 F.3d 656) appropriate. Until then they desperately wanted the RICO claim included in the class settlement so that they wouldn't have to face it in any other RAL suits. They prevailed in the present litigation, until the settlement was finally rejected, by arguing that Buford was wrong. They are estopped to argue now that it was right. And anyway collateral estoppel is an affirmative defense that is forfeited if not raised in timely manner, and it was not raised in a timely manner in this case. Page 6 Briefs and Other Related Documents (Back to top) • 04-8008 (Docket) (Apr. 12, 2004) • 04-8009 (Docket) (Apr. 12, 2004) END OF DOCUMENT The defendants tell us that anything that makes it easier for a settlement class to molt into a litigation class will discourage the settlement of class actions. They say that defendants have settled class actions "in the past secure in the knowledge that if the settlement agreement should unravel, they would be restored to the pre-certification position and remain free to defend against any future effort to certify a class for litigation purposes." But the defendants in this case were perfectly free to defend against certification; they just didn't put up a persuasive defense. Anyway their argument is unrealistic. The pressures for settlement of class actions are enormous and will not be lessened significantly by our upholding the class certification. We are mindful that no district judge has as yet explicitly addressed whether the other criteria for class certification, besides adequacy of representation of the class, have been met in this case. Those criteria are whether "(1) the class is so *664 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." Fed.R.Civ.P. 23(a). There is no need for a remand on these questions, however. Criteria (1) and (2) have been met; and the satisfaction of (3) is implicit in Judge Bucklo's rejection of the defendants' contention that to handle their dispute with the class members in the class action format would be unmanageable. There has been substantial compliance with the requirements of the rule, and no more is required, Shvartsman v. Apfel, 138 F.3d 1196, 1201 (7th Cir.1998); Berger v. Iron Workers Reinforced Rodmen Local 201, 843 F.2d 1395, 1401 (D.C.Cir.1988), especially in a case in which the defendants were enthusiastic proponents of class treatment until their opportunistic change of heart. AFFIRMED. 376 F.3d 656, RICO Bus.Disp.Guide 10,706 © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 400 F.3d 505 400 F.3d 505, 34 Employee Benefits Cas. 2005 (Cite as: 400 F.3d 505) Page 1 [2] Declaratory Judgment 118Ak305 Most Cited Cases 305 Briefs and Other Related Documents United States Court of Appeals, Seventh Circuit. In re: ALLSTATE INSURANCE COMPANY; Agent Transition Severance Plan, Petitioners. No. 04-8022. Submitted Jan. 30, 2005. Decided March 8, 2005. Background: Former employees who had retired or had converted to independent-contractor status brought class action against former employer under Employee Retirement Income Security Act (ERISA), alleging interference with receipt of enhanced retirement/conversion benefits, as well as breach of fiduciary duty. The District Court, 213 F.Supp.2d 862, Moran, Senior District Judge, denied agency's motion to dismiss, and certified the class of former employees with respect to the interference claim, 223 F.R.D. 489. Former employer appealed the certification. Holding: The Court of Appeals, Posner, Circuit Judge, held that lawsuit could not properly be certified as class action, under federal rule of civil procedure governing class actions for injunctive or declaratory relief. Vacated. West Headnotes [1] Federal Civil Procedure 170Ak177.1 Most Cited Cases 177.1 [1] Federal Civil Procedure 180 170Ak180 Most Cited Cases Class actions under federal rule of civil procedure governing actions for injunctive relief generally do not require giving class members notice of the suit and a chance to opt out of it and bring their own, individual suits; class actions seeking damages generally do require giving class members notice and a chance to opt out. Fed.Rules Civ.Proc.Rule 23(b, c), 28 U.S.C.A. [2] Federal Civil Procedure 180 170Ak180 Most Cited Cases When the main relief sought in a class action is injunctive or declaratory, and the damages are only incidental, the suit can be maintained under federal rule of civil procedure governing class actions seeking injunctive or declaratory relief, which does not require giving class members the chance to opt out. Fed.Rules Civ.Proc.Rule 23(b)(2), 28 U.S.C.A. [3] Jury 34(1) 230k34(1) Most Cited Cases When a class action is limited to equitable relief or incidental damages, such that the computation of damages is mechanical and does not require individual calculation, the award of damages by a judge does not run afoul of the Seventh Amendment's right to a jury trial in federal civil cases. U.S.C.A. Const.Amend. 7; Fed.Rules Civ.Proc.Rule 23(b), 28 U.S.C.A. [4] Declaratory Judgment 118Ak305 Most Cited Cases 305 [4] Federal Civil Procedure 170Ak177.1 Most Cited Cases 177.1 [4] Federal Civil Procedure 170Ak180 Most Cited Cases 180 [4] Federal Civil Procedure 184.5 170Ak184.5 Most Cited Cases Employee Retirement Income Security Act (ERISA) lawsuit by former employees who had retired or had converted to independent-contractor status, alleging interference with receipt of enhanced retirement/conversion benefits, and breach of fiduciary duty, could not properly be certified as class action, under federal rule of civil procedure governing class actions for injunctive or declaratory relief, which did not require giving class members notice and an opportunity to opt out; former employees alleged different circumstances surrounding their discharge from employment, which would affect whether they were entitled to relief, so that employees were entitled to notice and an opportunity to opt out. Employee Retirement Income © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 400 F.3d 505 400 F.3d 505, 34 Employee Benefits Cas. 2005 (Cite as: 400 F.3d 505) Security Act of 1974, § 2 et seq., 29 U.S.C.A. § 1001 et seq.; Fed.Rules Civ.Proc.Rule 23(b)(2, 3), (c), 28 U.S.C.A. [5] Declaratory Judgment 118Ak305 Most Cited Cases 305 [5] Federal Civil Procedure 177.1 170Ak177.1 Most Cited Cases When, though the class action is for declaratory relief, the effect of the declaration on individual class members will vary with their particular circumstances, the class members should be given notice of the class action so that they can decide whether they would be better off proceeding individually. Fed.Rules Civ.Proc.Rule 23(b)(2), (c), 28 U.S.C.A. Richard C. Godfrey, P.C., Sallie G. Smylie, Andrew B. Bloomer, Donna M. Welch (submitted), and Jane S. Park, Kirkland & Ellis, Chicago, IL, for Petitioners. Lawrence Walner, Walner & Associates, Chicago, IL, for Respondents. Before POSNER, RIPPLE, and SYKES, Circuit Judges. POSNER, Circuit Judge. Allstate petitions us under Fed.R.Civ.P. 23(f) for leave to appeal the district court's decision to certify under Rule 23(b)(2) a class of plaintiffs who allege that Allstate constructively discharged them in order to deprive them of benefits to which ERISA entitled them. We grant the petition (and proceed to decide the merits) because it presents a novel and important issue: whether certification under Rule 23(b)(2) is proper when, though injunctive or declaratory relief is sought rather than damages, individual hearings may be necessary to determine causation and hence liability. The plaintiffs' complaint, which the district court held states a claim, alleges the following facts: In 1998 Allstate decided to replace its employee insurance agents with independent contractors, and before announcing a severance package for employees who would lose their jobs harassed them, in violation of ERISA § 510, 29 U.S.C. § 1140, so that they would quit before they could take advantage of the severance benefits. It harassed them by extending office hours, imposing burdensome reporting requirements, reducing or eliminating reimbursement for office expenses, and setting Page 2 unrealistic sales quotas. As a result of the campaign of harassment, between December 1998 and May 1999 176 agents quit outright and 1,106 others quit as employees but became independent contractors. The class seeks a judgment declaring that the members are entitled to the benefits they would have received under Allstate's ERISA plan had they been fired rather than quitting. Armed with the declaration, they will then ask the court to award them those benefits. [1] A Rule 23(b)(2) class action does not require giving class members notice of the suit and a chance to opt out of it and bring their own, individual suits; a Rule 23(b)(3) class action does. The thinking behind this distinction is that declaratory or injunctive relief will usually have the same effect on all the members of the class as individual suits would. *507Lemon v. International Union of Operating Engineers, Local No. 139, 216 F.3d 577, 580 (7th Cir.2000); Jefferson v. Ingersoll International, Inc., 195 F.3d 894, 897 (7th Cir.1999); Holmes v. Continental Can Co., 706 F.2d 1144, 1157 (11th Cir.1983). For example, were Allstate enjoined from issuing a particular type of insurance policy, there wouldn't be any purpose in allowing individual members of the class to opt out and seek their own injunction. They would all sink or swim together. Indeed, as Judge Friendly explained in Galvan v. Levine, 490 F.2d 1255, 1261 (2d Cir.1973), "insofar as the relief sought [in a class action] is prohibitory, an action seeking declaratory or injunctive relief ... is the archetype of one where class action designation is largely a formality, at least for the plaintiffs." In contrast, when damages are sought, it is quite likely that some individual class members will want to sue on their own (provided that the potential damages per class member are substantial) rather than participate in a class-wide award, because they may have greater than average damages. [2] But this is in general rather than in every case. When the main relief sought is injunctive or declaratory, and the damages are only "incidental," the suit can be maintained under Rule 23(b)(2). Jefferson v. Ingersoll International Inc., supra, 195 F.3d at 898; Allison v. Citgo Petroleum Corp., 151 F.3d 402, 415 (5th Cir.1998); Probe v. State Teachers' Retirement System, 780 F.2d 776, 780 (9th Cir.1986); see Berger v. Xerox Corp. Retirement Income Guarantee Plan, 338 F.3d 755, 763-64 (7th Cir.2003); Murray v. Auslander, 244 F.3d 807, 812 (11th Cir.2001). The operational meaning of "incidental" damages in this setting is that the computation of damages is mechanical, "without the © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 400 F.3d 505 400 F.3d 505, 34 Employee Benefits Cas. 2005 (Cite as: 400 F.3d 505) need for individual calculation," Manual for Complex Litigation (Fourth) § 21.221 (2004), so that a separate damages suit by individual class members would be a waste of resources. See Allison v. Citgo Petroleum Corp., supra, 151 F.3d at 415. The present case is one of incidental damages because if the plaintiffs get the declaration they are seeking, the benefits to which the ERISA plan entitles them will simply be read off from the plan. Compare Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 163-64 (2d Cir.2001). [3] When limited to incidental damages as the cases define the term, the award of damages by a judge does not run afoul of the Seventh Amendment's right to a jury trial in federal civil cases. For when calculation of damages is mechanical, there is no right to a jury trial because summary judgment would be granted. When, moreover, the basic relief sought in a case is equitable, the judge can award damages in the exercise of his equity powers, and thus without calling in a jury, under the "clean up" doctrine of equity. For the application of this principle to ERISA, see May Dept. Stores Co. v. Federal Ins. Co., 305 F.3d 597, 603 (7th Cir.2002). The present suit is an ERISA suit. [4] But just as the presence of a damages claim does not always require insisting that the case proceed under Rule 23(b)(3), so the fact that declaratory or injunctive relief is sought (and no, or only incidental, damages) should not automatically entitle the class to proceed under Rule 23(b)(2). There can be critical differences among class members that are independent of differences in the amount of damages. In this case, the critical difference concerns the circumstances that induced the members of the class to quit their employment with Allstate. One of the named plaintiffs alleges that he was constructively discharged because he was unable to comply with the new office-hour requirements, another because he was harassed by his manager's enforcement of Allstate's new policies, and another because he was forced to attend too many *508 unnecessary meetings. This variance in circumstances doubtless pervades the entire class. Given the size of the class, more than a thousand individual hearings will be necessary in order to determine which members were really forced to quit and which quit voluntarily; only the former are entitled to relief. [5] This is not to say that the case is unsuitable for class treatment. It may well be highly suitable. A single hearing may be all that's necessary to determine whether Allstate had a policy of forcing its Page 3 employee agents to quit. This issue could be decided first and then individual hearings conducted to determine which of the members of the class were actually affected by the policy rather than having decided to quit for their own reasons. Fed.R.Civ.P. 23(c)(4)(A). That would be a more efficient procedure than litigating the class-wide issue of Allstate's policy anew in more than a thousand separate lawsuits. We explained this kind of hybrid procedure in Carnegie v. Household International, Inc., 376 F.3d 656, 661 (7th Cir.2004), and need not repeat the explanation here. But when, though the suit is for declaratory relief, the effect of the declaration on individual class members will vary with their particular circumstances, they should be given notice of the class action so that they can decide whether they would be better off proceeding individually. In re Monumental Life Ins. Co., 365 F.3d 408, 417 (5th Cir.2004). Several cases suggest that it might not be necessary to convert such a proceeding to Rule 23(b)(3) because adequate notice and an opportunity to opt out could be provided within the context of a Rule 23(b)(2) proceeding. See, besides Monumental, Jefferson v. Ingersoll International Inc., supra, 195 F.3d at 898 ("instead of divided certification--perhaps equivalent to it--the judge could treat a Rule 23(b)(2) class as if it were under Rule 23(b)(3), giving notice and an opportunity to opt out on the authority of Rule 23(d)(2)" (emphasis in original)), and Lemon v. International Union of Operating Engineers, Local No. 139, supra, 216 F.3d at 582 ("the third option discussed in Jefferson is that the district court might certify the class under Rule 23(b)(2) for both monetary and equitable remedies but exercise its plenary authority under Rules 23(d)(2) and 23(d)(5) to provide all class members with personal notice and opportunity to opt out, as though the class was certified under Rule 23(b)(3)"). The statement in Lemon is dictum, however, and Jefferson carefully left open the question whether the procedure we quoted from that opinion is ever proper. See 195 F.3d at 899. As the quotation from Lemon makes clear, such an effort to restructure Rule 23(b)(2) would be complicated and confusing--unnecessarily so, given the ready availability of the 23(b )(3) procedure. We conclude that this class action should have been certified, if at all, under Rule 23(b)(3) rather than under (b)(2). The certification is therefore VACATED. 400 F.3d 505, 34 Employee Benefits Cas. 2005 © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 400 F.3d 505 400 F.3d 505, 34 Employee Benefits Cas. 2005 (Cite as: 400 F.3d 505) Briefs and Other Related Documents (Back to top) • 04-8022 (Docket) (Nov. 29, 2004) END OF DOCUMENT © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Page 4 Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) Only the Westlaw citation is currently available. Page 1 conclusions of law. I. CLASS DESCRIPTION United States District Court, W.D. Pennsylvania. James D. MEYER, individually, and on behalf of a group of similarly situated individuals, Plaintiff, v. CUNA MUTUAL GROUP, Defendant. No. Civ.A. 03-602. Jan. 25, 2006. Mark T. Coulter, Peirce, Raimond & Coulter, Pittsburgh, PA, for Plaintiff. Amanda M. Abraham, Roland C. Goss, W. Glenn Merten, Jorden Burt, Washington, DC, Dennis St. John Mulvihill, Daniel L. Rivetti, Robb Leonard Mulvihill, Pittsburgh, PA, for Defendant. MEMORANDUM OPINION CONTI, J. *1 Pending before the court is a motion for class certification (Doc. No. 30) filed pursuant to Federal Rule of Civil Procedure 23(b)(3) in the abovecaptioned civil action by James D. Meyer ("plaintiff" or "Meyer"). Plaintiff seeks class certification for persons who purchased disability insurance issued in the state of Pennsylvania from the defendant CUNA Mutual Group (the "defendant" or "CUNA") pursuant to policies containing a particular definition of "Total Disability" and whose claims for disability benefits were allegedly wrongfully denied after those persons had received disability benefits pursuant to the policy for approximately a twelve-month period. [FN1] FN1. See class definition infra Part I for a more precise description of the class. On December 16, 2004, the court held a class certification hearing. On February 25, 2005, the plaintiff submitted a proposed trial plan (Doc. No. 47), the defendant submitted a response to the proposed trial plan (Doc. No. 46), and the parties submitted proposed findings of fact and conclusions of law (Doc. No. 49). Pursuant to Federal Rule of Civil Procedure 52, this court makes the following findings of fact and Plaintiff sought in his amended complaint the certification of a nationwide class. Plaintiff seeks in his motion for class certification, however, the certification of a state-wide class limited to the Commonwealth of Pennsylvania. Plaintiff seeks certification of a class defined as follows: All persons who purchased disability insurance issued in Pennsylvania from the defendant CUNA Mutual Group, or its subsidiaries, which policies contain the definition of total disability including the following material language: "After the first twelve consecutive months of disability, the definition changes and requires the Member to be unable to perform any of the duties of his occupation, or any occupation for which he is reasonably qualified", [sic] to the extent that such individuals were determined by the defendant to be not able to perform all of the duties of his or her occupation, but were determined by the defendant to be capable of sufficient physical activity that the defendant decided that they were no longer eligible for total benefits under the defendant's interpretation of the subject policy. Plaintiff's and Defendant's Proposed Findings of Fact and Conclusions of Law ("Joint Filing") at 2 (citing Plaintiff's Brief in Support of Motion for Class Certification ("Pl.'s Br.") at 8). II. FINDINGS OF FACT A. Background Facts 1. On February 24, 1999, plaintiff purchased credit disability insurance pursuant to a group policy (the "policy") issued by defendant CUNA to URE Federal Credit Union (the "credit union") in connection with the financing by the credit union of an automobile purchase made by plaintiff. Joint Filing, Agreed Findings of Fact ("AFF") ¶ 3. 2. The policy provided that, in the event plaintiff became totally disabled, defendant would make payments on the loan to the credit union on plaintiff's behalf. AFF ¶ 6 (citing Group Credit Insurance Policy at 4). *2 3. The policy contained a definition of "Total Disability" that provided: © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) during the first 12 consecutive months of disability means that a member is not able to perform substantially all of the duties of his occupation on the date his disability commenced because of a medically determined sickness or accidental bodily injury. After the first 12 consecutive months of disability, the definition changes and requires the member to be unable to perform any of the duties of his occupation or any occupation for which he is reasonably qualified by education, training or experience. AFF ¶ 7 (citing Group Credit Insurance Policy at 1). 4. This policy was approved by the Pennsylvania Insurance Department, as required by Pennsylvania law, before being sold to plaintiff. AFF ¶ 8. 5. The policy at issue--including the language defining total disability-- resulted from defendant's efforts to modify language in its policies during the 1980s and to use "plain language" in drafting its policies. Pl.'s Br., Ex. 8, Deposition of Diane Konz ("Konz.Dep.") at 14-18. Diane Konz, defendant's representative, testified: Q: Okay. Now, in changing whatever that prior not-plain language policy was to this plain language policy, do you recall whether nor not any changes were made to the words describing total disability? A: We re-cast the definition to simply make it--to use easier words to understand. Q: Okay. And was the reason for doing that at that time the fact the insurance commissions were requesting plain language be used? A: Yes. Q: And in this particular instance at that point in time was the Pennsylvania Insurance Commission requesting plain language be used? A: Not at that time. Q: Was that something you anticipated coming down the road? A: Yes. Konz Dep. at 18. 6. Ms. Konz testified in her deposition that she worked with a team at CUNA that drafted insurance contracts, submitted them to state regulators, and worked with the regulators to gain approval. Konz Dep. at 6-7. Ms. Konz testified that the drafting team included the manager of claims, the manager of underwriting, the manager of accounting, an actuary, and herself on behalf of the government relations and regulatory compliance group. Id. Ms. Konz testified that she drafted the language of the policy at issue Page 2 during CUNA's efforts to modify policies to contain plain language. Konz Dep. at 21. Defendant asserts that the policy was drafted by a group, whereas plaintiff asserts that the policy was drafted by Ms. Konz, but reviewed by a group. See Defendant's Proposed Findings of Fact ("DFF") ¶ 2 and Plaintiff's Response thereto. 7. Ms. Konz is a high school graduate without a formal education in law. Konz Dep. at 9. Ms. Konz testified that she cannot recall ever reading any legal cases dealing with interpretation of insurance contracts. Konz Dep. at 10. Ms. Konz was trained onthe-job, in-house, by defendant CUNA. Konz Dep. at 9-10. This policy was Ms. Konz's first opportunity to participate as a member of a drafting team from start to finish on a policy. Konz Dep. at 15. *3 8. Plaintiff obtained a loan in the face amount of $19,838.44 and purchased a credit disability insurance policy with respect to that loan. The policy was effective on February 24, 1999 and the premium for the policy was $1,230.00. AFF ¶ 4. 9. Plaintiff worked as a brakeman and conductor for Union Railroad for approximately 31 years. AFF ¶ 2. 10. On May 27, 2000, plaintiff suffered an injury at work while moving a train from one yard to another. AFF ¶ 5, 9. 11. As a result of the injury plaintiff was diagnosed with a herniated cervical disc with radiculopathy, leading to surgical discectomy. AFF ¶ 10. 12. Plaintiff sued his employer Union Railroad as a result of this incident, alleging that Union Railroad was responsible for his injuries because the equipment he was using at the time he was injured was defective. AFF ¶ 11. Plaintiff received a jury verdict in this lawsuit in the amount of $600,000.00. AFF ¶ 12. This jury verdict was vacated by an appellate court in September 2004. AFF ¶ 13. 13. In connection with this injury, plaintiff filed a claim for disability benefits under the policy at issue in this lawsuit. AFF ¶ 14. 14. In response to plaintiff's claim, CUNA began to pay plaintiff disability benefits. AFF ¶ 15. CUNA made its first payment of disability benefits to plaintiff on August 2, 2000 for the period of July 7, 2000 through July 27, 2000. Id. 15. The definition of "Total Disability" in the policy © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) defines "Total Disability" during the first twelve consecutive months of disability differently from "Total Disability" during the time period thereafter. See AFF ¶ 7. The policy defines "Total Disability" during the first twelve consecutive months of disability to mean "that a member is not able to perform substantially all of the duties of his occupation on the date his disability commenced because of a medically determined sickness or accidental bodily injury." Id. The policy states that the definition of "Total Disability" during the time period thereafter "changes and requires the member to be unable to perform any of the duties of his occupation or any occupation for which he is reasonably qualified by education, training or experience." Id. 16. CUNA paid plaintiff disability benefits for the period between July 7, 2000, and July 7, 2001, pursuant to the definition of "Total Disability" that governed the first twelve months of disability because for that period CUNA determined that plaintiff was totally disabled according to that definition. AFF ¶ 16. 17. CUNA paid plaintiff disability benefits for the period between July 8, [2001] [FN2] through November 24, 2002, pursuant to CUNA's interpretation of the definition of "Total Disability" that governed the time period after twelve months had passed from the date the disability commenced because for that period CUNA determined that plaintiff was totally disabled according to that definition. AFF ¶ 17; AFF ¶ 30. FN2. The Agreed Findings of Fact state that CUNA continued to pay benefits to plaintiff "from July 8, 2000 through November 24, 2002, pursuant to the second sentence of the definition of total disability." The court, however, infers that the parties meant to state "from July 8, 2001 through November 24, 2002." AFF ¶ 17 (emphasis added). B. Medical Evaluations *4 18. During the time period that CUNA paid benefits to plaintiff under the policy, plaintiff was treated by several physicians. AFF ¶ 18. 19. During this period, plaintiff saw Dr. Antoin Munirji on a monthly basis for an extended period of time. AFF ¶ 19. In conjunction with each visit, Dr. Munirji completed two different forms relating to plaintiff's disability status: an internal office form Page 3 used at Dr. Munirji's office (the "Munirji form") and a form provided by CUNA to Dr. Munirji (the "CUNA form"). AFF ¶ ¶ 21, 23. 20. The Munirji form contained the question: "Can patient return to his/her pre-injury job without restrictions?" The question was followed by spaces to mark "Yes" and/or "No." AFF ¶ 22. 21. The CUNA form contained the question: "Has patient been released to return to work?" The question was followed by spaces to mark "Yes" and/or "No." AFF ¶ 23. 22. In order to complete the certification forms, Dr. Munirji tested plaintiff's strength and range of motion, and recorded these results. AFF ¶ 24. 23. On several occasions physicians authorized plaintiff to return to work in a sedentary, light, or medium duty capacity. AFF ¶ 25. 24. For example, on November 13, 2000, Dr. Munirji submitted a claim form to CUNA indicating that plaintiff had as of October 11, 2000, regained the ability to return to work subject to light duty restrictions. Munirji Dep. at 12-14, Ex. 3 at 2. See DFF ¶ 18 and Plaintiff's Response thereto. On December 5, 2000, Dr. Munirji submitted a claim form to CUNA indicating again that plaintiff had regained the ability to return to work subject to light duty restrictions as of October 11, 2000. Munirji Dep, Ex. 3 at 4. 25. CUNA representative Tarry Blanke testified in her deposition that Dr. Levin had submitted a certification to CUNA indicating that plaintiff could return to light duty work in some capacity as of June 8, 2000. DFF ¶ 16 (citing Blanke Dep. at 45). (Dr. Levin's report, Ex. 7 to Blanke's deposition, does not appear in the record.) 26. During plaintiff's deposition he was questioned about a report written by Dr. Talbott which apparently indicated Dr. Talbot had stated that plaintiff was capable of full time light employment, as opposed to returning to plaintiff's occupation as a conductor / brakeman. DFF ¶ 17 (citing Pl. Dep. at 92-94). (Dr. Talbott's report, part of Ex. 7 to plaintiff's deposition, does not appear in the record.). 27. Plaintiff believed that as of October 25, 2000 he was capable of performing sedentary or light work on a full time basis. AFF ¶ 26. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) 28. Later, on May 3, 2002, Dr. Munirji indicated that plaintiff was capable of performing modified light duties at work, so long as he did no above-shoulder work and no lifting over 10-15 pounds. AFF ¶ 27. In December 2002, Dr. Munirji informed CUNA that plaintiff was capable of performing modified light duties at work, so long as he did no above-shoulder work and no lifting over 10-15 pounds. AFF ¶ 28. On December 10, 2002, Dr. Munirji submitted a form to CUNA and indicated that plaintiff was capable of performing "modified light duty." AFF ¶ 29. *5 29. Dr. Munirji's report of December 31, 2002, however, demonstrates that though plaintiff was capable of performing modified light duties, plaintiff continued to suffer effects of his injury that prevented him from returning to his time-of-injury occupation. PFF ¶ 2. The report indicates, for example, that plaintiff was "totally disabled from performing his own occupation" and that Dr. Munirji expects either "no change" or "unknown," rather than "improvement" or "deterioration," regarding plaintiff's injury. Pl.'s Br., Ex. 6 at 1. In addition, Dr. Munirji testified in his deposition that in the years since 2002, plaintiff's physical condition has not significantly improved and that plaintiff remained unable to perform substantially all of the activities of his prior occupation as a conductor for Union Railroad. PFF ¶ 3, 5. 30. Although several physicians authorized plaintiff at various times after his disabling injury to return to working in some capacity subject to light or medium duty restrictions, there is no indication in the record that any physician certified that after the disabling injury plaintiff could perform all of the duties of his time-of-injury occupation--conductor / brakeman at Union Railroad. Page 4 railroad employment, Mr. Matey could not determine whether plaintiff could return to his railroad employment. Id. Mr. Matey reported, however, among other things, that he "fe[lt] less than confident that return to full duty would be advised at this time" and that "[i]f prior position is unavailable [he] fe[lt] [plaintiff]'s abilities suggest he could return [to] medium duty work at this time with below weight limits recommended." Appendix in Support of CUNA's Memorandum in Opposition to Plaintiff's Motion for Class Certification ("Def.App."), Pl.'s Dep., Ex. 2, Matey Report at 1. 33. In 2002, counsel for plaintiff referred plaintiff to Charles Cohen, Ph.D., a licensed psychologist/vocational expert, for a vocational evaluation in 2002. AFF ¶ 35. The results of this evaluation are detailed in a report (the "Cohen Report") dated September 30, 2002. Id. Dr. Cohen concluded, among other things, that "[plaintiff] has a loss of earnings capacity associated with his inability to perform his previous job on the railroad." Def.App., Pl.'s Dep., Ex. 1, Cohen Report at 8. *6 34. The vocational/employment evaluations contained conclusions that plaintiff was capable of some light or medium work duty, even if he could not return to his original job. DFF ¶ 26 (citing Pl.'s Dep., Ex. 10 & 11). Mr. Matey concluded that plaintiff could work at a job with "medium duty" requirements. Pl.'s Dep., Ex. 10. Dr. Cohen concluded that though plaintiff could no longer perform his job as conductor/brakeman and his skills are not transferable to other work, he may have been able to secure employment in some other occupation such as retail sports equipment sales. Pl.'s Dep., Ex. 11. D. Termination of Benefits C. Vocational / Employment Evaluations 31. During the time period that CUNA paid benefits to plaintiff under the policy, plaintiff participated in two vocational/employment evaluations. AFF ¶ 31. 32. In late 2001, plaintiff's surgeon, Dr. El-Kadi, recommended plaintiff for a vocational evaluation in late 2001. AFF ¶ 32. This evaluation was performed by Mr. Matey, Director of Physical Therapy at Rehab Plus. Id. The results of this evaluation are detailed in a report (the "Matey Report") dated November 29, 2001. AFF ¶ 33. Mr. Matey concluded that plaintiff could work at a job with "medium duty" requirements, but due to incomplete information about the specific physical requirements of plaintiff's 35. CUNA paid plaintiff benefits under the policy until November 24, 2002. AFF ¶ ¶ 30-33, 37. 36. On or about January 27, 2003, CUNA informed plaintiff by letter that he was no longer eligible for benefits under the policy. AFF ¶ 36. In the letter plaintiff was informed that, though CUNA had processed his claim for the period September 25, 2000, through November 24, 2002, it was terminating his benefits under the policy. The letter explained in pertinent part: Based on information obtained, no additional benefits may be extended at this time. The information obtained indicated you're capable of modified light duty work. This, along with other © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) information contained in your claim file, indicates that you are no longer unable to perform any occupation. Therefore, your claim has been closed. The Credit Disability Insurance contract contains a definition of total disability. According to this definition, total disability during the initial 12 consecutive [sic] months of disability means you are not able to perform the duties of your occupation. After the initial 12 consecutive months of disability, the definition changes and states that you must be disabled from performing any occupation for which you are reasonably qualified by education, training, or experience. Def.App., Blanke Affidavit, Ex. A (Letter from Carolyn J. Frye to James D. Meyer) (the "January 27, 2003 letter"). 37. The January 27, 2003 letter is a form letter sent by CUNA to disability claimants (1) to whom CUNA had paid twelve consecutive months of benefits under a credit disability policy, and (2) for whom CUNA had received information indicating that the claimant was capable of returning to work in some capacity. AFF ¶ 38. 38. As of the date CUNA responded to an interrogatory (interrogatory number four) served by plaintiff, CUNA believed as best as can be determined that approximately 1,545 claims fell into a category for Pennsylvania residents from April 29, 1997 to April 29, 2003, which is the statute of limitations period for the putative class in this case. The category referred to was for insureds who were insured under policies containing the language at issue in this case whose benefits were terminated after CUNA determined that the insured was capable of sufficient physical ability--although not enough to perform the duties of the insured's occupation--to be no longer eligible for benefits. The data was limited to Pennsylvania residents because insurance certificates with this definition of disability were only sold to Pennsylvania residents. See AFF ¶ ¶ 39-40. [FN3] FN3. CUNA's designated representative for the purposes of testifying to claims procedures, Tarry Blanke, testified in her deposition that she received a request from the in-house legal department to assist them in identifying relevant claims, that she participated in ascertaining the number of claims by contacting the IT Department and giving them parameters for identifying the claims, and that she passed on this information to the legal department. Blanke Page 5 Dep. at 26-27. This process apparently led to defendant's answer to interrogatory number four. In an affidavit submitted with defendant's opposition to the motion for class certification, Ms. Blanke further explained that (1) this number was ascertained by determining from computer records that the same form of letter sent to plaintiff was sent to 1,545 Pennsylvania residents; (2) it was not determined by defendant why the persons who had received this form of letter stopped receiving benefits; and (3) in sending the letter, CUNA did not make any determination of whether each recipient of the letter could have returned to their pre-injury job without restriction. Plaintiff objects that this Affidavit submitted after the close of discovery and days prior to argument is untimely, contradicts defendant's answer to interrogatory number four, and cannot vitiate that answer. The court need not resolve that objection because the answer to interrogatory number four is sufficient to meet plaintiff's burden on the numerosity requirement for a class certification at this stage of the proceedings. *7 39. CUNA's practice is to include in a letter to an insured denying benefits all of the bases upon which benefits are being denied because CUNA understands that is expected and required under the Fair Claims Practices Act. Blanke Dep. at 67. E. Plaintiff's Current Employment Status 40. At the time of plaintiff's deposition he could perform all of the verbal requirements of his job as brakeman/conductor, but could not perform all of the physical requirements of his job as brakeman/conductor. AFF ¶ 42. 41. Plaintiff testified during his deposition that the rules promulgated by his union, the United Transportation Union (the "union") prevented him from taking a different job with his employer. AFF ¶ 43. Plaintiff explained that brakeman/conductors do not have light duty work, his agreement with the union prevented him from switching from brakeman/conductor to some other position such as being a clerk, and that in his 31 years of experience at the railroad he had never had any other job than brakeman/conductor. Pl.'s Dep. at 73-74. 42. Plaintiff testified during his deposition that since © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) becoming disabled he had not discussed job training possibilities with his union, considered attending any kind of job training or education courses to prepare himself for a new occupation, or looked for or applied for a new job. AFF ¶ 44-45. 43. Plaintiff has the ability to perform tasks associated with some occupations other than brakeman/conductor. AFF ¶ 46. 44. Plaintiff receives a monthly disability pension from the Railroad Retirement Board in the amount of $2,230.00. AFF ¶ 47. In June 2004, plaintiff received a lump sum "US Carnegie" pension payment in the amount of approximately $167,000.00. AFF ¶ 48; Pl.'s Dep. at 21-22. F. Plaintiff's Adequacy as Class Representative 45. Plaintiff has expressed his willingness to serve as class representative, and to vigorously prosecute this case on behalf of the entire class. PFF ¶ 22; Amended Complaint ¶ ¶ 11,15-16. 46. Because defendant has represented that it sold this policy only in Pennsylvania, there are no variations in state law which create conflicts of interest between members of the proposed class. PFF ¶ 24. 47. On April 16, 2004, the court entered a case management order providing that class certification discovery close on August 23, 2004, and that plaintiff's motion for class certification be filed by September 14, 2004. AFF ¶ 58. 48. On July 12, July 19, and August 20, 2004, counsel for defendant requested dates for deposing plaintiff. AFF ¶ 59. 49. Plaintiff's deposition was scheduled for the week of September 20, 2004, but was thereafter postponed because plaintiff's counsel was unavailable. AFF ¶ 60. 50. The parties filed a joint motion to amend the case management order (Doc. No. 28) on or about September 13, 2004. The court, upon consideration of the parties' joint motion, amended the case management order on September 15, 2004, and ordered that class certification discovery be concluded by October 8, 2004, and that plaintiff's motion for class certification be filed by October 29, 2004. AFF ¶ 61. Page 6 *8 51. Plaintiff's deposition was re-scheduled for September 30, 2004. AFF ¶ 62. 52. Several days before plaintiff's scheduled deposition, an appellate court vacated plaintiff's $600,000.00 jury verdict against his employer. AFF ¶ 63. Because of the appellate court's opinion, plaintiff informed his attorney that he believed that "the judicial system did not work" and that "he was not willing on that date to participate in it." AFF ¶ 64. Plaintiff stated that he had lost faith in the legal system and was unwilling to be deposed. AFF ¶ 65. Plaintiff at no time claimed that he was ill or had an unforeseen conflict with the scheduled deposition. Instead, plaintiff refused to attend it. AFF ¶ 66. The day before the scheduled deposition plaintiff's counsel informed defendant's counsel that plaintiff refused to attend the September 30, 2004 deposition. AFF ¶ 67. 53. Defendant's counsel re-noticed plaintiff's deposition for October 5, 2004, three days before the close of class discovery, as a courtesy to plaintiff's counsel. AFF ¶ 68. Plaintiff's counsel, however, was unable to secure plaintiff's attendance on October 5, 2004, and plaintiff failed to appear at the October 5 deposition. AFF ¶ 69. 54. Class discovery closed, therefore, without defendant having an opportunity to depose plaintiff. AFF ¶ 70. 55. Plaintiff sought and received an extension of the class discovery period and plaintiff was deposed on October 28, 2004. AFF ¶ 72. 56. At his deposition plaintiff agreed that if a class representative exposed the members of a putative class that he seeks to represent possibly to adverse consequences due to a failure to abide by court rules that such conduct would not be in the best interests of the members of the class. AFF ¶ 73; Pl.'s Dep. at 17. 57. Plaintiff asserts that there was no prejudice to any party and no harm done to the class in light of the delay occasioned by the re-scheduling of plaintiff's deposition. PFF ¶ 25. 58. Plaintiff does not know the physical capabilities or level of education, training, and experience of any member of the putative class. AFF ¶ 49. 59. At the time of his deposition plaintiff was unaware that a class representative is expected to pay discovery and notice expenses inherent in all class © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) action litigation, did not expect to incur expenses in connection with the litigation, and indicated that at that time he was unable to pay the potential expense of class notice or discovery in this action. Pl.'s Dep. at 6. 60. Plaintiff has arranged for costs and expenses of this matter to be contingently advanced by plaintiff's counsel in the above-captioned civil action. AFF ¶ 50. Plaintiff avers that the contingent fee agreement properly provides that plaintiff's counsel may advance the costs of litigation, repayment of which is contingent on the outcome of the matter. DFF ¶ 47 and Plaintiff's Response thereto (citing Pennsylvania Rule of Professional Conduct 1.8(e)(I)). *9 61. Plaintiff's proposed class counsel, Mark T. Coulter and D. Aaron Righn of Peirce, Raimond and Coulter, P.C. have experience litigating class actions, including consumer cases, and possess the resources to prosecute this case. AFF ¶ 51. G. Issues Related to Administration of the Class Action 62. Were the class to be certified, plaintiff's trial plan asserts that a damages determination would not be problematic and defendant's trial plan asserts that a damages determination would be problematic. [FN4] FN4. No facts relevant to the size of the claims of putative class members were referred to by either party. III. Procedural Background 1. Plaintiff brings this action on his own behalf, and on behalf of similarly situated individuals who were granted, but later denied, benefits under credit disability insurance policies purchased from the defendant. AFF ¶ 52-3; Amended Complaint (Doc. No. 21) at 1-3. 2. Plaintiff's initial complaint (Doc. No. 1) sought certification of a nationwide class based upon claims for breach of contract, breach of fiduciary duty, violation of the Pennsylvania Unfair Trade Practices Act and Consumer Protection Law, and violation of Pennsylvania's bad faith insurance statute. 3. Defendant filed a motion to dismiss this complaint (Doc. No. 6) which the court granted in part as to the breach of fiduciary duty claim and denied in part as to the remaining claims in its memorandum order of February 11, 2004 (Doc. No. 12), noting that plaintiff Page 7 had conceded in his response to the motion to dismiss that count three of the complaint fails to state a claim as to breach of fiduciary duty. 4. Plaintiff subsequently filed an amended complaint (Doc. No. 21) with leave of the court re-alleging claims for breach of contract, breach of fiduciary duty, and violation of the Pennsylvania Bad Faith statute, and further alleging violations of the Unfair Trade Practices Act and Consumer Protection laws of all 50 states and the District of Columbia and violation of the covenant of good faith and fair dealing under common laws of all 50 states, the District of Columbia, and federal common law. AFF ¶ 55. 5. Defendant filed a motion to dismiss this complaint (Doc. No. 22) which the court in its memorandum order of December 20, 2004 (Doc. No. 41) granted as to count three, the breach of fiduciary duty claim, granted in part as to count four, the unfair trade practices claim, and denied without prejudice as to count six, the breach of the implied covenant of good faith and fair dealing claim. AFF ¶ 56. The court granted in part the motion to dismiss as to count four, the unfair trade practices and consumer protection claim, dismissing that claim to the extent that it purported to state a claim for violations of unfair trade practices of all 50 states and the District of Columbia as well as the federal statute prohibiting unfair trade, and permitting plaintiff to maintain such a claim to the extent the claim alleges violations of the Pennsylvania Unfair Trade Practices Act and Consumer Protection Law. AFF ¶ 57. The court denied defendant's motion to dismiss count six without prejudice to defendant's rights to revisit the issue upon a more fully developed record in a motion for summary judgment. Id. *10 6. Plaintiff asserts that defendant's sworn discovery responses have indicated that the policy language at issue in this case was used only in Pennsylvania. PFF ¶ 21. Plaintiff seeks, therefore, in his motion for class certification creation of a class limited to Pennsylvania participants. Id. In the event that subsequent discovery should demonstrate that defendant's discovery responses were erroneous regarding the use of this clause only in Pennsylvania, whether by intent or omission, plaintiff reserves the right to request the court to reconsider the scope of the proposed class. Id. IV. CONCLUSIONS OF LAW 1. To be certified, a class must satisfy the four © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) requirements of Federal Rule of Civil Procedure 23(a): (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. Fed.R.Civ.P. 23(a). If the Rule 23(a) requirements are met, the court must then find that the class fits within one of the three categories of class actions set forth in Federal Rule of Civil Procedure 23(b). In Re Community Bank of Northern Virginia, 418 F.3d 277, 302 (3d Cir.2005). See also Chiang v. Veneman, 385 F.3d 256, 264 (3d Cir.2004); In Re LifeUSA, 242 F.3d 136, 143 (3d Cir.2001); Georgine v. Amchem. Prods., Inc., 83 F.3d 610, 624 (3d Cir.1996), aff'd. