United States District Court, D. Kansas
PATRICIA GEIGER, and MICHELLE HUNGET, on behalf of themselves and all others similarly situated, Plaintiffs,
SISTERS OF CHARITY OF LEAVENWORTH HEALTH SYSTEM, INC., et al., Defendants.
MEMORANDUM AND ORDER
CARLOS MURGUIA, District Judge.
The matter before the court is on plaintiffs' unopposed motion for preliminary approval of a proposed class action settlement (Doc. 78). For the reasons below, the court grants plaintiffs' motion, thereby approving the parties' preliminary class action settlement, certifying the proposed settlement class, appointing plaintiffs' counsel as class counsel, approving the proposed notice of the class action and settlement, and adopting plaintiffs' proposed schedule for final settlement approval.
On July 30, 2014, named-plaintiffs Patricia Geiger and Michelle Hunget, on behalf of themselves and all others similarly situated, filed a class action complaint pursuant to Federal Rule of Civil Procedure 23 against defendants Sisters of Charity of Leavenworth Health System, Inc., SCLHS's Separation Benefit Plan (the "Benefit Plan"), and the Benefit Plan Administrator (collectively, the "SCLHS Defendants"), as well as Prime Healthcare Services, Inc., Prime Healthcare Services-Saint John Leavenworth, LLC, and Prime Healthcare Services-Providence, LLC (collectively, the "Prime Defendants"). Plaintiffs, who were laid off from their jobs in April 2013, allege they were deprived of separation benefits under the Benefit Plan in violation of the Employee Retirement Income Security Act ("ERISA") and Kansas state law. Plaintiffs sought to represent a class of all employees who were employed by SCLHS as of March 31, 2013, who were eligible participants in the Benefit Plan as of that date, and who were notified between April 1, 2013 and April 15, 2013 that they would be laid off. On October 10, 2014, plaintiffs filed their First Amended Complaint. (Doc. 27.) The Prime Defendants filed a motion to dismiss under Federal Rule 12(b)(6), (Doc. 42), and both defendants have asserted cross-claims, against each other. (Docs. 51 and 57.) On February 23, 2015, the court denied the Prime Defendant's motion to dismiss. (Doc. 63.) Since then, the Prime Defendants have answered the complaint. (Doc. 66.)
On April 2, 2015, the parties engaged in a full day of mediation with Phil Miller at Kansas City Mediation Services, LC, during which the parties nearly reached a settlement. After further communications with Mr. Miller, the parties reached a Settlement Agreement (Doc. 80-1 at 2-19).
II. The Settlement Agreement
The parties agree to settle this lawsuit for a total settlement amount of $550, 000, which is broken into two parts: $525, 000 and $25, 000. The $525, 000 is one-hundred percent of the actual separation benefits that plaintiffs, as a class, would have received under the Benefit Plan had they been paid those benefits upon termination-assuming the class was entitled to such benefits ("Baseline Amount"). The $25, 000 is a fixed amount paid in addition to the Baseline Amount. As part of the settlement, defendants agreed to allow plaintiffs to conduct further due diligence to ensure the accuracy of the information produced in discovery and, by extension, the Baseline Amount. Such adjustment (a "Due Diligence Adjustment") can only increase the Baseline Amount. In other words, under no circumstances, will the Baseline Amount fall below $525, 000. The resulting formula is: the Baseline Amount plus any Due Diligence Adjustment plus the fixed $25, 000 equals the "Finalized Settlement Fund." The lowest possible amount of the Finalized Settlement Fund is $550, 000. By way of example, if plaintiffs' Due Diligence Adjustment is $50, 000, the Baseline Amount would increase to $575, 000, which is further increased by the fixed $25, 000, for a Finalized Settlement Fund of $600, 000.
The Finalized Settlement Fund covers class members' awards, service payments to the named-plaintiffs, attorney's fees and costs, and a reserve set aside for reasonable costs of the settlement administration. The remaining Finalized Settlement Fund will be distributed to class members on a pro rata basis, consistent with the Benefit Plan.
A. Preliminary Approval of the Parties' Settlement Agreement
The law favors compromise and settlement of class action suits. See Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 2005) (noting the "strong judicial policy in favor of settlements, particularly in the class action context") (internal quotation marks omitted); In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 535 (3d Cir. 2004) ("there is an overriding public interest in settling class action litigation, and it should therefore be encouraged"); see also Newberg § 11.41 ("The compromise of complex litigation is encouraged by the courts and favored by public policy."). Federal Rule of Civil Procedure 23(e) authorizes a court to approve a class action settlement after notice, a hearing, and "on finding that [the settlement] is fair, reasonable, and adequate." Fed.R.Civ.P. 23(e)(2). Courts determine whether a proposed settlement is fair, reasonable, and adequate by considering:
1. whether the proposed settlement was fairly and honestly negotiated;
2. whether serious questions of law and fact exist, placing the ultimate outcome of the litigation in doubt;
3. whether the value of an immediate recovery outweighs the mere possibility of future relief after protracted ...