Lessons Learned from Implementing a Class Action Settlement by Cullen D

Lessons Learned from Implementing a Class Action Settlement By Cullen D. Seltzer ass torts Be Fanatical about Data So, to guard against the possibility are famous Keeping track of information is im- of benefits being denied to someone Mfor their portant in every case, but class actions entitled to them, or paid to someone legal battlegrounds. magnify problems, and nowhere more who is not entitled, be fanatical about Fights over class than in the task of keeping track of the data. certification, control- information. How many class members Being fanatical about data is also es- ling law, discovery, are there, where do they live, and what sential to reliably anticipating problems Cullen D. Seltzer bell weather trials, are their birthdays and social security in the settlement. One of the main multidistrict litiga- numbers? Who are their heirs, doctors, settlement benefits in the Sulzer settle- tion (MDL) transfers, preemption, and authorized and emergency contacts, ment was a $160,000 payment for a removal can happily occupy 100 lawyers and lawyers? Is Mary Smith-Jones from qualifying hip or knee replacement for a decade or more in a single case. Wilmington the same person as Mary surgery plus an attorney fee subsidy for The lessons this article discusses are Smith from Wilmington? If you have represented claimants of up to $46,000. those learned after these fights are over. claims from both of those people, are That means each qualifying surgery re- How do you implement a mass tort they duplicate claims from one person duced the corpus of the trust by about settlement? or two separate claims? $200,000. Even with a $1 billion dollar In February 2002, Judge Kathleen There are at least two strategies for trust, claims with a value of $200,000 McDonald O’Malley of the United dealing with this problem. The first is to leave precious little margin for error. States District Court for the Northern use the best technology you can afford If the data regarding pending, valid, District of Ohio preliminarily approved to build a robust database that many invalid, and potentially curable claims a class action settlement in In re Sulzer people can simultaneously access. Take is unreliable, the claims administrator’s Hip Prosthesis and Knee Prosthesis care to limit who can make certain types ability to project the fund’s adequacy is Product Liability Litigation, MDL No. of entries in your database. Claims corrupted. 1401.1 The case turned on a medical processors should have ascending levels device (hip and knee prosthetics) manu- of responsibility; your least-tested folks Think about Claim Processing Before facturer’s liability for allegedly improp- should have limited areas of responsi- the Settlement Is Final erly manufactured devices that required bility that can be quickly checked for The Sulzer settlement was preliminarily surgical replacement. The settlement quality control. We asked junior claims approved in February 2002 and then contemplated resolving the claims of processors to do ministerial data entry set for a fairness hearing in May 2002. approximately 40,000 class members tasks. We asked more senior supervisors Judge O’Malley had approved engaging and a settlement trust of more than $1 to review reports of those workers’ over- Judge James McMonagle (former judge billion dollars. In the intervening eight all performance and work product. of the Ohio Common Pleas Court) as years, the settlement trust has paid out When confronted with a question of claims administrator months before essentially all its money, paid eligible identity, as in the hypothetical case of the scheduled fairness hearing. Judge class members up to 110 percent of their Mary Smith-Jones, we reviewed claims McMonagle’s appointment was instru- prescribed awards, limited transaction carefully to check for similar addresses, mental to successful implementation of costs associated with implementing the phone numbers, or signatures. If the the settlement. First, he has many years settlement to about 1 percent of the question could not be resolved on that experience in complex mass tort cases, trust, and processed to conclusion more basis, we put in calls to the plaintiffs’ including work in settlement facilities. than 23,000 benefit claims. lawyers involved or the claimants Second, he enjoys the respect of the Since February 2002, I have repre- directly if they were unrepresented. court and class counsel from their long sented James McMonagle, the claims In the Sulzer settlement, like in most association with him in other contexts. administrator for the class action settle- settlements, a claimant’s eligibility for Third, because of his extensive experi- ment in Sulzer. While it may seem like benefits was a function of his or her pre- ence working in tort claim facilities, he handing out a billion of other people’s sentation of a written claim form and has exceptional insight into the best dollars should be easy enough, I can accompanying documents. The claim practices of a successful administration attest that it is far easier said than done. process did not contemplate a hearing effort. Additionally, the time between What follows are the lessons worth not- at which direct and cross-examination his appointment and the approval of ing from the settlement.2 might clarify questions left ambiguous. the settlement gave Judge McMonagle 14 - Published in Mass Torts, Volume 8, Number 3, Spring 2010. © 2010 by the American Bar Association. Reproduced with permission. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. a few precious months to engage coun- These touched on a range of subjects, special master, was required to explain sel and a claims processing facility.3 including how to make out payment in writing the reason for any benefit During that window, the claims admin- checks for certain benefit awards,7 how denial. Given the large stakes for each istrator had the opportunity to engage to make claims for certain subrogation individual claimant, these protections necessary insurance providers as well. indemnification claims,8 how to award for claimants were reasonable, but they Most importantly, there was time to re- attorney fee subsidies for attorneys who were also labor intensive. view the administration procedures the accepted clients after the settlement was A banker’s box of medical records settlement contemplated. These were approved,9 and how to prosecute an ap- and physicians’ declarations may sup- largely well put together, but we identi- peal from an adverse benefit determina- port any given claim. All of that infor- fied a handful of changes we thought tion by the claims administrator to the mation had to be measured for relevance were important. party-approved special master.10 If the and probative value against the settle- Significantly, the agreement was class action settlement agreement was ment agreement’s very specific eligibility modified to permit the claims admin- the statute authorizing implementation requirements. In the Sulzer settlement, istrator to promulgate claims admin- of the settlement, the claims adminis- claimants did not have to prove their istration procedures after consulting trator procedures were the regulatory prosthetic’s defect in design or manufac- with class counsel, to aid in processing scheme that announced the particulars ture as they might have been required claims, and to clarify ambiguities should of how the settlement would work. to do at trial, but they did have to prove they arise.4 That idea that ambigui- they were implanted with a covered ties in the interpretation of a 100-page Making the Process More Fair Is Also prosthetic and that the product caused settlement agreement would arise was More Expensive the injury for which they sought a inevitable.5 For example, if a surgeon American jury trials provide robust monetary award. They also had to prove removed a prosthetic covered by the protections for litigants’ substantive the severity of the injury to establish the settlement from a patient and then and procedural rights. Opportunities value of their claim. test-fit a replacement during the same to confront evidence, call for evidence, Balancing burdens of proof in this surgery, but ultimately decided a larger have questions reviewed on appeal, and way was abundantly fair. It relieved prosthetic was appropriate, did that have questions considered not only by a claimants of complex, class-wide removal, reinsertion, re-removal, and judge, nominated by the president, and liability proof questions, but required re-reinsertion count as a single revision confirmed by the Senate, but also by a claimants to prove their damages surgery or two? jury of one’s peers, are all procedures by tendering documents specifically To resolve the question, the claims our laws extend, in part, because we required by the settlement’s drafters. administrator promulgated a proce- recognize that important interests ought That fairness, though, came at a price. dure clarifying that to get two surgery to be safeguarded by careful and strong While we were pleased that so little of benefits, a patient had to undergo two procedural mechanisms. the trust’s assets went to administration separate surgeries on two separate oc- The administration process must also costs, at least as a proportion of the casions, and test-fitting a single joint provide

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