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997); Baby Neal v. Casey, 43 F.3d 48, 55 (3d Cir.1994). 2. The proponent of class certification has the burden of proving each of the prerequisites of a class action under Rule 23(a) and that the class fits within one of the three categories of class actions set forth in Rule 23(b). Chiang, 385 F.3d at 264. The court notes, however, that it is not necessary for plaintiff to establish the merits of his case at the certification stage, and that in determining whether the class will be certified, the substantive allegations of the complaint must be taken as true. Chiang, 385 F.3d at 262 (citing Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 177-78, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974)). In deciding a motion for class certification, the court must be satisfied "after a rigorous analysis" that all the requirements for class certification are met. General Telephone Co. v. Falcon, 457 U.S. 147, 160, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). As the United States Court of Appeals for the Third Circuit has recently made clear, failure to follow the procedures required before approving a class action is an abuse of discretion. In Re Community Bank of Northern Virginia, 418 F.3d 277 (3d Cir.2005) (settlement-only class). A. The Class Definition 3. Plaintiff proposes class certification for a group of individuals who purchased disability benefits policies in Pennsylvania from defendant containing a certain definition of "Total Disability" which provided that: during the first 12 consecutive months of disability means that a member is not able to perform substantially all of the duties of his occupation on the date his disability commenced because of a medically determined sickness or accidental bodily injury. After the first 12 consecutive months of disability, the definition changes and requires the member to be unable to perform any of the duties of his occupation or any occupation for which he is Page 8 reasonably qualified by education, training or experience. *11 AFF ¶ 7 (citing Group Credit Insurance Policy at 1). Plaintiff seeks certification of a class defined as follows: All persons who purchased disability insurance issued in Pennsylvania from the defendant CUNA Mutual Group, or its subsidiaries, which policies contain the definition of total disability including the following material language: "After the first twelve consecutive months of disability, the definition changes and requires the Member to be unable to perform any of the duties of his occupation, or any occupation for which he is reasonably qualified", [sic] to the extent that such individuals were determined by the defendant to be not able to perform all of the duties of his or her occupation, but were determined by the defendant to be capable of sufficient physical activity that the defendant decided that they were no longer eligible for total benefits under the defendant's interpretation of the subject policy. 4. The crux of plaintiff's case is that the definition of "Total Disability" in defendant's disability insurance policies is ambiguous on its face. Specifically, plaintiff points to the language used to describe the second period of disability (the period after the first twelve consecutive months of disability has passed) as problematic. 5. Plaintiff's proposed class definition is predicated on the definition of "Total Disability" in the disability insurance policies sold in Pennsylvania by defendant. Plaintiff proposes a class of claimants who, like plaintiff, were initially approved for total disability benefits but whose benefits were subsequently terminated based upon a determination by defendant that the claimant, while "not able to substantially perform all of the duties of his occupation" as referenced in the initial definition of the total disability provision, nevertheless was capable of sufficient physical activity that defendant deemed the insured no longer eligible for total disability benefits under defendant's interpretation of the policy provisions. 6. Plaintiff avers that this class contains approximately 1,545 claimants based upon defendant's response to interrogatory number four, which indicated that "[a]s best as can be determined at the present time, CUNA believes that approximately 1,545 claims fall in to [sic] this category for Pennsylvania residents from April 29, 1997 to April 29, 2003, which is the statute of © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) Page 9 limitations period for the putative Class in this case." incorrect. 7. Plaintiff maintains that, using the subject language in the policy sold to plaintiff, defendant identified approximately 1,545 individuals who remained occupationally disabled, and yet were terminated from receipt of their benefits after a twelve-month period (or thereafter) based upon defendant's interpretation of the policy provisions which plaintiff contends entitled those claimants to continued coverage. Plaintiff seeks to use the policy language itself to define and limit the class. Plaintiff argues that the proposed class definition is sufficiently clear to encompass an ascertainable group of individuals who share common and predominate issues of law and fact, a group that is too large reasonably to anticipate individual prosecution of the case, and a group that lends itself to management as a class action. 2. Class is Not Readily Ascertainable *12 8. Defendant argues, however, that (1) plaintiff's class definition bears no relation to his claims; (2) the class is not readily ascertainable; (3) the class may not include persons whose claims are barred by the applicable statute of limitations; and (4) plaintiff has no standing to represent disability claimants who purchased different policies than he did. The court addresses these concerns in turn. 1. Relationship of Class Definition to Plaintiff's Claims 9. Defendant argues that it is inappropriate for plaintiff's class definition to refer to a determination with respect to "all of the duties" of one's occupation, which defendant submits is the standard for benefits during the first twelve months of disability. Defendant argues that plaintiff's claims relate to a denial of benefits subject to the standard for benefits during the period after twelve months of benefits. The court cannot agree with defendant's position. Though the claims advanced by plaintiff relate specifically to the ambiguity inherent in the definition of "Total Disability" during the period after twelve months of coverage, there is nothing fundamentally defective about a class definition that requires looking to both the first and second parts of the definition to ascertain the class. Defining the class to include those claimants who were first given benefits subject to the first part of the definition and then denied benefits subject to the second part of the definition in fact narrows the group to those who are similarly situated as the plaintiff and who may have a claim if plaintiff succeeds in establishing that defendant's interpretation of the policy language was 10. Defendant argues that the class is not readily ascertainable because it is not precise, objective, and presently ascertainable without detailed person-byperson analysis to determine who falls within the class. 11. Defendant is correct that a clear class definition is critically important because it identifies the persons who are entitled to relief, bound by a final judgment, and entitled to notice in a Rule 23(b)(3) action like this one. "A class must be clearly defined and only members can be legally bound by settlements or judgments in the class action." In re School Asbestos Litigation, 56 F.3d 515, 519 (3d Cir.1995) (citations omitted). 12. Defendant cites authority from other circuits to the effect that class proponents must propose a class definition which is "precise, objective, and presently ascertainable." See, e.g., Neumont v. Monroe County, 198 F.R.D. 554, 557 (S.D.Fla.2000) (for a class definition to be viable, class membership must be capable of ascertainment under objective standards); O'Connor v. Boeing N. Am., Inc., 184 F.R.D. 311, 319 (C.D.Cal.1998) (class definition should be "precise, objective and presently ascertainable"). 13. Further, defendant argues that if it is necessary to engage in a person-by-person analysis to determine who falls within a proposed class, the composition of the class cannot be ascertained through reasonable effort, and class certification must be denied. See, e.g., Crosby v. Social Sec. Admin., 796 F.2d 576, 580 (1st Cir.1986) (denying certification where definition of class made "class members impossible to identify prior to individualized fact-finding and litigation"). Defendant argues that, here, the members of the putative class can only be identified through detailed person-by-person inquiry, and not through a reasonable effort, because plaintiff's proposed class consists of individuals who were unable to perform substantially all of the duties of their pre-injury occupation, but were denied benefits because they could work in another occupation for which they were reasonably qualified by education, training or experience. According to defendant, there is no way to determine whether individuals meet this requirement without an individualized review of the claims file for each of the 1,545 claimants plaintiff contends are members of the putative class. Defendant points out, further, that there is no © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) guarantee that each claim file will contain the factual information necessary to make these determinations, and to the extent that such information is not present in any file, additional investigation would be necessary. *13 14. Defendant fails to address head on in its opposition brief, however, the fact that the 1,545 figure came from defendant, not plaintiff. Defendant certified in its answer to plaintiff's interrogatory that approximately 1,545 claimants in the state of Pennsylvania during the applicable time period fell into the category described by plaintiff. It is inappropriate for defendant to now protest that this number is inaccurate, or the criteria for determining it not clear, precise, and objective. In addition, some amount of individualized inquiry may, but does not necessarily, defeat class certification on some or all issues. See Chiang, 385 F.3d 256 at 267 (Becker, J.) ("We note in this regard that courts commonly use Rule 23(c)(4) to certify some elements of liability for class determination, while leaving other elements to individual adjudication--or, perhaps more realistically, settlement."); Carnegie v. Household Int'l, Inc., 376 F.3d 656, 661 (7th Cir.2004) (Posner, J.) ("[I]t may be that if and when the defendants are determined to have violated the law separate proceedings of some character will be required to determine the entitlements of the individual class members to relief."). This issue will be addressed more thoroughly below. 3. Claims Barred by Statute of Limitations 15. Defendant argues that the class may not include persons whose claims are barred by the applicable statute of limitations. While plaintiff's class definition does not explicitly refer to a time period, plaintiff asserts that the class is made up of the approximately 1,545 claims identified by defendant in its answer to interrogatory number four, in which defendant explained "these 1545 claims fall into this category from Pennsylvania residents from April 29, 1997 to April 29, 2003, which is the statute of limitation [sic] period for the putative class in this case." The 1,545 claims, therefore, by defendant's own determination, do not include claims barred by the applicable statute of limitations. 4. Standing 16. Defendant argues that plaintiff has no standing to represent disability claimants who purchased different policies than he did. As a threshold matter, individual standing is a prerequisite for the Page 10 maintenance of all actions, including class actions. Osgood v. Harrah's Entertainment, Inc., 202 F.R.D. 115, 120-21 (D.N.J.2001) (citations omitted). While there is no additional standing requirement for a plaintiff who seeks to represent a class, questions relating to Article III standing, however, frequently overlap and are sometimes confused with the criteria required for class certification embodied in Federal Rule of Civil Procedure 23(a). Id. 17. Though defendant cites the constitutional standard for standing in its opposition brief, defendant actually makes a standing argument that should be addressed pursuant to the criteria contained in Rule 23. That is, Article III standing requires (1) the plaintiff must have suffered an injury in fact; (2) there must be a causal connection between the injury and the conduct complained of--the injury has to be fairly traceable to the challenged action of the defendant and not the result of the independent action of some third party not before the court; and (3) it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Society Hill Towers Owners' Ass'n v. Rendell, 210 F.3d 168, 175-176 (3d Cir.2000); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc., 140 F.3d 478, 484-85 (3d Cir.1998). See also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Further, constitutional standing implicates prudential considerations that overlap, but extend beyond, the inquiry under Article III. The United States Court of Appeals for the Third Circuit has summarized those prudential principles as follows: (1) the plaintiff generally must assert his own legal rights and interests, and cannot rest his claim to relief on the legal rights or interests of third parties; (2) even when the plaintiff has alleged redressable injury sufficient to meet the requirements of Article III, the federal courts will not adjudicate abstract questions of wide public significance which amount to generalized grievances pervasively shared and most appropriately addressed in the respective branches; and (3) the plaintiff's complaint must fall within the zone of interests to be protected or regulated by the statute or constitutional guarantee in questions. Society Hill Towers Owners' Ass'n, 210 F.3d at 177- 178 (citations omitted) *14 18. The court in Osgood explained the relationship between standing and the Rule 23 criteria in a prospective class action: Though there is no additional standing requirement for the plaintiff who seeks to represent a class, a proper class action requires a similarity of claims © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) Page 11 between the named plaintiffs and the class members. This similarity of claims is tested not by principles of standing, but by the application of the Rule 23(a)(3) criteria. If a class action is proper, then by definition the class representative's claims will be typical of the class. Thus the class plaintiff's individual standing, linked to his or her asserted claim, becomes automatically linked to the class claim. Having standing which a class representative shares with the members of a class is another way of saying that the class representative is a proper party to raise a particular issue common to the class. The commonness of issues is an express requirement of Rule 23 and is an attribute of the issue involved, rather than a threshold characteristic of whether the issue meets the constitutional case or controversy test. Accordingly, a plaintiff who meets individual standing requirements possesses [standing] in the constitutional sense, and whether the plaintiff may represent the rights of others depends on the application of Rule 23 tests in the case of a class action[.] 202 F.R.D. at 120-21 (citing Herbert B. Newberg & Alba Conte, Newberg On Class Actions § 2.05 (3d ed.1992)) (emphasis added). an interrogatory ... if the party learns that the response is in some material respect incomplete or incorrect and if the additional or corrective information has not otherwise been made known to the other parties during the discovery process or in writing."). Under Federal Rule of Civil Procedure 37(c) there can be consequences to failing to amend a prior response to discovery as required by Rule 26(e)(2). Fed.R.Civ.Proc. 37(c)(1). The figure of 1,545 represents, at the very least, that some nontrivial number of claimants in the ballpark of 1,545 were represented by defendant during discovery to fall within the class of claimants that plaintiff seeks to identify. 19. Defendant's argument that it is improper for plaintiff to represent CUNA policyholders who may have purchased different policies than plaintiff did, therefore, is an argument that goes to the similarity of claims between the named plaintiff and the class members, and the similarity of claims is tested not by principles of constitutional standing, but by the application of the Rule 23(a)(3) criteria. Id. 22. To be certified, a class must satisfy the four requirements of Federal Rule of Civil Procedure 23(a): (1) numerosity; (2) commonality; (3) typicality; and (4) adequacy of representation. Fed.R.Civ.P. 23(a). Rule 23(a) specifically provides: One or more members of a class may sue or be sued as representative parties on behalf of all only 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. 20. Defendant's standing argument must fail, in addition, if all of the policies contain the same material language defining "Total Disability." This question is disputed to the extent that defendant, who produced the figure of 1,545 claims, now contends that "there is no evidence that the definition is the same in the policies for all members of the putative class." Joint Filing, Defendant's Proposed Conclusions of Law ("DCL") ¶ 25; see also Def.App., Blanke Affidavit at 2-3. Defendant's position, however, relies on the post-discovery affidavit of defendant's representative, Ms. Blanke, and may contradict defendant's answer during discovery to plaintiff's interrogatory. There is no evidence that this new information was furnished to plaintiff as a timely supplement to defendant's response to plaintiff's interrogatory as required by Federal Rule of Civil Procedure 26(e)(2) ("A party is under a duty seasonably to amend a prior response to *15 21. The class definition is sufficiently precise, objective, and presently ascertainable to submit to class certification if the other prerequisites of a class action are met. In addition, if upon further information the parties discover that the class definition must be modified, the court has the discretion to do so. See Rule 23(c)(1)(C) ("An order under Rule 23(c)(1) may be altered or amended before final judgment."). B. Rule 23(a) Prerequisites to a Class Action 23. The United States Court of Appeals for the Third Circuit Court has explained that the requirements of Rule 23(a) are meant to ensure that class action treatment is necessary and efficient and that it is fair to absentees under the particular circumstances of a case. Baby Neal, 43 F.3d at 55 (Becker, J.). Numerosity addresses the first of these concerns (i.e., the necessity of class action treatment) while commonality, typicality, and adequacy address whether the class action can be maintained in a fair and efficient manner. Id. 1. Numerosity © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) 24. Rule 23(a)'s numerosity requirement focuses on the necessity of class action treatment where the class is so numerous that joinder of all members is impracticable. See Fed.R.Civ.P. 23(a). The proposed class here consists of approximately 1,545 claimants. [FN5] While no number definitively establishes numerosity, a class as large as this one is sufficiently numerous for joinder to be impracticable. As the United States Court of Appeals for the Third Circuit has explained: FN5. Defendant's response to plaintiff's interrogatory is sufficient to meet plaintiff's burden on this matter. If the information furnished in the response is erroneous and the numerosity requirement is not met, then the court has the authority to decertify the class pursuant to Rule 23(c)(1)(C) ("An order under Rule 23(c)(1) may be altered or amended before final judgment."). As previously noted, there may be issues that defendant will need to address under Rules 26(e)(1) and 37(c). On the subject of how many is enough, Professor Moore has written "While the attitude taken towards a given number may vary, each opinion reflects a practical judgment on the particular facts of the case. Thus no hard and fast number rule can or should be stated, since 'numerosity' is tied to 'impracticability' of joinder under the specific circumstances. Nevertheless, some general tendencies can be observed. While there are exceptions, numbers under twenty-one have generally been held to be too few. Numbers between twenty-one and forty have evoked mixed responses and again, while there are exceptions, numbers in excess of forty, particularly those exceeding one hundred or one thousand have sustained the requirement." Weiss v. York Hosp., 745 F.2d 786, 808 n. 5 (3d Cir.1984) (citing 3B J. MOORE, MOORE'S FEDERAL PRACTICE ¶ 23.05[1], at 23-150 (2d ed.1982) (footnotes omitted)). Defendant argues, however, that plaintiff has failed to establish that joinder is impracticable, and that plaintiff improperly rests only on the estimated number of claims and asks the court to infer impracticability without engaging in any analysis that joinder is impracticable. *16 25. While defendant is correct that a class proponent cannot rely on bare assertions of numerosity and conclusory allegations that joinder is impractical, plaintiff bases his position that joinder is Page 12 impracticable on the number of claims reported by CUNA to fall into the category that plaintiff seeks to certify. The court, looking at the totality of the circumstances before it, finds that the numerosity requirement set forth in Rule 23(a) is satisfied. Though plaintiff could have been more effusive in its argument that joinder of the approximately 1,545 claims is impracticable, there is sufficient basis in the record for the court to find that the class is "so numerous that joinder of all members is impracticable." Fed.R.Civ.P. 23(a). As noted by defendant, practicability of joinder depends on a number of factors, including: the size of the class, ease of identifying members and determining addresses, ease of service on members if joined, geographical dispersion and whether proposed members of the class would be able to pursue remedies on an individual basis. Liberty Lincoln Mercury, Inc. v. Ford Marketing Corp., 149 F.R.D. 65, 74 (D.N.J.1993) (citations omitted). Here, the court's determination that joinder is impracticable rests primarily on the size of the class. Because here the number of potential class members is so large as to make joinder difficult if not impossible, and because the size of the individual claims may make it unlikely that the claims would be prosecuted on their own, [FN6] the court determines that the joinder is sufficiently impracticable and the numerosity requirement is satisfied. See id. FN6. While the record is not sufficient at this point for the court to determine conclusively that the size of the individual claims is so small that claimants are unlikely to prosecute individual claims on their own, the size of the named plaintiff's claim-considering that the face amount of the debt for which the credit disability policy was issued, $19,838.44, and the court not being apprised by either party that other lawsuits have been filed support an inference that the size of the individual claims may make it unlikely that the claims would be prosecuted on their own. 2. Commonality 26. The commonality requirement set forth in Rule 23(a) is satisfied if the named plaintiff shares at least one question of fact or law with the grievances of the prospective class. Baby Neal, 43 F.3d at 56 (citations omitted). As the United States Court of Appeals for the Third Circuit has noted, the commonality requirement "is not a high bar." Chiang, 385 F.3d at 265. See also Baby Neal, 43 F.3d at 56 ("Because the © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) requirement may be satisfied by a single common issue, it is easily met...."). Furthermore, and relevant to the harm alleged in this case, "class members can assert such a single common complaint even if they have not all suffered actual injury; demonstrating that all class members are subject to the same harm will suffice." Id. (emphasis in original) (citations omitted). 27. Here, plaintiff alleges that the entire class, by its definition, was (1) subject to the same legal harm-namely, denial of disability benefits by defendant, and more specifically, denial of disability benefits under the same allegedly ambiguous policy language which forms the basis of plaintiff's complaint; and (2) limited to those individuals who were determined by defendant to be physically unable to resume their prior occupation, yet were considered by defendant to be ineligible for continuing disability benefits under identical policy language. *17 28. Defendant does not directly contes t commonality in its memorandum in opposition or in its proposed conclusions of law contained in the joint filing. Defendant argues, however, that plaintiff failed to show that common issues of fact or law predominate as required by Rule 23(b). This court addresses commonality here and will address predominance below. 29. The court finds that the named plaintiff shares at least one question of fact or law with the grievances of the prospective class. The court notes, in particular, that all class members had their disability benefits terminated by defendant subject to defendant's interpretation of the same material language defining "Total Disability" which defendant used in its disability benefits policies in Pennsylvania. Further, this very language provides the basis for the named plaintiff's case. For this reason, it is clear that at least one common issue of law binds the class members: Was the policy language ambiguous? And if so, a second common issue of law would bind the class members: What are the legal implications of the ambiguity? These issues may well be addressed at the merits stage of the case. The court finds at this stage, however, that for the purposes of deciding the certification motion at least one common question of law is shared by plaintiff and the members of the putative class. Upon this finding, the court holds that the commonality requirement of Rule 23(a) is met. 3. Typicality 30. Rule 23(a) requires that "the claims or defenses Page 13 of the representative parties are typical of the claims or defenses of the class." Fed.R.Civ.P. 23(a)(3). It has been noted that "[t]he concepts of commonality and typicality are broadly defined and tend to merge" and both seek to assure that the interests of absentees will be fairly and adequately represented. Baby Neal, 43 F.3d at 56 (citing 7A CHARLES A. WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE § 1764, at 247 (1986)). See also In Re Community Bank, 418 F.3d at 303. Neither commonality nor typicality, however, mandates that all putative class members share identical claims. In Re Community Bank, 418 F.3d at 303; Baby Neal, 43 F.3d at 56. 31. Moreover, despite their similarity in seeking to protect the interests of absentees, commonality and typicality are dis tinct requirements. Baby Neal, 43 F.3d at 56. Where commonality evaluates the sufficiency of the class, typicality evaluates the sufficiency of the named plaintiff. Id. (citing Hassine v. Jeffes, 846 F.2d 169, 177 n. 4 (3d Cir.1988). [FN7] FN7. The court in Baby Neal noted further that: We underscore at the outset that neither [typicality nor commonality] mandates that all putative class members share identical claims, and that factual differences among the claims of the putative class members do not defeat certification. Id. at 56. See also Eisenberg v. Gagnon, 766 F.2d 770 (3d Cir.1985) (certifying securities fraud class action despite differences in injuries); Troutman v. Cohen, 661 F.Supp. 802, 811 (E.D.Pa.1987) (certifying subclass of 1,973 nursing home patients challenging reductions in levels of nursing care designations over commonality and typicality objections "because it is not the unique facts of the individual appeals which give rise to this action but rather the decision making process"). 32. Typicality assesses whether the named plaintiff has incentives that are aligned with those of absent class members so as to assure that the absentees' interests will be fairly represented by the named plaintiff. Baby Neal, 43 F.3d at 57. In other words, "[t]he 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 named absentees." Id. Typicality, it has been explained, entails an inquiry whether the © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) named plaintiff's individual circumstances are markedly different, or the legal theory upon which the named plaintiff's claims are based is different from one upon which the claims of other class members will be based. Id. (citing Hassine, 846 F.2d at 177; Eisenberg, 766 F.2d at 786). *18 33. Inquiries related to typicality ask whether the plaintiff's individual circumstances are different from that of absentees and whether plaintiff's legal theory is different from that of absentees. Yet, as the United States Court of Appeals for the Third Circuit explained with respect to typicality in Baby Neal, even claims marked by factual differences in injury, but in which the same course of conduct gives rise to claims based on the same legal theory, are not necessarily rendered atypical by virtue of those factual differences: Commentators have noted that cases challenging the same unlawful conduct which affects both the named plaintiffs and the putative class usually satisfy the typicality requirement irrespective of the varying fact patterns underlying the individual claims.... Actions requesting declaratory and injunctive relief to remedy conduct directed at the class clearly fit this mold. [F]actual 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 ..... Indeed, even relatively pronounced factual differences will generally not preclude a finding of typicality where there is a strong similarity of legal theories. Where an action challenges a policy or practice, the named plaintiffs suffering one specific injury from the practice can represent a class suffering other injuries, so long as all the injuries are shown to result from the practice.... 43 F.3d at 58 (internal citations and quotations omitted) (emphasis added). 34. Here, plaintiff argues Rule 23(a)'s typicality requirement is satisfied for much the same reasons that the commonality requirement is satisfied: (1) the class definition identifies a group of disability benefits claimants, including plaintiff, whose disability benefits were terminated subject to defendant's interpretation of the same policy language, the very language which is at the heart of the merits of plaintiff's case; and (2) the class definition is limited to individuals whose factual circumstances, though potentially different in multiple respects, are similar in that they all stand similarly before defendant as claimants who were Page 14 determined to be unable to resume their prior occupation, yet considered by defendant to be ineligible for continuing benefits due to defendant's interpretation of identical policy language defining "Total Disability." 35. Defendant argues, to the contrary, that plaintiff failed to demonstrate that his claims are typical of the claims of the members of the putative class. According to defendant, plaintiff's claims are "typical" of other members of the class only if proof of plaintiff's factual circumstances will also automatically prove the claims of all other class members. In Liberty Lincoln Mercury, Inc. v. Ford Marketing Corp., 149 F.R.D. 65, 74 (D.N.J.1993), relied upon by defendant, the court stated: "[G]iven [representative]'s highly individualized circumstances, [representative]'s claims are not typical of the class at large.... 'If proof of the representatives' claims would not necessarily prove all the proposed class members' claims, the representative' claims are not typical of the proposed members' claims." ' (citations omitted). The court in Liberty Lincoln Mercury, however, focused on the "the lack of commonality and highly individualized facts among proposed class members" and stated that, in those circumstances, "no proposed Dealer could be said to have claims 'typical' of the entire class." Id. In Liberty Lincoln Mercury the district court also recognized the standard for typicality: *19 Even when there are actual differences between the representative parties and the rest of the class, a proposed class will meet Rule 23(a)(3) requirements if "the claim arises from the same events 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." Grasty v. Amalgamated Clothing and Textile Wkrs. Union, etc., 828 F.2d 123, 130 (3d Cir.1987) (citing Newberg, Class Actions, § 3.15), cert. denied, 484 U.S. 1042, 108 S.Ct. 773, 98 L.Ed.2d 860 (1988); see also Hassine v. Jeffes, 846 F.2d 169, 177 (3d Cir.1988).... As the Circuit has indicated: "Rule 23 does not require that the representative plaintiffs have endured precisely the same injuries that have been sustained by class members, only that the harm complained of be common to the class." Hassine, 846 F.2d at 177 (emphasis omitted). Id. at 77 (some internal citations omitted). [FN8] FN8. With respect to typicality, defendant also relies on Parke v. First Reliance Std. Life. Ins. Co., 368 F.3d 999 (8th Cir.2004). In Parke, the United States Court of Appeals for the Eighth Circuit affirmed the district © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) court's denial of class certification in a disability benefits case where the named plaintiff claimed that the insurer in that case engaged in a practice of awarding long-term disability benefits to a claimant, then terminating or suspending them without asking for or receiving evidence that the claimant's condition had changed. Id. at 1004. The court of appeals determined that denial of certification was appropriate in that case because the propriety of terminating any claimant's benefits remained "dependent on the facts of the individual case" and "the question whether a breach occurred remains a case-by-case determination." Id. at 100405. That decision, however, bears only superficial similarity to this one. Though both deal with the termination of disability benefits, Parke did not involve a common issue of contract interpretation as this matter does; rather, in Parke, liability for termination of benefits was based upon highly individualized inquiry into each claimant's case. Therefore, Parke is distinguishable and does not change the analysis herein. 36. Here, the harm complained of is common to the class. Both plaintiff and the members of the putative class, taking as true the substantive allegations of the complaint, were subject to the same course of conduct by defendant that gives rise to claims that are based on the same legal theory. See Chiang, 385 F.3d at 262 (substantive allegations of the complaint are taken as true for purposes of deciding the class certification motion). See also Baby Neal, 43 F.3d at 58 ("[F]actual 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."). Both plaintiff and the members of the putative class were allegedly denied disability benefits based upon identical language in defendant's disability insurance policies--namely, defendant's definition of "Total Disability." The typicality requirement of Rule 23(a)(3) is, therefore, satisfied in this case. 4. Adequacy 37. Rule 23(a) 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, thus, addresses the sufficiency of the named plaintiff. As the United States Court of Page 15 Appeals for the Third Circuit explained, "[a]dequacy of representation assures that the named plaintiffs' claims are not antagonistic to the class and that the attorneys for the class representatives are experienced and qualified to prosecute the claims on behalf of the entire class." Baby Neal, 43 F.3d at 55. 38. The adequacy require ment "encompasses two distinct inquiries designed to protect the interests of absentee class members: 'it considers whether the named plaintiffs' interests are sufficiently aligned with the absentees,' and it tests the qualifications of the counsel to represent the class." ' In Re Community Bank, 418 F.3d at 303 (3d Cir.2005) (quoting In Re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prod. Liab. Litig., 55 F.3d 768, 800 (3d Cir.1995) ("G.M.Trucks" )). Defendant cites Hassine v. Jeffes, 846 F.2d 169, 179 (3d Cir.1987) and Bogosian v. Gulf Oil Corp., 561 F.2d 434, 449 (3d Cir.1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978), to the effect that there are three required components to adequacy: (1) that the putative named plaintiff has the ability and the incentive to represent the claims of the class vigorously; (2) that he or she has obtained adequate counsel; and (3) that there is no conflict between the individual's claims and those asserted on behalf of the class. The court in Hassine stated that "[t]he inquiry that a court should make regarding the adequacy of representation requisite of Rule 23(a)(4) is to determine that 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." Id. (citations omitted). While the court in Hassine did not specifically identify these factors as "three required components of adequacy," as does defendant, this court will examine nonetheless all of the factors listed above from Hassine as well as the factors identified in In Re Community Bank under two prongs: (1) the adequacy of the named plaintiff; and (2) the adequacy of plaintiff's counsel. *20 39. Regarding the first prong of the adequacy analysis --adequacy of the named plaintiff--the court will examine (i) whether the putative named plaintiff has the ability and the incentive to represent the claims of the class vigorously; and (ii) whether the named plaintiff's interests are sufficiently aligned with the absentees' interests. First, with respect to plaintiff's ability and incentive, plaintiff asserts that plaintiff has expressed his willingness to serve as class representative and to prosecute vigorously this case. Defendant, however, points to facts in the © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) record that challenge plaintiff's ability and incentive. Defendant argues that (1) plaintiff's alleged lack of engagement in the suit, demonstrated by his alleged insufficient knowledge of litigation generally and the litigation of this case; (2) plaintiff's failure to comply with the court's case management order and Federal Rule of Civil Procedure 30 by failing to participate in his scheduled deposition before the close of fact discovery; and (3) plaintiff's failure to agree to shoulder the financial burden of class representation, all support a finding that plaintiff is inadequate as a class representative in this civil action. 40. The court notes, as an initial matter, that plaintiff has the burden of proving that the prerequisites for a class action are met, and the initial burden to adduce evidence to support a finding that he will fairly and adequately protect the interests of the class are met. As to adequacy, however, "in most cases, adequate representation presumptions are usually invoked in the absence of contrary evidence by the party opposing the class." Alba Conte & Herbert Newberg, Newberg on Class Actions § 7:24 (4th ed.2002). More specifically: On the issue of no conflict with the class, one of the tests for adequate representation, the presumption fairly arises because of the difficulty of proving negative facts. On the issue of professional competence of counsel for the class representative, the presumption fairly arises that all members of the bar in good standing are competent. Finally, on the issue of intent to prosecute the litigation vigorously, the favorable presumption arises because the test involves future conduct of persons, which cannot be prejudged adversely. Id. (citations omitted). Further, [i]f there are any doubts about adequate representation or potential conflicts, they should be resolved in favor of upholding the class, subject to later possible reconsideration, or subclasses might be created initially. Alternatively, notice should be sent to the class inviting others to come in as additional class representatives. Id. (citations omitted) (emphasis added). 41. Regarding plaintiff's ability and incentive to prosecute the case, the court finds that with respect to plaintiff's knowledge of this litigation and plaintiff's failure to agree to shoulder the financial burden of class representation, and in light of the authority above regarding resolving doubts as to intent to prosecute the litigation vigorously in favor of plaintiff, any potential defects with the named plaintiff that interfere with the fair and efficient Page 16 prosecution of the action will be cured either by the competence of plaintiff's counsel, who the parties agree are adequate counsel to prosecute the action and who have agreed to advance the expenses of litigation, or by reconsideration of the named plaintiff as class representative. If the need arises, the court can reconsider the representative's adequacy and even consider a replacement representative. *21 42. Regarding plaintiff's failure to appear for his scheduled deposition before the close of fact discovery, on the record before the court, plaintiff's failure, while not condoned, is not indicative of his current intent to prosecute the case vigorously in light of the totality of the circumstances at the time of the deposition, i.e. the disappointment occasioned by the vacating of his $600,000.00 jury verdict during the time period in question. The parties ultimately were able to cooperate in a relatively short time frame -approximately thirty days--and schedule and take plaintiff's deposition. No serious prejudice to the class resulted from the delay, albeit the delay was upsetting to the other party. 43. For the above reasons, with respect to this first prong of the adequacy analysis, the court finds the proposed plaintiff adequate. 44. Regarding the second prong of the adequacy analysis, whether plaintiff's counsel is qualified to represent the class, the parties agree that plaintiff's proposed class counsel, Mark T. Coulter and D. Aaron Righn of Peirce, Raimond and Coulter, P.C., have experience litigating class actions, including consumer cases, and possess the resources to prosecute this case. See AFF ¶ 51. With respect to this second prong of the adequacy analysis, the court finds the proposed class counsel adequate. 45. Given the reasons set forth above, the adequacy requirement of Rule 23(a) is satisfied in this case. C. Certification of a Class Action Pursuant to Rule 23(b)(3) 46. In deciding a motion for class certification, if the Rule 23(a) requirements are met, the court must then find that the class fits within one of the three categories of class actions set forth in Federal Rule of Civil Procedure 23(b). In Re Community Bank, 418 F.3d at 302; Chiang, 385 F.3d at 264; In Re LifeUSA, 242 F.3d at 143; Baby Neal, 43 F.3d at 55. 47. This action invokes Rule 23(b)(3), which provides: © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) An action may be maintained as a class action if the prerequisites of [Rule 23(a) ] are satisfied, and in addition: ... (3) the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. Fed.R.Civ.P. 23(b)(3). The court addresses whether common questions of fact or law predominate over individual questions and whether the class action device is the superior method of adjudication of the controversy in turn. Page 17 defenses of the class.' ") (quoting Amchem, 521 U.S. at 623-24). 1. Common Questions of Fact or Law Predominate Over Individual Questions 49. Here, plaintiff's claims arise out of defendant's interpretation of specific language used by defendant in its disability benefits policies-- namely, language defining "Total Disability." The class is defined to include only those individuals who were denied benefits pursuant to this language. The crux of plaintiff's case at the merits stage will be a determination whether this language is ambiguous, and if so, what legal consequences flow from the ambiguity. At this stage, the court refrains from making any determination as to the merits of this claim. The court, however, recognizes for the purpose of deciding the class certification motion that determining whether contract language is ambiguous is a question of law for the court. In re Montgomery Ward & Co., Inc., 428 F.3d 154, 161 (3d Cir.2005). If an agreement is unambiguous, the court can declare its meaning as a matter of law. Id. (citations omitted). If an agreement is ambiguous, its meaning is a question of fact. Id. Further, if identical language was material in the denial of disability benefits to all of the members of the putative class, then on the question of interpreting the language, the court finds that common questions of law and fact predominate over individual ones. *22 48. The predominance inquiry focuses on whether the proposed class is sufficiently cohesive to warrant adjudication by representation. In Re Community Bank, 418 F.3d at 308-09. "A proper predominance inquiry 'trains on the legal or factual questions that qualify each member's case as a genuine controversy, questions that preexist any settlement.' " Id. (citing Amchem, 521 U.S. at 62324). In this vein, the predominance inquiry is related to, but more strenuous than, the commonality requirement set forth in Rule 23(a). Chiang, 385 F.3d at 273 ("[B]ecause the Rule 23(b)(3) predominance requirements incorporate the commonality requirement of 23(a), it is possible that 'even if Rule 23(a)'s commonality requirement is satisfied ... the predominance criterion is far more demanding.' ") (quoting Amchem, 521 U.S. at 623-24). The predominance requirement is that "the common issues must constitute a 'significant part' of the individual cases." Id. (citations omitted). The predominance requirement's relation to Rule 23(a)'s typicality requirement has been noted as well. See In Re Community Bank, 418 F.3d at 308-09 ("[A] predominance analysis 'is similar to the requirement of Rule 23(a)(3) that claims or defenses of the named representative must be 'typical of the claims [or] 50. Further, the fact that some individualized inquiry may be required with respect to other issues in the litigation, or with respect to damages, does not impugn the court's ability to certify a class for the purpose of deciding the issue of contract interpretation which underlies plaintiff's claims and similar claims of absentee members of the class. As noted above, some amount of individualized inquiry can, but does not necessarily, defeat class certification on some or all issues. See Chiang, 385 F.3d 256 at 267 (Becker, J.) ("We note in this regard that courts commonly use Rule 23(c)(4) to certify some elements of liability for class determination, while leaving other elements to individual adjudication-or, perhaps more realistically, settlement."); Carnegie v. Household Int'l, Inc., 376 F.3d 656, 661 (7th Cir.2004) (Posner, J.) ("[I]t may be that if and when the defendants are determined to have violated the law separate proceedings of some character will be required to determine the entitlements of the individual class members to relief."). Courts have flexibility to certify a class as to certain issues pursuant to Rule 23(c)(4)(A), which provides that "[w]hen appropriate an action may be brought or maintained as a class action with respect to particular issues." The United States Court of © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) Appeals for the Third Circuit has long recognized and affirmed this flexibility. See, e.g., Chiang, 385 F.3d 256 at 267, 273; Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir.1985); Bogosian v. Gulf Oil Corp., 561 F.2d 434, 456 (3d Cir.1977). *23 51. Courts have recognized, particularly with respect to damages, that the necessity to engage in some individual inquiry at the damages stage does not necessarily defeat certifying a class for the purposes of determining liability over issues that are properly considered as part of a class action. See In Re Community Bank, 418 F.3d at 305-6 (3d Cir.2005). As the court explained in Carnegie v. Household Int'l, Inc., 376 F.3d 656, 661 (7th Cir.2004): Often ... there is a big difference from the standpoint of manageability between the liability and remedy phases of a class action.... [I]t may be that if and when the defendants are determined to have violated the law separate proceedings of some character will be required to determine the entitlements of the individual class members to relief ..... That prospect need not defeat class treatment of the question whether the defendants violated [the law]. Id. (internal citations omitted). The court also noted: Once [the question of liability] is answered, if it is answered in favor of the class, a global settlement ... will be a natural and appropriate sequel. And if there is no settlement, that won't be the end of the world. Rule 23 allows district courts to devise imaginative solutions to problems created by the presence in a class action litigation of individual damages issues. Those solutions include "(1) bifurcating liability and damage trials with the same or different juries; (2) appointing a magistrate judge or special master to preside over individual damages proceedings; (3) decertifying the class after the liability trial and providing notice to class members concerning how they may proceed to prove damages; (4) creating subclasses; or (5) altering or amending the class." Id. (Posner, J.) (quoting In re Visa Check/MasterMoney Antitrust Litigation, 280 F.3d 124, 141 (2d Cir.2001). 52. In this case, liability issues that hinge on contract interpretation and language ambiguity will be decided based upon questions of law or fact common to the members of the class. A recent opinion from the United States District Court for the Eastern District of New York certifying a breach of contract class action is instructive. In Steinberg v. Nationwide Mutual Insurance Co., 224 F.R.D. 67 Page 18 (E.D.N.Y.2004), the court noted that adjudication of the claims at issue would require the court to interpret key terms, definitions, and contractual provisions that were substantively similar if not identical in all of the defendant's relevant insurance contracts, and that these contracts could be considered uniform or "form contracts" for the purposes of the litigation. The court noted that "in light of Rule 23, claims arising from interpretations of a form contract appear to present the classic case for treatment as a class action, and breach of contract cases are routinely certified." Id. (internal quotations and citations omitted). This case, like Steinberg, involves common questions of law or fact that hinge upon an interpretation of the language defining "Total Disability" in defendant's disability benefits contracts. Though defendant argues that the application of "Total Disability," no matter how it is interpreted, necessarily requires individualized determinations for each member of the putative class, the court finds that, at least as to the issues of interpreting the contract language and whether the language is ambiguous, common issues of fact and law predominate over any individualized inquiries. See In Re Montgomery Ward & Co., Inc., 428 F.3d 154 (3d Cir.2005) (explaining that determin ing whether contract language is ambiguous is a question of law for the court; if an agreement is unambiguous, the court can declare its meaning as a matter of law; if an agreement is ambiguous, its meaning is a question of fact); Emerson Radio Corp. v. Orion Sales Inc., 253 F.3d 159, 164 (3d Cir.2001). *24 53. The court thus finds that questions of law or fact common to the members of the class predominate over questions affecting only individual members. In particular, the court finds that the question of contract interpretation that underlies plaintiff's claims is a question common to all of the class members who were denied continuing disability benefits based upon defendant's interpretation of language used in the relevant policies. 2. Class Action is Superior Method of Adjudication of the Controversy 54. As explained by the United States Court of Appeals for the Third Circuit most recently in In Re Community Bank, "[t]he superiority requirement asks a district court 'to balance, in terms of fairness and efficiency, the merits of a class action against those of "alternative methods" of adjudication.' " 418 F.3d at 277 (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)). Matters pertinent to this inquiry include: © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; [and] (D) the difficulties likely to be encountered in the management of a class action. Fed.R.Civ.P. 23(b). 55. Here, considering the interest of members of the class in individually controlling the prosecution or defense of separate actions, and balancing the merits of the class action device with respect to efficiency and fairness with individual prosecutions, the court determines that the interests of the members of the class weigh in favor of certification because the costs of prosecution and the potentially numerous number of class members inform the court's determination that the class action is the superior method. Considering the extent and nature of any litigation concerning the controversy already commenced by or against members of the class, the court is only aware of this civil action and determines that this factor weighs neither in favor of nor against certification. Considering the desirability or undesirability of concentrating the litigation of the claims in the particular forum, the court notes that the policy was issued only in Pennsylvania and that no other alternative forum readily presents itself as more desirable than this one. Considering the difficulties likely to be encountered in the management of a class action, the court is sensitive to both the efficiency gains and losses that are potentially attributable to certifying the class. On the one hand, certification should bring substantial efficiency gains because the multiple claims, approximately 1,545 based on the record developed thus far, could be litigated in one forum, at one time. On the other hand, the court is aware of the administrative burdens that maintaining and litigating a class action, especially one pursuant to Rule 23(b)(3) which requires adherence to the Rule's notice provisions, can cause. On balance, efficiency concerns weigh in favor of class certification. Page 19 resolved at the summary judgment stage. That is, plaintiff's trial plan envisions class certification at least as to the question of contract interpretation. A motion for summary judgment as to that issue may well impact the possibility of settlement. As to damages, plaintiff envisions that if the class is certified and a decision favorable to the class is obtained with respect to the contract interpretation issues, the court could then determine the appropriate manner in which to proceed with respect to damages issues. Defendant objects to plaintiff's trial plan on the grounds that a trial plan should outline and demonstrate how a case could be tried manageably on a class-wide basis, and that plaintiff's trial plan is deficient because it fails to address more than one manner in which the case may reasonably develop. Defendant argues that individual determinations will be necessary not only at the damages phase, but also as part of the liability determination, based on defendant's position that the application of the definition of "Total Disability" will require individual interpretations. Defendant argues further that if defendant is found liable at the liability phase, the court will still have to determine the damages owed to each member of the class. Plaintiff, defendant argues, does not provide in his trial plan a specific formula or methodology for doing so, nor disclose how such data will be obtained. Defendant avers that, contrary to plaintiff's assumption that the facts necessary for damages calculations are readily available from defendant, in fact defendant does not maintain a database with the pertinent data. 57. The court is satisfied that certification at this stage is appropriate. If the liability issue is determined unfavorably to the class then the case will be resolved. If the liability issue is determined in favor of the class, then the court may consider on a fully developed record whether to decertify the class or to take other appropriate action. IV. CONCLUSION For the foregoing reasons, plaintiff's motion for class certification (Doc. No. 30) is GRANTED. An appropriate Order follows. V. ORDER *25 56. Reviewing the plaintiff's proposed trial plan and the defendant's response, the court notes that plaintiff asserts in its filing that the core issue of defendant's liability relating to the insurance contracts in issue is one that readily lends itself to class disposition, and that if liability on this issue can be resolved as a class action, then liability can be AND NOW, this 25th day of January, 2006, upon consideration of plaintiff's motion for class certification (Doc. No. 30), all related submissions, and the hearing held on December 16, 2004, and in accordance with this court's findings of fact and conclusions of law set forth herein, IT IS HEREBY © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Slip Copy Slip Copy, 2006 WL 197122 (W.D.Pa.) (Cite as: 2006 WL 197122 (W.D.Pa.)) ORDERED that plaintiff's motion for class certification is GRANTED. The following class of plaintiffs shall be certified: All persons who purchased disability insurance issued in Pennsylvania from the defendant CUNA Mutual Group, or its subsidiaries, which policies contain the definition of total disability including the following material language: "After the first twelve consecutive months of disability, the definition changes and requires the Member to be unable to perform any of the duties of his occupation, or any occupation for which he is reasonably qualified", [sic] to the extent that such individuals were determined by the defendant to be not able to perform all of the duties of his or her occupation, but were determined by the defendant to be capable of sufficient physical activity that the defendant decided that they were no longer eligible for total benefits under the defendant's interpretation of the subject policy. *26 IT IS FURTHER ORDERED that the class claims and issues shall be those set forth in the Amended Complaint (Doc. No. 21), and that the following shall serve as class counsel pursuant to Federal Rule of Civil Procedure 23(g): Mark T. Coulter and D. Aaron Righn of Peirce, Raimond and Coulter, P.C. IT IS FURTHER ORDERED that the parties shall promptly meet and confer with respect to a plan of class notice that complies with Rule 23(c)(2)(B) and directs to class members the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort, and which concisely and clearly states in plain, easily understood language: (1) the nature of the action, (2) the definition of the class certified, (3) the class claims, issues, or defenses, (4) that a class member may enter an appearance through counsel if the member so desires, (5) that the court will exclude from the class any member who requests exclusion, stating when and how members may elect to be excluded, and (6) the binding effect of a class judgment on class members under Rule 23(c)(3). The parties shall submit a plan of class notice that complies with these requirements within twenty (20) days from the date of this Order. Slip Copy, 2006 WL 197122 (W.D.Pa.) END OF DOCUMENT © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. Page 20 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) Motions, Pleadings and Filings United States District Court, D. Massachusetts. In re LUPRON® MARKETING AND SALES PRACTICES LITIGATION. Master File No. 01-CV-10861-RGS. MDL NO. 1430. May 12, 2005. Background: Patients, health care plans, and insurers filed multi-district litigation (MDL) class action under Racketeer Influenced and Corrupt Organizations Act (RICO) and state consumer protection statutes seeking damages incurred because of alleged scheme orchestrated by pharmaceutical manufacturer to inflate retail price of prescription drug. Parties filed motion for final approval of settlement agreement, permanent certification of class, and entry of final judgment. Holdings: The District Court, Stearns, J., held that: (1) class counsel adequately notified class members of proposed settlement; (2) certification of settlement class was warranted; and (3) approval of proposed settlement was warranted. Motion granted. West Headnotes [1] Compromise and Settlement 89k68 Most Cited Cases 68 [1] Federal Civil Procedure 179 170Ak179 Most Cited Cases Class counsel adequately notified class members of proposed settlement of consumer protection claims against pharmaceutical manufacturer, even though direct mail was not used to contact consumer class, where notice plan called for nationwide publication notice, solicitation of public service radio announcements and mainstream news coverage, posting of court-approved notices on websites, establishment of interactive claims information website, and toll free telephone number to take questions from class members, plan exposed 80 Page 1 percent of members of consumer class on three or more occasions to notice of proposed settlement and procedure for submitting claims, and accurate mailing list for direct mail would have required obtaining of patient names and addresses from medical providers, insurers, and pharmacies. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [2] Federal Civil Procedure 161.1 170Ak161.1 Most Cited Cases In determining whether to certify settlement class, court need not inquire whether case, if tried, would present intractable management problems. Fed.Rules Civ.Proc.Rule 23(b)(3), 28 U.S.C.A. [3] Federal Civil Procedure 161.1 170Ak161.1 Most Cited Cases When settlement class is proposed, it is incumbent on district court to give heightened scrutiny to class certification requirements in order to protect absent class members. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [4] Federal Civil Procedure 182.5 170Ak182.5 Most Cited Cases Certification of settlement class was warranted in action seeking damages incurred because of alleged scheme orchestrated by pharmaceutical manufacturer to inflate retail price of prescription drug, where class included tens of thousands of third party payers (TPP), hundreds of thousands of consumers, all class members would need to establish that they purchased drug at price derived from fraudulently inflated average wholesale price (AWP), as well as scienter on manufacturer's part, and complicity on part of physicians and clinics who billed members directly or through their insurers at price derived from inflated AWP, claims of class representatives were typical of those of members of class, class representatives were adequate, individual issues primarily involved amount of damages to be awarded to individual class members, and few, if any, members of settlement class had incurred damages in amount sufficient to justify costs of pursuing individual action. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [5] Federal Civil Procedure 165 170Ak165 Most Cited Cases Commonality requirement for class certification does not require that every class member share every factual and legal predicate of action. Fed.Rules © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) Civ.Proc.Rule 23(a), 28 U.S.C.A. [6] Federal Civil Procedure 164 170Ak164 Most Cited Cases Sufficient nexus is established to show typicality necessary for class certification if claims or defenses of class and class representative arise from same event or pattern or practice and are based on same legal theory. Fed.Rules Civ.Proc.Rule 23(a), 28 U.S.C.A. [7] Federal Civil Procedure 176 170Ak176 Most Cited Cases Proposed class must be precisely defined and its members must be ascertainable through application of stable and objective factors so that court can decide, among other things, who will receive notice, who will share in any recovery, and who will be bound by judgment. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [8] Compromise and Settlement 51 89k51 Most Cited Cases While settlement and compromise are favored by law, in ruling on proposed settlement in class action, court has fiduciary duty to absent members of class in light of potential for conflicts of interest among class representatives and class counsel and absent members. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [9] Compromise and Settlement 89k57 Most Cited Cases 57 [9] Compromise and Settlement 59 89k59 Most Cited Cases Approval of proposed settlement in class action is to be given if settlement is untainted by collusion and is fair, adequate, and reasonable. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [10] Compromise and Settlement 70 89k70 Most Cited Cases When sufficient discovery has been provided and parties have bargained at arms -length, there is presumption in favor of proposed settlement in class action. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [11] Compromise and Settlement 56.1 89k56.1 Most Cited Cases In assessing proposed settlement of class action, court should consider: (1) complexity, expense and likely duration of lit igation; (2) reaction of class to settlement; (3) stage of proceedings and amount of discovery completed; (4) risks of establishing Page 2 liability; (5) risks of establishing damages; (6) risks of maintaining class action through trial; (7) ability of defendants to withstand greater judgment; (8) range of reasonableness of settlement fund in light of best possible recovery; (9) range of reasonableness of settlement fund to possible recovery in light of all attendant risks of litigation. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [12] Compromise and Settlement 59 89k59 Most Cited Cases Storm warnings indicative of collusive settlement of class action are lack of significant discovery and extremely expedited settlement of questionable value accompanied by enormous legal fee. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [13] Compromise and Settlement 61 89k61 Most Cited Cases Approval of proposed settlement was warranted in multi-district litigation (MDL) class action seeking damages incurred because of alleged scheme orchestrated by pharmaceutical manufacturer to inflate retail price of prescription drug, despite objectors' contentions that larger settlement could have been obtained, and that release was broader than warranted by size of settlement, where negotiations were conducted at arms -length, unclaimed funds would not revert to manufacturer, release would have no effect on liability of any alleged coconspirator, continued litigation of case would be noxiously burdensome to all involved, most vociferous objectors were persons enlisted by counsel competing with MDL counsel for control of litigation, case was in litigation for nearly four years before settlement was reached, case was very complex, proving damages represented significant risks to consumer class, and consumer fund appeared more than adequate to fully compensate all consumer claimants and to perhaps pay dividend. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. [14] Compromise and Settlement 57 89k57 Most Cited Cases Settlement court reviewing fairness of compromise in class action does not decide merits of case or resolve unsettled legal questions. Fed.Rules Civ.Proc.Rule 23, 28 U.S.C.A. *76 Elizabeth K. Ainslie, Schnader, Harrison, Segal & Lewis LLP, Philadelphia, PA, Kenneth D. Quat, Concord, MA, for Objectors. Stephen D. Annand, Cohen, Milstein, Hausfeld & Toll, Washington, DC, *77Richard W. Cohen, © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) Page 3 Lowey, Dannenberg, Bemporad & Slelinger, P.C., White Plains, NY, Michael J. Flannery, The David Danis Law Firm, P.C., St. Louis, MO, Marlene F. Gibbons, Cohen Milstein Hasufeld & Toll West Tower, Washington, DC, Michael D. Hausfeld, Cohen, Milstein, Hausfeld & Toll, Washington, DC, Joseph D. Jackson, Jr., Baxley, Dillard, Dauphin, McKnight & Barclift, Birmingham, AL, Jeffrey L. Kodroff, Spector & Roseman, Philadelphia, PA, Lisa M. Mezzetti, Cohen, Milstein, Hausfeld & Toll, Washington, DC, Todd A. Seaver, Berman, DeValerio, Pease, Tabacco, Burt & Pucillo, Boston, MA, Thomas G. Shapiro, Shapiro, Haber & Urmy LLP, Boston, MA, Thomas M. Sobol, Hagens, Berman LLP, Boston, MA, Donna F. Solen, Cohen, Milstein, Hausfeld & Toll, Washington, DC, for Plaintiffs. 2004, the court preliminarily certified a settlement class consisting of consumers and certain Third Party Payers (TPPs), and gave its preliminary approval to a proposed settlement agreement between TAP, Abbott Laboratories (Abbott), and Takeda Pharmaceuticals Company Ltd. (Takeda), [FN2] and the universe of prospective litigants who claimed to have suffered economic damages as a result of TAP's Lupron®related pricing practices. [FN3] Under the terms of the settlement, TAP transferred $150 million into an escrow account to satisfy the claims of consumers and TPPs who had made purchases of Lupron® between 1985 and 2005, and to pay the fees and expenses of plaintiffs' counsel. The parties now seek final approval of the settlement, permanent certification *78 of the class, and entry of final judgment. Anita B. Bapooji, Goodwin, Procter LLP, Boston, MA, Laura D. Cullison, Winston & Strawn, Chicago, IL, Daniel A. Curto, McDermott, Will & Emery LLP, Boston, MA, James R. Daly, Jones, Day, Chicago, IL, Monica Meier Franceschini, Goodwin Procter LLP, Boston, MA, Donald R. Frederico, McDermott, Will & Emery, Boston, MA, George Lombardi, Winston & Strawn, Chicago, IL, Martin F. Murphy, Bingham, McCutchen LLP, Boston, MA, Rheba Rutkowski, Bingham, McCutchen LLP, Boston, MA, Joseph F. Savage, Jr., Goodwin Procter, LLP, Boston, MA, Eric W. Snapp, Winston & Strawn, LLP, Chicago, IL, Fiona S. Trevelyan, Bingham, McCutchen LLP, Boston, MA, Matthew A. Wolfman, Testa, Hurwitz & Thibeault, LLP, Boston, MA, for Defendants. FN1. Lupron®, the trade name for leuprolide acetate, is principally used in the treatment of prostrate cancer. It is also effective in the treatment of endometriosis, precocious puberty, and uterine fibroid preoperative anemia. Lupron® is administered by intramuscular injection, typically in the arm or buttocks, in daily or monthly doses. Consequently, most Lupron® is sold through doctors who administer the injections to their patients. Donald E. Haviland, Kline & Specter, Philadelphia, PA, Ronald J. Ranta, Beverly, MA, Shanin Specter, Kline & Specter, Philadelphia, PA, for Intervenor Plaintiffs. MEMORANDUM AND ORDER APPROVING SETTLEMENT AND CERTIFYING THE CLASS STEARNS, District Judge. This aspiring Multi-District Litigation (MDL) class action was brought by patients, health care plans, and insurers seeking damages incurred because of an alleged scheme orchestrated by TAP Pharmaceutical Products, Inc. (TAP) to inflate the retail price of the prescription drug Lupron®. [FN1] Plaintiffs' principal claims are based on the civil provisions of the Racketeer Influenced and Corrupt Organizations Act (RICO), 18 U.S.C. § 1962, and various state consumer protection statutes. On November 24, FN2. TAP is a venture jointly owned by Abbott and Takeda. TAP, which is based in Waukegan, Illinois, has a corporate identity separate from its owners, that is, it has its own officers and board of directors. FN3. In the Settlement Agreement, the class is defined as "[a]ll individual persons or entities who, [between January 1, 1985, through March 15, 2005] made Lupron® Purchases. Excluded from the class are the Settling Health Plans; Defendants, their respective present and forme r, direct and indirect, parents, subsidiaries, divisions, partners and affiliates; and the United States government, its officers, agents, agencies and departments, and all other government entities' claims, to the extent that they previously released their claims pursuant to the 2001 Settlement Agreement and Release resolving the matter of United States of America v. TAP Pharmaceutical Products, Inc. (D.Mass.) and related litigation." The court held a three-day Fairness Hearing © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) beginning on April 13, 2005. Valerie Samsell and Milton Greene were permitted to intervene as objectors to the settlement. The Intervenors participated in the hearing through retained counsel, the Philadelphia-based firm of Kline & Specter. Having considered the evidence presented at the hearing, the objections, the arguments of counsel, and the full record of the case, the court will grant the motion for final certification of the class, confirm the appointment of class counsel, and approve the proposed settlement. BACKGROUND Procedural History On October 16, 2001, TAP pled guilty in the federal district court to violations of the Prescription Drug Marketing Act, 21 U.S.C. § § 331(t), 333(b). [FN4] TAP admitted that it had encouraged doctors to fraudulently bill the federal Medicare program for free samples of Lupron® as part of a "brand loyalty" scheme. The intent was to provide incentives to doctors to prescribe Lupron® instead of cheaper, similarly effective drugs, such as Zoladex® (manufactured by AstraZeneca). Pursuant to a plea agreement with the United States government, TAP paid a $290,000,000 criminal fine and $559,483,560 in civil restitution and penalties, the largest beneficiary of which was the federal Medicare program, although $25,516,440 was paid to the fifty States and the District of Columbia to compensate for overcharges absorbed by state Medicaid programs. TAP also executed a Corporate Integrity Agreement with the Inspector General of the Department of Health and Human Services (HHS) and the state Attorneys-General committing to changes in the supervision of its marketing and sales staff and agreeing to report to Medicare and Medicaid the true "Average Sales Price" (ASP) of its reimbursable drugs. Abbott and Takeda agreed to cooperate fully with any further government investigation of TAP in exchange for an agreement by the United States to forgo a prosecution alleging complicity by Abbott and Takeda in TAP's wrongdoing. FN4. Following TAP's plea, an indictment was unsealed against six present and former TAP employees and a Massachusetts urologist alleging a criminal conspiracy to defraud Medicare. Several other urologists pled guilty to criminal informations. Alan Mackenzie, W. Donald Meek, Donald Patton, and Eric Otterbein, the highest ranking TAP executives indicted in connection with the alleged scheme, were Page 4 among a group of TAP employees who, after a lengthy trial, were acquitted on July 14, 2004, of any criminal wrongdoing. See U.S. v. MacKenzie, No. 01-CR-10350-DPW (D.Mass.). At the heart of the scheme was TAP's overt or tacit encouragement of doctors to bill Medicare for Lupron® at an imaginary "Average Wholesale Price" (AWP) provided by TAP to the Red Book, an industry publication used by Medicare and other TPPs to establish payment schedules for reimbursable prescription drugs. [FN5] "TAP knew that [it] could 'raise' the average wholesale price of Lupron® at any time by simply forwarding to the Redbook a new and higher average wholesale price. This allowed TAP, in effect, to control the maximum Medicare reimbursement paid to a doctor for [prescribing] *79 Lupron®." Government's Sentencing Memorandum, at 12. The government acknowledged that its "global" settlement with TAP did not provide restitution to private insurers and copaying patients who may have been overcharged for Lupron®, but noted that "some patients and health insurers have commenced litigation against TAP to recover overpayments caused by the criminal conduct and thus have a forum in which to demonstrate and obtain any appropriate damages." Id. at 4. FN5. While Medicare Part B does not generally reimburse the costs of selfadministered drugs, it does pay providers for up to 80 percent of the "allowable cost" of physician-injected drugs like Lupron®. The remaining 20 percent is paid by the Medicare beneficiary as a "co-payment." "Allowable cost" was defined by HHS regulations from 1992 to 1998 as the lesser of a drug's estimated actual acquisition cost or its national average wholesale price (AWP). 42 C.F.R. § 405.517 (amended Nov. 2, 1998; Jan. 7, 2004; Nov. 15, 2004). Prior to 1992, Medicare reimbursements were based on the "reasonable charge method." From 1998 to 2004, "allowable cost" was defined as the lesser of a drug's estimated actual acquisition cost or 95 percent of AWP. 42 C.F.R. § 405.517. For 2004, reimbursement for Lupron® was set at the lesser of the actual charge on the bill or 81 percent of the April 1, 2003 AWP for Lupron®. 42 C.F.R. § 414.707. For 2005, reimbursement is based on the ASP. 42 C.F.R. § 414.904. The AWP was taken by HHS from the Drug Topics Red Book (Red © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) Book ), a pharmaceutical industry publication compiling wholesale drug prices. The AWP for Lupron® published in the Red Book was supplied by TAP. No independent verification of the actual AWP was undertaken by HHS, Medicare, or the editors of the Red Book. The published AWP for Lupron® as reported by TAP ranged from $418.75 in 1992 to $623.79 in 2001. In fact, a number of actions were brought in various state and federal courts against TAP, Abbott, and Takeda on behalf of co-paying patients, direct purchasers of Lupron®, private health care plans, and insurers that were not included in the governmentnegotiated civil settlement. The unifying themes of these civil claims are allegations that the defendants fraudulently manipulated the AWP for Lupron® and engaged in unscrupulous practices in the marketing of the drug. They are also mostly pled, as in this case, under the federal RICO law and state consumer protection statutes. [FN6] According to plaintiffs, the AWP reported by TAP for Lupron® bore no resemblance to the actual prices being charged to doctors, nor did it bear any relationship to a reasonable interpretation of the terms "average" or "wholesale." The AWP rather was inflated at plaintiffs' expense to funnel hidden profits to doctors. As summarized in the Consolidated Amended Complaint: FN6. The factual allegations and legal theories underlying the Consolidated Amended Complaint are set out at length in In re Lupron® Marketing and Sales Practices Litigation, 295 F.Supp.2d 148 (D.Mass.2003). [t]he improper marketing and sales practices include, inter alia: (a) deliberately overstating the published average wholesale price ("AWP") for Lupron®--the rate upon which Medicare reimbursement (and Medicare beneficiaries ['] copayments) as well as many other insurers' payments are set--so that Plaintiffs and the Class pay an artificially inflated amount of money for Lupron®; (b) providing free samples of Lupron® to medical providers and instructing them, with the intent, that they could and should unlawfully bill Medicare, private insurers and individual patients for the free samples; (c) providing other unlawful financial inducements and hidden price discounts; and (d) actively concealing, and causing others to conceal, information about the true price being Page 5 charged for Lupron®. Id. ¶ 4. TAP's concession in its guilty plea that its sales representatives distributed $31 million in "free" Lupron® samples between 1993 and 1999 figures prominently in most of the civil complaints. The complaints also mirror the government's criminal case in reciting other irregular financial inducements offered by TAP to doctors to stimulate the sales of Lupron®, including volume discounts, rebates, "education" grants, junkets, off-invoice pricing, free goods, credit memos, supposed consulting fees, and debt forgiveness. William Porter filed the first of two Lupron®-related class actions in the Massachusetts federal district court on May 18, 2001. Similar cases seeking class action status were filed in Alabama, Illinois, and Minnesota. [FN7] On December 17, 2001, all pending federal class actions were consolidated by the MDL Panel (MDLP) in this district for pretrial proceedings. Two cases filed on behalf of Blue Cross and Blue Shield entities (Blues) in the District of Massachusetts were later joined with the MDL action as related cases. [FN8] FN7. The lead plaintiffs in six of these cases are named as plaintiffs in the Consolidated Amended Complaint. The six cases are: Russano v. TAP Pharmaceutical Products, Inc. (N.D.Ill.C.A. No. 01- 6982); Goetting v. TAP Pharmaceutical Products, Inc. (S.D.Ill.C.A. No. 01-703); Porter v. TAP Pharmaceutical Products, Inc. (D.Mass.C.A. No. 01-10861); Beacon Health Plans, Inc. v. TAP Pharmaceutical Products, Inc. (D.Mass.C.A. No. 01-10897); Brickey v. TAP Pharmaceutical Products, Inc. (N.D.Ala.C.A. No. 01-2770); and Twin Cities Bakery Workers Health and Welfare Fund v. TAP Pharmaceutical Products, Inc. (D.Minn.C.A. No. 01-2023). FN8. The Blues cases are Empire Healthchoice, Inc., d/b/a/ Empire Blue Cross and Blue Shield v. TAP Pharmaceutical Products, Inc. (D.Mass.C.A.02-10015), and Blue Cross and Blue Shield of Florida, Inc. v. TAP Pharmaceutical Products, Inc. (D.Mass.C.A.02-10139). On January 14, 2003, the court approved a stipulation adding Oxford Health Plans, Inc., and Horizon Healthcare Services, Inc., as parties to the Consolidated Amended Complaint. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) *80 Several Lupron®/AWP cases were also filed as either state or nationwide class actions in state courts. Counsel in a number of these cases, including those in California (In re Lupron® Drug Cases, San Francisco Superior Court, JCCP No. 4238; Peralta v. Abbott Laboratories, Los Angeles County Superior Court, No. BC 259587); Texas (Benoit v. Takeda Chemical Industries Ltd., et al., Jefferson County District Court, No. B166742); and Illinois (Clark v. TAP Pharmaceuticals, Inc. et al., Williamson County Circuit Court No. 01L132; Jarman v. TAP Pharmaceutical Products, Inc. et al., Madison County Circuit Court, No. 01L1019), agreed to coordinate discovery efforts with the counsel appointed by this court as the interim representatives of the interests of the MDL plaintiffs. However, Kline & Specter, which directly or through local counsel had brought class actions in Arizona, North Carolina, and New Jersey, refused to join in the cooperative effort. [FN9] Kline & Specter instead embarked on a preemptive strategy to seize control of the litigation by using the state court proceedings to gain leverage over counsel cooperating with the MDL action. [FN10] FN9. On December 31, 2001, Kline & Specter filed a class action in the North Carolina Superior Court on behalf of lead plaintiff Harry Stetser. The complaint named the Lupron® defendants (TAP, Abbott and Takeda), as well as Johnson & Johnson, a distributor of Lupron®, and two wholly-owned Johnson & Johnson subsidiaries, Ethicon Endo-Surgery and Indigo Laser Corporation as defendants. On April 24, 2003, Superior Court Judge Paul Jones certified Stetser as a nationwide class action. On July 6, 2004, the Court of Appeals reversed the decision and decertified the nationwide class. On January 7, 2005, Judge Jones recertified Stetser as a North Carolina-only class action, retroactive to October 8, 2004. On October 9, 2001, Kline & Specter filed a class action against the Lupron® defendants in the New Jersey Superior Court on behalf of lead plaintiff Bernard Walker alleging unjust enrichment, fraud, civil conspiracy, and violations of the New Jersey consumer protection statute. On August 29, 2003, Superior Court Judge Joseph Visalli denied the request to certify a nationwide class of Lupron® purchasers, but certified a New Jersey-only Lupron® class. Judge Visalli is proceeding to trial on Walker's individual claims. On June 28, Page 6 2002, an Arizona law firm allied with Kline & Specter filed a class action in the Maricopa County Superior Court against the Lupron® defendants and other drug manufacturers that had also used AWP as a marketing tool. The complaint mirrors the causes of action set out in the Walker complaint. On March 10, 2005, Superior Court Judge Rebecca Albrecht stayed proceedings in Swanston pending a certification ruling in the MDL action. FN10. Bringing an end to unseemly attempts to exact advantage over class action defendants or lawyers representing competing plaintiffs' claims by exploiting the potential for conflict inherent in a federal system of coordinate sovereigns was a principal argument advanced by advocates of the Class Action Fairness Act of 2005. The Act essentially consolidates all class actions with multi-state constituencies in the federal courts. On February 11, 2002, the court held a case management conference to establish a discovery and motions schedule. By that time, the defendants had assembled a central depository containing more than 300 boxes of case-related documents to which plaintiffs' counsel (including Kline & Specter) were given access. On March 15, 2002, the MDL plaintiffs filed a Consolidated Amended Complaint, and on June 7, 2002, a Corrected Consolidated Amended Complaint. Takeda, a Japanese company, challenged the Consolidated Amended Complaint on jurisdictional grounds. On January 24, 2003, the court denied Takeda's motion to dismiss in part, holding that while plaintiffs Goetting and Russano had failed to establish specific jurisdiction over Takeda, they had produced sufficient prima facie evidence to establish general jurisdiction under the "doing business" test of the Illinois Long-Arm Statute, 735 Ill. Comp. Stat. § 5/2-209(b)(4). See In re Lupron Mktg. & Sales Practices Litig., 245 F.Supp.2d 280, 295-297 (D.Mass.2003). On November 25, 2003, after another heated exchange of briefs and arguments, the court issued a lengthy decision on defendants' Rule 12(b)(6) motion to dismiss, ultimately rejecting the (not inconsequential) arguments that political question considerations, statutes of limitations issues, and the "filed rate doctrine" operated to bar the litigation in its entirety. The court found the RICO claims as pled (alternatively identifying TAP as the enterprise and © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) Page 7 Takeda and Abbott as RICO "persons," or the three defendants as an "enterprise-in-fact" with each *81 defendant acting as a RICO "person") sufficient to satisfy the requirements of Rule 9(b). The court also ruled that the state consumer protection act claims were not preempted by the Employment Retirement Income Security Act of 1974 (ERISA), § 514(a), 29 U.S.C. § 1144(a), or the Medicare Act. The court, however, agreed with defendants that plaintiffs had failed to plead a manageable RICO claim of an "association-in-fact" involving all doctors and clinics in the United States who had sold Lupron® at a price derived from AWP. Consequently, it dismissed the physician-related claims. and Abbott. Liberty reimburses beneficiaries under a special cancer treatment policy for Lupron® injections. United reimburses beneficiaries who purchase a supplemental Medicare insurance policy for prescription drug co-payments including Lupron®. Both insurers based their reimbursement rates on the published AWP. On May 14, 2004, the court issued a decision denying motions by TAP and Abbott to dismiss both complaints. On August 4, 2004, the court denied a motion by TAP to dismiss a similar complaint brought by Aetna Health, Inc., alleging claims under RICO and the Pennsylvania insurance fraud statute, 18 PA. CONS. STAT. ANN. § 4117(a)(2) (West 2005). [FN11] In February of 2004, the MDL plaintiffs, apparently content with the nucleus of the remaining state and federal claims, moved to certify a class consisting of [a]ll persons or entities who paid for Lupron® at a price in whole or in part calculated by reference to the AWP as published in national pharmaceutical publications such as the Red Book and First Data Bank (the "Class") during the period from January 1, 1991, through September 30, 2001 (the "Class Period"). Excluded from the Class are (a) Defendants and any entity in which any Defendant has a controlling interest, and their legal representatives, officer, directors, assignees and successors, and (b) any co-conspirators. The impending hearing on the certification motion precipitated a flurry of discovery disputes as the parties maneuvered for position. See Orders dated March 1, 2004 (re: Motion to Compel Calculations); March 1, 2004 (re: Motion to Compel Individual Plaintiffs' Releases); March 2, 2004 (re: Motion to Compel Individual Plaintiffs to Produce Documents); March 17, 2004 (re: Motion to Compel TAP to Produce Documents); April 5, 2004 (re: Temporary Stay); April 16, 2004 (re: Certification of Order for Appellate Review); April 23, 2004 (re: Production of Transcripts of Deposition of TAP Employees); June 14, 2004 (re: protective order); June 25, 2004 (re: motion for modification of schedule). On May 6, 2004, TAP filed an emergency petition with the First Circuit Court of Appeals seeking an order of mandamus vacating the order of this court compelling the production of documents for which TAP had claimed attorney-client privilege and attorney work-product protection. On July 12, 2004, the First Circuit denied TAP's petition. FN11. On October 3, 2003, Aetna filed suit in the Eastern District of Pennsylvania. After the complaint was transferred by the MDLP to the District of Massachusetts, Aetna added by amendment three counts under RICO. At oral argument, Aetna waived three of its originally filed state law claims. On January 22, 2004, the MDLP transferred to this court "tag-along" actions brought by Liberty National Life Insurance Company (Liberty) and United American Insurance Company (United) against TAP On August 12, 2004, the court held an extended hearing on MDL plaintiffs' class certification motion, and took the matter under advisement. On October 11, 2004, as the court was completing the draft of its decision, the MDL parties notified the court that they had reached a settlement, which if approved, would eliminate the need to certify a litigation class. The MDL parties then moved for preliminary approval of the negotiated settlement. Immediately after the settlement was announced, Kline & Specter filed a motion to intervene on behalf of Valerie Samsell and Milton Greene. [FN12] The court allowed the motion "*82 for the purpose of participating in the process established by the court for the evaluation of the proposed settlement." On November 24, 2004, after a hearing in which counsel for the MDL parties and the Intervenors participated, the court gave preliminary approval to the proposed settlement and settlement class. [FN13] MDL counsel were ordered to implement the Settlement Notice Plan and to establish an interactive website on which notice materials could be accessed and downloaded by prospective class members. FN12. Samsell and Greene object to the settlement as negotiated. Although Samsell and Greene are clients of Kline & Specter, neither appears to be a potential beneficiary of a pending Lupron® lawsuit other than the MDL action, including any lawsuit brought © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) by Kline & Specter. Samsell believes (apparently mistakenly) that Kline & Specter represents her in a coverage dispute with an insurer who refused to reimburse her for Lupron® purchased on behalf of family members. FN13. On December 6, 2004, the Intervenors appealed the Preliminary Approval Order and asked the district court to stay its proceedings pending the outcome of the appeal. The district court declined to do so. See Rule 23(f). As of this date, no action has been taken by the Court of Appeals. On December 10, 2004, less than three weeks after the court's preliminary approval order, the MDL plaintiffs filed an emergency motion asking the court to enjoin Kline & Specter from improper communication with members of the Lupron® Purchaser Class, dissemination of false, misleading and confusing information to members of the Lupron® Purchaser Class concerning both the MDL settlement and the status of other state court proceedings related to Lupron®, the improper solicitation of opt outs from the MDL settlement, and plans to conduct individual trials of Lupron® related claims in specific state court proceedings while the MDL settlement is pending review and approval by this court. Defendants filed a similar motion of their own. The MDL parties directed the court to Kline & Specter websites established under the domain names www.lupronlaw.com and www.lupronclass.com purporting to "welcome" potential members to "the class" and inviting Lupron® purchasers "to register for the Lupron® class action." After reviewing the websites, the court issued a Memorandum and Order in which it found that the Kline & Specter websites were intended to mislead potential members of the MDL class. The court concluded that the typical registrant on a Kline & Specter website would not know that he or she was opting out as a participant in the MDL class by "registering" with Kline & Specter. Moreover, neither of the websites explained that a registrant who opted for inclusion "in litigation in the state courts" might (depending on his or her state of residence) be left with no means of recovery. [FN14] The court acknowledged that while "[Kline & Specter] and attorney Haviland are perfectly free to criticize the proposed settlement agreement ... they are not privileged to engage in deceptive conduct manipulating the very consumers they claim to protect." Order dated December 21, 2004, at 3. The Page 8 court ordered Kline & Specter to remove the purported "registration" form from the websites and to prominently display a banner stating that the websites had not been authorized by the MDL court, and directed that a complete list of all "registrants" be produced to the court (under seal) for inspection. Upon in camera review of the list, the court found that the great majority of those who had "registered" were not residents of New Jersey or North Carolina, the states in which Kline & Specter had Lupron® actions pending. [FN15] FN14. The websites appear to have originated as part of the notice plan undertaken in the later decertified North Carolina Stetser action, and to have been resuscitated by Kline & Specter as convenient fora for attacking the proposed MDL settlement. FN15. According to the list submitted by Kline & Specter, some 7,000 prospective class members had registered with Kline & Specter, of whom some 600 are residents of New Jersey and North Carolina. Immediately after the court ruled on the website issue, it learned that on December 29, 2004, attorney Haviland had addressed a "Dear Client" letter to every person who had registered on the Kline & Specter websites. The letter began by noting that the national class previously certified in North Carolina had "recently" been decertified (in fact, it had been decertified six months earlier) and *83 reported (accurately) that nonresidents of North Carolina were "no longer included in and being protected by the North Carolina case." The letter then advised registrants "to affirmatively protect their rights going forward" by opting out of the MDL settlement and by completing a Kline & Specter Retainer Agreement. The letter then presented a distorted picture of the MDL settlement, including the patently false statement that MDL claimants would be paid only 3 cents for each dollar of their actual damages. The letter was signed by attorney Haviland as "Co-Lead Counsel for State Court Plaintiffs and the State Court Classes," without any disclosure of the fact that Kline & Specter was serving as lead counsel in pending Lupron® actions in only two states. Having found the "Dear Client" letter to contain a number of deliberate misrepresentations and falsehoods, the court ordered that a curative notice be sent by Kline & Specter to all of the letter's recipients. [FN16] The notice highlighted © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) misstatements in the "Dear Client" letter, informed recipients living outside of North Carolina and New Jersey that Kline & Specter had not filed state lawsuits on their behalf, and warned that persons opting out of the MDL class might be required to bring a lawsuit personally to recover damages from the Lupron® defendants. The court advised recipients of the "Dear Client" letter desiring more information to contact the MDL Claims Administrator or to discuss with Kline & Specter their rights and obligations under any retainer agreement. [FN17] FN16. The curative notice was drafted by the court after soliciting suggestions from the MDL parties and comments from Kline & Specter. FN17. The court allowed Kline & Specter's request that for economic and client privacy reasons it rather than the MDL Claims Administrator be permitted to mail the curative notice to the list of registrants. After the mailing of the curative notice, the court sent Letters of Request to Judge Jones in North Carolina (dated February 2, 2004), and Judge Visalli in New Jersey (dated January 27, 2004), the presiding judges in the Stetser and Walker cases. The Letters noted the misinformation disseminated by Kline & Specter and the efforts undertaken by the court to provide prospective MDL class members with a full understanding of their rights and the opportunity to make an informed choice about participating in either the federal or (where available) state Lupron® litigation. As a matter of comity, the court asked Judge Jones and Judge Visalli to defer ruling on dispositive motions or proceeding with any potentially preclusive trials until this court could convene a hearing and rule on the fairness of the proposed MDL settlement. Intervenors then moved to disqualify this judge from continuing to preside over the MDL proceedings, arguing that the federal court's "unsolicited" communications with the state court judges gave "an objective appearance of partiality, if not actual partiality," by demonstrating that "Judge Stearns has become fully engaged with the MDL litigants in their efforts to deprive Walker, Stetser, Nelson and DeMontbrun of their timely day in court." Intervenors' Memorandum, at 5. The court denied the motion, noting the longstanding federal policy encouraging MDL judges to communicate directly with state court judges presiding over parallel cases Page 9 in the interests of avoiding conflicts and conserving judicial resources. See Manual for Complex Litigation, Fourth, § 20.312 (Fed.Jud.Ctr.2004) (Manual). The court commenced a three-day Fairness Hearing on April 13, 2005. Prior to the hearing, the Intervenors filed seven boxes of exhibits, together with associated memoranda and affidavits. MDL plaintiffs and TAP also submitted substantial briefs and affidavits. The court provided the MDL parties and Intervenors each a total of fours hours for the presentation of evidence, with an additional hour for argument. Objectors who requested to appear were allotted time to address the court, including several objectors affiliated with Kline & Specter. [FN18] The *84 court heard direct testimony from nine witnesses called by the MDL plaintiffs and the Intervenors, and received in deposition form the testimony of seven additional witnesses offered by Intervenors. The Intervenors submitted twenty-three exhibits at the hearing, the MDL plaintiffs eighteen, and the MDL defendants four. Three insurers appeared to express their support for the settlement. [FN19] FN18. Prior to the hearing, Paula Treskow withdrew her objection after reviewing with MDL counsel the reasons for the apportionment of the settlement funds between the consumer and TPP classes. Larry Crown (co-counsel with Kline & Specter in the Arizona AWP case) addressed the court on behalf of objector Swanston. Jennifer Koiles, Esq., explained that an objection filed on behalf of Rhonda Marcus on the mistaken belief that the settlement documents had been sealed by the court. FN19. Michael Hefter, Esq., addressed the court in support of the settlement on behalf of Empire Health Choice, Inc., Aetna, and Cobalt. Notice Notice to the class was disseminated by Hilsoft Notifications, a Pennsylvania company "specializing in designing, developing, analyzing and implementing large-scale, un-biased legal notification plans." Hilsee Aff. ¶ 2. Todd B. Hilsee, the president of Hilsoft, has served as a notice expert in more than 175 class action cases, including In re Holocaust Victims Assets Litig., No. CV-96-4849 (E.D.N.Y.); In re Domestic Air Transp. Antitrust © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) Litig., MDL 861 (N.D.Ga.); In re Dow Corning Corp., 95-20512-11 (Bankr.E.D.Mich.); In re Synthroid Mktg., MDL 1182 (N.D.III.); and In re Bridgestone/Firestone Tires Prods. Liab. Litig., MDL No. 1373 (S.D.Ind.). Hilsee was the only notice expert invited to testify before the Advisory Committee on Civil Rules on the amendment to Rule 23 requiring "clear, concise, plain language notices." Hilsee was also asked by the Federal Judicial Center to design model notices to illustrate Rule 23 plain language "best practices." The notice plan approved by the court provided for individual notice where practicable as well as nationwide publication notice, the solicitation of public service radio announcements and mainstream news coverage, the posting of court-approved notices on Lupron®-related websites, the establishment of an interactive claims information website (www.lupronclaims.com), and a toll free telephone number to take questions from class members. The Notice Program was designed to (a) effectively reach approximately 80% or more of consumer Class members; (b) provide the consumer Class members reached with multiple opportunities to be exposed to the Notice--on average three or more times each; (c) provide a comprehensive and virtually complete reach of TPP Class members by way of mailed summary Notice; (d) use targeted notice vehicles and stateof-art notice planning (i.e. media known to be used by Class members), with audiences that can be mathematically calculated; (e) provide thorough and fair geographic coverage of the United States; (f) design a program broadly targeting Class members without disadvantaging any potential Class member on the basis of geography (where they choose to live) or demographics (e.g. their age or socio-economic status); (g) develop a program consistent with other notice programs we have designed that have been court-approved and that we have implemented for large classes certified for purposes of settlement in federal courts, Massachusetts courts, and elsewhere; (h) use high quality notification vehicles and methods in order to convey the importance of the information affecting Class members' rights; (i) write and design Notices in plain language that will be "noticed" as well as simple, clear, easy to understand and act upon; (j) ensure that Class members who choose to participate can conveniently act on their right to claim a payment from the settlement through repetition, a variety of notice distribution methods, and notice design features; and (k) ensure an overall effective effort Page 10 based on all relevant communication standards. Hilsee Aff. ¶ 28. To enhance consumer exposure, Hilsoft studied the media habits of persons most likely to have received or procured Lupron® injections: men fifty years of age and older (prostate cancer); women ages 18 to 64 (endometriosis); parents of children likely to have been afflicted by precocious puberty; and African-American women ages 18 to 64 (the population group most susceptible to uterine fibroids). The Claims Administrator, Complete Claim Solutions, Inc., reported that on January *85 7, 2005, it mailed a "TPP Notice Packet" to 235,480 potential TPP class members. TPP and Consumer Notice Packets were mailed to the Attorneys General of the fifty States (two packets were sent to the Office of the Attorney General in Pennsylvania--one to the then current Attorney General and one to the Attorney General-elect), Puerto Rico, and the Virgin Islands. As of April 4, 2005, 3,206 Consumer Notice Packets had been mailed to potential class members who contacted the Lupron® Hotline to request a claims package. According to Hilsee, the plan exposed 80 percent of the members of the consumer class on three or more occasions to notice of the proposed settlement and the procedure for submitting claims. Specifically, Hilsee calculates that adults over 18 were reached an average of 3 times, 85 percent of living adults treated for prostate cancer were exposed an average of 3.7 times, 80.7 percent of all men over 50 were exposed an average of 3.1 times, 83.2 percent of women between the ages of 18 and 64 3.0 times, 80.8 percent of parents 3.1 times, and 86.2 percent of African American women between the ages of 18 and 64 an average of 3.2 times. Hilsee published notice in 947 newspapers, in Sunday newspaper supplements (Parade Magazine and USA Weekend), and in publications as diverse as American Legion, Cosmopolitan, Ebony, Field & Stream, National Enquirer, Newsweek, Parents, People, Popular Mechanics, Reader's Digest, Time and VFW Magazine. Hilsee testified that the notice was positioned opposite news articles and editorial features to increase the likelihood that it would be read. Hilsee testified that additional exposure was achieved through public service announcements, the website, and free media coverage of the settlement. Hilsoft produced and distributed fifteen, thirty and sixty second public service announcements to 1,250 radio stations, including the top three to six adult © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) stations in every major media market. Hilsoft also "selected the voice talent to help ensure that Class members would identify with the voice from the standpoint of demographic matching." Hilsee Aff. ¶ 70. As of March 15, 2005, 127 radio stations in thirty-seven states had aired the announcement a total of 25,083 times (an average of 198 broadcasts per radio station). Hilsee estimates that this figure translates into an audience of 61,953,500 adults. The www.lupronclaims.com website address was prominently displayed in all notice materials and website keywords were registered with hundreds of search engines, including Google, AOL, Ask Jeeves, Lycos, Yahoo!, WebCrawler, and AltaVista. Hilsee testified that as of April 15, 2005, 38,187 "hits" had been recorded at the website. [FN20] On January 7, 2005, a court-approved informational release was issued to established news wires reaching more than 450 health and medical publications, as well as 4,200 press outlets throughout the country. The informational release was also sent to sixty-eight support groups for the diseases treated by Lupron®. FN20. A "hit" is an instance of a web page being loaded by an Internet user into his or her browser. At the Fairness Hearing, Hilsee testified that direct mail was not used to contact the consumer class because of privacy and practicality concerns. To compile an accurate mailing list would have required the obtaining of patient names and addresses from medical providers, insurers, and pharmacies that are for the most part forbidden from divulging patient information by federal and state privacy laws. Hilsee testified that in his experience with similar cases, including the Synthroid® and Paxil® drug litigations, "privacy concerns stood in the way of being able to consider giving individual notice to patients.... In this particular circumstance, it's even more problematic, because these are very personal issues, prostate, infertility, [and] precocious puberty." Fairness Hearing, April 14, 2005 Tr. at 154. Also, because the class period dates back to 1985, most of the older addresses (even if they could be obtained) would have no value for purposes of direct mail. Id., April 14, 2005 Tr. at 151. [FN21] FN21. Hilsee also cited studies showing that 75 percent of direct mail is thrown away by the recipient or the recipient's "gatekeeper" without being opened. Hilsee Aff. at 55 n. 30. *86 [1] Hilsee explained that a "placard" program Page 11 (advocated by Intervenors' counsel) would have been ineffective for several reasons. Placard notice is usually positioned in pharmacies while almost all consumer class me mbers received Lupron® injections directly from their physicians (who would be unlikely to display a potentially incriminating notice in their offices). According to Hilsee, placard notice is "a tool that [he] would [n]ever rely on nor has [he] ever [done so] in providing constitutionallyadequate notice under due process concerns." Fairness Hearing, April 14, 2005 Tr. at 163. Hilsee pointed out that the Intervenors' counsel did not utilize placard notice (or patient direct mail) in giving notice of a proposed settlement to the Stetser "national class." In Hilsee's opinion the Notice Plan "as implemented, fully satisfied the notice requirements of Federal Rule of Civil Procedure 23, including the new plain language requirements of Rule 23(c)(2)." Hilsee Aff. ¶ 81. The Parties to the Settlement The proposed settlement of this case involves two distinct agreements. The first is between the defendants and the Settling Health Plans (SHPs). [FN22] The SHPs are a consortium of insurance companies and health plans that provide prescription drug benefits to an estimated 70 percent of the 197,869,000 persons in the United States who are covered by private medical insurance. The SHPs brought a separate complaint against the defendants. The SHPs are not associated as a class and have settled in their individual capacities with the defendants. The SHPs agreement is before the court for informational purposes only. FN22. The term SHPs is common to both agreements. The second agreement, which has been presented for the court's approval, is between the defendants and the "Lupron® Purchaser Class." This class consists of consumer-purchasers and TPPs that are not part of the SHPs settlement. The class TPPs consist primarily of self-insured employers and Taft-Hartley benefit plans. The SHPs are explicitly excluded from the Lupron® Purchaser Class. The Proposed Settlement The total amount allocated between the two settlement agreements is $150 million. Of this sum, $40 million is earmarked for the claims of individual consumers, while $55 million is initially allocated to the claims of the TPP class members, and an © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) additional $55 million to those of the SHPs. Attorneys' fees and expenses are subtracted from each pool, with the SHPs paying their own fees and costs, and the members of the Lupron® Purchaser Class paying the fees and costs of class counsel in proportion to the ultimate amounts awarded to consumer-purchasers and class TPPs. The first $1 million in notice and claims expenses is to be borne by the class TPPs; thereafter the TPPs and the consumer-purchasers are to bear their respective costs in processing any remaining claims. Incentive payments to class representatives will be borne separately by each funding pool. Any unclaimed surplus in the consumer pool will not revert to TAP, but will be distributed by the court at its discretion. [FN23] TAP is, however, entitled to a refund from the TPP pool in proportion to the value of the claims of those TPPs that opt out of the class settlement. FN23. If the court designates a charity as the recipient of any surplus funds, the Settlement Agreement permits TAP to take a corresponding tax deduction. A mechanism is also provided to adjust the division of funds between the class TPPs and the SHPs depending on claims experience. To the extent that the SHPs group accounts for more than 50 percent of the eligible claims, it will receive a proportionate contribution from the class TPP pool, net of expenses, attorneys' fees, and the deduction for opt outs from the TPP class. Conversely, if the SHPs group accounts for less than 50 percent of the eligible claims, the TPPs will take a proportionate share of the SHPs pool, to a maximum of $15 million. [FN24] By way of example, if 70 percent of the approved claims *87 originate from the SHPs group, it will be entitled to an additional $22 million (20 percent) of the $110 million allocated between the SHPs and the class TPPs, net of fees, expenses, and opt out deductions. FN24. To insure payment of this $15 million, the SHPs will initially distribute only $40 million in claims, and will place the remaining $15 million in escrow until the claims of all SHPs and class TPPs are processed. Consumer-purchasers are entitled to recover 30 percent of their total out-of-pocket payments for Lupron®, or $100, whichever is greater, unless the total amount of claims exceeds the amount allotted to the consumer pool. If the pool is depleted, pay-outs to consumers will be reduced on a pro rata basis. Page 12 MDL counsel estimate that after payment of expenses and attorneys' fees, $27.5 million will be available to the consumer-purchaser class, an amount that MDL plaintiffs' counsel believe will be sufficient to pay all claims in full. On the other hand, because the TPP class may experience a higher claims rate, in the event its fund pool becomes oversubscribed the class through its representatives has agreed to share the funds available on a pro rata basis according to each TPP's purchase of Lupron® in 2000-2001. A representative sample method was chosen to avoid the expense involved in recreating twenty years of purchasing data. According to the analysis of MDL plaintiff's expert, Dr. Raymond Hartman, the allocation of the settlement funds is deliberately weighted to favor the consumer-purchaser class over the SHPs and the class TPPs. (Hartman Decl., at 1-2). By Dr. Hartman's calculation, the average spread (AWP/ASP) was 182 percent between 1993 and 2000 (the years for which reliable data is available). (Hartman Decl. at 15.) Assuming that an AWP/ASP percentage spread of 125 percent (the "but-for spread") would be expected by the market, the difference between the actual and the but-for spread in the years analyzed by Dr. Hartman is 57 percent. This "unreasonable" 57 percent excess in the spread amounts to approximately 30 percent of the actual spread, explaining Dr. Hartman's opinion that a 30 percent of AWP recovery to consumers is reasonable. [FN25], [FN26] FN25. As an example, a 30 percent claims reimbursement pegged to an AWP of $182 would result in a recovery of $54.60 (roughly equivalent to the presumed overcharge of $57). FN26. Dr. Meredith Rosenthal, an MDL plaintiffs' expert who testified at the final approval hearing, points out that while consumer claims most likely account for 9 to 13 percent of the total overcharges (with extremes of 7 to 25 percent), consumers will receive 27 percent of the settlement. Dr. Rosenthal and Dr. Hartman believe that consumer damages over the period from 1991 to 2001 amounted to some $166 million. Of this amount, $150 million was borne by Medicare patients making out-ofpocket or coinsurance payments, and $16 million was borne by consumers paying coinsurance in a private context. Both experts are of the opinion that the © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) overcharge for private consumers was around 30 percent, whereas for Medicare patients it was around 45 percent, because of the difference in what they consider to be the baseline. The but-for price for Medicare (that is, what Medicare patients would have paid absent the inflation) they set at the ASP, whereas the but-for price in the private context they set at 80 percent of the AWP. Both experts, however, consider a 30 percent recovery to be a reasonable approximation of the economic damages to the class members. CLASS CERTIFICATION Rule 23(a) sets out several prerequisites for a class action. A class may be certified only 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 representatives will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a). Plaintiffs seek to certify a class pursuant to Rule 23(b)(3). This section provides that a class action may be maintained only if, in additional to the prerequisite of Rule 23(a): the court finds that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members *88 of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. Fed.R.Civ.P. 23(b)(3). [2][3] "A district court must conduct a rigorous analysis of the prerequisites established by Rule 23 before certifying a class." Smilow v. Southwestern Bell Mobile Sys., Inc., 323 F.3d 32, 38 (1st Cir.2003). In "determinating the propriety of a class action, the question is not whether the plaintiff or plaintiffs have stated a cause of action or will prevail on the merits, Page 13 but rather whether the requirements of Rule 23 are met." Waste Mgt. Holdings, Inc. v. Mowbray, 208 F.3d 288, 298 (1st Cir.2000) (quoting Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 178, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974) (internal citation omitted)). In the settlement context, however, there is an important refinement to the Rule 23 analysis: the court "need not inquire whether the case, if tried, would present intractable management problems." Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). When a settlement class is proposed, it is incumbent on the district court to give heightened scrutiny to the requirements of Rule 23 in order to protect absent class members. [FN27] Amchem, 521 U.S. at 620, 117 S.Ct. 2231. This cautionary approach notwithstanding, the law favors class action settlements. City P'ship Co. v. Atl. Acquisition Ltd. P'ship, 100 F.3d 1041, 1043 (1st Cir.1996). FN27. The heightened scrutiny rule is a byproduct of the controversy over the concept of a settlement class, a litigation device that was initially viewed with deep suspicion by courts and commentators who feared (not without justification) that it invited collusion between defendants and fee-hungry lawyers. Judge Becker summarizes the arguments for and against settlement classes in his seminal decision on the subject, In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 787-792 (3d Cir.1995). (a) Numerosity [4] The class easily meets the Rule 23(a) requirement that "the class [be] so numerous that joinder of all members is impracticable." While the mortality rate associated with prostate cancer, coupled with the extended class period, makes it impossible to predict the size of the class to any degree of mathematical certainty, the class includes thousands of TPPs and tens if not hundreds of thousands of consumer-purchasers or their estates. (b) Commonality [5] While at least one common issue of fact or law at the core of the action must shape the class, Rule 23(a) does not require that every class member share every factual and legal predicate of the action. In re General Motors Corp., 55 F.3d at 817. "The threshold of 'commonality,' is not high. Aimed in part at 'determining whether there is a need for © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) combined treatment and a benefit to be derived therefrom,' the rule requires only that resolution of the common questions affect all or a substantial number of the class members." Jenkins v. Raymark Indus., Inc., 782 F.2d 468, 472 (5th Cir.1986) (citation omitted). In this case, there are a number of common issues of fact and law that the class members would be required to establish to prove the defendants' liability, as well as their entitlement to damages. All class members would need to establish that (1) they purchased Lupron® (2) at a price derived from a fraudulently inflated AWP (3) published by defendants as part of a concerted marketing scheme involving, inter alia, the provision of "free" samples, rebates, debt forgiveness, junkets, and "education grants" (4) that was intended to funnel hidden profits to doctors (5) as an inducement to prescribe Lupron® instead of less expensive alternatives like Zoladex®. The class would also be required to prove scienter on defendants' part, as well as complicity on the part of physicians and clinics who billed members directly or through their insurers at a price derived from the inflated AWP. The civil RICO statute (the mainstay of the Consolidated Amended Complaint) would require the class to prove as a matter of fact and law that defendants (1) conducted (2) an enterprise (either a legal entity or an association in fact) (3) through a pattern (at least two *89 related acts) (4) of racketeering activity. [FN28] Sedima, S.P.R.L. v. Imrex Co., Inc., 473 U.S. 479, 496, 105 S.Ct. 3275, 87 L.Ed.2d 346 (1985). In short, the commonality requirement is easily satisfied. [FN29] FN28. The predicate acts alleged by plaintiffs to constitute racketeering activity on the part of the defendants are mostly mailings and electronic communications plead as violations of the mail and wire fraud statutes. See Neder v. United States, 527 U.S. 1, 20, 119 S.Ct. 1827, 144 L.Ed.2d 35 (1999). FN29. While the Intervenors suggest that some Lupron® purchasers might not have been charged an AWP-based price or might not have paid for Lupron® distributed to doctors as "free" samples, plaintiffs' evidence credibly demonstrates that virtually every purchase of Lupron® during the class period was influenced to one degree or another by the defendants' manipulation of the published AWP. Given the needle and haystack problems that would be associated with any attempt to cull out the minuscule Page 14 number of purchasers (if they in fact exist) who did not pay for Lupron® based on AWP or who did not receive a bill for a free sample, the inclusion of all purchasers of Lupron® in the class is an expeditious means of insuring that all purchasers who were affected by the scheme receive relief. (c) Typicality [6] "A sufficient nexus is established [to show typicality] if the claims or defenses of the class and the class representative arise from the same event or pattern or practice and are based on the same legal theory." In re Terazosin Hydrochloride Antitrust Litig., 220 F.R.D. 672, 686 (S.D.Fla.2004) (finding that representatives were typical of plaintiffs subject to an overcharge for a prescription drug despite the fact that class members paid for the overcharge in different ways) (quoting Kornberg v. Carnival Cruise Lines, Inc., 741 F.2d 1332, 1337 (11th Cir.1984)). "Although [the plaintiffs] may not have suffered identical damages, that is of little consequence to the typicality determination when the common issue of liability is shared." In re Lorazepam & Clorazepate Antitrust Litig., 202 F.R.D. 12, 28 (D.D.C.2001) (finding representatives' claims typical despite the fact that some class members bought prescription drugs directly while others bought from agents or wholesalers at various rates) (quoting Lewis v. Nat'l Football League, 146 F.R.D. 5, 9 (D.D.C.1992)). Typicality is not a demanding test. Forbush v. J.C. Penney Co., Inc., 994 F.2d 1101, 1106 (5th Cir.1993). Intervenors challenge the typicality of the claims of the class representatives, relying on the briefs filed by the defendants prior to the hearing on the certification of a litigation class asserting that no class representative actually paid for Lupron® at the AWP. [FN30] The challenge is without merit. The court is satisfied, based on the affidavits presented by the MDL plaintiffs, that the Lupron® purchases of the class representatives were impacted by TAP's publication of an inflated AWP for Lupron®. The class representatives, in common with all other class members, claim to have been damaged by the defendants' price manipulation scheme. They claim to have been unaware of the fraudulent conduct in which the defendants were engaged. They seek to recover the maximum amount of damages possible, as would any member of the class, and they seek to do so under the civil RICO statute and state consumer protection laws, as would most of the members of the class. In sum, I find that the claims of the class © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) representatives *90 are typical of those of the members of the class. FN30. Intervenors additionally assert that the class representatives are not typical of class members who have claims based on the diversion theory pressed by Intervenors' counsel in the North Carolina state court action in that no class representative claims to have been victimized by this alleged scheme. The complaint filed in North Carolina alleges that the Johnson & Johnson companies are liable for conspiring with TAP to sell excess Lupron® to doctors in North Carolina, a "Least Costly Alternative" (LCA) state, at a discount. The defendants then allegedly allowed or encouraged doctors to resell the surplus Lupron® in non-LCA states at a profit, as a means of preserving Lupron®'s market share at a time when doctors were switching their patients to Zoladex® because of LCA programs. Assuming that these allegations are true, they simply represent a variant in the overall marketing scheme resulting in the same generic injury-- economic damages-suffered by the class representatives. See In re Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283, 311-312 (3d Cir.1998) (rejecting the argument that to satisfy the typicality requirement, the class representatives must share every form of injury suffered by the class); City P'ship, 100 F.3d. at 1044 (same). (d) Adequacy "The [adequacy] rule has two parts. The moving party must show first that the interests of the representative party will not conflict with the interests of any of the class members, and second, that counsel chosen by the representative party is qualified, experienced, and able to vigorously conduct the proposed litigation." Andrews v. Bechtel Power Corp., 780 F.2d 124, 130 (1st Cir.1985). "In complex actions such as this one, named plaintiffs are not required to 'have expert knowledge of all details of the case, ... and a great deal of reliance on the expertise of counsel is to be expected.' " County of Suffolk v. Long Island Lighting Co., 710 F.Supp. 1407, 1416 (E.D.N.Y.1989) (citation omitted). Intervenors challenge the adequacy of the class representatives, but the challenge is lacking in analysis, and for the most part appears to be the Page 15 product of sloppy investigation. [FN31] The Intervenors first accuse the TPP representatives, Twin Cities Bakeries and Beacon Health Plans, of being "professional plaintiffs." Even if the accusation is true (no evidence suggests that it is), it has no relevance to the competence of these TPPs to act as representatives of the TPP class. If anything, experience with prior similar litigation and knowledge of the legal issues involved enhances their role as class representatives. Intervenors also complain that the consumer representatives are reluctant role players who lack knowledge of allocation issues, the scope of the releases granted to the defendants, and the settlement in general. These allegations are not borne out by the record. Mrs. Brickey, in her capacity as the executor of the estate of William Brickey, submitted to a seven hour deposition at the defendants' request. There is nothing surprising in the fact that Mrs. Brickey and Mrs. Goetting, the widows of the original class representatives, are unschooled in the intricacies of the legal process or the complexities of prescription drug pricing. They are, however, fully aware of the circumstances in which their husbands purchased Lupron®. During the Fairness Hearing, consumer class representative William Porter (who is 78 years old) gave a telephone deposition in which he demonstrated a full understanding of the settlement and the consequences of the release being offered to the defendants. Intervenors also argue that a number of potential conflicts exist among class members. Those that are identified are illogical. Individual differences in damages suffered do not create a class conflict when recovery varies in direct proportion to the amount of individual damages incurred. The fact that a SHP may be able to pull into the SHPs group benefit plans that it has a contractual right to represent does not create a conflict by allowing a SHP to "steal" from the TPP class. There is nothing untoward about contracts for representation, and the only likely effect of a SHP's exercise of the right to appropriate a claim is the revenue-neutral shift of a payment that would be made in any event from one pool to the other. Also, unlike the situation in In re General Motors Corp., 55 F.3d at 800-01, where the class representatives were individual truck owners whose interests were in conflict with unrepresented fleet owners who received a less generous settlement, the Lupron® class representatives include both TPPs and consumer-purchasers. No objector has complained of any disparity in the benefits negotiated on behalf of consumer-purchasers and TPPs giving rise to an intra-class conflict. Nor are there any potential disparities in possible recoveries under state law of a significant enough magnitude to warrant © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) separate state proceedings. [FN32] In *91 sum, I find the representation to be adequate. FN31. With respect to the second component of the adequacy of representation prerequisite, the Intervenors make a rhetorical attack on the competence of MDL plaintiffs' counsel, accusing them of being "feeble," "disarmed," "ineffectual," and interested only in their fees, but without citing anything by way of evidentiary support for these insults (other than reckless claims of conflicts of interest that were exposed at the Fairness Hearing as false). The court has previously found MDL counsel to be highly competent and zealous in their pursuit of the interests of the class. Nothing said in the Intervenors' brief or adduced at the Fairness Hearing would cause the court to revise that finding. FN32. Intervenors claim that certain MDL plaintiffs' counsel face ethical conflicts because of their involvement in other drug pricing cases. Intervenors, for example, assert that the lead class counsel represents the State of Nevada in a suit involving similar Lupron® claims. In fact, the Nevada lawsuit does not involve Lupron®, but other drugs. A similar accusation that one of the class counsel represented doctors suing certain SHPs who were also plaintiffs in the MDL action proved equally untrue. (e) Predominance "The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation." Amchem, 521 U.S. at 623, 117 S.Ct. 2231. "Predominance is a test readily met in certain cases alleging consumer or securities fraud or violations of antitrust laws." Id. at 625, 117 S.Ct. 2231. "Where ... common questions predominate regarding liability, then courts generally find the predominance requirement to be satisfied even if individual damages issues remain," for "[t]he individuation of damages in consumer class actions is rarely determinative under Rule 23(b)(3)." Smilow, 323 F.3d at 40. See also Tardiff v. Knox County, 365 F.3d 1, 6-7 (1st Cir.2004) (the certification of a litigation class of individuals subjected to illegal strip searches was not improper despite the fact that individual damages would inevitably vary depending upon each individual's claims of emotional distress, lost wages, and medical bills). Similarly, "where Page 16 common issues otherwise predominated, courts have usually certified Rule 23(b)(3) classes even though individual issues were present in one or more affirmative defenses," for "[i]f ... evidence later shows that an affirmative defense is likely to bar claims against at least some class members, then a court has available adequate procedural mechanisms." Smilow, 323 F.3d at 39-40. See also Waste Mgt., 208 F.3d at 296 ("Although a necessity for individualized statute-of-limitations determinations invariably weighs against class certification under Rule 23(b)(3), we reject any per se rule that treats the presence of such issues as an automatic disqualifier."); Tardiff, 365 F.3d at 5 (noting that the probability that some members of the class were lawfully strip searched did not defeat class certification, since class members could be grouped by the seriousness of the crime for which they were arrested); Carnegie v. Household Int'l, Inc., 376 F.3d 656, 660-63 (7th Cir.2004) (Posner, J.) (affirming a RICO class certification and suggesting procedural mechanisms that at a later stage in the proceedings could be used to address the issues of whether particular class members were defrauded and the ext ent of any corresponding damages). Courts dealing with allegations of pricing fraud in an analogous antitrust context have generally found common issues to predominate despite individual differences in amounts paid, the method of payment, and potential knowledge of the fraud. See, e.g., In re Linerboard Antitrust Litig., 305 F.3d 145, 163 (3d Cir.2002) ("Key questions will not revolve around whether Appellees knew that the prices paid were higher than they should have been or whether Appellees knew of the alleged conspiracy among Appellants. Instead, the critical inquiry will be whether 'defendants successfully concealed the existence of the alleged conspiracy, which proof will be common among the class members in each class.' ") (citation omitted); In re Cardizem CD Antitrust Litig., 200 F.R.D. 326, 345 (E.D.Mich.2001) ("The courts have routinely rejected similar arguments, despite differences in prices paid by class members, where the plaintiffs show that the 'minimum baseline for beginning negotiations, or the range of prices which resulted from negotiations, was artificially raised (or slowed in its descent) by the collusive actions of the defendants.' ") (quoting In re Commercial Tissue Prods., 183 F.R.D. 589, 595 (N.D.Fla.1998) (internal citations omitted)); Terazosin, 220 F.R.D. at 694-700 (finding plaintiff purchasers of drugs showed predominance of common issues in a suit alleging increased prices from antitrust conspiracy to prevent generic © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) competition). But see Lienhart v. Dryvit Sys., Inc., 255 F.3d 138, 147-49 (4th Cir.2001) (decertifying class in part because of the possible contributory negligence of contractors who may have failed to follow instructions in installing defendant's house siding product); Markarian v. Conn. Mutual Life Ins. Co., 202 F.R.D. 60, 63-70 (D.Mass.2001) *92 (denying certification in part because despite evidence that company may have encouraged salespersons to use a misleading sales pitch, determination of whether it was actually used in particular cases would require individual inquiry). Here, issues common to the class predominate over those that are personal to class members. The core factual issues involve the manner in which the defendants marketed Lupron® to physicians; the methodology of the Medicare and private-payor reimbursement systems; the effect of competition from Zoladex® on Lupron®'s market share; and the impact of the defendant's marketing scheme on the actual price of the drug. As previously observed, the need to establish the elements of a civil RICO claim-the conduct of an enterprise through a pattern of racketeering activity--poses mixed issues of fact and law common to the class. Individual issues, on the other hand, primarily involve the amount of damages to be awarded to individual class members, a factor disfavored in determining predominance. While the extent to which individual class members were aware of the defendants' marketing scheme might weigh against certification, particularly in the case of the larger insurers that were arguably aware that the AWP for Lupron® was an artificial number, these entities are part of the SHPs group that has settled outside of the class. [FN33] Thus, this issue does not create individual predominance. FN33. Intervenors finally note some differences in the state consumer protection laws plead by various members of the class. These differences, however, do not pose a serious obstacle to certification. See In re Prudential Ins. Litig., 148 F.3d at 315 ("Courts have expressed a willingness to certify nationwide classes on the ground that relatively minor differences in state law could be overcome at trial by grouping similar state laws together and applying them as a unit."); Mowbray, 208 F.3d at 292, 296-297 (variations in twenty states' laws concerning reliance, waiver, and statutes of limitations did not cause individual issues to predominate). In any event, the issue is one of manageability, Page 17 which is not a consideration in the certification of a settlement class. See Amchem, 521 U.S. at 620, 117 S.Ct. 2231. (f) Superiority Rule 23(b)(3) requires a class action to be "superior to other available methods for the fair and efficient adjudication of the controversy." The matters pertinent to the findings include: (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. Id. "In adding 'predominance' and 'superiority' to the qualification-for-certification list, the Advisory Committee sought to cover cases 'in which a class action would achieve economies of time, effort, and expense, and promote ... uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results.' " Amchem, 521 U.S. at 615, 117 S.Ct. 2231. "[A] class action has to be unwieldy indeed before it can be pronounced an inferior alternative--no matter how massive the fraud or other wrongdoing that will go unpunished if class treatment is denied--to no litigation at all." Carnegie, 376 F.3d at 661. The superiority analysis dovetails with the predominance analysis. The issue here is one that lies at the very heart of the invention of the class action as a litigation vehicle: few, if any, members of the settlement class have incurred damages in an amount sufficient to justify the costs of pursuing an individual action. That fact alone makes a class action the only means by which most class members can obtain redress. Even if the claims could be prosecuted individually, their sheer number would make it unlikely that any significant number would be resolved during the lifetimes of the consumer class members. The court finds that under the circumstances, a class action is superior to any other mechanism for adjudicating this case (including joinder). [FN34] FN34. In the court's experience, joinder of parties for trial in numbers above two dozen is unworkable. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) Page 18 *93 (g) Ascertainability of the Class class definition. [7] "The proposed class must be precisely defined and its members must be ascertainable through the application of 'stable and objective factors' so that a court can decide, among other things, 'who will receive notice, who will share in any recovery, and who will be bound by the judgment.' " Van West v. Midland Nat'l Life Ins. Co., 199 F.R.D. 448, 451 (D.R.I.2001) (finding insufficiently definite a class of persons harmed by the unspecified "wrongful conduct" of defendant's sales agents, whose practices differed from transaction to transaction). Compare Crosby v. Soc. Sec. Admin., 796 F.2d 576, 580 (1st Cir.1986) (finding that a class of disability benefits claimants who did not receive a hearing "within a reasonable time" was impossible to ascertain in any objective fashion); In re Copper Antitrust Litig., 196 F.R.D. 348, 358-360 (W.D.Wis.2000) (finding that the class was unascertainable where indirect purchasers had no means of knowing if they had been harmed) with Lorazepam, 202 F.R.D. at 22-25 (finding that the complexities of the pharmaceutical market did not make purchasers of drugs unascertainable, and collecting cases certifying classes of direct purchasers in complex markets). FAIRNESS DETERMINATION General Considerations Intervenors make three challenges to ascertainability. First, they argue that self-funded plans might not know if they are members of the class. Second, they argue that the class period post-dates the notice, so that some persons who purchase Lupron® after the notice period may not know that they are in the class. Even if these persons learn of the class, Intervenors argue, they may do so after the March 15 deadline for objections and with a limited opportunity to opt out. Third, they argue that the class is "sprawling," making it difficult to ascertain the appropriate time frame and to differentiate included from excluded entities. The first argument is without merit. A self-funded plan may determine whether it has the right to file a claim in its own name, or whether the right belongs to the SHP that administers claims on its behalf, by simply reviewing its contract with the SHP. The second argument has no relevance to ascertainability, but is rather concerns the sufficiency of the notice given to members of the class. The third argument is entirely unsupported by analysis, and is on its face unpersuasive. The inclusion of "all purchasers" rather than purchasers who paid in reference to AWP makes purchasers easier, not harder, to ascertain, while the opening and closing dates of the class could not be set out any more clearly than they are in the [8][9][10][11] While the factors to be considered in making a fairness determination pursuant to Rule 23(e) often overlap with the class certification requirements of Rule 23(a) and (b), a court is required to analyze fairness as a separate and distinct issue. Rule 23(e) "was designed to function as an additional requirement, not a superseding direction, for the 'class action' to which Rule 23(e) refers is one qualified for certification under Rule 23(a) and (b)." Amchem, 521 U.S. at 621, 117 S.Ct. 2231. While settlement and compromise are favored by the law, the court has a fiduciary duty to absent members of the class in light of the potential for conflicts of interest among class representatives and class counsel and the absent members. "Rule 23(e) imposes on the trial judge the duty of protecting absentees, which is executed by the court's assuring the settlement represents adequate compensation for the release of the class claims." In re General Motors Corp., 55 F.3d at 805. Approval is to be given if a settlement is untainted by collusion and is fair, adequate, and reasonable. "When sufficient discovery has been provided and the parties have bargained at arms length, there is a presumption in favor of the settlement." City P'ship, 100 F.3d at 1043. While the First Circuit has not established a formal protocol for assessing the fairness of a settlement, other circuits have identified factors deemed appropriate for consideration. The most commonly referenced factors were identified by the Second Circuit in City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir.1974), overruled on other grounds by Missouri v. Jenkins, 491 U.S. 274, 109 S.Ct. 2463, 105 L.Ed.2d 229 (1989): *94 (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; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. Id. at 463 (citations omitted). As a prelude to consideration of each of each of these factors, the court will briefly describe the negotiations that © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) produced the proposed settlement and the principal objections tabled by the Intervenors, and principally the allegation that this is a collusive settlement. [12][13] The storm warnings indicative of collusion are a "lack of significant discovery and [an] extremely expedited settlement of questionable value accompanied by an enormous legal fee." In re General Motors Corp., 55 F.3d at 801. The successful negotiations that led to this settlement were consummated relatively quickly (they appear to have been concluded in one or two days). However, the negotiations must be viewed in the context of the lit igation as a whole. [FN35] The successful negotiation built on an earlier, three-month attempt to reach a settlement in 2003. The negotiations were not bilateral. MDL counsel wisely chose to secure separate and independent representation for the two distinct subclasses, the consumer-purchasers and the TPPs. At the Fairness Hearing, the court heard the testimony of Gregory Cox, the lead counsel in the Texas Lupron® action, and Stephen Rosenfeld, an attorney with extensive experience in pharmaceutical litigation (who is not affiliated with the MDL steering committee). Cox and Rosenfeld were designated to represent consumers in the negotiations. Operating on the assumption that the consumer share of the damages might amount to at most 15 percent of the total damages, Rosenfeld testified that his (and Cox's) primary objective was to maximize their percentage recovery from the settlement fund. The achievement of that objective over the resistance of the more powerful SHPs group is strong evidence of the arms -length nature of the negotiations. A secondary objective of the consumer representatives, insuring that any unclaimed funds did not revert to TAP, was also achieved. FN35. One of the concerns with so-called "drive by" class actions is that the court called upon to certify the class and approve the settlement is presented with a fait accompli and has no independent means of verifying the lawyers' representations. Here, several years of hotly contested litigation has educated the court in the factual and legal intricacies of the case and the relative strengths and weaknesses of the parties' respective positions. Intervenors' criticism is directed less at the percentage of the allocation of the fund to consumers than at the size of the fund itself, which they contend would be larger but for a "reverse auction" orchestrated by the defendants. The only support Page 19 offered for this allegation is the affidavit of Geoffrey Miller, a New Yo rk University law professor, which while instructive on the theory of reverse auctions, disavows any familiarity with the negotiations in this case. Intervenors' stronger argument is that the impetus to settle on defendants' part arose from the impending Walker trial in New Jersey (where attorney Haviland serves as lead counsel), and that the defendants found the MDL steering committee to be a more pliant negotiating partner than Kline & Specter as the latter would have insisted on a larger settlement fund in exchange for a release. This would be a persuasive argument if it were true. I credit defendants' representation that the global peace that they desired could never have been negotiated with Kline & Specter. The firm represents less than 5 percent of the national pool of consumer-purchasers and more critically, almost none of the TPPs, the entities with claims of 90 percent of the damages. As a consequence, a settlement with Kline & Specter was never considered a realistic alternative, and hence no global negotiations were ever undertaken with the firm. Intervenors' final substantive objection is that the release agreed to by MDL counsel is *95 broader than warranted by the size of the settlement. Intervenors offered two witnesses on the subject, Ms. Samsell, who is involved in a dispute with her insurer over coverage for Lupron®, and Steven Rowan, a prostate cancer patient who appears to have been the victim of fraudulent billing by his treating clinic. Both witnesses had been told by Kline & Specter that the release would extinguish their claims. An attorney appearing for Robert Swanston, the class representative in the Arizona action, argued that the release given to TAP might conceivably be interpreted as immunizing other pharmaceutical companies which Swanston alleges conspired with TAP in the manipulation of the AWP of other drugs. As to the first two issues, MDL counsel agree that the only claims extinguished by the release are those related to defendants' marketing, pricing, and sale of Lupron®. [FN36] The release would have no affect on insurance coverage disputes or on overcharging claims unrelated to TAP's conduct. Insofar as Swanston is concerned, the release of TAP would have no affect on the liability of any alleged coconspirator. It has always been the law that a legally immune party may be part of an actionable conspiracy. [FN37] See, e.g., Standefer v. United States, 447 U.S. 10, 15-21, 100 S.Ct. 1999, 64 L.Ed.2d 689 (1980). While the issue of the release of physicians who prescribed Lupron® was not a subject of testimony at the Fairness Hearing, it is © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) touched upon in the Intervenors' brief. However, as MDL counsel point out, their RICO enterprise theories involving physicians were dismissed by the court as either failing the RICO tests of association, organization and control, or if brought individually against 10,000 urologist enterprises as totally impracticable and unmanageable. In re Lupron® Litig., 295 F.Supp.2d at 173-174 & n. 27. Consequently, MDL plaintiffs' counsel state, and correctly so, that in releasing the claims against the urologists, they gave up little of consequence. [FN38] FN36. I agree with Intervenors that as written the release does not make the point as clearly as did MDL counsel at the Fairness Hearing that it is intended to cover only conduct related to defendants' alleged fraudulent activity in marketing Lupron®. I will ask that the Proposed Final Judgment clarify the scope of the release in this respect. FN37. Intervenors also complain of the absence of prospective injunctive relief barring TAP from engaging in similar overpricing in the future. I agree with the MDL parties that the Corporate Integrity Agreements entered by TAP with the United States Government and the State Attorneys General make any such relief redundant. FN38. MDL counsel also note that neither Intervenors' counsel nor anyone else has actually brought a direct claim against a urologist. The Grinnell Factors [FN39] FN39. I have not considered one of the traditional Grinnell factors, the risks of maintaining the suit as a class action through trial. As Judge Scirica observed in In re Prudential Ins. Litig., 148 F.3d at 321, this factor is largely irrelevant in settlement-only cases as Amchem does not require a manageability inquiry in a settlement context. (a) the complexity, expense and likely duration of the litigation The continued litigation of the case would be noxiously burdensome to all involved, given the twenty year duration of the alleged RICO conspiracy, the involvement of a foreign party (Takeda), and the Page 20 differing orders of proof required to establish (or defeat) the claims of the consumer and TPP subclasses. MDL plaintiffs' counsel report having incurred over $14 million in fees and over $1 million in costs to date. I have to assume that the costs incurred in defending the case are of a similar magnitude and are compounded by the rearguard skirmishes being fought with Kline & Specter. These costs and fees would escalate precipitously if the case were to be litigated through certification of a litigation class, summary judgment and the two or four trials (depending on the bifurcation of liability and damages as between the two subclasses) that would be required to achieve a comprehensive verdict. This process would reasonably take another two to three years to complete, and at least another year to resolve on appeal. Given the fact that many in the consumer claimant class are elderly and/or ill, it is in the interest of this subclass to bring the litigation to a closure, particularly one that allows a distribution of damages, as expeditiously as possible. *96 (b) the reaction of the class to the settlement Absent polling data, which is not available to the court, this factor can be analyzed only by comparing the number of objectors and opt outs with the number of claimants, and by assessing the extent to which notice effectively reached absent class members. As of May 9, 2005, 10,614 consumer claims had been filed with the Claims Administrator. To date 7,123 of these claims have been processed for a total claimed amount of $15,320,831.81. The only significant number of opt outs are persons who have been excluded from the settlement by Kline & Specter. [FN40] Most of the these persons are residents of states in which the firm has no Lupron® action pending. Only forty-nine persons unaffiliated with Kline & Specter have opted out of the settlement on their own initiative and only ten persons submitted objections (several of whom are associated with Kline & Specter). [FN41] See In re Prudential Ins. Litig., 148 F.3d at 318 (in assessing the weight of the objections, the district court properly considered the fact that the most vociferous objectors were persons enlisted by counsel competing with MDL counsel for control of the litigation). As previously indicated, the SHPs, the parties with the largest claim to damages, but also the group most vulnerable to defendants' affirmative defenses, have settled separately with defendants. Of the TPP class members, 880 have submitted claims , of which 286 have been processed for a total claimed amount of $39,160,604.89. None of the TPPs has objected to the settlement, and of the some 235,000 TPPs who received mail notice, only © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) fourteen have elected to opt out. Finally, six state Attorneys General purported to exercise opt outs on behalf of the citizens of their states who are otherwise qualified as members of the consumer-purchaser class. [FN42] With respect to the effectiveness of notice, in the absence of any evidence to the contrary, I accept the testimony of Todd Hilsee that the plan he designed achieved its objective of exposing 80 percent of the members of the consumer class on three or more occasions to notice of the proposed settlement and the procedure for submitting claims, and of providing direct written notice to all TPPs that might be affected by the settlement. I have examined the materials that were used to publicize the settlement, and I agree with Hilsee's opinion that they complied in all respects with the "plain, easily understood language" requirement of Rule 23(c). In sum, I find that the notice given meets the requirements of due process. FN40. The Claims Administrator has received several letters from attorney Haviland purporting to exercise blanket opt outs on behalf of 783 (or as many as 978) consumers who are said to be clients of Kline & Specter. (The exact number is difficult to ascertain as the lists submitted by attorney Haviland are inconsistent). See Supplemental Decl. of Thomas R. Glenn. Some of the consumers on various of the lists have independently filed claims with the MDL Claims Administrator. The MDL parties have asked that the court either strike the Haviland opt outs and give each person affected an opportunity to decide personally whether or not to join the MDL class, or at a minimum, that the court require Kline & Specter to submit proof that attorney Haviland has the authority to exercise the exclusions on each individual's behalf. FN41. As previously noted, the objection of Paula Treskow was withdrawn prior to the Fairness Hearing. After hearing the uncontradicted statements of MDL counsel that no consideration was given in exchange for withdrawal of the objection, and that the objection was withdrawn on the merits after Treskow and her attorney had the opportunity to review the settlement documents in depth, the court will give its approval for the withdrawal as required by Rule 23(e)(4)(B). FN42. This matter is in the process of being Page 21 separately briefed after the court questioned the authority of the Attorneys General to act on behalf of private citizens without their express consent. It would appear now that at least some of the Attorneys General have come to the view that the court's scepticism is well-taken. (c) stage of the proceedings and the amount of discovery completed As the procedural history of the case outlined earlier makes clear, the case was in litigation for nearly four years before the settlement was reached. Some 500 boxes of documents totaling over a million pages had been produced by the defendants for review. Twenty-six depositions had been taken, including depositions of TAP's senior management. Discovery has been sufficient to give *97 counsel an informed view of the strengths and weaknesses of plaintiffs' case. More impressive, however, than the sheer volume of documents reviewed and depositions taken is the skillful use that MDL plaintiffs' counsel have made of that discovery in fending off aggressive and equally skillful motions brought by defendants, several of which had the potential of collapsing the plaintiffs' case. (d) the risks of establishing liability and damages [14] As any experienced lawyer knows, a significant element of risk adheres to any litigation taken to binary adjudication. With respect to establishing liability, plaintiffs' principal risks arise from: (1) the complexity of the case; (2) the difficulty of establishing any uniform practice in the actual use of the AWP in marketing Lupron®, particularly Lupron® sold through TPPs pursuant to negotiated contracts; (3) the difficulty of deflecting defenses based on imputed knowledge that the AWP was subject to manipulation by the defendants, as well as apparent government ratification of the defendants' conduct; and (4) related statutes of limitations defenses. [FN43] The plaintiffs face formidable, albeit not insurmountable obstacles in presenting to a lay jury a clear, and yet legally sufficient, narrative of the evidence, [FN44] while defendants have a powerful argument that the AWP was known to Congress and large insurers to be an artificial benchmark with no real market significance. [FN45] Proving damages represents two significant risks to the consumer class: (1) a number of consumers (or their estates) would likely no longer have records available to prove the extent of their Lupron® purchases; while (2) those consumers who made flat © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) co-payments for prescription drugs might be found to have suffered no damages at all, as a co-payment is a fixed fee that does not vary with the price of the drug in question. The TPPs, on the other hand, which account for the lion's share of the damages, were the most likely to have been aware of the manipulation of AWP by TAP and therefore the most vulnerable to TAP's knowledge defense. FN43. In noting the risks, the court is not passing judgment on the ultimate outcome. A settlement court reviewing the fairness of a compromise does not "decide the merits of the case or resolve unsettled legal questions." Carson v. Am. Brands, Inc., 450 U.S. 79, 88 n. 14, 101 S.Ct. 993, 67 L.Ed.2d 59 (1981). FN44. While the standard of proof in a criminal case is much higher than in a civil one, it cannot go unremarked that the government failed to win a single conviction in its trial of some dozen TAP executives and employees who were indicted for their roles in the marketing of Lupron®. FN45. This consideration appears to have led the government to abandon an AWPbased criminal prosecution of TAP and to substitute instead the allegations of "free sample" fraud to which TAP pled guilty. (e) ability of the defendants to withstand a greater judgment This defendant-oriented factor is largely neutral as there seems little doubt that TAP and its venture partners (Takeda and Abbott) are defendants with classic deep pockets. (f) the amount of the settlement fund in contrast to the best possible recovery In applying this test of reasonableness, "the present value of the damages plaintiffs would likely recover if successful, appropriately discounted for the risk of not prevailing, should be compared with the amount of the proposed settlement." In re General Motors Corp., 55 F.3d at 806 (quoting Manual § 30.44). Measured against the civil recovery from TAP obtained by the government under the threat of debarment, the proposed settlement is roughly commensurate in size. More importantly, the sufficiency of the allotment to the consumer fund, which was initially difficult to judge because of the Page 22 lack of claims experience and uncertainty as to the size of the ultimate claimant pool, now appears more than adequate to fully compensate all consumer claimants and to perhaps pay a dividend. While it is possible to hypothesize about larger amounts that might have been recovered, [FN46] as do Intervenors, *98 Judge Becker counsels: "[t]he evaluating 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." In re General Motors Corp., 55 F.3d at 806. Based on Dr. Hartman's and Dr. Rosenthal's analysis of the likely damages, the opinions of experienced MDL counsel, and my own determination that the risks plaintiffs face in establishing a viable litigation class outweigh any potential benefit to be gained by further litigation, I find that the proposed settlement lies within the range of reasonableness. FN46. Intervenors' counsel are consistently inconsistent in their evaluation of what might optimally be recovered, ranging from $300 million with a 50 percent chance of an adverse result to literally billions of dollars with no risk whatsoever. ATTORNEYS' FEES AND COSTS Under the terms of the Settlement Agreement, and subject to the court's approval, class counsel may seek reasonable attorneys' fees not to exceed 30 percent of the $95,000,000 settlement fund (after deducting any amount that might be rebated to TAP because of TPP exclusions). [FN47] MDL class counsel have petitioned the court for an award of attorneys' fees in the amount of $23,750,000 and for reimbursement of $1,822,754.71 in costs. [FN48] The court finds the fee request to be within the range of reasonableness, given the duration and intensity of the litigation, and the results achieved. [FN49] It will, however, defer making specific findings until all outstanding motions are resolved and final judgment is entered. The award of attorneys' fees will in any event not exceed 25 percent of the settlement fund, and should the court award less, it will order any surplus to be paid into the appropriate pool. Class counsel also request that the court approve modest incentive awards totaling $100,000, including $5,000 to be paid to each named consumer plaintiff who was deposed, $2,500 to be paid to each named consumer plaintiff who was not deposed, and $25,000 to be paid to each of the named TPP plaintiffs. Incentive awards are recognized as serving an important function in promoting class action settlements, © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 228 F.R.D. 75 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 (Cite as: 228 F.R.D. 75) particularly where as here, the named plaintiffs participated actively in the litigation. Denney v. Jenkens & Gilchrist, 2005 WL 388562, at *31 (S.D.N.Y. Feb.18, 2005). Consequently, I will approve the awards as requested. FN47. Despite the terms of the Settlement Agreement, class counsel have agreed that the collective request for fees will not exceed 25 percent of the settlement fund. Page 23 and costs until all outstanding motions are resolved, including any involving disputes over the allocation of an attorneys' fee award; and (8) ORDER MDL counsel to submit a joint proposed form of final judgment within *99 thirty (30) days of the court's resolution of all outstanding motions other than those concerning the award of attorneys' fees and costs. SO ORDERED. FN48. The lodestar as of the date the petition was filed, April 6, 2005, amounted to $14,503,055.50, meaning that class counsel were seeking an award at a multiplier of 1.64, a number that will shrink as additional hours are expended implementing the settlement. The court takes no position for present purposes as to the appropriateness of the requested multiplier. FN49. At the Fairness Hearing, MDL counsel and TAP suggested that any excess funds in the consumer pool be used to increase the percentage of the recovery allocated to consumer-purchasers, to provide for additional notice and further distribution to absent class members, or to fund a cy pres award to benefit the consumer class as a whole. 228 F.R.D. 75, RICO Bus.Disp.Guide 10,888 Motions, Pleadings and Filings (Back to top) • 2001 WL 34132013 (Trial Pleading) Class Action Complaint (May. 18, 2001) • 1:01cv10861 (Docket) (May. 18, 2001) END OF DOCUMENT ORDER For the foregoing reasons, the court will: (1) OVERRULE the objections to the settlement class and the proposed settlement; (2) APPROVE the withdrawal of the Treskow and Marcus objections pursuant to Rule 23(e)(4)(b); (3) CERTIFY the proposed class, the court having found that the class satisfies the prerequisites of Rules 23(a) and (b); (4) APPROVE the proposed settlement as fair, reasonable, and adequate for purposes of Rule 23(e); (5) APPOINT interim class counsel as permanent class counsel pursuant to Rule 23(g)(1)(A); (6) APPROVE the award of incentive fees to the named class plaintiffs; (7) DEFER acting on the petitions for attorneys' fees © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) Motions, Pleadings and Filings United States District Court, S.D. New York. Thomas DENNEY, R. Thomas Weeks, Norman R. Kirisits, Kathryn M. Kirisits, TD Cody Investments, L.L.C., RTW Investments, L.L. C., NRK Syracuse Investments, L.L.C., DKW Partners, DKW Lockport Investors, Inc., Donald A. Destefano, Patricia J. Destefano, DD Tiffany Circle Investments L.L.C., Tiffany Circle Partners, Diamond Roofing Company, Inc., Jeff Blumin, JB Hilltop Investments L.L.C., Kyle Blumin, KB Hoag Lane Investments, L.L.C., L. Michael Blumin, MB St. Andrews Investments, L.L.C., Fayetteville Partners, and Laurel Hollow Investors, Inc., on their own behalf and on behalf of all others similarly situated, Plaintiffs, v. JENKENS & GILCHRIST, a Texas Professional Corporation, Jenkens & Gilchrist, an Illinois Professional Corporation, BDO Seidman, L.L.P., Pasquale & Bowers, L.L.P., Cantley & Sedacca, L.L.P., Dermody, Burke, and Brown, Certified Public Accountants, PLLC, Paul M. Daugerdas, Paul Shanbrom, Edward Sedacca, Deutsche Bank AG, and Deutsche Bank Securities, Inc., d/b/a Deutsche Bank Alex Brown, a Division of Deutsche Bank Securities, Inc., Defendants. No. 03 Civ. 5460(SAS). Feb. 18, 2005. Background: Buyers of currency options pursuant to allegedly fraudulent tax strategy sued law firm advancing strategy, underwriters and others. Parties sought class certification and approval of settlement agreement creating fund of approximately $81 million. Holdings: The District Court, Scheindlin, J., held that: (1) commonality, typicality and adequacy requirements for class action certification were satisfied; Page 1 (2) requirement that common issues predominate over individual issues was satisfied; (3) settlement would be approved as fair and reasonable; (4) bar on contribution and indemnification claims by non participating defendants, compensated for by judgment credits, would be approved; (5) counsel would be entitled to recovery out of common fund, at less than requested amount; (6) counsel for objectant to settlement would be entitled to fees award; and (7) lead plaintiffs would be paid additional $10,000, to reflect extra work on case. Class certified; settlement approved. See, also, 2004 WL 2997930. West Headnotes [1] Federal Civil Procedure 163 170Ak163 Most Cited Cases Numerosity requirement for class action certification, under federal procedure rule, is generally satisfied when putative class consists of more than 40 members. Fed.Rules Civ.Proc.Rule 23(a)(1), 28 U.S.C.A. [2] Federal Civil Procedure 165 170Ak165 Most Cited Cases Critical inquiry, in determining whether commonality requirement for class action certification has been satisfied, is whether common questions are at core of cause of action alleged. Fed.Rules Civ.Proc.Rule 23(a)(2), 28 U.S.C.A. [3] Federal Civil Procedure 164 170Ak164 Most Cited Cases Typicality requirement for class action certification, under federal procedure rule, is satisfied if claims of named plaintiffs arise from same practice or course of conduct that gives rise to claims of proposed class members. Fed.Rules Civ.Proc.Rule 23(a)(3), 28 U.S.C.A. [4] Federal Civil Procedure 164 170Ak164 Most Cited Cases To satisfy adequacy of representation requirement, for class action certification under federal procedure rule, putative class representatives must have interest in fairly and vigorously pursuing claims of class, and have no interests that are antagonistic to those of © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) other class members. 23(a)(4), 28 U.S.C.A. Fed.Rules Civ.Proc.Rule [5] Federal Civil Procedure 165 170Ak165 Most Cited Cases Requirement for class action certification, under federal procedure rule governing maintainability of class action, that common issues predominate over individual issues, is far more demanding than commonality requirement which was prerequisite to certification. Fed.Rules Civ.Proc.Rule 23(a)(2), (b), 28 U.S.C.A. [6] Federal Civil Procedure 161.2 170Ak161.2 Most Cited Cases Determination of whether requirement for certification of class action, that it be superior method of adjudicating dispute, is satisfied, requires consideration of (1) interest of members of class in individually controlling prosecution or defense of separate actions, (2) extent and nature of any litigation concerning controversy already commenced by or against members of class, (3) desirability or undesirability of concentrating litigation of claims in particular forum, and (4) difficulties likely to be encountered in management of class action. Fed.Rules Civ.Proc.Rule 23(b)(3), 28 U.S.C.A. [7] Compromise and Settlement 57 89k57 Most Cited Cases In determining whether proposed class action settlement should be approved as fair, court is to consider (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. Fed.Rules Civ.Proc.Rule 23(e), 28 U.S.C.A. [8] Federal Ci vil Procedure 187 170Ak187 Most Cited Cases Commonality requirement for class action certification was satisfied in suit by putative class consisting of buyers of currency options pursuant to allegedly fraudulent tax strategies advocated by law firm; same issues of existence of fraud, Page 2 reasonableness of reliance, and excessiveness of fees charged were present in all cases. Fed.Rules Civ.Proc.Rule 23(a)(2), 28 U.S.C.A. [9] Federal Civil Procedure 187 170Ak187 Most Cited Cases Typicality requirement for class action certification was satisfied, in suit by buyers of currency options pursuant to allegedly fraudulent tax strategy presented by law firm, even though strategy was presented to representative plaintiffs by different marketers. Fed.Rules Civ.Proc.Rule 23(a)(3), 28 U.S.C.A. [10] Federal Civil Procedure 187 170Ak187 Most Cited Cases Adequacy of representation requirement, for class action certification under federal procedure rule, was satisfied in suit against law firm, by buyers of currency options, pursuant to firm's allegedly fraudulent tax strategy, even though there was alleged conflict, as putative representatives had been injured as result of penalties assessed by tax authorities and some class members had not been so assessed; all putative class members had paid firm for supposedly bad legal advice. Fed.Rules Civ.Proc.Rule 23(a)(4), 28 U.S.C.A. [11] Federal Civil Procedure 187 170Ak187 Most Cited Cases Requirement for certification of class action, under federal procedure rule, that common issues predominate over individual issues, was satisfied in suit by buyers of currency options pursuant to allegedly fraudulent tax strategy advocated by law firm; while different state laws would be initially involved, choice of law rules would lead to concentration on Illinois law, many questions involved federal law, and firm's conduct would be evaluated against standard of care applicable to federal tax practitioner. Fed.Rules Civ.Proc.Rule 23(b)(3), 28 U.S.C.A. [12] Federal Civil Procedure 187 170Ak187 Most Cited Cases Requirement for certification of class action, under federal procedure rule, that class suit be superior method of adjudicating dispute, was satisfied in suit by buyers of currency options pursuant to allegedly fraudulent tax strategy advocated by law firm; individual suits would quickly exhaust assets of firm, and deplete insurance, resulting in recoveries only to buyers who most quickly asserted rights. Fed.Rules Civ.Proc.Rule 23(b)(3), 28 U.S.C.A. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) [13] Compromise and Settlement 61 89k61 Most Cited Cases Court would approve, as fair and reasonable, settlement of class action suit by buyers of currency options pursuant to tax strategy allegedly fraudulently advocated by law firm, when settlement involved $70,057,805 from insurance, $5.25 million from firm, and $6.25 million from individual defendants, with possibility of $25 million more from insurance, and there was protection of buyers relative to other buyers opting out of settlement; settlement was intensively negotiated, class response was positive, case was well-developed at time of settlement, risks of establishing liability and damages were significant, considering that other law firms concurred in advice in question, decertification might occur, firm was already losing attorneys and might lose more if required to pay more on claims, and amount was within reasonable range of recovery. Fed.Rules Civ.Proc.Rule 23(e), 28 U.S.C.A. [14] Compromise and Settlement 61 89k61 Most Cited Cases Court would approve, as settlement of class action suit by buyers of currency futures as tax strategy against law firm that developed strategy, bar on claims by non-settling defendants against settling defendants, seeking contribution or indemnification for claims by buyers, when nonsettling defendants were granted credit against judgment obtained by class member, to replace lost contribution or indemnification rights. Fed.Rules Civ.Proc.Rule 23(e), 28 U.S.C.A. [15] Compromise and Settlement 89k68 Most Cited Cases 68 [15] Federal Civil Procedure 179 170Ak179 Most Cited Cases Notice of approval of proposed settlement of class action, by buyers of currency options pursuant to allegedly fraudulent tax strategy advocated by law firm, satisfied requirements of federal procedure rule; notice was mailed to 1,286 purchasers of securities in question, containing all information required by rule, class members were given 136 days to opt out, terms of settlement were clearly given and summarized in major financial newspaper, and amendment was widely and timely circulated and described. Fed.Rules Civ.Proc.Rule 23(c)(2)(B), 28 U.S.C.A. [16] Federal Civil Procedure 180 Page 3 170Ak180 Most Cited Cases Court would not grant second period, during which buyers of currency options pursuant to allegedly fraudulent tax strategy advocated by law firm could opt out of proposed settlement, when after expiration of first period terms of proposed settlement were changed so that insurer could allocate some of its settlement commitment to processing of opt-out claims, increasing amount of money earmarked for those claims and increasing attractiveness of opt-out alternative. Fed.Rules Civ.Proc.Rule 23(c)(2)(B), 28 U.S.C.A. [17] Federal Civil Procedure 180 170Ak180 Most Cited Cases Buyers of securities pursuant to allegedly fraudulent tax strategy developed by law firm could not opt out of class of claimants, after expiration of opt-out period, on grounds that they did not comprehend significance of provision granting protection to nonclass members. Fed.Rules Civ.Proc.Rules 23(d), 60(b)(1, 2), 28 U.S.C.A. [18] Federal Civil Procedure 187 170Ak187 Most Cited Cases Court could preliminarily certify class, for purpose of considering settlement of putative class action suit by buyers of currency options pursuant to allegedly fraudulent tax advice from law firm, even though federal procedure rule was amended to preclude general practice of preliminary certification. Fed.Rules Civ.Proc.Rule 23(c)(1)(C), (e). [19] Attorney and Client 155 45k155 Most Cited Cases Under the "common fund" doctrine, where an attorney succeeds in creating a common fund for the benefit of a class of plaintiffs, that attorney is entitled to a reasonable fee to be set by the court and taken from the fund. [20] Attorney and Client 155 45k155 Most Cited Cases Factors to be considered, in determining amount of attorney fees to be awarded out of common fund created through efforts of attorney, are (1) time and labor expended by counsel, (2) magnitude and complexities of litigation, (3) risk of litigation, (4) quality of representation, (5) requested fee in relation to settlement and (6) public policy considerations. [21] Attorney and Client 155 45k155 Most Cited Cases Amount of proposed settlement agreement, resolving © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) suit by participants in tax strategy against attorneys advocating strategy, was excessive in providing for reimbursement of participants' attorney fees of $16,936,084.84, representing 20.8% of fund created as settlement of suit; cross checking by dividing proposed figure by lodestar amount arrived at by multiplying hours spent by applicable rates, produced multiplier of 2.04 and hourly fee of $1,071, which would be reduced to 1.5 multiplier and fee of $12,610,44.84, in middle or range for $80 million recoveries. [22] Attorney and Client 155 45k155 Most Cited Cases Counsel for currency option buyers who objected to proposed settlement of class action arising out of allegedly fraudulent tax strategy was entitled to award out of fund created through litigation, even though buyers would not be participating. [23] Federal Civil Procedure 2736 170Ak2736 Most Cited Cases Lead plaintiffs, in class action suit by buyers of currency options pursuant to allegedly fraudulent tax strategy, would be entitled to $10,000 from common fund created through settlement, as compensation for extra work done in furtherance of suit. *320 David R. Deary, W. Ralph Canada, Shore & Deary, L.L.P., Dallas, Texas, Jeffrey Daichman, Nahum Kainovsky, Kane Kessler, P.C., New York City, Joe R. Whatley, Jr., Othni Lathram, Whatley Drake, L.L.C., Birmingham, Alabama, Ernest Cory, Cory Watson Crowder & Degaris, P.C., Birmingham, Alabama, Stephen F. Malouf, Dallas, Texas, for Plaintiffs. Larry Black, Austin, Texas, for Defendants Paul Daugerdas, Erwin Mayer, and Donna Guerin. Rod Phelan, Baker Botts, L.L.P., Dallas, Texas, for Defendant Jenkens & Gilchrist, P.C. H. Lamar Mixson, Alison Berkowitz Prout, Bondurant, Mixson & Elmore, L.L.P., Atlanta, Georgia, Steven Spielvogel, Gallion & Spielvogel, Garden City, New York, for Plaintiffs Eric Harslem, Lorraine Clasquin, Douglas MacGregor, Jeffrey Clarke and Loretta Clarke. Philip E. Bryant, Boyer & Ketchand, Houston, Texas, for Plaintiffs Denis Hoasjoe and Robert Moore. Robert J. Clary, Owens, Clary & Aiken, L.L.P., Dallas, Texas, for Plaintiffs James Mattei and J. Scott Page 4 Mattei. Lawrence M. Hill, Seth C. Farber, Dewey Ballantine, L.L.P., New York City, for Defendants Deutsche Bank AG and Deutsche Bank Securities. Michael R. Young, Michelle Nadel, Brian A. Turetsky, Willkie Farr & Gallagher, New York City, for Defendants BDO Seidman and Paul Shanbrom. Shirah Neiman, Justin S. Weddle, Assistant United States Attorneys, Southern District of New York, New York City, for the Government. *321 OPINION & ORDER SCHEINDLIN, District Judge. I. INTRODUCTION Plaintiffs allege in this putative class action that defendants violated the Racketeer Influenced and Corrupt Organizations Act ("RICO") and are liable for damages and other relief arising from unjust enrichment, breach of contract, breach of the duty of good faith and fair dealing, breach of fiduciary duties, fraud, negligent misrepresentation, professional malpractice, unethical, excessive and illegal fees, and conspiracy. [FN1] On May 14, 2004, the Court preliminarily certified a settlement class and approved a proposed settlement with defendants Jenkens & Gilchrist, P.C., Paul Daugerdas, Erwin Mayer and Donna Guerin (collectively, "Jenkens"). [FN2] Lead Plaintiffs now seek final approval of the settlement and certification of the class, and entry of a proposed final judgment. Lead Counsel seek an award of attorney's fees and expenses for their efforts. [FN3] On January 24, 2005 the Court held a hearing on the fairness of the settlement. Having considered all objections, a class is hereby certified and the settlement is approved in a separate Order issued today. This opinion explains the decision to certify the class and approve the settlement. FN1. See Second Amended Complaint. Lead Plaintiffs in this action, acting on behalf of themselves and all others similarly situated, include: Thomas Denney, R. Thomas Weeks, Norman Kirisits, Kathryn M. Kirisits, NRK Syracuse Investments, L.L.C., RTW High Investments, L.L.C., TD Cody Investments, L.L.C., DKW Lockport Investments, Inc., DKW Partners, Donald A. DeStefano, Patricia J. DeStefano, DD © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) Tiffany Circle Investments, L.L.C., Tiffany Circle Partners, Diamond Roofing Company, Inc., Jeff Blumin, Kyle Blumin, L. Michael Blumin, JB Hilltop Investments, L.L.C., KB Hoag Lane Investments, L.L.C., MB St. Andrews Investments, L.L.C., and Laurel Hollow Investors, Inc. (collectively, the "Denney Plaintiffs"). In addition, in connection with this settlement, both the plaintiffs in the case of Camferdam v. Jenkens & Gilchrist, No. 02 Civ. 10100 (S.D.N.Y.) (Henry N. Camferdam, Jeffrey M. Adams, Jay Michener, and Carol Trigilio (collectively, the "Camferdam Plaintiffs")) and Jack Riggs, plaintiff in Jack Riggs v. Jenkens & Gilchrist, No. 03-6291-C (Co.Ct.Dallas, Tex.) have appeared in this action as additional class representatives. Denney and Camferdam are class actions; Riggs is not. FN2. The Class is defined as follows: all Persons who, from January 1, 1999, through December 31, 2003, inclusive, either (1) consulted with, relied upon, or received oral or written opinions or advice from Jenkens & Gilchrist or any Jenkens & Gilchrist attorney concerning any one or more of the Tax Strategies and who in whole or in part implemented, directly or indirectly, any one or more of the Tax Strategies or (2) filed with a Person described in (1) a joint tax return for the year(s) in which such Tax Strategy was implemented, and (3) the legal representatives, heirs, successors, and assigns of all Persons described in (1) and (2). The Class includes, without limitation, the individuals, partnerships, limited liability companies, trusts, corporations and other legal entities that Jenkens & Gilchrist or any Jenkens & Gilchrist attorney advised concerning, that were formed in connection with, or that engaged or were utilized in any one or more of the Tax Strategies. The Class excludes, however, any Persons described in (1), (2) and (3) who timely elected to be excluded from the Class and did not later timely revoke that election. The "Tax Strategies" are defined as: those tax-reducing strategies that are the basis of the Denney, Camferdam and Riggs suits, as well as all other tax-reducing strategies advised upon or opined about by any of the J & G Defendants involving (a) basis enhancing investment transactions, (b) Page 5 basis -enhancing derivatives structure, (c) basis leveraged investment swap spreads, (d) hedge option monetization of economic remainders, (e) basis adjustment remainder trust, (f) gain option partnerships, or (g) other basis -enhancing, basis -preserving, and/or gain-avoidance transactions utilizing options and/or indebtedness and involving corporations and/or partnerships. The "J & G Defendants" are defined as: Jenkens & Gilchrist and all Persons (including Daugerdas, Mayer and Guerin) who, during all or any part of the period January 1, 1998, to date, held the status of director, officer, stockholder, partner, principal, member, owner and/or employee in any of the entities comprising Jenkens & Gilchrist (whether or not any such Person has been sued). FN3. The Denney and Camferdam Plaintiffs are represented by the firms of Deary Montgomery DeFeo & Canada, LLP ("DMDC"), Whatley Drake LLC ("Whatley Drake"), Cory Watson Crowder & DeGaris, P.C. ("Cory Watson"), and Kane Kessler, P.C. ("Kane Kessler"). Jack Riggs is represented by the firm of Stephen F. Malouf, P.C. ("Malouf"). II. BACKGROUND A. The Alleged Conspiracy This case arises out of tax and consulting services offered by several professional law and accounting firms. In their Second Amended Complaint, the Denney Plaintiffs *322 allege that, in the mid -1990's, Jenkens, in concert with Deutsche Bank [FN4] and others, developed a tax shelter strategy based on the purchase of foreign currency options. The strategy, sometimes with minor variations, was marketed under various names, including "Currency Options Bring Reward Alternatives," or COBRA. The gravamen of plaintiffs' allegations is that Jenkens, and the other defendants, knew that the tax strategies lacked economic substance and would be held invalid by the IRS, but falsely held them out to plaintiffs as legitimate. FN4. "Deutsche Bank" refers to Deutsche Bank AG and Deutsche Bank Securities. The Denney Plaintiffs allege that Jenkens and Deutsche Bank recruited a number of accounting © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) firms (the "Marketing Participants") to market the tax strategies to their clients. The Marketing Participants included, inter alia, BDO [FN5] and Ernst & Young. Once the Marketing Participants identified a suitable client, they would arrange a meeting to present the tax strategy to the client. FN5. "BDO" refers to BDO Seidman, LLP and Paul Shanbrom. At these presentations, plaintiffs allege, the Marketing Participants would represent that the tax strategy was "legitimate and in accordance with all applicable tax laws, rules, and regulations [and] was not a 'sham transaction' that would be ignored or disallowed for tax purposes." [FN6] The Marketing Participants further represented that the tax strategy was devised by them, not by Jenkens. "The crux of the sales pitch was always that a major law firm, Jenkens & Gilchrist, would prepare an 'independent' opinion letter confirming the propriety of the [tax strategy], which would supposedly provide insurance in the event of an audit." [FN7] Plaintiffs allege that Jenkens was not, in fact, able to provide a truly "independent" opinion letter, but could provide only "a pre-fabricated and canned legal opinion confirming the propriety of their own tax strategy." [FN8] Plaintiffs allege that Jenkens charged excessive and unreasonable fees for its advice and opinion letters. FN6. Denney Second Amended Complaint ¶ 99. FN7. Id. ¶ 85. FN8. Id. ¶ 86. Essentially these same representations were allegedly made to all members of the class. After plaintiffs entered and completed the tax shelter transactions, Jenkens provided them with an opinion letter attesting to the legitimacy of the tax strategies. [FN9] These opinion letters were substantially identical. Page 6 Jenkens with respect to the tax strategies, and who began, but did not complete the transactions, and did not receive opinion letters. Jenkens' Memorandum of Law in Support of Class Certification and Approval of the Settlement ("Jenkens Mem.") at 6 n. 4. B. The Denney Plaintiffs The Denney Plaintiffs were introduced to COBRA by their accountants, the small firm of Pasquale & Bowers, who had been recruited by BDO to market COBRA to their clients. Pasquale & Bowers contacted the Denney Plaintiffs regarding COBRA in September 1999. The Denney Plaintiffs subsequently met with the Pasquale Defendants and BDO to discuss the strategy. At the presentation in September 1999, BDO and Pasquale made the representations described above. The Denney Plaintiffs decided to engage in the transaction in October 1999, and retained Jenkens to advise them. With the assistance of Jenkens, the Denney Plaintiffs created various partnerships and limited liability companies for the purpose of carrying out the COBRA transactions. The Denney Plaintiffs entered into the COBRA transactions in November 1999. Jenkens sent each of the Denney Plaintiffs virtually identical opinion letters in March 2000. [FN10] The opinion letters advised that the COBRA strategy was legitimate. The Denney Plaintiffs allege that these letters are representative of similar letters provided to all Class Members. [FN11] In reliance on defendants' *323 representations, the Denney Plaintiffs reported the COBRA transactions on their tax returns for 1999. FN10. See Denney Second Amended Complaint ¶ 157. One of the Denney Plaintiffs did not receive his opinion letter until September 2000. FN11. See id. ¶ 157. C. The Camferdam and Riggs Plaintiffs FN9. The class includes not only those who directly received opinion letters from Jenkens, but also those who filed joint returns with such a person, and the partnerships and other entities that were formed in connection with, or that engaged or were utilized in any one or more of the tax strategies. The definition also includes several dozen taxpayers who consulted The plaintiffs in Camferdam and Riggs have appeared in this action as additional class representatives. The Camferdam Plaintiffs sold their business in 1999, realizing a combined capital gain in excess of $70 million. [FN12] Ernst & Young, who had for several years provided accounting services to the © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) business and to two of the individual Camferdam Plaintiffs, advised the Camferdam Plaintiffs during the transaction. [FN13] Shortly after the transaction, Ernst & Young approached the Camferdam Plaintiffs to market the COBRA strategy to them. On November 5, 1999, the Camferdam Plaintiffs attended a presentation by Ernst & Young, at which Ernst & Young allegedly made the above representations with regard to COBRA. [FN14] FN12. See Camferdam First Amended Complaint ¶ 46. FN13. See id. ¶ 47. FN14. See id. ¶ ¶ 51-63. The Camferdam Plaintiffs engaged in the COBRA transactions on November 16, 1999. [FN15] They subsequently retained Jenkens & Gilchrist to provide opinion letters. Jenkens sent each plaintiff a substantially identical opinion letter in March 2000. The Camferdam Plaintiffs also received a second, substantially identical opinion letter from the law firm of Brown & Wood. In reliance on these representations, the Camferdam Plaintiffs included the COBRA transactions on their tax returns. FN15. See id. ¶ ¶ 64-74. Jack Riggs' investments were managed by Deutsche Bank. [FN16] Riggs alleges that "Deutsche Bank solicited Jack Riggs to hire the Jenkens Defendants" to procure advice relating to the tax strategies. [FN17] Riggs carried out the tax strategy. Riggs retained Ernst & Young, who he alleges were secretly working together with Deutsche Bank and Jenkens to develop and promote the tax strategies, to prepare his 1999 tax returns, reflecting the tax strategy. [FN18] FN16. See Riggs Fourth Amended Petition ¶ 30. FN17. See id. ¶ 24. FN18. See id. ¶ ¶ 25, 26, 30. D. The Settlement Negotiations Class Counsel and Jenkens began settlement discussions in November 2003. Jenkens' insurance carriers claimed that their policies did not cover the damages alleged by plaintiffs. Jenkens asserted that it was severely stressed by the pressure of the tax shelter litigation; the firm was having difficulty Page 7 retaining lawyers and staff, and was in danger of filing for bankruptcy protection. Following an investigation of the insurance carriers' claims, "and the perilous circumstances of [Jenkens], Class Counsel believed it was in the best interest of all Class Members to immediately attempt to negotiate a global settlement." [FN19] FN19. Declaration of Lead Counsel in Support of Certification and Approval of the Settlement ("Lead Counsel Decl.") ¶ 48. The parties, including the Camferdam and Riggs Plaintiffs, along with Jenkens' insurance carriers, participated in three mediation sessions, on December 17- 18, 2003, January 16-17, 2004, and February 19, 2004. Retired Federal Judge Robert Parker presided over these mediations, which he has described as "difficult" and "intense." [FN20] These negotiations resulted in a Mediated Settlement Agreement, dated March 4, 2004, and a Stipulation of Settlement, dated April 28, 2004, signed by all parties, including Jenkens' insurance carriers. The settlement agreement provided for a settlement fund of $75 million, consisting of $63.5 million from the insurance carriers, $5.25 million from Jenkens, and a total of $6.25 million from the individual defendants. [FN21] The agreement also provided for extensive informal discovery from Jenkens. FN20. Declaration of Retired Judge Robert M. Parker, Mediator ("Parker Decl.") ¶ 6. FN21. The settlement contains no explicit plan of allocation. The Stipulation of Settlement provides that the court-appointed Special Masters will recommend a plan of allocation for the Court's approval, taking into account various factors relating to the extent of each class member's injuries. *324 The Court preliminarily approved this settlement on May 14, 2004, and notice was sent to the class. Class members were given until September 27, 2004 to opt out of the class. One hundred and twenty-two plaintiffs timely elected to opt out. [FN22] This put the settlement at risk. The settlement contemplated the release of Jenkens' insurers in return for their contribution to the settlement fund; it thus left Jenkens without insurance to defend the claims of opt outs. Jenkens had earlier stated that it was unable and unwilling to settle in the face of significant numbers of opt outs. Because of the opt out problem, the parties held a fourth round of mediation on December 1-2, 2004, © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) presided over by retired Judge Parker and by Michael Young of Judicial Arbitration and Mediation Services, who had been appointed Special Master by the Court. FN22. Thirty-three of these plaintiffs subsequently returned to the Class. E. The Amended Settlement This fourth round of mediation resulted in an Amended Mediated Settlement Agreement, dated December 2004. The amended settlement provides for an increased settlement fund of $81,557,805, consisting of $70,057,805 from the insurance carriers, $5.25 million from Jenkens, and a total of $6.25 million from the individual defendants. The insurers have further agreed to make $24,942,195-the remainder of the "unreinstated" insurance coverage under Jenkens' policy--available to Jenkens to defend or resolve the claims of opt-outs. In addition, a further $25 million in "reinstated" coverage may be available. [FN23] FN23. Jenkens' primary carrier asserts that the claims in this case do not trigger reinstatement of the additional coverage. Pursuant to the amended settlement, Jenkens has agreed to release the excess carriers from any reinstatement claim, in return for the excess carriers' waiver of coverage defenses and policy defenses on the $75 million of unreinstated insurance coverage. F. The Bar Order and Judgment Credit As part of the settlement, the parties' proposed judgment contains a Bar Order and Judgment Credit provision. Because this provision is the focus of most of the objections, [FN24] it warrants further description. FN24. See infra Part II.G. The Bar Order provides that all non-settling defendants and all third parties are barred and enjoined from commencing or prosecuting any action against Jenkens on a "Claim Over." [FN25] A Claim Over is defined as any claim that FN25. Proposed Judgment (submitted in final form on January 27, 2005) ¶ 12. (i) directly or indirectly arises out of or is based upon, related to or connected with any of the Tax Page 8 Strategies, and (ii) is for recovery of amounts that the Non-Settling Defendant or Third Party paid or owes to the Class (if the case in which an issue arises is a class action) or a Class Member (if the case in which an issue arises is brought by a Class Member). "Claims Over" includes, but is not limited to, all claims by a Non-Settling Defendant or Third Party for contribution and indemnity for amounts owed or paid to a Class Member. It does not, however, include claims based on a written indemnity agreement.... [FN26] FN26. Id. ¶ 1(b). Essentially, the Bar Order prohibits any non-settling defendant or third party from seeking contribution or indemnification from Jenkens. The Bar Order is mutual: it also prohibits Jenkens from seeking contribution or indemnification from non-settling defendants or third parties. [FN27] Non-settling defendants and third parties are not precluded from seeking contribution from Jenkens for damages they might eventually be required to pay to plaintiffs who have opted out of the class. [FN28] The Bar Order applies only to claims for contribution (however denominated); it does not bar any independent claims non-settling defendants and third parties may have against Jenkens. FN27. See id. ¶ 12. FN28. See id. To compensate non-settling defendants and third parties for the loss of their contribution claims, the proposed judgment also contains a Judgment Credit provision. Pursuant to this provision, the Court is asked to *325 order that any judgment or award obtained by a class member against a non-settling defendant or third party will be reduced "by the amount or percentage, if any, necessary under applicable law to relieve the Released Persons [the Jenkens defendants] of all liability to such NonSettling Defendant or Third Party on such barred Claims." [FN29] This reduction is to be "accomplished by judgment reduction, partial or complete release, settlement credit, setoff, election to recover exclusively under an award for which there is no Claim Over, or such other method as may be permitted by applicable law." [FN30] The proposed judgment further states that "Such judgment credit, settlement credit, release or setoff shall be in an amount or percentage sufficient under applicable law as determined by the court in which the issue arises to compensate the Non-Settling Defendant or Third © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) Page 9 Party for the loss of its Claim Over." [FN31] FN29. Id. ¶ 13(a). FN30. Id. ¶ 13(b). FN31. Id. ¶ 13(c). The Judgment Credit provision does not specify a single method of calculating the credit. Instead, it leaves the calculation of the credit to the "applicable law" of the jurisdiction in which a class member may win a judgment or award against a non-settling defendant or third party. The credit will be whatever is necessary under the applicable law to compensate the non-settling defendant or third party for the loss of its claim for contribution. [FN32] FN32. In the majority of states, the applicable law precludes claims for contribution against settling defendants, and provides a compensating judgment credit. See, e.g., Tex. Civ. Prac. & Rem.Code § 33.015; N.Y. Gen. Oblig. Law § 15.108(b) (McKinney 2003). In those jurisdictions, the Bar Order and Judgment Credit provisions will have no effect, and the judgment credit will be determined by the applicable law-- generally, either a pro tanto reduction, equal to the amount paid by Jenkens attributable to common damages, a pro rata reduction, apportioning an equal share of liability to each tortfeasor, or a proportionate fault reduction, based on a determination of Jenkens' and the third party's relative share of fault. See In re Masters Mates & Pilots Pension Plan, 957 F.2d 1020, 1027-1030 (2d Cir.1992) (discussing methods of calculating judgment credit). In jurisdictions in which contribution claims against settling tortfeasors are not permitted, non-settling defendants and third parties will not be entitled to any judgment credit. In jurisdictions in which contribution claims against settling tortfeasors are permitted, non-settling defendants and third parties will be entitled to a judgment credit equal to the value of the contribution claims they would have been able to assert against Jenkens, but for the Bar Order. disseminated a supplemental notice of the amended settlement to the class, and the Court extended the deadline for objections to January 10, 2005, to accommodate objections to the amended settlement. The Court received objections from three groups of plaintiffs: the "Harslem" plaintiffs, the "Mattei" plaintiffs, and the "Moore" plaintiffs. [FN33] The Court also received objections from two non-settling defendants, BDO and Deutsche Bank, and from the Government. A fairness hearing was held on January 24, 2005. In response to objections, the settlement's proponents agreed to certain changes to the language of the proposed judgment offered for the Court's approval; I therefore ordered one final notice to the class, including the language of the proposed judgment, and a final one-week extension of the time for objections. The Court received continued objections from the Harslem Plaintiffs, the Mattei Plaintiffs, BDO, Deutsche Bank and the Government; there were no new objectors. FN33. The Harslem Plaintiffs are Eric Harslem, Lorraine Clasquin, Douglas MacGregor, and Jeffrey and Loretta Clarke. The Mattei Plaintiffs are James E. Mattei and J. Scott Mattei. The Moore Plaintiffs are Denis Hoasjoe and Robert Moore. III. LEGAL STANDARD A. Class Certification Federal Rule of Civil Procedure 23 governs class certification. To be certified, a putative class must meet all four requirements of Rule 23(a) as well as the requirements of one of the three subsections of Rule 23(b). In this case, as in most cases seeking money damages, plaintiffs bear the burden of demonstrating that the class meets the requirements of Rule 23(a)-- referred to as numerosity, commonality, typicality, *326 and adequacy [FN34]-and that the action is "maintainable" under Rule 23(b)(3). [FN35] Under Rule 23(b)(3)--the only applicable subsection of Rule 23(b)--"common" issues of law or fact must "predominate over any questions affecting only individual members," and a class action must be demonstrably "superior" to other methods of adjudication. [FN36] FN34. See Caridad v. Metro-North Commuter R.R., 191 F.3d 283, 291 (2d Cir.1999). G. Objections and the Fairness Hearing On December 29, 2004, the settling parties FN35. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 614, 117 S.Ct. 2231, 138 © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) L.Ed.2d 689 (1997). Page 10 conformance with Rule indispensable." [FN43] 23(a) remains ... FN36. Fed.R.Civ.P. 23(b)(3). The Supreme Court has held that when a class is certified for settlement purposes only, the "specifications of [Rule 23]--those designed to protect absentees by blocking unwarranted or overbroad class definitions--demand undiluted, even heightened, attention." [FN37] The Court recognized one exception to this requirement: when confronted with a settlement class, "a district court need not inquire whether the case, if tried, would present intractable management problems." [FN38] FN37. Amchem Prods., 521 U.S. at 620, 117 S.Ct. 2231. FN38. Id. The Second Circuit requires a "liberal" construction of Rule 23. [FN39] Thus, "to deny a class action simply because all of the allegations of the class do not fit together like pieces in a jigsaw puzzle [ ] would destroy much of the utility of Rule 23." [FN40] Notwithstanding the general liberality in this circuit towards class certification motions, the Supreme Court unequivocally requires district courts to undertake a "rigorous analysis" that the requirements of Rule 23 have been satisfied. [FN41] FN39. See Korn v. Franchard Corp., 456 F.2d 1206 (2d Cir.1972); In re Lloyd's Am. Trust Fund Litig., No. 96 Civ. 1262, 1998 WL 50211, at *5 (S.D.N.Y. Feb. 6, 1998) ("The Second Circuit has directed district courts to apply Rule 23 according to a liberal rather than a restrictive interpretation."). FN40. Green v. Wolf Corp., 406 F.2d 291, 300 (2d Cir.1968). FN42. See In re Initial Public Offering, No. 21 MC 92, 2004 WL 2297401, at *19 (S.D.N.Y. Oct. 13, 2004). FN43. Falcon, 457 U.S. at 161, 102 S.Ct. 2364. "In order to pass muster, plaintiffs--who have the burden of proof at class certification--must make 'some showing' " that the proposed class comports with Rule 23. [FN44] That showing may take the form of, for example, expert opinions, evidence (by document, affidavit, live testimony, or otherwise), or the uncontested allegations of the complaint. However, "a district court is forbidden to weigh the evidence on class certification [and] plaintiffs need not establish the elements of Rule 23 by a preponderance of the evidence." [FN45] FN44. In re Initial Public Offering, 2004 WL 2297401, at *19 (quoting Caridad, 191 F.3d at 292) (original emphasis). FN45. Id. (citing Caridad, 191 F.3d at 293). 1. The Requirements of Rule 23(a) a. Numerosity [1] Rule 23 requires that the class be "so numerous that joinder of all members is impracticable." [FN46] "Impracticability does not mean impossibility of joinder, but refers to the difficulty or inconvenience of joinder." [FN47] Although precise calculation of the number of *327 class members is not required, and it is permissible for the court to rely on reasonable inferences drawn from available facts, numbers in excess of forty generally satisfy the numerosity requirement. [FN48] FN46. Fed.R.Civ.P. 23(a)(1). FN41. General Tel. Co. of the Southwest v. Falcon, 457 U.S. 147, 161, 102 S.Ct. 2364, 72 L.Ed.2d 740 (1982). In ruling on class certification, a district court may not simply accept the allegations of plaintiffs' complaint as true. [FN42] Rather, it must determine, after a "rigorous analysis ," whether the proposed class comports with all of the elements of Rule 23. "[S]ometimes it may be necessary for the court to probe behind the pleadings before coming to rest on the certification question.... [A]ctual, not presumed, FN47. In re Independent Energy Holdings PLC Sec. Litig., 210 F.R.D. at 479 (citing In re Avon Sec. Litig., No. 91 Civ. 2287, 1998 WL 834366, at *5 (S.D.N.Y. Nov. 30, 1998)). FN48. See Trief v. Dun & Bradstreet Corp., 144 F.R.D. 193, 198 (S.D.N.Y.1992). b. Commonality [2] Commonality requires a showing that common © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) issues of fact or law affect all class members. [FN49] A single common question may be sufficient to satisfy the commonality requirement. [FN50] "The critical inquiry is whether the common questions are at the core of the cause of action alleged." [FN51] FN49. See Fed.R.Civ.P. 23(a)(2); see also Trief, 144 F.R.D. at 198. FN50. See German v. Federal Home Loan Mortgage Corp., 885 F.Supp. 537, 553 (S.D.N.Y.1995). FN51. Labbate-D'Alauro v. GC Servs. Ltd. P'shp., 168 F.R.D. 451, 456 (E.D.N.Y.1996) (quotation omitted). Accord In re "Agent Orange" Prod. Liab. Litig., 818 F.2d 145, 166-67 (2d Cir.1987). c. Typicality [3] The typicality requirement "is not demanding." [FN52] A named plaintiff's claims are "typical" pursuant to Rule 23(a)(3) where each class member's claims arise from the same course of events and each class member makes similar legal arguments to prove the defendants' liability. [FN53] "The rule is satisfied ... if the claims of the named plaintiffs arise from the same practice or course of conduct that gives rise to the claims of the proposed class members." [FN54] Accordingly, the commonality and typicality requirements " 'tend to merge' because '[b]oth serve as guideposts for determining whether ... the named plaintiff's claim and the class claims are so interrelated that the interests of the class members will be fairly and adequately protected in their absence.' " [FN55] FN52. Forbush v. J.C. Penney Co., 994 F.2d 1101, 1106 (5th Cir.1993) (citing Shipes v. Trinity Indus., 987 F.2d 311, 316 (5th Cir.1993)). FN53. See Robinson v. Metro-North Commuter R.R. Co., 267 F.3d 147, 155 (2d Cir.2001). FN54. Marisol A. v. Giuliani, 929 F.Supp. 662, 691 (S.D.N.Y.1996), aff'd, 126 F.3d 372 (2d Cir.1997). FN55. Caridad, 191 F.3d at 291 (alterations in original) (quoting Falcon, 457 U.S. at 157 n. 13, 102 S.Ct. 2364). d. Adequacy Page 11 [4] Plaintiffs must also show that "the representative parties will fairly and adequately protect the interests of the class." [FN56] To do so, plaintiffs must demonstrate that the proposed class representatives have no "interests [that] are antagonistic to the interest of other members of the class." [FN57] Class representatives must have "an interest in fairly and vigorously pursuing" the claims of the class, so that there is an "assurance of vigorous prosecution." [FN58] In addition, "Rule 23(a)(4) requires that plaintiffs demonstrate that class counsel is qualified, experienced, and generally able to conduct the litigation." [FN59] FN56. Fed.R.Civ.P. 23(a)(4). See also Banyai v. Mazur, 205 F.R.D. 160, 164 (S.D.N.Y.2002). FN57. Baffa v. Donaldson, Lufkin & Jenrette Sec. Corp., 222 F.3d 52, 60 (2d Cir.2000). An antagonistic interest arises when there is a "fundamental conflict or inconsistency between the claims of the proposed class members" that is "so palpable as to outweigh the substantial interest of every class member in proceeding with the litigation." In re NASDAQ MarketMakers Antitrust Litig., 169 F.R.D. 493, 514-15 (S.D.N.Y.1996). FN58. Robinson, 267 F.3d at 170. FN59. Marisol A., 126 F.3d at 378. Class representatives cannot satisfy Rule 23(a)(4)'s adequacy requirement if they "have so little knowledge of and involvement in the class action that they would be unable or unwilling to protect the interests of the class against the possibly competing interest of the attorneys." [FN60] However, it is well established that "in complex litigations ... a plaintiff need not have expert knowledge of all aspects of the case to qualify as a class representative, and a great deal of reliance upon the expertise of counsel is to be expected." [FN61] FN60. Baffa, 222 F.3d at 61 (quotations and citation omitted). FN61. In re AM Int'l Inc., Sec. Litig., 108 F.R.D. 190, 196-97 (S.D.N.Y.1985). *328 2. Rule 23(b) If plaintiffs can demonstrate that the proposed class © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) satisfies the elements of Rule 23(a), they must then establish that the action is "maintainable" as defined by Rule 23(b). Rule 23(b) provides that "an action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition" one of three alternative definitions of maintainability is met. The proponents of this settlement argue that the action is maintainable under subsection (b)(3), which requires "that questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." [FN62] Rule 23(b)(3) thus has two elements: "predominance" and "superiority." FN62. Fed.R.Civ.P. 23(b)(3). [5] "Class-wide issues predominate if resolution of some of the legal or factual questions that qualify each class member's case as a genuine controversy can be achieved through generalized proof, and if these particular issues are more substantial than the issues subject only to individualized proof." [FN63] "The 23(b)(3) predominance requirement is 'more stringent' and 'far more demanding than' the commonality requirement of Rule 23(a)." [FN64] Courts have frequently found that the requirement was not met where, notwithstanding the presence of common legal and factual issues that satisfy the commonality requirement, individualized inquiries predominate. [FN65] Nonetheless, the Supreme Court has noted that "[p]redominance is a test readily met in certain cases alleging consumer or securities fraud...." [FN66] FN63. Moore v. PaineWebber, Inc., 306 F.3d 1247, 1252 (2d Cir.2002). FN64. Maneely v. City of Newburgh, 208 F.R.D. 69, 76 (S.D.N.Y.2002) (quoting Amchem Prods., 521 U.S. at 623-24, 117 S.Ct. 2231). FN65. See, e.g., In re Methyl Tertiary Butyl Ether ("MTBE") Prods. Liab. Litig., 209 F.R.D. 323, 353 (S.D.N.Y.2002) (finding individual issues predominate although defendants conceded commonality); Augustin v. Jablonsky, No. 99-CV-3126, 2001 WL 770839, at *13 (E.D.N.Y. Mar. 8, 2001) (finding individualized issues of proximate causation predominate despite plaintiffs' showing of commonality under Page 12 Rule 23(a)(2)); Martin v. Shell Oil Co., 198 F.R.D. 580, 592-93 (D.Conn.2000) (finding individualized proof of breach, causation, and trespass predominates where commonality was not contested). FN66. Amchem Prods., 521 U.S. at 625, 117 S.Ct. 2231. [6] The superiority prong of Rule 23(b)(3) requires a court to consider whether a class action is superior to other methods of adjudication. [FN67] In making the requisite inquiries into predominance and superiority, courts should consider, inter alia, FN67. See Fed.R.Civ.P. 23(b)(3). See also Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 164, 94 S.Ct. 2140, 40 L.Ed.2d 732 (1974). (A) the interest of members of the class in individually controlling the prosecution or defense of separate actions; (B) the extent and nature of any litigation concerning the controversy already commenced by or against members of the class; (C) the desirability or undesirability of concentrating the litigation of the claims in the particular forum; (D) the difficulties likely to be encountered in the management of a class action. [FN68] FN68. Fed.R.Civ.P. 23(b)(3). Where a class is being certified solely for settlement purposes, a court need not consider the last of these factors, the manageability issues that would arise if the case were to be litigated as a class action, "for the proposal is that there be no trial." [FN69] FN69. Amchem Prods., 521 U.S. at 620, 117 S.Ct. 2231. B. The Fairness of the Proposed Settlement There is a "strong judicial policy in favor of settlements, particularly in the class action context." [FN70] "The compromise of complex litigation is encouraged by the courts and favored by public policy." [FN71] However, the *329 Court "must eschew any rubber stamp approval in favor of an independent evaluation" of the settlement. [FN72] In carrying out this evaluation, "[t]he Court has a fiduciary duty to the non-representative class members who were not party to the settlement agreement 'because inherent in any class action is the potential for conflicting interests among the class © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) representatives, class counsel, and absent class members.' " [FN73] FN70. In re PaineWebber Ltd. P'ships Litig., 147 F.3d 132, 138 (2d Cir.1998). FN71. 4 Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 11:41, at 87 (4th ed.2002). FN72. City of Detroit v. Grinnell Corp., 495 F.2d 448, 462 (2d Cir.1974), abrogated on other grounds by Goldberger v. Integrated Resources, Inc., 209 F.3d 43 (2d Cir.2000). The Court should, however, "stop short of the detailed and thorough investigation that it would undertake if it were actually trying the case." Id. FN73. In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 454-55 (S.D.N.Y.2004) (quoting Martens v. Smith Barney, Inc., 181 F.R.D. 243, 262 (S.D.N.Y.1998)). "A court may approve a class action settlement if it is 'fair, adequate, and reasonable, and not a product of collusion.' A court determines a settlement's fairness by looking at both the settlement's terms and the negotiating process leading to settlement." [FN74] "A presumption of fairness, adequacy, and reasonableness may attach to a class settlement reached in arm's-length negotiations between experienced, capable counsel after meaningful discovery." [FN75] FN74. Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116-17 (2d Cir.2005) (quoting Joel A. v. Giuliani, 218 F.3d 132 (2d Cir.2000)). FN75. Id. (citing Manual for Complex Litigation, Third, § 30.42 (1995)). Accord Thompson v. Metro. Life Ins. Co., 216 F.R.D. 55, 61 (S.D.N.Y.2003) ("A strong presumption of fairness attaches to proposed settlements that have been negotiated at arm's length."). [7] In addition to looking at the negotiating process, courts consider the following factors in the approval of class action settlements: (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 Page 13 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; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. [FN76] FN76. Grinnell Corp., 495 F.2d at 463. When a settlement is negotiated before class certification, the danger of collusion between defendants and class counsel is heightened. Moreover, a settlement agreement "generates [ ] momentum" and may look, to class members and even to the court, "like a fait accompli." [FN77] Therefore, "a proposed settlement negotiated before class certification is subjected to a higher degree of scrutiny than a later settlement." [FN78] FN77. Mars Steel Corp. v. Continental Illinois Nat'l Bank & Trust Co., 834 F.2d 677 (7th Cir.1987). FN78. 5-23 Moore's Federal Practice--Civil § 23.161 (3d ed.2004). Accord County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1323 (2d Cir.1990). C. Permitting a Second Opt-Out Opportunity Under Rule 23(e)(3) Federal Rule of Civil Procedure 23(e)(3) provides that "[i]n an action previously certified as a class action under Rule 23(b)(3), the court may refuse to approve a settlement unless it affords a new opportunity to request exclusion to individual class members who had an earlier opportunity to request exclusion but did not do so." [FN79] The Advisory Committee Note states that: FN79. Fed.R.Civ.P. 23(e)(3). [t]he decision whether to approve a settlement that does not allow a new opportunity to elect exclusion is confided to the court's discretion. The court may make this decision before directing notice to the class under Rule 23(e)(1)(B) or after the Rule 23(e)(1)(C) hearing. Many factors may influence the court's decision. Among these are changes in the information available to class members since expiration of the first opportunity to request © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) exclusion, and the nature of the individual class members' claims. [FN80] FN80. Fed.R.Civ.P. Committee Note. 23(e)(3) Page 14 paid to Jenkens for their opinion letters and advice are recoverable. The requirement of commonality is thus easily met here. Advisory *330 IV. DISCUSSION A. Class Certification The threshold issue, before undertaking any consideration of the fairness of the settlement, is whether the class may be certified under Rule 23. For the following reasons, I find that certification is appropriate. 1. Rule 23(a) a. Numerosity Over the period in question--January 1, 1999 through December 31, 2003-- Jenkens issued advice concerning the tax strategies to over 1,100 clients. This number is more than sufficient to render joinder of all class members impracticable. No objector contests numerosity. b. Commonality [8] The common questions in this case are overwhelming. All members of the class received legal advice from Jenkens concerning the tax strategies. If this case were to proceed to trial, all class members' claims would involve the same common questions of liability, including: (1) was the tax advice correct? (2) If not, was it negligent, or knowingly false? (3) Did the advice fail to disclose material facts about the transactions, or the controlling law? (4) Did Jenkens falsely represent that its advice and opinion letters were "independent"? (5) Was reliance on the Jenkens advice and opinion letters reasonable, given that each letter asserted only that the strategies were "more likely than not" to pass muster? (6) Were the fees charged unreasonable and excessive? These questions of law and fact are at the core of this action, and are more than sufficient to establish commonality. In addition, each class member's claims involve common questions of fact as to the alleged conspiracy between Jenkens and the other defendants, and as to the extent to which Jenkens was responsible for the representations made by their alleged co-conspirators. [FN81] Finally, even at the damages stage, there are many common issues of law, including whether the allegedly excessive fees FN81. See Buford v. H & R Block, 168 F.R.D. 340, 349 (D.Ga.1996) ( "In RICO cases, commonality is frequently satisfied. An alleged scheme to defraud which affects a class of people is a common question of law and/or fact, regardless of the characteristics of the scheme's intended victims."). c. Typicality [9] The Denney, Camferdam, and Riggs Plaintiffs, like all class members, received legal advice from Jenkens regarding the tax strategies, and executed those tax strategies. All proposed class representatives allege that they were injured by the same acts of Jenkens and by the same alleged conspiracy as the rest of the class. [FN82] The fact that some class members were approached by different Marketing Participants does not defeat typicality. "When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is usually met irrespective of minor variations in the fact patterns underlying individual claims." [FN83] FN82. See 5-23 Moore's Federal Practice-Civil § 23.24 ("In actions under [RICO], the typicality requirement is satisfied if the claims of the class representative and the class arise from the same scheme by the defendant to defraud class members."). FN83. Robidoux v. Celani, 987 F.2d 931, 936-37 (2d Cir.1993). d. Adequacy No objector challenges the adequacy of the class representatives' counsel. There can be no question that class counsel are highly experienced, qualified and able, and have been zealous in their prosecution of this case. The Harslems challenge the adequacy of the proposed class representatives, arguing that the proposed class is divided by a conflict of interest. The Denney Plaintiffs, the Harslems argue, were introduced to COBRA by the accounting firm of Pasquale & Bowers, while the Harslems were introduced to the scheme by Ernst & Young. Pasquale & Bowers is a small, local firm, while Ernst © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) & Young is one of the world's largest accounting and financial services firms. Therefore (the Harslems' argument runs) because *331 Jenkens "represent[s] the only 'fat wallet' to the Denney [Plaintiffs]," the Denney Plaintiffs are only concerned with maximizing their recovery from Jenkens. [FN84] The Harslems, by contrast, are mainly concerned with their recovery from Ernst & Young, "a wrongdoer with far deeper pockets" than either Jenkens or Pasquale & Bowers. [FN85] The Harslems object to the judgment credit provision in the proposed settlement, which is a necessary concession to secure a settlement with Jenkens, but might limit their recovery from Ernst & Young. Even without the proposed judgment credit provision, however, settlement with Jenkens would still affect the rights of class members against joint tortfeasors, because many states have statutory judgment credit rules. [FN86] The Harslems argue that they and the class representatives therefore have fundamentally opposed interests with respect to a settlement with Jenkens: the Harslems argue that they, and similarly situated class members, would prefer not to put their recovery from deep pocketed third parties at risk by settling with Jenkens, while the Denney Plaintiffs have nothing to lose by such a settlement. FN84. Harslem Plaintiffs' Memorandum of Law in Support of Motion to Opt Out or in the Alternative to Object to the Settlement ("Harslem Mem.") at 4. FN85. Id. at 4. FN86. See, e.g., N.Y. Gen. Oblig. Law § 15-108(b). The Harslems' argument would be compelling, were it supported by the facts; but it is not. First, all class representatives (and almost all class members, including the Harslems) have claims against Deutsche Bank, another deep pocket who acted (in most cases) as the counter-party to the tax shelter transactions and is alleged to have been a part of the conspiracy. Second, the Denney Plaintiffs were introduced to COBRA not only by Pasquale & Bowers, but also by the undeniably deep-pocketed BDO. [FN87] The Camferdam Plaintiffs, joined in this action as class representatives, were introduced to the scheme by Ernst & Young, and are in essentially the same position as the Harslems. [FN88] Jack Riggs was introduced to the scheme by Deutsche Bank, and used Ernst & Young to prepare his tax returns. [FN89] Thus, all of the class representatives have claims against deep-pocketed Page 15 third parties, similar to those of the Harslem Plaintiffs, which will be affected equally by the settlement with Jenkens. The interests of the class and its representatives are therefore aligned: in agreeing to the judgment credit provision, each class member and their representatives are making an equal concession, in return for an equal share of the benefits of the settlement. FN87. The Harslems assert that "at least two" of the Denney Plaintiffs have stated that they have no complaint against BDO. Harslem Mem. at 3 n. 8 (citing November 1, 2003 Affidavit of Thomas Denney in Opposition to BDO's Motion to Compel Arbitration and October 30, 2003 Affidavit of Kyle Blumin in Opposition to BDO's Motion to Compel Arbitration). The Harslems appear to have misconstrued Denney and Blumin's affidavits. In those affidavits, Denney and Blumin stated only that their complaints against BDO were not based on BDO's performance of the services described in their consulting agreements (and were therefore not subject to the arbitration clauses in those agreements); they certainly did not abandon their claims against BDO. FN88. See Camferdam First Amended Complaint, ¶ ¶ 10-12. The Harslems argue that their claims against Ernst & Young are stronger than those of the Camferdams. This is not persuasive. The fact that their complaint uses slightly stronger language than the Camferdams' complaint to describe essentially the same conduct and representations (i.e., alleging that Ernst & Young promised that the chance of being audited was "next to nothing") does not demonstrate that their claim against Ernst & Young will fare significantly better in litigation than the Camferdams' claim. FN89. Riggs Fourth Amended Petition ¶ ¶ 24-26. [10] The Matteis raise a different potential conflict. They assert that there is an irreconcilable conflict between class representatives and some class members because the former have been injured as a result of penalties assessed by the tax authorities, while the latter have not yet suffered any injury although penalties may be assessed against them in the future. The Matteis argue that this "is reminiscent © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) of the conflict that plagued the proposed settlement class in Amchem." [FN90] For the following reasons, this argument is unavailing. FN90. Mattei Plaintiffs' Supplemental Memorandum of Law Opposing Class Certification and Settlement at 7. *332 In Amchem, the Supreme Court addressed a challenge to approval of a settlement class in a large consolidated asbestos litigation. The "sprawling" and "amorphous" class [FN91] included both injured plaintiffs and plaintiffs who had been exposed to asbestos but who had not yet manifested any injury. The Court held that the class representatives could not adequately represent both groups of plaintiffs. FN91. Amchem Prods., 521 U.S. at 627-28, 117 S.Ct. 2231. In significant respects, the interests of those within the single class are not aligned. Most saliently, for the currently injured, the critical goal is generous immediate payments. That goal tugs against the interest of exposure-only plaintiffs in ensuring an ample, inflation-protected fund for the future. [FN92] FN92. Id. at 626, 117 S.Ct. 2231. There were several problems with the proposed settlement class in Amchem. First, the exposure-only plaintiffs might never suffer an injury or might manifest an injury decades after the settlement. Second, if they did eventually suffer an injury, the magnitude of that injury was impossible to assess at the time of the settlement. As noted by the Third Circuit, those who were not yet injured faced "vastly different outcomes." [FN93] Finally, because of the size of the class and the uncertainty as to whether some potential claimants would ever be damaged, it was difficult or impossible to ascertain class members and provide adequate notice to all putative class members, many of whom may not have been aware that they were exposed to asbestos. FN93. Georgine v. Amchem Prods., 83 F.3d 610, 633 (3d Cir.1996). (finding that plaintiffs might suffer from asbestosis, lung cancer, mesothelioma or a number of other conditions). None of these problems plague the class now before this Court. First, members of this class have been identified as all those who received tax advice from Page 16 the Jenkens defendants, and implemented the tax strategies in whole or in part, during a fixed time frame, between January 1, 1999 and December 31, 2003. Each of those 1,076 class members has received notice of the settlement. [FN94] Thus all class members are known to the settling parties and have been identified. Second, all class members have suffered a cognizable injury because they paid (allegedly) excessive fees for (allegedly) negligent or fraudulent tax advice. [FN95] While it is true that some class members do not yet know the full extent of their injury, because they may yet be assessed penalties by the IRS, the cut-off for such assessments is rapidly approaching. The IRS must assess a tax deficiency within three years after the return is filed. [FN96] Thus, all injuries can be determined within a finite period of time. Because all groups of plaintiffs, both the audited and the unaudited, have already manifested some injury, and because even the unaudited will be audited soon, if they are audited at all, they share a common interest in obtaining some recovery at this time. [FN97] FN94. The figure of 1,076 does not include persons who are class members because they filed joint returns with those to whom Jenkens rendered opinions, or the 121 class members who received advice from Jenkens and implemented the strategies in part, but received no opinion letters. See Jenkens Mem. at 6 n. 4. FN95. Among the proposed factors to be considered in allocating the settlement is "the amount of fees paid to Jenkens & Gilchrist by the Class Member." Stipulation of Settlement at 40. FN96. See 26 U.S.C. § 6501(a). Jenkens estimates that approximately 60% of class members engaged in the tax strategies in 1998 or 1999, and are therefore protected by the statute of limitations if they have not already been audited. FN97. Moreover, it is possible to predict the extent of an unaudited class member's potential exposure for back taxes and penalties. In allocating the fund, the Special Masters and the Court will of course take care to ensure that sufficient funds are reserved for those who have not yet been audited. It is always possible to identify potential class © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) conflicts. For example, some plaintiffs have a greater or lesser tolerance for facing the risks of trial versus settlement. The Second Circuit has noted that "not every potential disagreement between a representative and class members will stand in the way of a class suit." [FN98] Rather, "the conflict *333 that will prevent a plaintiff from meeting the Rule 23(a)(4) prerequisite must be fundamental." [FN99] There are no such fundamental conflicts here. [FN100] FN98. Wal-Mart Stores, Inc. v. Visa USA Inc., 280 F.3d 124, 145 (2d Cir.2001) (quoting 1 Herbert B. Newberg & Alba Conte, Newberg on Class Actions § 3.26, at 3-143 (3d ed.1992)). FN99. Id. Accord Valley Drug Co. v. Geneva Pharms., Inc., 350 F.3d 1181, 1189 (11th Cir.2003) ("the existence of minor conflicts alone will not defeat a party's claim to class certification: the conflict must be a fundamental one going to the specific issues in controversy."). FN100. I note that all potential class members received notice of this settlement months ago. Yet this potential problem was raised by a single objector less than a week ago. While this in itself does not defeat the objection, it strongly suggests that the argument lacks merit. 2. Rule 23(b)(3) a. Predominance [11] The Harslems argue that common issues do not predominate over individual ones. First, the Harslems observe that different class members were introduced to the scheme by different Marketing Participants, and argue that the resulting factual differences among class members' claims defeat predominance. Second, they argue that the claims asserted "are ill-suited for class treatment because the strength of the claims depends on very individual factual inquiries," in particular with reference to reliance. [FN101] Third, they point to differences in levels of sophistication among class members. Finally, they argue that the fact that many different states' laws could apply to these claims prevents a finding of predominance. None of these arguments is persuasive. FN101. Harslem Mem. at 17. Page 17 Despite the factual differences pointed to by the Harslems, "the issues in the class action that are subject to generalized proof, and thus applicable to the class as a whole ... predominate over those issues that are subject only to individualized proof." [FN102] The core issues in class members' claims against Jenkens relate to Jenkens' representations to the class members, in particular the opinion letters. Jenkens' opinion letters were substantially identical. The legal advice given by Jenkens regarding the tax strategies was always the same. Thus, generalized proof--the opinion letters, and other evidence of Jenkens' legal advice--could be used to establish liability. Although different plaintiffs dealt with different accounting firms, it is Jenkens' conduct toward plaintiffs that would be relevant to the determination of liability, and that conduct was essentially the same with respect to all class members. Jenkens' liability toward all class members turns on the same questions of law and fact identified above--most significantly, whether the advice was negligently given, or knowingly false. FN102. In re Visa Check/MasterMoney Antitrust Litig., 280 F.3d 124, 136 (2d Cir.2001) (quotation marks and citation omitted). The fact that class members relied not only on Jenkens' representations to them, but also on the representations of several different accounting firms, does not defeat predominance. In Moore v. PaineWebber, Inc., the Second Circuit held that class certification for fraud-based claims could be proper where the misrepresentations made to each member of the class were materially uniform, and reliance could thus be "established by generalized proof." [FN103] The Moore court further held that even oral misrepresentations, made by different sales agents, could be considered materially uniform, even in the absence of proof that the misrepresentations followed a specific script. [FN104] FN103. 306 F.3d 1247, 1253 (2d Cir.2002). However, mere "proof of a central, coordinated scheme" among defendants is not sufficient to establish predominance, if the representations are not materially uniform. Id. FN104. Id. at 1255 ("While training and the existence of scripts are relevant factors, the inquiry should remain focused on whether material variations in the misrepresentations existed.... Thus, the fact that sales agents © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) submitted affidavits that they did not participate in training programs or follow scripts, even if uncontroverted, is insufficient to demonstrate by itself that the misrepresentations themselves were not materially uniform."). Here, as noted, Jenkens' most important representations--in the form of their opinion letters-were both written and materially uniform. It is these representations that are at the core of the case, and would predominate in plaintiffs' attempts to prove liability. Insofar as the case turns on oral representations, *334 it appears that those representations were also materially uniform. Although the form of the representations may have varied, the basic pitch was always the same: that the tax shelters were legitimate and supported by independent legal advice, and that plaintiffs would not face penalties. The only difference the Harslems point to is that they were (allegedly) informed that "their chances of being audited were next to nothing" while other plaintiffs were informed that they might be audited, but that the shelter was legitimate and that the opinion letter would protect them from penalties. [FN105] Despite these (alleged) differences in emphasis, the basic message is the same in both cases. [FN106] Thus, "[a]ll plaintiffs [would] rely on the same or substantially similar documents, statements, and legal theories to prove the defendants' liability." [FN107] FN105. Harslem Mem. at 20. By contrast, the Moore court pointed to far more substantial differences among the representations made to plaintiffs: e.g., "[o]ne customer complaint states that the broker misrepresented the Provider as a retirement program with insurance benefits; another states that the broker represented that the Provider was an IRA; a third specifically states that the broker never mentioned that the Provider was a life insurance product." Moore, 306 F.3d at 1256. FN106. See Klay v. Humana, 382 F.3d 1241 (11th Cir.2004), cert. denied, --- U.S. ----, 125 S.Ct. 877, 160 L.Ed.2d 825 (2005). In Klay, the Eleventh Circuit affirmed the certification of a class of physicians suing certain HMOs for fraud-based RICO claims. The court rejected the defendants' argument that individual issues of reliance predominated. The court found that while Page 18 the defendants engaged in a variety of specific communications with physicians, they all conveyed essentially the same message--that the defendants would honestly pay physicians the amounts to which they were entitled. Thus, "common evidence (that is, [ ] legitimate inferences based on the nature of the alleged misrepresentations at issue)" would predominate in proving reliance, and certification was proper. Id. at 1259. FN107. In re Interpublic Secs. Litig., No. 02 Civ. 6527, 2003 WL 22509414, at *4 (S.D.N.Y. Nov. 6, 2003). With respect to plaintiffs' RICO and conspiracy claims, the predominant issue is the existence of a conspiracy between Jenkens and the other defendants. Moreover, many of plaintiffs' allegations of fraud turn on the alleged conspiracy, insofar as plaintiffs allege that Jenkens purported to be providing "independent" analysis of COBRA when it was in fact deeply involved in COBRA's marketing and design. The existence and nature of this alleged conspiracy is therefore an issue that is common to each plaintiff, and predominates over the differences among different groups of plaintiffs who were introduced to the alleged conspiracy by different accounting firms. [FN108] FN108. See Klay, 382 F.3d at 1255-57 (approving certification of fraud-based RICO class, and holding that "the existence of a conspiracy, and whether the defendants aided and abetted each other, were also issues common to each of the plaintiffs that tended to predominate ... the numerous factual issues relating to the conspiracy are common to all plaintiffs ... and would necessarily have to be reproven by every plaintiff if each [plaintiff's] claim were tried separately."). See also Carnegie v. Household Int'l, Inc., 376 F.3d 656 (7th Cir.2004) (holding that, because "the question whether RICO was violated was separate from the question whether the targets of the violation had been injured," the prospect of separate proceedings "to determine the entitlements of the individual class members to relief ... need not defeat class treatment of the question whether the defendants violated RICO. Once that question is answered, if it is answered in favor of the class, a global settlement ... will © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) Page 19 be a natural and appropriate sequel."). investment advice" are not sufficient to defeat certification); In re Data Access Sys. Sec. Litig., 103 F.R.D. 130, 139 (D.N.J.1984) ("There will always be some individuals who read the financial statements directly, others who read secondary analyses ... and many others who relied on advice of stockbrokers or friends. If defendants' argument were to prevail that factual differences of this nature were sufficient to defeat class action certification, there could never be a class action of securities purchasers."). Common issues also predominate with respect to plaintiffs' claims that Jenkens' fees were excessive and unreasonable. The burden of this claim is that Jenkens charged high fees for advice and opinion letters which were "canned' and 'prefabricated' [and] used with hundreds, if not thousands, of other clients and ... the Jenkens Defendants charged these clients the same or similar fees for the same services and expended little, if any additional time or effort in providing the opinion letters and advice." [FN109] In proving this claim, each plaintiff would necessarily rely primarily on the same proof of Jenkens' course of conduct; each plaintiff would have to prove that Jenkens provided essentially identical advice and opinion letters to other plaintiffs, and the marginal cost of providing the advice was therefore very low. FN109. Denney Complaint ¶ 376. Second Amended The Harsle ms also argue that predominance fails because class members had varying *335 levels of sophistication regarding tax law. In any fraud-based class action, there will be differing levels of sophistication among plaintiffs; nevertheless, the Supreme Court has clearly stated that "[p]redominance is a test readily met in certain cases alleging consumer or securities fraud." [FN110] This argument arises frequently in the context of securities fraud; in that context, courts have consistently held that differences in levels of sophistication are not sufficient to defeat predominance. [FN111] It is important to note that, regardless of differing levels of sophistication, each plaintiff in this case could prove reliance by the same common evidence. Although some plaintiffs may have known more about tax matters than others, all plaintiffs relied on the advice of their accountants and lawyers on tax matters of great complexity; even a sophisticated plaintiff could be found to have reasonably relied on such advice. Finally, the Harslems argue that "when the law of a claim varies by state, and when putative class members are dispersed across 41 states ... predominance must fail as a matter of law." [FN112] This argument is unavailing. Because this is a settlement-only class, the Court need not be concerned with the feasibility of managing the trial of a class action involving many different states' laws. [FN113] While "there may be situations where variations in state laws are so significant so as to defeat commonality and predominance even in a settlement class certification," [FN114] that is not the case here. FN112. Harslem Mem. at 22. FN113. See In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 529 (3d Cir.2004) ("when dealing with variations in state laws, the same concerns with regards to case manageability that arise with litigation classes are not present with settlement classes, and thus those variations are irrelevant to certification of a settlement class."). See also Manual for Complex Litigation, Fourth ("Manual") § 22.921 n. 1477 ("variations in state law that might make a class-wide trial unmanageable might not defeat certification for settlement purposes."). FN110. Amchem Prods., 521 U.S. at 625, 117 S.Ct. 2231. FN114. In re Warfarin Sodium Antitrust Litig., 391 F.3d at 529. FN111. See, e.g., Kennedy v. Tallant, 710 F.2d 711, 717 (11th Cir.1983) ("The degree of investment experience or sophistication of each of the class members is irrelevant."); In re Initial Public Offering, 2004 WL 2297401, at *32 (differences among class members in "access to sophisticated First, I note that many of the key issues here are matters of federal law; for example, plaintiffs' RICO claims. Second, many of plaintiffs' most significant state law causes of action may be governed by a single state's law, that of Illinois. In determining which state's law to apply, a federal court looks to the choice of law rules of the state in which it sits. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) [FN115] Under New York's choice of law rules, a court gives controlling effect to the law of the jurisdiction with the most significant interest in the specific issues involved in the dispute. [FN116] A state has a paramount interest in regulating the conduct of attorneys licensed to practice within its borders. [FN117] Plaintiffs' claims for malpractice (and related claims, such as negligent misrepresentation, and disgorgement of excessive fees) would therefore likely be governed by the law of Illinois. FN115. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-497, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). FN116. See id., 495 F.2d at 452-53. FN117. See The Diversified Group, Inc. v. Daugerdas, 139 F.Supp.2d 445, 453 (S.D.N.Y.2001). Even insofar as plaintiffs' claims would require the application of varying state laws, the variations are not so great as to defeat predominance. "When a class action raises common issues of conduct that would establis h liability under a number of states' laws, it is possible for those common issues to predominate and for class certification to be an appropriate mechanism for handling the dispute." [FN118] Plaintiffs' state law claims turn *336 largely on issues of federal tax law: e.g., was Jenkens' advice reasonable in light of published IRS Notices and federal tax law? The basic principles that will determine liability on class members' common law claims will not vary substantially from state to state. [FN119] For example, plaintiffs' breach of contract claims turn on general principles of contract interpretation, which tend to be uniform among the states. [FN120] Even if plaintiffs' malpractice claims are not governed by Illinois law, the elements of plaintiffs' malpractice claims are substantially uniform. An attorney is held to the standard of care of a practitioner in his or her field: [FN121] because Jenkens was engaged in the same practice with respect to each class member, it is likely that, regardless of the applicable state law, Jenkens would be held to a uniform standard of care--that of a practitioner in federal tax law. Thus, although there may be some variations in applicable law, particularly with respect to damages, [FN122] the variations are not so great as to defeat predominance. FN118. In re Buspirone, 185 F.Supp.2d 363, 377 (S.D.N.Y.2002). Accord Klay, 382 F.3d Page 20 at 1262 ("if a claim is based on a principle of law that is uniform among the states, class certification is a realistic possibility"); Steinberg v. Nationwide Mut. Ins. Co., 224 F.R.D. 67, 77 (E.D.N.Y.2004) ("A claim or defense can implicate common issues and be litigated collectively, despite the existence of state law variations, so long as the elements of the claim or defense are substantially similar...."). FN119. Plaintiffs bear the burden of showing, through an "analysis of state law variations," that such variations do not "swamp common issues." In re Currency Conversion Fee Antitrust Litig., 230 F.R.D. 303, 311, No. 03 Civ. 2843, 2004 WL 2750091, at *8 (S.D.N.Y.2004) (quotations omitted). Plaintiffs have met this burden, demonstrating in detail that their state law claims are based on substantially uniform principles. See Class Representatives' Supplemental Brief in Support of Class Settlement and Final Certification at 1-13, Apps. 4-6. FN120. See Klay, 382 F.3d at 1263 ("A breach is a breach is a breach, whether you are on the sunny shores of California or enjoying a sweet autumn breeze in New Jersey."). FN121. See, e.g., Cunningham v. Langston, Frazer, Sweet & Freese, P.A., 727 So.2d 800, 803 (Ala.1999); Rhodes v. Batilla, 848 S.W.2d 833, 843 (Tex.App.--Houston [14th Dist.] 1993); Bent v. Green, 39 Conn.Supp. 416, 466 A.2d 322, 325 (1983); Rodriguez v. Horton, 95 N.M. 356, 622 P.2d 261, 264 (1980). FN122. For example, the availability of back taxes and interest as damages may vary from state to state. See Seippel v. Jenkens & Gilchrist, P.C., 341 F.Supp.2d 363, 383-85 (S.D.N.Y.2004) (noting split of authority and citing cases). b. Superiority [12] Although class members' individual claims are substantial, and individual resolution of these claims would not be impossible, it is clear that class-wide resolution would be the superior method. The pressure of a thousand individual lawsuits would, in all probability, cause Jenkens to collapse and file for © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) bankruptcy. [FN123] The total value of plaintiffs' claims greatly exceeds Jenkens' available assets, the value of which would be substantially reduced in bankruptcy. [FN124] Jenkens' insurance, the only significant asset which plaintiffs could pursue, is a "wasting policy," which is eroded by the cost of defense. Moreover, if Jenkens were to file for bankruptcy, the firm's carriers would be "relieved of concerns of a 'bad faith' claim for failing to settle within policy limits leading to the destruction of a going concern enterprise" and would be free to assert coverage defenses. [FN125] The likely outcome of a thousand individual suits, then, would be that at most only the first few plaintiffs at the front of the race to the courthouse would recover anything. FN123. See Declaration of Arthur Steinberg, Jenkens' Bankruptcy Expert ("Steinberg Decl."), ¶ 7(b) ("It is evident that, at this stage, the failure of the firm to now settle the class action will lead to a major exit of firm partners with the high probability of the firm being thrust into a 'wind down' mode, and ultimately bankruptcy."). FN124. See id. ¶ 19 (explaining that the value of Jenkens' assets would be dramatically reduced in bankruptcy, as the defunct firm's former shareholders would lose interest in collecting unpaid fees from clients). FN125. See id. ¶ ¶ 8-17. B. Approval of the Settlement 1. The Procedural Fairness of the Settlement This settlement is the product of extensive, protracted, arm's length negotiations by experienced and capable counsel. [FN126] There is *337 no indication of collusion between Lead Counsel and Jenkens; indeed, on more than one occasion, it appeared that negotiations would break down. The concerns and objections of opt outs were a significant factor in negotiations, and resulted in important improvements in the settlement as late as December, 2004. The parties reached their final settlement only after the plaintiffs had conducted months of merits and confirmatory discovery. The presence of a courtappointed special master during the December 2004 negotiations helped ensure that the proceedings were free of collusion or undue pressure. [FN127] For these reasons, the proposed settlement is entitled to a strong presumption of fairness. Page 21 FN126. See Parker Decl. ¶ ¶ 6-7 ("The parties were plainly bargaining at arm's length. While many mediations are intense, this one was especially so ... All parties, especially the Plaintiffs, were very well represented in these negotiations [and] bargained very hard."). See also Declaration of Michael D. Young, court-appointed Special Master, ¶ 10 ("Class counsel vigorously negotiated on behalf of the class."). FN127. See County of Suffolk, 907 F.2d at 1323 (noting that the presence of a courtappointed mediator during pre -certification hearings helped to ensure the absence of collusion or undue pressure). 2. The Grinnell Factors [13] Application of the Grinnell factors weighs in favor of acceptance of the settlement. First, litigation of these claims would be highly complex and expensive. Plaintiffs allege a huge and intricate conspiracy between Jenkens and a large number of global financial and legal institutions, over the course of years. The investigation of such a claim, putting aside trial costs, would be exceedingly complex and expensive. Moreover, the underlying claims involve complicated tax transactions. A central issue in the case is whether Jenkens knew or should have known that COBRA was contrary ot established law and published IRS Notices. If this case were to be tried, both sides would be heavily dependent on tax law experts, further compounding the expense and complexity of the case. The burden on the parties would be significant. Second, the reaction of the class has been generally positive. Out of over one thousand class members, three groups, comprising nine class members, have objected, and a further eighty-nine plaintiffs have opted out. Even after the Court gave a third and final round of notice and objections, [FN128] no class member raised any complaint apart from the nine who had objected previously. This reflects a rejection rate of less than 10%. Courts have frequently found this factor to be satisfied in the face of similar or higher levels of dissent. [FN129] I find the low level of dissent in this case particularly striking given the fact that each class member's individual claim against Jenkens is substantial; these are not plaintiffs who would remain silent if the settlement was unfair. FN128. See infra Part IV.C. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) FN129. See, e.g., Stoetzner v. U.S. Steel Corp., 897 F.2d 115, 118-19 (3d Cir.1990) (noting that "out of 281 class members, only twenty-nine[ ] filed objections to the proposed settlement"); Grant v. Bethlehem Steel Corp., 823 F.2d 20, 24 (2d Cir.1987) (noting that "[o]nly 45 of 126 class members expressed opposition to the settlement"); Laskey v. International Union, United Automotive, Aerospace and Agricultural Implement Workers, 638 F.2d 954, 956 (6th Cir.1981) ( "Significantly, only seven [class members] out of 109 made any kind of objection"); In re Lloyd's Am. Trust Fund Litig., No. 96 Civ. 1262, 2002 WL 31663577, at *23 (S.D.N.Y. Nov. 26, 2002) (noting that "[o]ut of the approximately 1,350 Class Members, only 239--or less than 18 percent-- have submitted objections"); Boyd v. Bechtel Corp., 485 F.Supp. 610, 624 (N.D.Cal.1979) ("the Court finds persuasive the fact that eighty-four percent of the class has filed no opposition."). The third factor looks to "the stage of the proceedings and the amount of discovery completed[; these] are important factors to consider in order to ensure that plaintiffs have had access to material to evaluate their case and assess the adequacy of any settlement proposal." [FN130] Here, the parties reached a tentative settlement agreement at an early stage in this litigation, prior to discovery. [FN131] However, pursuant to the parties' stipulation of settlement, Jenkens provided the class with extensive discovery. Jenkens has produced approximately 70,000 documents relating to the merits of the class claims and the financial status of Jenkens. [FN132] Lead counsel have conducted extensive interviews *338 with Jenkens witnesses, including the individual Jenkens defendants. [FN133] Plaintiffs thus "have a clear view of the strengths and weaknesses of their cases" and of the adequacy of the settlement. [FN134] FN130. In re PaineWebber Ltd. P'ships Litig., 171 F.R.D. 104, 126 (S.D.N.Y.1997), aff'd, 117 F.3d 721 (2d Cir.1997). FN131. See Lead Counsel Decl. ¶ 39. FN132. See id. ¶ 40. Page 22 FN134. In re Warner Communications Sec. Litig., 618 F.Supp. 735, 745 (S.D.N.Y.1985). As to the fourth and fifth factors, the risks of establishing liability and damages are significant. In assessing this factor, the Court si not required to "decide the merits of the case or resolve unsettled legal questions" [FN135] or to "foresee with absolute certainty the outcome of the case." [FN136] "[R]ather, the Court need only assess the risks of litigation against the certainty of recovery under the proposed settlement." [FN137] Here, Jenkens has substantial defenses to all of plaintiffs' claims. Jenkens notes, in particular, the "limited 'more likely than not' nature of the opinions," and the fact that many other law and accounting firms gave similar opinions, which it argues will make it hard to demonstrate a breach of the standard of care. [FN138] Jenkens also argues that the class members- millionaire tax avoiders--make unsympathetic plaintiffs, and that there is a substantial possibility that they will be found to be more than 50% at fault themselves. Even if plaintiffs were able to prove liability, many of plaintiffs' significant items of damages may not be recoverable. For example, plaintiffs may not be able to recover for back taxes or interest on back taxes. [FN139] FN135. Carson v. American Brands, Inc., 450 U.S. 79, 88 n. 14, 101 S.Ct. 993, 67 L.Ed.2d 59 (1981). FN136. In re Austrian & German Bank Holocaust Litig., 80 F.Supp.2d 164, 177 (S.D.N.Y.2000). FN137. Global Crossing, 225 F.R.D. 436, 458-59. FN138. Jenkens Mem. at 19. FN139. See Seippel, 341 F.Supp.2d at 38385. Sixth, there is some risk of maintaining class status throughout trial. Were this action to proceed to trial, proving reliance and damages might prove unmanageable. [FN140] This is especially true in light of the fact that, unlike in many class actions, plaintiffs could bring these claims individually; thus, the superiority of class action treatment would be hard to establish if this case were to be litigated. FN133. See id. ¶ 42. FN140. See In re Prudential Ins. Co. Am. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) Page 23 Sales Practice Litig. Agent Actions, 148 F.3d 283, 321 (3d Cir.1998) (noting that, because manageability is a factor if a class proceeds to trial, but not at settlement, there will always be a risk of maintaining class status at trial that favors settlement, rendering this test somewhat "toothless."). but now has only 420. See January 17, 2005 Declaration of Thomas H. Cantrill ¶ 5. The seventh factor requires the Court to examine the ability of the defendant to withstand a higher judgment. This factor "does not require that the defendant pay the maximum it is able to pay." [FN141] The test takes into account the possibility that, if the case were to go to trial, the defendant would not be able to survive. "The purpose behind this consideration is to determine whether defendant could withstand a judgment significantly higher than the settlement figure, assuming the case were litigated.... If a higher judgment would excessively impact the company's shareholders or would jeopardize the company's survival, this factor weighs in favor of approving the settlement." [FN142] I am less convinced that the individual defendants' contributions are reasonable in light of their ability to withstand a greater judgment. However, the individual defendants' potential contributions are relatively minor compared to the available insurance. Moreover, the individual defendants might well succeed on their claim that they are entitled to full indemnification from Jenkens. The low contributions from individual defendants do not render the settlement unfair when weighed against all other considerations. [FN147] FN141. O'Keefe v. Mercedes-Benz USA, 214 F.R.D. 266, 301 (E.D.Pa.2003). FN142. Berkley v. United States, 59 Fed.Cl. 675, 713 (2004) (citing In re Cendant Corp. Litig., 264 F.3d 201, 240 (3d Cir.2001); In re Prudential Ins. Co. of America Sales Practices Litig., 148 F.3d at 321). Jenkens' contribution to the settlement is $5.25 million--"over 5% of equity shareholder profits last year." [FN143] Although this contribution may not seem large, given the magnitude of plaintiffs' claims, Jenkens may not be able to withstand a greater judgment. Jenkens is already in a weakened condition, facing severe retention problems. [FN144] Jenkens argues, persuasively, that it could not contribute more to the settlement without causing more lawyers to leave the firm, likely resulting in the firm's collapse: "[a]lready unstable, the firm cannot ask its shareholders to [contribute] more and expect them to *339 decline offers from competitors." [FN145] If the case were to go to trial, the firm would be unlikely to survive. [FN146] Given Jenkens' position, it does not appear that the firm could withstand a significantly greater judgment. FN145. Jenkens Mem. at 25. FN146. See Declaration of Ward Bower, Legal Consultant, ¶ ¶ 4-10. FN147. See D'Amato v. Deutsche Bank, 236 F.3d 78, 86 (2d Cir.2001) (upholding approval of settlement although the defendants' ability to withstand a greater judgment weighed against approval, where other Grinnell factors were met). Finally, the eighth and ninth factors --the range of reasonableness of the settlement fund in light of the best possible recovery and the range of reasonableness of the settlement fund in light of all the attendant risks of litigation--weigh in favor of the settlement. Plaintiffs' best possible recovery is limited, given the likelihood that, absent this settlement, Jenkens would fail and declare bankruptcy, and the only available assets would be insurance--an uncertain source of recovery, given the carriers' coverage defenses. Moreover, class members' claims, in the aggregate, greatly exceed the available insurance or Jenkens' assets. Absent a settlement, only the first few plaintiffs in line, at best, would recover anything. There is also a significant possibility that class members would not prevail if this case were to go to trial. FN143. See January 21, 2005 Supplemental Declaration of Thomas H. Cantrill, Jenkens' President and Chairman of the Board, ¶ 8. Although the settlement fund by itself represents a fair and reasonable recovery, I note that the settlement also includes significant non-monetary benefits. Pursuant to the settlement, Jenkens has agreed to provide (and has already provided) discovery on plaintiffs' claims. The value of this agreement is hard to determine, but it is not negligible. [FN148] FN144. The firm had 615 lawyers in 2000, FN148. Of course, plaintiffs could possibly © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) obtain much of this information through ordinary discovery processes. In practice, however, plaintiffs may have more success obtaining information from a cooperative, settling defendant than from an uncooperative defendant through an adversarial discovery process. See Lisa Bernstein and Daniel Klerman, An Economic Analysis of Mary Carter Settlement Agreements, 83 Geo. L.J. 2215, 2222-23 (1995) (noting the value of agreements to cooperate with discovery pursuant to settlement: absent such cooperation, "[a]dverse information is ordinarily disclosed only in response to narrowly tailored discovery requests or when a defendant or his attorney fears that not revealing the information will lead to the imposition of sanctions. A recent study of the discovery process found that attempts to conceal information are often successful."). For the foregoing reasons, I find that the settlement is fair and reasonable. I will, however, discuss the specific objections made to certain provisions of the proposed judgment. 3. Non-Settling Defendants' Objections to the Bar Order [14] Non-settling defendants BDO, joined by Deutsche Bank, object to the bar order and judgment credit. Although "[i]n a class action settlement, the normal focus is on the fairness, reasonableness and adequacy of the settlement to the plaintiff class ... [w]here the rights of third parties are affected [ ] their interests too must be considered.... Moreover, if third parties complain to a judge that a decree will be inequitable because it will harm them unjustly, [s]he cannot just brush their complaints aside." [FN149] FN149. Masters Mates, 957 F.2d at 1025-26 (quotations and citations omitted). Such bar orders are common in class action settlements. "If a non-settling defendant against whom a judgment had been entered were allowed to seek payment from a defendant who had settled, then settlement would not bring the latter much peace of mind." [FN150] Because federal policy strongly favors settlement, especially in complex litigation, courts may approve a bar on contribution claims between the settling defendants *340 and the nonsettling defendants, "so long as there is a provision that gives the non-settling defendants an appropriate right of set-off from any judgment imposed against Page 24 them." [FN151] If courts were not able to limit the liability of settling defendants through bar orders, "it is likely that no settlements could be reached." [FN152] FN150. Id. at 1028. FN151. In re WorldCom Inc., ERISA Litig., 339 F.Supp.2d 561, 569 (S.D.N.Y.2004) (quoting Masters Mates, 957 F.2d at 1028). FN152. In re Ivan F. Boesky Sec. Litig., 948 F.2d 1358, 1369 (2d Cir.1991). Nonetheless, "[a] settlement bar should not be approved unless it is narrowly tailored and preceded by a judicial determination that the settlement has been entered into in good faith and that no one has been set apart for unfair treatment." [FN153] In assessing the fairness of a bar order, a court may weigh relative fault, the likelihood of a plaintiff's success at trial, and the adequacy of the resources of the most culpable party to ensure that "a settling defendant escapes neither the responsibility for his wrongdoing nor, therefore, the deterrent effect which underlies the right to contribution." [FN154] FN153. Masters Mates, 957 F.2d at 1031. FN154. Id. at 1028. The order proposed here leaves the calculation of the judgment credit to the applicable law of the various jurisdictions in which a class member may bring a claim. BDO urges the Court to impose, on all cases the class members may bring, the capped proportionate share judgment credit approved in Gerber v. MTC Electronic Technologies. [FN155] Although the Gerber court approved that approach, it does not require it, and a "one-size-fits-all" judgment credit is neither required nor appropriate here. FN155. 329 F.3d 297, 303 (2d Cir.2003) ("Under this rule, the credit given for the settlements will be the greater of the settlement amount for common damages (a 'pro tanto' rule) or the 'proportionate share' of the settling defendants fault as proven at trial."). Although the court approved this formu la as fair, it did "not hold that such a formula is required." Id. "There may [ ] be instances in which a settlement may be approved without the identification of a specific judgment reduction provision." [FN156] In © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) In re Ivan F. Boesky, [FN157] the Second Circuit approved a judgment credit that required class members to "reduce or satisfy any judgment against a nonsettling defendant to the extent necessary to extinguish any claims of such non-settling defendant for indemn ity or contribution from [the settling defendants], as may be determined by the Court or jury." [FN158] The court noted that FN156. In re WorldCom Inc., ERISA Litig., 339 F.Supp.2d at 569. FN157. 948 F.2d 1358, 1362 (2d Cir.1991). FN158. Id. (quotation omitted). [t]he precise methods of judgment reduction to be employed are left to a time when, if ever, judgments against particular nonsettling defendants are obtained. Deferring these issues avoids the enormous complexities of hypothesizing findings of fact and law regarding future litigation against nonsettling defendants.... Claims by nonsettling defendants for contribution or indemnification may raise issues as to the legal basis for the particular judgment and the precise facts found. Moreover, choice-of-law questions may preclude use of a single judgment-reduction method for each nonsettling defendant. Other complexities may arise that are not evident at this time and on this record. [FN159] FN159. Id. at 1363, 1369. Here, class members have already brought numerous actions, on a variety of state al w and federal law theories, in jurisdictions all over the nation, against non-settling defendants and numerous other third parties. To impose a single method of judgment reduction on all claims that have been or might be brought by class members, in any court or tribunal, regardless of the applicable law, would be not be appropriate. [FN160] Non-settling defendants and third parties will be fully *341 compensated for the loss of their contribution claims: the order ensures that they will receive a judgment credit at least equal to the contribution claim they might otherwise assert. [FN161] To force the settling parties to accept a judgment credit provision that would provide BDO with a credit that is potentially greater than the value of the contribution claims it might otherwise have been able to assert--as BDO suggests --would give BDO a windfall, and would be an impediment to settlement. [FN162] Moreover, forcing courts all over the country to follow a particular method of Page 25 judgment reduction, which may conflict with their own policies and procedures, would be an unwarranted interference with their proceedings. FN160. If class members win an award against non-settling defendants in this court, in the present action, the judgment credit would likely be at least the amount of the class member's recovery under the settlement attributable to common damages, in order to comport with this circuit's "onesatisfaction" rule. See Masters Mates, 957 F.2d at 1031. In order that non-settling defendants may know promptly how the judgment credit in Denney will be calculated, should this case go to trial, and be able to prepare their litigation strategy accordingly, non-settling defendants in Denney are invited to request the opportunity to brief the issue of the appropriate judgment credit to be applied in this case, under the applicable law. FN161. BDO observes that the proposed judgment "notes the 'Settling Parties' intent to fully protect the Released Persons [i.e., Jenkens] from all Claims Over,' no similar language describes the non-settling defendants' right to be fully compensated. Rather, the judgment reduction language speaks only in terms of amounts or percentages 'sufficient ... to compensate the Non-Settling Defendant.' " February 4, 2005 Letter to the Court from BDO at 2 (original emphasis). BDO is "concerned that another court ... could interpret [this language] as prioritizing Jenkens ['] interests over the interests of the non-settling defendants." Id. I will nonetheless approve the proposed judgment on the understanding that no such construction should be placed on this language. The purpose of the judgment credit is to fully compensate nonsettling defendants for the loss of their contribution claims. FN162. The uniform method of judgment reduction suggested by BDO might also, in certain situations, under compensate nonsettling defendants and third parties for the loss of their contribution claims --e.g., where the applicable law would permit a pro rata contribution claim, which might exceed both the proportionate share and the pro tanto credit. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) This settlement was the result of aggressive, arm's length bargaining. Given the limits on Jenkens' ability to withstand a greater judgment, I have found the settlement to be fair. There is no indication that BDO or other non-settling defendants have been treated unfairly. I also note that while BDO argues that the bar order is too generous to class members, the Harslem Plaintiffs argue that it is too generous to non-settling defendants. Such conflicting objections suggest that the provision strikes the proper balance. 4. The Harslem Plaintiffs' Objections to the Judgment Credit The Harslem Plaintiffs also object to the judgment credit provision. First, the Harslem Plaintiffs object on the ground that the judgment credit's impact falls unequally on different groups of class members, being especially unfair to those who have claims against deep-pocketed third parties. As I explained earlier, this argument is not supported by the facts. All Lead Plaintiffs, like the Harslem Plaintiffs, have essentially identical claims against deep-pocketed third parties, and will also suffer the impact of the judgment credit provision. In accepting the judgment credit provision, all plaintiffs have made a reasonable concession, necessary to secure the benefits of settlement. The Harslem Plaintiffs also argue, citing National Super Spuds, Inc. v. New York Mercantile Exchange, [FN163] In re Auction Houses Antitrust Litigation, [FN164] and Wal-Mart Stores, [FN165] that the judgment credit provision is an impermissible attempt to impair claims "non-class claims outside the factual predicate for the settlement." [FN166] This argument is unavailing. FN163. 660 F.2d 9 (2d Cir.1981) FN164. 42 Fed.Appx. 511 (2d Cir.2002). FN165. 396 F.3d 96. FN166. Harslem Mem. at 14 (emphasis removed). The authority cited by the Harslem Plaintiffs stands for the proposition that courts may not approve a settlement that releases claims that are not based on the identical factual predicate as those asserted by the class; however, "class action releases may include claims not presented and even those which could not have been presented as long as the released conduct arises out of the 'identical factual predicate' as the Page 26 settled conduct." [FN167] In In re Auction Houses (an unpublished *342 summary order) the Second Circuit expanded the reach of this doctrine, holding that Super Spuds requires rejection of a settlement which "merely impairs, rather than extinguishes" claims held only by a subset of the class, and arising out of a different factual predicate. [FN168] The settlement in that case contained a provision which prohibited class members from bringing certain nonclass claims in United States courts, though it allowed them to be brought elsewhere. The subset of the class who held those non-class claims received no additional compensation. Although the non-class claims were not extinguished, but only impaired, FN167. Wal-Mart Stores, 396 F.3d at 10708 (citing TBK Partners, Ltd. v. Western Union Corp., 675 F.2d 456 (2d Cir.1982)). FN168. In re Auction Houses Antitrust Litig., 42 Fed.Appx. 511, 519 (2d Cir.2002). the impairment is an 'uncompensated sacrifice of claims of members ... which were not within the description of claims assertable by the class.' That the impairment may be slight is of no moment, as we cannot say that it is valueless ... yet it is exacted without any compensation whatsoever. [FN169] FN169. Id. (quoting Super Spuds, 660 F.2d at 19). This doctrine is not applicable here. Class Members' claims against third parties have not been released, nor, within the meaning of In re Auction Houses, impaired without compensation. The Harslem Plaintiffs may still bring their claims against Ernst & Young; the judgment credit provision will only affect their claims against third parties to the extent that plaintiffs have already been compensated for damages arising out of those claims by Jenkens. The contribution law of the majority of states would reduce the Harslem Plaintiffs' claims against third parties even if the settlement contained no judgment credit provision. If courts were to accept the Harslem Plaintiffs' argument that a judgment credit provision is an impermissible impairment of claims against third parties, this would create a serious obstacle to any settlement. There could never be a bar order and judgment credit provision in any partial settlement in which some of the plaintiffs also brought the same claims against different third parties--a not uncommon situation in class actions alleging a © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) conspiracy among multiple defendants. Without the possibility of a bar order, partial settlement in such cases would be extremely unlikely. The Second Circuit has explained that "at the heart of our concern [in National Super Spuds] was the danger that a class representative not sharing common interests with other class members" would sacrifice the interests of those other class members. [FN170] That is not the case here. The Harslem Plaintiffs' interests with respect to the judgment credit provision are aligned with those of class representatives. The judgment credit provision is part of the price of the settlement for all class members: the settlement fully compensates the Harslem Plaintiffs, like every other class member, for accepting the provision. FN170. TBK Partners, Ltd., 675 F.2d at 462. Accord Wal-Mart Stores, 396 F.3d at 110-11 (noting that "Super Spuds hinged on the fact that the class representatives did not possess the [released claims]" and distinguishing Super Spuds on the basis that lead plaintiffs were also members of the sub-classes whose claims were released, and "their interests are, therefore, aligned with the interests of those classes."); In re Visa Check/Mastermoney Antitrust Litig., 297 F.Supp.2d 503, 514 (E.D.N.Y.2003) ("there is no specter here, as there was in National Super Spuds, of settling plaintiffs giving away claims possessed only by absent class members in exchange for the settlement."). 5. The Government's Objection to Paragraph 14 The Government objects to Paragraph 14 of the proposed order. Paragraph 14 provides that: Neither this Judgment, the Stipulation of Settlement, nor any act performed or document executed pursuant to or in furtherance of the Stipulation of Settlement: (i) is or shall be deemed to be or shall be used as an admission of, or evidence of, the validity of any Released Claims or any wrongdoing by or liability of any Released Persons; (ii) is or shall be deemed to be or shall be used as an admission of, or any evidence of, any fault or omissions of any Released Person in any statement, release or written document or financial report issued, filed or made; (iii) shall be offered or received in evidence against any Released Person in any civil, criminal or administrative*343 action or proceeding in any court, administrative agency, arbitral or other tribunal other than such Page 27 proceedings as may be necessary to consummate or enforce the Stipulation of Settlement, the releases executed pursuant thereto, and/or the Judgment, except that the Stipulation of Settlement and the Judgment and the Exhibits thereto may be filed in the Litigation or in any subsequent action brought against any of the Released Persons in order to support a defense or counterclaim of any Released Person of res judicata, collateral estoppel, release, good faith settlement, judgment bar or reduction, or any other theory of claim or issue preclusion or similar defense or counterclaim, including without limitation specific enforcement of the settlement embodied in the Stipulation of Settlement by way of injunctive relief. The Government objects to this paragraph on the ground that "it is not appropriate for this or any Court to determine, in the abstract, the admissibility or use of documents or acts in other proceedings." [FN171] FN171. January 24, 2005 Letter to the Court from the Government at 3. At the Government's request, the settling parties have inserted language into the proposed judgment which provides that "[n]othing in this Judgment prejudices or limits in any way the right of the Government of the United States to obtain or use information," and furthermore, that "[n]othing in this Judgment or in any agreement of the parties that relates to the admissibility of evidence shall apply to or be binding on the Government or any federal administrative agency, or shall be binding on any court with respect to the Government or any federal administrative agency." [FN172] The Government concedes that these provisions are sufficient to protect the Government's interests. [FN173] The Government therefore has no standing to object to paragraph 14. Moreover, the Government offers no authority in support of its objection. Provisions such as paragraph 14 are common in judgments accompanying class action settlements. [FN174] Such orders may be necessary to encourage settlement. [FN175] The parties who are most likely to be affected by this provision--non-settling defendants and third parties--have raised no objection to it. The Government's objection is therefore overruled. FN172. Proposed Judgment ¶ 15. FN173. See January 24, 2005 Letter to the Court from the Government at 4. See also Transcript of January 24, 2005 Fairness Hearing at 60. © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) FN174. See, e.g., In re Vitamins Antitrust Litig., 305 F.Supp.2d 100, 108 (D.D.C.2004); Teachers' Retirement System of Louisiana v. A.C.L.N., Ltd., No. 01 Civ. 11814, 2004 WL 1087261, at *8 (S.D.N.Y. May 14, 2004); Galloway v. Southwark Plaza Ltd. P'ship, No. 01 Civ. 835, 2003 WL 22657200, at *10 (E.D.Pa. Oct. 27, 2003); Vista Healthplan, Inc. v. BristolMyers Squibb Co., 287 F.Supp.2d 65, 68 (D.D.C.2003); Cooper v. Miller Johnson Steichen Kinnard, Inc., No. 02 Civ. 1236, 2003 WL 23335321, at *4 (D.Minn. July 22, 2003); In re Compact Disc Minimum Advertised Price Antitrust Litig., No. MDL 1361, 2003 WL 21685581, at *13 (D.Me. July 18, 2003); In re General Instrument Securities Litigation, 209 F.Supp.2d 423, 439 (E.D.Pa.2001); In re Intelligent Electronics, No. 92 Civ. 1905, 1997 WL 786984, at *3 (E.D.Pa. Nov. 26, 1997). FN175. Cf. Federal Rule of Evidence 408 (providing that evidence of settlement offers, or of conduct or statements made in settlement negotiations, is not admissible to prove liability for or invalidity of the claim or its amount). This rule is grounded principally on the "public policy favoring the compromise and settlement of disputes." Fed.R.Evid. 408 Advisory Committee Note. Page 28 exclude themselves from the class, (iii) the binding effect of a class judgment on all class members who do not request exclusion, and (iv) class members' right to object to the partial settlement and appear through counsel. [FN178] FN176. Fed.R.Civ.P. 23(c)(2)(B). FN177. Eisen, 417 U.S. at 173, 94 S.Ct. 2140; Fed.R.Civ.P. 23(c)(2)(B). FN178. See Fed.R.Civ.P. 23(c)(2)(b). In addition, Rule 23(e)(B) requires that "the court must direct notice in a reasonable manner to all class members who would be bound by a proposed settlement, voluntary dismissal, or compromise." [FN179] FN179. Fed.R.Civ.P. 23(e)(b). There are no rigid rules to determine whether a settlement notice to the class satisfies constitutional or Rule 23(e) requirements; the settlement notice must fairly apprise the prospective members of the class of the terms of the proposed settlement and of the options that are open to them in connection with the proceedings. Notice is adequate if it may be understood by the average class member. [FN180] FN180. Wal-Mart Stores, 396 F.3d at *11314 (quotation omitted). C. Adequacy of the Notice [15] Rule 23(c)(2)(B) requires that "for any class certified under Rule 23(b)(3), the court must direct to class members the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." [FN176] The notice must inform each class member of the nature of the action and the class certified, and that "he has the right to exclude himself from the action on request or to enter an appearance through counsel, and further that the judgment, whether favorable or not, will bind all class members not requesting exclusion." [FN177] It is not necessary that every class member receive actual notice, so long as class counsel acted reasonably in selecting means likely to inform persons *344 affected. Rule 23(c)(2)(B) specifies certain information that a class notice in a Rule 23(b)(3) action must contain, including (i) the nature of the case, the clas s definition, and the claims, issues, or defenses in the action, (ii) class members' right to Due to confidentiality concerns, the notices sent to class members were mailed directly by Jenkens. On June 29, 2004, Jenkens mailed notice to the last known addresses of 1286 persons. This notice clearly stated all of the information required by Rule 23(c)(2)(b). Class members were given 136 days to opt out of the settlement, a more than adequate allowance of time. [FN181] The notice clearly informed class members of the terms of the settlement. [FN182] Class Counsel published a Summary Notice in the Wall Street Journal on the same day. FN181. See Weinberger v. Kendrick, 698 F.2d 61, 70 (2d Cir.1982) (holding a six week opt out period to be adequate). FN182. The Harslem Plaintiffs' argument that the notice did not adequately inform them of the judgment credit provision is without merit. The notice informed them © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) that "Class Members will be required to protect [Jenkens] from liability to other defendants and third parties for contribution.... This will require Class Members who recover a judgment or make other recovery against another defendant or third party to grant the defendant or third party a judgment credit or other form of setoff." June 29 Notice at 9. This language clearly informed class members of the judgment credit provision. On December 29, 2004, following the amendments to the settlement in December, 2004, Jenkens mailed a supplemental notice to all class members who had not previously opted out. The notice clearly described the nature of the changes to the settlement, and included the original and the amended mediated settlement agreements. The supplemental notice informed class members that the deadline for objections was extended by one week. Simultaneously, Class Counsel published a summary of the notice in the Wall Street Journal. Finally, because the settlement proponents made minor changes to the language of the proposed judgment to accommodate objections, Jenkens, at the Court's instructions and in an excess of caution, mailed a third round of notice to all class members (individually, or to counsel if known), containing the final proposed judgment and extending the time frame for objections. The notice was thus more than adequate, both procedurally and with respect to its content. C. No Further Opt-Out Opportunity Is Required 1. Rule 23(e)(3) [16] The Harslem, Moore and Mattei plaintiffs ("the objectors") argue that the Court should grant them a second opportunity to opt out. Under the new Rule 23(e)(3), a court is permitted to allow class members a second opportunity to opt out. This is a matter for the Court's discretion; the objectors have failed to show any reason for the Court to exercise its discretion to permit such an opportunity. The Advisory Committee Note to Rule 23(e)(3) states that "[m]any factors may influence the court's decision [to grant a second opt-out]. Among these are changes in *345 the information available to class members since expiration of the first opportunity to request exclusion." [FN183] The objectors argue that the information available to them has changed since the expiration of the original opt-out date. Page 29 However, the proposed settlement has only improved since the June 28 Notice: the settlement fund is now $6.56 million larger, and to be divided among 89 fewer class members. Nevertheless, the objectors argue that the relative attractiveness of opting out has also changed. In the original settlement, no insurance funds were allocated to the defense of opt-out claims; in the amended settlement, the insurers have set aside $25 million (with the possibility of another $25 million in reinstated coverage) to defend or settle the claims of opt-outs. Therefore, the objectors argue that opting out now presents a more attractive prospect. FN183. Fed.R.Civ.P. Committee Note. 23(e)(3) Advisory Rule 23(e)(3) was not meant to require an automatic second opt-out whenever a proposed settlement is amended after the close of the first opt-out period. The Advisory Committee Note makes it clear that a change in information about the settlement is only one factor to be considered in informing the exercise of the court's discretion. Rule 23(e)(3) was intended to be applied sparingly, to a limited number of cases, and in particular to cases where the first opt-out period closed prior to reaching a settlement: The rules committees also believe that providing a second opt-out opportunity in a limited number of cases, when warranted, will not be unduly disruptive to settlement. It will make a difference only in cases in which the class is certified and the initial opt-out period expires before a settlement agreement is reached. It is irrelevant in the many cases in which a settlement agreement is submitted to the court simultaneously with a request that a class be certified. In the cases in which it might be used, moreover, the court retains broad discretion. [FN184] FN184. See Comm. on Rules of Practice & Procedure, Agenda F-18 (Appendix D, Proposed Rule Amendments of Significant Interest) (2002) (available at http:// www.uscourts.gov/rules/supct1202/ controversial.pdf). Both before and after the 2003 amendments, courts have consistently rejected arguments that due process requires a second opportunity to opt out when the final terms of a proposed settlement become known-even in those cases where the initial opt-out period expires before a settlement agreement is reached. [FN185] "[T]o hold that due process requires a second opportunity to opt out after the terms of the © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) settlement have been disclosed to the class would impede the settlement process so favored in the law." [FN186] Rule 23(e)(3) was not intended to alter this sound policy by mandating a second opt out opportunity every time parties renegotiate their settlement in any respect. FN185. See, e.g., In re Lloyd's Am. Trust Fund Litig., 2002 WL 31663577, at *12 ("Due process requires only that Class Members have notice of the proposed settlement and an opportunity to be heard at a fairness hearing. If the proposed settlement is fair, adequate and reasonable, due process does not afford Class Members a second opportunity to opt out."). See also In re Visa Check/Mastermoney Antitrust Litig., 297 F.Supp.2d at 518 n. 18 ("[Objectors] requested that Class members be given a second opportunity [under the new Rule 23(e)(3), which had taken effect eighteen days prior to the court's decision] to opt out of the Class now that the Settlements' terms are known. Because I have approved these Settlements as fair, however, due process does not afford Class members a second opportunity to opt out.") (citation omitted). FN186. Officers for Justice v. Civil Serv. Comm'n of the City and County of San Francisco, 688 F.2d 615, 635 (9th Cir.1982). Here, the June 28 Notice clearly apprised all class members of the terms of the settlement. There has been no material change in the settlement adverse to the class: the proposed settlement has only improved since the June 28 Notice. The fact that Jenkens has subsequently negotiated with its insurers for money to defend the claims of opt-outs is a matter outside the proposed settlement, and cannot justify a new opt-out period. A number of class members, with the same information as Objectors, took the gamble of opting out prior to the close of the first period, taking the risk that Jenkens would be unable to find resources to meet their claims; Objectors chose not to take that risk. Objectors are a tiny minority of the class, who chose not to opt out of the class in a *346 timely manner. [FN187] If the Court were to grant a second opt out opportunity, the resulting delay and uncertainty would pose significant risks of killing the settlement and driving Jenkens into bankruptcy, depriving the Page 30 vast majority of the class of the benefits of settlement. The Objectors' request for a second opt out opportunity pursuant to Rule 23(e)(3) is therefore denied. [FN188] FN187. See In re Visa Check/Mastermoney Antitrust Litig., 297 F.Supp.2d at 518 n. 18 (declining to exercise discretion under Rule 23(e)(3) to grant second opt-out opportunity in part "in light of the infinitesimal number of objections."). FN188. I note also that the Harslem Plaintiffs sought a belated opportunity to opt out on the basis of excusable neglect in December 2004 (prior to the amendment of the settlement), claiming that they had failed to comprehend the judgment credit provision. See December 2, 2004 Letter to the Court of Steven Spielvogel, counsel to the Harslem Plaintiffs. The Harslems therefore cannot credibly claim that they wish to opt out now because new information about the amended settlement has become available. 2. Excusable Neglect [17] Claiming "excusable neglect," certain objectors ask that the Court permit them to opt out of the class on an individual basis. They argue that their failure to opt out in a timely fashion should be excused because they failed to comprehend the judgment credit provision as described in the notice, and because the information on which they relied in choosing to remain in the class has changed since the end of the first opt out period. Pursuant to Rule 60(b)(1), Rule 60(b)(2), and Rule 23(d), courts have the power to grant an extension of the time to opt out on a showing of "excusable neglect." [FN189] The movant must show "both good faith and a reasonable basis for not acting within the specified period." [FN190] "Even upon a finding of excusable neglect, it remains within the district court's sole discretion whether or not to grant the extension." [FN191] Courts rarely grant such extensions, recognizing that "granting leave to file untimely exclusions would undermine the finality of judgments entered therein and would discourage settlement of such actions. Defendants would be loath to offer substantial sums of money in compromise settlements of class actions unless they can rely on the notice provisions of Rule 23 to bind class members." [FN192] So, for example, courts have refused to permit an extension of the opt-out © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) Page 31 period on the basis of "excusable neglect" even in cases where a class member never received notice, so long as the notice was sent out by means that comport with due process. [FN193] previous notice and opt-out period was ineffective, and the Court must grant a new notice and opt-out period when the class is finally certified. The Mattei Plaintiffs' argument is creative, but unavailing. FN189. In re Prudential Secs. Ltd. P'shps. Litig., 164 F.R.D. 362, 368-69 (S.D.N.Y.1996). FN194. See Transcript of January 24, 2005 Fairness Hearing at 35-36. FN190. Id. FN191. Id. (citing In re Four Seasons Sec. Laws Litig., 493 F.2d 1288 (10th Cir.1974) and Supermarkets General Corp. v. Grinnell, 490 F.2d 1183 (2d Cir.1974)). FN192. In re Prudential Secs. Ltd. P'shps. Litig., 164 F.R.D. at 368-69. Accord In re VMS Ltd. P'shp. Secs. Litig., No. 90 C 2412, 1995 WL 355722, at *2 (D.Ill. June 12, 1995) ("courts will not act under Rule 60(b)(6) unless extraordinary circumstances are present.... A too liberal application of Rule 60(b) in class actions would undermine the finality of judgments entered therein and would discourage settlement of such actions."). FN193. See In re VMS P'ship Secs. Litig., 1995 WL 355722, at *2. Objectors have failed to show excusable neglect. The notice clearly stated that the settlement would impose a judgment credit in actions against nonsettling defendants and third parties. Objectors' failure to comprehend that provision--even if genuine and in good faith--does not constitute excusable neglect. Objectors' argument that they should be permitted to opt out because of changes to the settlement's terms is more properly treated as a request for a general second opt-out opportunity for the class as a whole under Rule 23(e)(3); to the extent the available information has changed, it has changed for the entire class, not simply objectors. Objectors' request is therefore denied. 3. Preliminary Certification Was Proper [18] At the Fairness Hearing, the Mattei Plaintiffs raised a third argument for a second opt-out opportunity. [FN194] The original notice to the class was sent out pursuant to the Court's May 2004 order preliminarily certifying *347 the class. The Mattei Plaintiffs argue that, following the 2003 amendments to Rule 23, a court no longer has the power to preliminarily certify a settlement class; therefore, the Prior to the 2003 Amendments, Rule 23(c)(1) stated that "[a]s soon as practicable after the commencement of an action brought as a class action, the court shall determine by order whether it is to be so maintained. An order under this subdivision may be conditional." The 2003 amendments to Rule 23(c)(1)(C) deleted the provision that a class certification "may be conditional." The Advisory Committee Note explains that "[a] court that is not satisfied that the requirements of Rule 23 have been met should refuse certification until they have been met." [FN195] FN195. Fed.R.Civ.P. 23(c)(1)(C) Advisory Committee Note. Courts have frequently certified settlement classes on a preliminary basis, at the same time as the preliminary approval of the fairness of the settlement, and solely for the purposes of settlement, deferring final certification of the class until after the fairness hearing. [FN196] Courts have continued to follow this procedure even after the 2003 amendments came into effect on December 1, 2003. [FN197] The Manual for Complex Litigation continues to recognize the practice, [FN198] as do other authorities. [FN199] In deleting the reference to "conditional" certification, the Committee did not intend to abolish this commo n and vital practice. The amendment was directed at different problems. The Advisory Committee's report described its concern: "[t]he provision for conditional class certification is deleted to avoid the unintended suggestion, which some courts have adopted, that class certification may be granted on a tentative basis, even if it is unclear that the rule requirements are satisfied." [FN200] The Committee was troubled by the "fear that emphasis on the conditional nature of a certification order will encourage some courts to grant certification without searching inquiry, relying on later developments to determine whether certification is in fact appropriate." [FN201] FN196. See Weinberger, 698 F.2d at 72 (discussing the practice of sending "simultaneous notice of the pendency of a class action and of a proposed settlement to © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) Page 32 prospective class members" and concluding that, despite certain misgivings, and the need for heightened scrutiny to protect against collusion, "[a] blanket rule prohibiting the use of temporary settlement classes ... does not appear necessary or desirable.... Temporary settlement classes have proved to be quite useful in resolving major class action disputes [and] most courts have recognized their utility."). text reflects the amendments. See id. at 2. FN197. See, e.g., Sylvester v. Cigna Corp., 225 F.R.D. 391 (D.Me.2005); In re WorldCom, Inc. Sec. Litig., No. 02 Civ. 3288, 2005 WL 78807 (S.D.N.Y. Jan. 11, 2005); In re Lupron (R) Mktg. & Sales Practices Litig., 345 F.Supp.2d 135 (D.Mass.2004); Yong Soon Oh v. AT & T Corp., 224 F.R.D. 357 (D.N.J.2004); In re Lutheran Bhd. Variable Ins. Prods. Co. Sales Practices Litig., No. 99 MDL 1309, 2004 WL 2931352 (D.Minn. Dec. 16, 2004); Medina v. Manufacturer's & Traders Trust Co., No. 04 C 2175, 2004 WL 3119019, at *1 (D.Ill. Dec. 14, 2004) (noting conditional certification on December 8, 2003 in related, prior action); Global Crossing Sec., 225 F.R.D. 436; In re Serzone Prods Liab. Litig., No. MDL 1477, 2004 WL 2849197 (S.D.W.Va. Nov. 18, 2004); McDaniel v. Universal Fid. Corp., No. 04 C 2157, 2004 U.S. Dist. LEXIS 21320 (D.Ill. Oct. 21, 2004); Latino Officers Ass'n City of New York, Inc. v. City of New York, No. 99 Civ. 9568, 2004 WL 2066605 (S.D.N.Y. Sep. 15, 2004); Moore v. Halliburton Co., No. 3:02CV-1152, 2004 WL 2092019 (D.Tex. Sept. 9, 2004); Serventi v. Bucks Technical High School, 225 F.R.D. 159 (E.D.Pa.2004); Klabo v. Myhre, No. 3:02-CV-0877, 2004 WL 554794 (D.Ind. Feb. 6, 2004); In re The St. Paul Companies, Inc. Sec. Litig., No. 02 Civ. 3825, 2004 WL 1459426 (D.Minn. June 7, 2004). FN201. Comm. on Rules of Practice & Procedure, Report of the Civil Rules Advisory Committee (May 20, 2002) (available at http://www.uscourts. gov/rules/supct1202/CVReport-final.pdf). FN198. See Manual § 21.612 (observing that "[s]ettlement classes -- classes certified as class actions solely for settlement--can provide significant benefits to class members ..."). See also id. § 21.633 (calling for a "preliminary determination" of certifiability in connection with preliminary approval of the settlement). The fourth edition of the Manual went to press before the 2003 Amendments took effect, but the FN199. See 5-23 Moore's Federal Practice-Civil § 23.161. FN200. Comm. on Rules of Practice & Procedure, Agenda F-18: Report of the Judicial Conference 8-21 (Sept.2002) (available at http:// www.uscourts. gov/rules/jc09-2002/Report.pdf). *348 Rule 23 directs courts to make a decision as to certification "at an early practicable time." [FN202] The Second Circuit has explained that "[t]he reason for this rule is plain: fundamental fairness requires that a defendant named in a suit be told promptly the number of parties to whom it may ultimately be liable for money damages." [FN203] The Second Circuit has noted "the onerous effect of failing to decide class certification promptly, finding that a district court's failure to decide class certification 'early in the proceedings not only produced below an atmosphere of confusion, but also made [its] appellate review more difficult.' " [FN204] FN202. Fed.R.Civ.P. 23(c)(1)(A). Prior to 2003, the Rule stated that the certification decision should be made "as soon as practicable after the commencement of an action." The 2003 amendment to Rule 23(c)(1)(A) recognized that there are sometimes legitimate reasons to defer certification; nevertheless, the certification decision should not be "unjustifiably delayed." Fed.R.Civ.P. 23(c)(1)(A) Advisory Committee Note. FN203. Siskind v. Sperry Ret. Program, 47 F.3d 498, 503 (2d Cir.1995). FN204. In re Philip Morris Inc. v. National Asbestos Workers Med. Fund, 214 F.3d 132 (2d Cir.2000) (quoting Henry v. Gross, 803 F.2d 757, 769 (2d Cir.1986)). For these reasons, the Committee was concerned that the conditional certification option might encourage courts to delay undertaking the rigorous analysis required by Rule 23 prior to reaching a certification © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) decision, instead taking the "approach of certify now and worry later." [FN205] This practice often resulted in confusion and unfairness. [FN206] Different considerations apply, however, in the context of a settlement class. Where settling defendants and plaintiffs both support certification, there is little danger in a preliminary certification that defers a final certification decision until after the fairness hearing. Preliminary certification of a settlement-only class is not an end-run around a court's duty to conduct a rigorous analysis of the propriety of certification; rather, it is an essential part of the settlement process, and an indispensable tool for the efficient management of complex litigation. FN205. Southwestern Refining Co., Inc. v. Bernal, 22 S.W.3d 425, 435 (Tex.2000) (criticizing the practice of certifying classes without performing an analysis of the predominance requirement, or where predominance is in doubt, on the assumption that certification may be withdrawn later, or even "postulat[ing] that because a settlement or a verdict for the defendant on the common issues could end the litigation before any individual issues would be raised, predominance need not be evaluated until later."). FN206. See 5-23 Moore's Federal Practice-Civil § 23.45 (noting, in particular, that "a number of cases purported to certify classes conditionally, and left for a later time the determination whether the laws of the relevant states were too divergent to permit a finding that common issues predominated."). When a court is presented with a motion for preliminary certification and approval of a proposed settlement, the merits of certification are bound up with the proposed settlement. The Amchem court recognized and accepted the concept of a settlement class, acknowledging that due to the complexity of the class members' claims such a class might not be certifiable in the absence of a settlement because the litigation would not be manageable. Courts must therefore have the ability to preliminarily certify settlement classes that could not be certified if the settlement fails and the case proceeds to trial. At the preliminary approval stage, the settlement is unopposed. The court is not in a good position to make a final decision as to settlement (and therefore certification), because the court has yet not heard any Page 33 objections. [FN207] Moreover, after the opt-out period has expired, the settlement's proponents may wish to abandon the settlement or renegotiate the terms; the settlement cannot be fully assessed until the opt-out and objection period has closed. The position advanced by the objectors here would require a court to order final certification of a settlement class, long before it is able to give final approval to the settlement. This makes little sense, as the propriety of certification may depend on whether there is a viable settlement. [FN208] FN207. See In re Lupron (R) Mktg. & Sales Practices Litig., 345 F.Supp.2d at 137 ("I see no practical way to ascertain the fairness of the proposed settlement to the consumer class other than by proceeding with conditional class certification and giving notice with the opportunity for its members to opt in or out of the settlement."). FN208. And, indeed, the amended Rule 23 continues to recognize that a court's decision to certify a class "may be altered or amended before final judgment." Fed.R.Civ.P. 23(c)(1)(C). Thus, certification is always contingent on subsequent events and information that may require the court to revisit its decision. *349 The parties also need the flexibility of moving for certification on a preliminary basis. Settling defendants, in particular, must be able to support certification of a settlement class, while being free to oppose certification for litigation purposes if the settlement collapses. [FN209] If this Court adopted the argument pressed by the objectors, defendants would be required to seek a final and binding certification of the class prior to the onset of the optout period and before any objections, taking the risk that the objections may convince the court to reject the settlement, or that opt-outs may be numerous enough to make settlement worthless. This would be a disincentive to settlement. FN209. See Manual § 21.612. See also Carnegie, 376 F.3d at 656 (holding that a defendant who urges a court to certify a class for settlement, and prevails, may later contest certification for litigation if the settlement fails, but only as to manageability). These policy considerations explain why, in the settlement context, courts regularly make a © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) preliminary determination as to the propriety of certification, at the same time as the preliminary approval of a proposed settlement, postponing the final decision on certification until the court is ready to evaluate the settlement. These considerations further explain why courts have continued the practice of preliminary certification of settlement classes, despite the 2003 Amendments' disapproval of conditional certification. [FN210] FN210. I am not blind to the countervailing considerations. In particular, where the final determination of certification is postponed until after the close of the opt-out and objection period, the settlement has "momentum" and a court is under great pressure to accept it as a fait accompli. The answer to this problem is that courts must conduct the required rigorous analysis, despite this pressure. On the other hand, the 2003 amendments should prevent one particularly troubling practice engaged in by some courts. As one leading authority has explained: In the past, the term "settlement class" was misused to refer to a temporary class approved by the court on a conditional basis, for the limited purpose of conducting settlement negotiations. Courts that made use of this unrecognized type of "settlement class" tentatively assumed the existence of a class in order to permit the parties to negotiate a settlement; and those courts would "conditionally" certify a class without the thorough certification analysis required by Rules 23(a) and (b). Because those courts indulged in the assumption of the class's existence only until a settlement was reached or the parties abandoned the negotiations, those classes were sometimes referred to as "temporary" or "provisional" classes. [FN211] FN211. 5-23 Moore's Federal Practice--Civil § 23.161 (e mphasis added). This practice is to be avoided. Assuming the existence of a class, without conducting any preliminary inquiry into whether the Rule 23 requirements are satisfied, in order to permit the parties to engage in "open-ended settlement negotiations" will undoubtedly delay the certification decision. [FN212] The same authority, however, explicitly recognizes the practice followed in this case. FN212. See id. Page 34 A true "settlement class" arises when the named parties to an uncertified class action reach a provisional settlement that they wish to make binding on the class as a whole. In those cases, the parties move the court for simultaneous class certification and approval of the settlement. Typically, the court then orders a combined notice of the certification, opt-out rights, and the proposed settlement, and combines the fairness hearing on the proposed settlement with a hearing on class certification. If the settlement is approved and the class is certified, absent class members who do not opt out are bound by the settlement agreement. [FN213] FN213. Id. (citing In re GMC Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 778 (3d Cir.1995))("the court disseminates notice of the proposed settlement and fairness hearing at the same time it notifies class members of the pendency of class action determination. Only when the settlement is about to be finally approved does the court formally certify the class, thus binding the interests of its members by the settlement."). *350 In sum: the 2003 amendments to Rule 23 were not intended to prohibit the practice of preliminary certification of settlement-only classes, with final certification to follow after the fairness hearing. However, the amendments were intended to emphasize that, even at the stage of preliminary certification, courts should conduct a rigorous Rule 23 analysis. A court should never merely assume the existence of a class. I have discussed this rather technical issue at length because of the recent change to Rule 23 eliminating conditional certification. The important issue from the perspective of the objectors, however, is whether the notice they received provided them with due process. As noted earlier, the notice sent to all putative class members was sufficient in all respects; whether the May 14 Order was preliminary or final does not affect the quality of the notice. The objectors, like other class members, had all the information they needed to make an informed decision as to whether to opt out or remain in the class; they chose to remain in the class and are properly bound by that decision. I have scrutinized the settlement and found it to be fair, reasonable, and adequate, and not a product of collusion or undue pressure. To permit the Mattei Plaintiffs now to opt © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) out of a settlement of which they had full notice (risking the settlement for the overwhelming majority of class members) merely because the class certification was preliminary rather than final would elevate form over substance. Page 35 percentage of the fund created for the benefit of the class." [FN221] FN218. See id. at 50. FN219. See Pennsylvania v. Delaware Valley Citizens' Council for Clean Air, 478 U.S. 546, 565, 106 S.Ct. 3088, 92 L.Ed.2d 439 (1986). D. Attorney's Fees 1. General Principles [19] The "equitable" or "common fund" doctrine governing awards of attorneys' fees was established more than a century ago in Trustees v. Greenough. [FN214] Where an attorney succeeds in creating a common fund for the benefit of a class of plaintiffs, that attorney is entitled to a reasonable fee to be set by the court and taken from the fund. [FN215] FN214. 105 U.S. 527, 533, 26 L.Ed. 1157 (1881). FN215. See Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980) ("The [common fund] doctrine rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its cost are unjustly enriched at the successful litigant's expense.") While an award of attorneys' fees is justified by the common fund doctrine, the amount of "fees awarded in common fund cases [must] not exceed what is 'reasonable' under the circumstances." [FN216] Furthermore "[w]hat constitutes a reasonable fee is properly committed to the sound discretion of the district court ... and will not be overturned absent an abuse of discretion, such as a mistake of law or a clearly erroneous factual finding." [FN217] FN216. Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 47 (2d Cir.2000). FN217. Id. (internal citation omitted). Both the lodestar and percentage of fund methods are available in calculating fee awards in class action settlements. [FN218] The lodestar method multiplies the number of hours reasonably expended by a reasonable hourly rate for attorneys of similar skill within a given geographic location. [FN219] "Courts in their discretion may increase the lodestar by applying a multiplier based on factors such as the riskiness of the litigation and the quality of the attorneys." [FN220] The percentage of fund method is a simpler calculation in that the award is "some FN220. Wal-Mart Stores, 396 F.3d at 12021 ("The multiplier takes into account the realities of a legal practice by rewarding counsel for those successful cases in which the probability of success was slight and yet the time invested in the case was substantial.... As the chance of success on the merits or by settlement increases, the justification for using a risk multiplier decreases."). Accord In re "Agent Orange" Prod. Liab. Litig., 818 F.2d 226, 236 (2d Cir.1987) (citations omitted). FN221. Savoie v. Merchants Bank, 166 F.3d 456, 460 (2d Cir.1999) (citing Blum v. Stenson, 465 U.S. 886, 900 n. 16, 104 S.Ct. 1541, 79 L.Ed.2d 891 (1984)). While the simplicity of the percentage of fund method may be initially appealing, the lodestar figure should be used to cross-check the reasonableness of the fees determined under the percentage of fund method. See Goldberger, 209 F.3d at 50 ("[W]e encourage the practice of requiring documentation of hours as a 'cross check' on the reasonableness of the requested percentage.... [W]here used as a mere crosscheck, the hours documented by counsel need not be exhaustively scrutinized by the district court."). *351 [20] Despite the availability of both methods, "the trend in this Circuit is toward the percentage method." [FN222] Regardless of which method is used, the following Goldberger factors determine the reasonableness of a fee award: FN222. Wal-Mart Stores, 396 F.3d at 12021. (1) the time and labor expended by counsel; (2) the magnitude and complexities of the litigation; (3) the risk of the litigation ...; (4) the quality of representation; © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) (5) the requested fee in relation to the settlement; and (6) public policy considerations. [FN223] FN223. Goldberger, 209 F.3d at 50 (internal quotation marks and citation omitted). [21] Furthermore, "the percentage used in calculating any given fee award must follow a sliding-scale and must bear an inverse relationship to the amount of the settlement. Otherwise, those law firms who obtain huge settlements, whether by happenstance or skill, will be over-compensated to the detriment of the class members they represent." [FN224] While the Goldberger court recognized the ever increasing use of benchmarks within the 25% range, it cautioned that the use of such benchmarks "could easily lead to routine windfalls where the recovered fund runs into the multi-millions." [FN225] In cases with recoveries of between $50 and $75 million, courts have traditionally awarded fees in the range of 12% to 20%. [FN226] Case citations are of limited usefulness, however, as a "fee award should be assessed based on scrutiny of the unique circumstances of each case." [FN227] FN224. In re Indep. Energy Holdings PLC, No. 00 Civ. 6689, 2003 WL 22244676, at *6 (S.D.N.Y. Sept. 29, 2003). FN225. Goldberger, 209 F.3d at 52. FN226. See, e.g., In re Twinlab Corp. Sec. Litig., 187 F.Supp.2d 80, 88 (E.D.N.Y.2002) (12% of $26,500,000); In re Dreyfus Aggressive Growth Mut. Fund Litig., No. 98 Civ. 4318, 2001 WL 709262, at *7 (S.D.N.Y. June 22, 2001) (15% of $18,500,000); In re Fine Host Corp. Sec. Litig., No. MDL 1241, 2000 WL 33116538, at *6 (D.Conn. Nov. 8, 2000) (17.5% of $17,750,000); Varljen v. H.J. Meyers & Co., Inc., No. 97 Civ. 6742, 2000 WL 1683656, at *5 (S.D.N.Y. Nov. 8, 2000) (20% of $5,000,000); In re Health Mgmt. Sec. Litig., 113 F.Supp.2d 613, 614 (S.D.N.Y.2000) (20% of $4,500,000). See also In re Arakis Energy Corp. Sec. Litig., No. 95 CV 3431, 2001 WL 1590512, at *9 (E.D.N.Y. Oct. 31, 2001) ("[T]he trend within this circuit after Goldberger has been to award attorney's fees in amounts considerably less than 30% of common funds in securities class actions, even where there is a substantial contingency risk.") Page 36 (citing cases). FN227. Goldberger, 209 F.3d at 53. 2. Application of the Goldberger Factors Lead Class Counsel, on their own behalf and on behalf of Other Class Counsel Counsel, seek attorneys' fees of $16,310,000 and expenses of $624,484.84. The requested attorneys' fee award alone represents approximately 20% of the $81,557,805 Settlement and is equivalent to 2.04 times the lodestar figure of $7,990,643.50. [FN228] Lead Counsel argue that such an award is justified based upon the Goldberger factors. FN228. This lodestar figure is comprised of the following: $5,173,025 from Deary Montgomery DeFeo & Canada, LLP; $1,549,350 from Cory Watson Crowder & DeGaris, P.C.; $972,483.50 from Whatley Drake, LLC; and $295,785 from Stephen F. Malouf, Esq. See Additional Evidentiary Support For Class Representatives' Motion For Final Approval Of Class Settlement, Final Certification Of The Class And Award Of Attorneys' Fees And Costs. a. The Time and Labor Expended by Counsel Plaintiffs' allegations required extensive pre-filing investigatory work by counsel. Class Counsel undertook an extensive investigation of the tax shelter business and analysis of the applicable law as well as widespread consultation with tax advisors and other experts. The result was the filing of the Denney and Camferdam class actions. Five law firms devoted almost 18,800 hours of professional time to investigating, prosecuting and settling the claims. Lead Counsel have been consumed with the litigation and settlement of these two class actions. The following is a list of some of the tasks Lead Class Counsel performed in connection with this litigation: Interviewed Class Members and their tax advisors *352 Reviewed and analyzed class members' documents Researched and analyzed relevant law and legal issues Identified and analyzed defendants' liability and damages for Class Members' claims Briefed substantial motions and participated in numerous oral arguments Prepared discovery Participated in extensive settlement negotiations, © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) including four lengthy mediation sessions Held extensive conferences with Class Members and their counsel Reviewed and analyzed over 200,000 documents produced by the J & G Defendants pursuant to the informal "merits" discovery provision of the settlement agreement Conducted extensive interviews of the Jenkens & Gilchrist defendants as part of the financial "confirmatory" discovery Reviewed and analyzed financial documents produced by the J & G Defendants as well as Jenkens & Gilchrist's insurance policies Retained and consulted with tax advisers and other experts In short, Class Counsel vigorously and efficiently litigated this case and were successful in reaching a global settlement agreement that is reasonably beneficial to the plaintiff class. Page 37 not an issue as the success of this case should deter others from engaging in this sort of conduct in the future, which benefits society as a whole. As to the fifth factor, counsel seek an award of fees and expenses totaling $16,936,084.84 which represents 20.8% of the total Settlement of $81,557,805. This combined award includes attorneys' fees of $16,311,600 which is 20% of the Settlement. While these percentages are not per se unreasonable, although they are at this highest end of the 12 to 20% range of reasonable for settlements in the range of $50 to 70 million, the resulting attorneys' fee award is 2.04 times the lodestar figure of $7,990,643.50. Under the particular circumstances of this case, a multiplier of 2.04 is excessive. Accordingly, the fee award as a percentage of the settlement must be reduced to bring the resulting multiplier in line with what is reasonable. 3. The Lodestar Cross-Check b. The Magnitude and Complexity of the Case This action was complex not only in terms of the procedural requirements associated with major class actions, but the underlying substantive claims involved complicated tax strategies. Class Counsel had to expend significant time learning the complicated tax shelter business in order to prosecute plaintiffs' claims. To succeed, Class Counsel had to understand very sophisticated tax issues. Prosecution of this action was heavily dependent on expert testimony, thereby adding to the complexity of the case. In sum, this is undoubtedly a complex class action litigation. c. The Risk of the Litigation There was a significant risk that absent a class settlement with Jenkens, the vast majority of Class Members would have recovered nothing from this defendant. This was due, in part, to significant issues regarding defendants' insurance coverage. Another risk was that the pressure of this litigation would force Jenkens to dissolve and file for bankruptcy, thereby frustrating any potential recovery. Thus, two separate sources of risk made the chance of recovering any damages from Jenkens especially speculative. d. Remaining Goldberger Factors The fourth Goldberger factor--the quality of Class Counsel's representation--is not an issue here as this case was well litigated by very skilled lawyers. Not only did their skill and expertise contribute to the favorable settlement for the class, it contributed to the overall efficiency of the case. The sixth factor is also A review of the lodestar computations for the various firms reveals a disproportionate ratio of partner to associate hours expended in this litigation. For example, Deary Montgomery DeFeo & Canada expended 11,413 attorney hours in total. The total number of hours by partners and local counsel billing at $525 per hour is 7,499, which represents approximately 66% of the total. Cory Watson Crowder & DeGaris, P.C. logged in a total of 3,101 attorney hours, 1,947 hours of which are from a partner billing at $525 per *353 hour. That firm's partner hours make up nearly 63% of total attorney hours. Whatley Drake's attorney hours total 2,225.90, of which 910.90 are attributable to partners billing at $550 per hour. At that firm, partner hours constitute approximately 41% of total attorney hours. Finally, all of Stephen F. Malouf's time, totaling 563.4 hours, was billed at his hourly rate of $525 per hour. The above analysis reveals that the partners at the firms comprising Class Counsel did not delegate as much of the work to associates as they might have. [FN229] Thus, the resulting lodestar figure of $7,990,643.50 is somewhat inflated. To permit a fee award amounting to 2.04 times this inflated lodestar figure would be a disservice to the plaintiff class. Indeed, one would be hard pressed to conclude that Class Members would agree to compensate a majority of the work performed at $1,071 per hour, which is what a 2.04 multiplier would do. I therefore conclude that a multiplier of 1.5 is more appropriate under the circumstances. Applying this multiplier to the lodestar figure results in an attorneys' fee award © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) of $11,985,965, which is approximately 15% of the Settlement. Added to this is an award of $624,484.84 for counsel's unreimbursed expenses. [FN230] FN229. See In re Dreyfus, 2001 WL 709262, at *7 ("[A]t most firms partners play a largely supervisory role, while the basic work on the case is performed by more junior staff who bill at lower rates."). FN230. See Miltland Raleigh-Durham v. Myers, 840 F.Supp. 235, 239 (S.D.N.Y.1993) ("Attorneys may be compensated for reasonable out-of-pocket expenses incurred and customarily charged to their clients...."). Accordingly, the total award for attorneys' fees and expenses is $12,610,449.84, which represents approximately 15.5% of the total Settlement funds, which is well within the range of 12 to 20% referred to earlier. The total award includes attorneys's fees of $11,985,965 and unreimbursed expenses of $624,484.84. [FN231] While the total award is $4,324,035 less than the total amount requested of $16,934,484.84, it is more than sufficient to compensate the attorneys for their labor and their assumption of risk at the beginning of this litigation. As aptly stated by Judge John Gleeson in the Visa Check/Mastermoney litigation, "[i]f [this] amounts to punishment, I am confident there will be many attempts to self-inflict similar punishment in future cases." [FN232] FN231. $81,665 of this sum is to be allocated to counsel for the Harslems, reducing the total award to class counsel to $12,528,784. See infra Part IV.D.4. FN232. In re Visa Check/Mastermoney Antitrust Litig., 297 F.Supp.2d at 525. 4. The Harslem Plaintiffs' Request For Fees [22] Counsel for the Harslem Plaintiffs, the firm of Bondurant, Mixson & Elmore, LLP ("Bondurant"), request that a portion of the fee award, in the range of 1.5% of the fund awarded to class counsel, be allocated to them. For the following reasons, Bondurant is entitled to a fee, although not in the amount requested. It is well settled that objectors have a valuable and important role to perform in policing class action settlements. [FN233] Accordingly, "they are entitled Page 38 to an allowance as compensation for attorneys' fees and expenses where a proper showing has been made that the settlement was improved as a result of their efforts." [FN234] Courts may also consider whether the objectors "aided the court and enhanced the adversarial process by generating debate about issues relating to the proposed settlement which otherwise would not have been discussed." [FN235] "The *354 trial judge has broad discretion in deciding whether, and in what amount, attorneys' fees should be awarded, since she is in the best position to determine whether the participation of objectors assisted the court and enhanced the recovery." [FN236] FN233. See White v. Auerbach, 500 F.2d 822, 828 (2d Cir.1974). FN234. Id. FN235. Great Neck Capital Appreciation Inv. P'ship, L.P. v. Pricewaterhousecoopers, L.L.P., 212 F.R.D. 400, 413 (E.D.Wis.2002) (citing White, 500 F.2d at 828). Accord In re Visa Check/MasterMoney Antitrust Litig., No. 96 Civ. 5283, 2004 U.S. Dist. LEXIS 8729, at *5 (E.D.N.Y. Apr. 27, 2004) ("Although it is true that the objectors' briefings did not drive my decision to reduce Lead Counsel's request for fees, their arguments did sharpen the debate by introducing contrary case law, and by requiring Lead Counsel to more fully brief the issue in reply papers. In short, the objectors' contribution was to make the proceedings more adversarial."); In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 359 (N.D.Ga.1993) (awarding fees to objectors who "significantly refined the issues germane to a consideration of the fairness of this complex settlement and[ ] transformed the settlement hearing into a truly adversarial proceeding"). FN236. White, 500 F.2d at 828. Counsel for the Harslems both enhanced the adversarial process, and secured benefits for the class. The Harslems raised a number of significant objections to the settlement and to the propriety of certification. While their objections were ultimately unsuccessful, they served to generate debate and focus the issues before the Court. For example, their objections to the proposed judgment credit helped to refine the parties' and the Court's understanding of © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) this important provision. The Harslems' objections conferred a benefit on the class by forcing the settling parties to clarify the judgment credit provision, removing certain ambiguities that might have worked to the detriment of class members in subsequent proceedings. Bondurant is therefore entitled to some compensation. However, the suggested award of 1.5% of the fund awarded to class counsel is excessive. The lodestar value of Bondurant's services is $54,615. Bondurant also incurred expenses of $49,917, for a total in fees and expenses of $104,532.90. [FN237] An award of 1.5% of the fund awarded to class counsel would amount to $179,784, representing 3.3 times the lodestar value of Bondurant's services, and 1.7 times the combined value of fees and expenses. There is no justification for granting the Harslems' counsel a significantly higher award, relative to their time and expenses, than class counsel. Bondurant did not bear the risk and the expense of the months of intense negotiations leading to this settlement; instead, it "argued the nuances of the settlement during the twilight of this litigation." [FN238] Although objectors benefitted the class by clarifying ambiguities in the judgment credit provision, they did not achieve any substantive improvements in the settlement. "An appropriate fee award for objectors under these circumstances would compensate counsel for the reasonable fees and expenses actually accrued in pursuit of their objections, nothing more." [FN239] FN237. These figures do not include time spent on seeking to opt out of the settlement. FN238. In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. at 359. Page 39 expenditure on local counsel was surely reasonable. I will therefore reduce the requested sum by 50%. [FN242] This results in a total award of fees and expenses of $81,665. FN240. In re Excess Value Ins. Coverage Litig., No. M-21-84, 2004 U.S. Dist. LEXIS 24368, at *18 (S.D.N.Y.2004). FN241. See Affidavit of H. Lamar Mixson, Harslems' counsel, in support of fee application. FN242. See SEC v. Goren, 272 F.Supp.2d 202, 214 (E.D.N.Y.2003) (reducing unitemized expense in receivership fee application by 50%, in recognition that some amount of that expense must have been reasonable). The settlement fund for the class is reasonable, but, as a result of Jenkens' vulnerable condition, not particularly generous. As a result, I conclude that the burden of paying the Harslems' fees and expenses should not fall on the class. Accordingly, $81,665 of the $12,610,449.84 award of attorney's fees and expenses is to be allocated to counsel for the Harslems. 5. Incentive Awards [23] Plaintiff request a "modest incentive award" of $10,000 for each of the individual *355 Lead Plaintiffs. [FN243] "Such awards are not uncommon and can serve an important function in promoting class action settlements." [FN244] In making these awards, courts generally consider: FN243. Lead Counsel Decl. ¶ 86. FN239. Id. "The fee applicant has the burden of establishing the reasonableness of the expenses it seeks to recover; therefore, a failure to itemize the reasons for substantial expenditures is grounds for a reduction in the amount of an expense award." [FN240] By far the most substantial of the expenses claimed by Bondurant is the cost of retaining local counsel. This alone accounts for $45,734, and is approximated without any itemization or support. It is impossible for the Court to determine the reasonableness of this expense. On its face, $45,734 appears excessive: the work of drafting the Harslems' objections appears to have been done largely if not entirely by Bondurant. [FN241] Nevertheless, some of Bondurant's FN244. Sheppard v. Consol. Edison Co. of N.Y., Inc., No. 94 Civ. 0403, 2002 WL 2003206, 2002 U.S. Dist. LEXIS 16314 (S.D.N.Y. Aug. 1, 2002). the existence of special circumstances including the personal risk (if any) incurred by the plaintiffapplicant in becoming and continuing as a litigant, the time and effort expended by that plaintiff in assisting in the prosecution of the litigation or in bringing to bear added value (e.g., factual expertise), any other burdens sustained by that plaintiff in lending himself or herself to the prosecution of the claim, and, of course, the ultimate recovery. [FN245] © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works. 230 F.R.D. 317 230 F.R.D. 317, RICO Bus.Disp.Guide 10,837 (Cite as: 230 F.R.D. 317) FN245. Roberts v. Texaco, Inc., 979 F.Supp. 185, 200 (S.D.N.Y.1997). In addition, courts consider the relationship between the requested incentive award and the amounts recovered by absent class members under the settlement. [FN246] FN246. Sheppard, 2002 WL 2003206 at *56, 2002 U.S. Dist. LEXIS 16314 at *17-20. Class Counsel have stated that Lead Plaintiffs were involved in settlement discussions, and, "while each of these individuals was in a position to capitalize on lawsuits already filed to attempt to get a full or at least far greater recovery for themselves [they] took seriously their role to arrive at a settlement in the best interest of the Class as a whole." [FN247] In light of Class Counsel's representations, I find that Lead Plaintiffs are entitled to a reasonable incentive award. The requested incentive award of $10,000 is comparable to incentive awards granted in other cases. [FN248] An award of $10,000 is also proportionate to the amount absent class members will recover under the settlement. [FN249] Page 40 against Jenkens. The joint motion of Jenkens and Lead Plaintiffs for entry of final judgment confirming the certification of the settlement class and approving the class settlement is granted. Class Counsel's motion for fees and expenses is granted to the extent stated above. The request of counsel for the Harslem Plaintiffs for fees and expenses is granted to the extent stated above. Lead Plaintiffs' request for an incentive award is granted. Objectors' requests to opt out of the class are denied. The Clerk of the Court is directed to close these motions [# s 173, 181, 187, 188]. SO ORDERED: Motions, Pleadings and Filings (Back to top) • 1:03cv05460 (Docket) (Jul. 23, 2003) END OF DOCUMENT FN247. Lead Counsel Decl. ¶ 85. FN248. See Sheppard, 2002 WL 2003206 at *6-7, 2002 U.S. Dist. LEXIS 16314 at *2122 (citing cases approving incentive awards ranging from $336 to $303,000, with most awards being in the $10,000 to $50,000 range). FN249. The settlement provides $81,557,805 for 1,076 class members, or roughly $65,000 per plaintiff, after counsels' fees, and making the unlikely assumption that all class members file a claim. The requested incentive award is thus roughly 15%, at most, of the average class recovery. See Sheppard, 2002 WL 2003206 at *6-7, 2002 U.S. Dist. LEXIS 16314 at *22-23 (approving as proportionate incentive awards $7,795 higher than the highest class payment of $21,372). V. CONCLUSION For the foregoing reasons, I hereby approve the proposed settlement as fair, reasonable and adequate, and certify the proposed class. Certification is solely for the purpose of settlement of the class claims © 2006 Thomson/West. No Claim to Orig. U.S. Govt. Works.