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 claimants procedures that pro- trust’s assets, all who were concerned with multiple prosthetics during a single vide fair mechanisms for deciding which understood that the cheapest way to surgery only entitled a claimant to a class members will receive settlement administer the settlement would be to single revision surgery benefit.6 Was this benefits. That concern was heightened take the total fund, divide by the total question weighted with enormous policy in the Sulzer settlement because a class number of class members, press play on implications that shook the foundations member who participates in the settle- a laser printer, and be done with it in of the settlement and western judicial ment executes a full release even if he 60 days. thinking? Of course not. The claims receives no award inside the settlement. That would have been efficient, but administrator’s ability to resolve the But the administration process cannot it would have been unfair and possibly question quickly with the consent of be as robust as that contemplated by unconstitutional.12 It would have treated class counsel meant implementation the Seventh Amendment. If it were, the dissimilarly injured claimants similarly, of the settlement was not delayed by costs of administering the settlement and it would have deprived class mem- lengthy motions briefing, argument, and for 20,000 claims would have quickly bers of the opportunity to make the case proceeding in federal court. Addition- exhausted the trust’s assets. why their claim merited special compen- ally, the published claims administra- The Sulzer settlement attempted to sation. A simple pro rata distribution to tor procedure made the resolution and balance those competing considerations all class members, without a concurrent administration process transparent for by providing claimants no less than five review of claimant medical records, the entire settlement class. opportunities to have their claim per- would have deprived the claims admin- Over the course of the settlement, the fected and considered for a settlement istrator of the opportunity to identify claims administrator adopted more than award.11 After each review, the claims wrongful, duplicate, and even fraudulent 30 claims administrator procedures. administrator, or the party-approved claims.

15 - 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. Have a Plan for Late Claims $200,000 awards, early trial verdicts goodwill. Later in the settlement when Late claim submissions are the bane of before the settlement were much higher new appeals would delay payment of every administrator’s existence. A late than that. Settlement participants, in some benefits, we would draw on that submission, the late filer argues, ought short, were angry about what happened reservoir. When the claims administra- not to be penalized given the beneficent to them and came to the settlement tor explained that we were pressing for purposes of the settlement. A small knowing they would likely receive only a the appeals to conclude as quickly as delay with regard to an administra- fraction of what they might win at trial feasible so that we could continue work- tive deadline ought not to disqualify if the defendants could afford to pay. ing to pay people fairly in the manner someone from eligibility for a signifi- The settlement drafters sought to required by the settlement agreement, cant settlement benefit. On the other allay those concerns first by getting callers believed us, in part, because we hand, granting short extensions for any payment out the door quickly in the had demonstrably worked so hard early reason only has the effect of creating form of a Guaranteed Payment Option on to do just that. While some appeals a new unwritten deadline with the po- (GPO).14 Participants in this process in 2003 and 2004 did delay some pay- tential for harsh disqualifying results. committed to the settlement terms even ments, not a single class member, by Moreover, paying late claims would if the settlement was ultimately derailed motion or otherwise, initiated a single have made it impossible for the claims for any reason, including appeal from proceeding collaterally attacking the administrator to know when the claims any trial court approval or ultimate settlement or its implementation during processing effort should conclude and decertification of the class. In exchange, what amounted to a year-long delay in when any residue of the trust might be GPO participants were given the defen- processing the most serious claims. distributed. dant’s binding commitment to pay the In the Sulzer settlement in particular, class action settlement benefits as well as Make Sure the Relevant some claimants were entitled to discre- a quick payment of $40,000. Constituencies are Well-Informed tionary awards, the amount of which Careful administration requires vigi- was, in part, a function of available lance for a wide range of circumstances money after base claims were paid. The defendents, by that could upset the settlement cart. For Honoring late claim submissions would operation of the settlement example, we encountered complications make these discretionary awards difficult agreement, had no financial associated with late claims, some class to make. members seeking de novo review of their We resolved early on, with the agree- incentive to tinker with benefit determinations in the district ment of class counsel, to adopt a claims administration except to court and outside settlement’s admin- administrator procedure that used Rule aid in the overall success istrative process, greater than expected 60, in its essence, as the measure of (and budgeted) claims in certain benefit whether an untimely submission might of the settlement. categories, and lower than expected otherwise be permissible.13 Ignorance of numbers of claims in other categories. a published deadline or negligence by a The notice campaign for the settle- Each of these required investigation, claimant’s attorney could not constitute ment was underway by March 2002, revised planning, and either a publicly excusable neglect. While that rule in and the settlement was approved in May announced Claims Administrator Proce- practice disqualified many late claims, 2002. By August 2002, the first GPO dure or an order from the court. it also ensured that the settlement trust checks were being mailed. In the weeks Although the claims administrator would be used to pay valid, timely before Christmas, the claims admin- was empowered by the settlement agree- claims, and not as an indemnity for at- istrator sent checks to class members ment to adopt processing procedures torney malpractice. totaling just under $300 million dollars. after consulting with class counsel, as a The important lesson to draw here is The quick, early processing bought the practical matter, he never did so without to assess the economic and practical im- settlement enormous good will. Early class counsel’s affirmative agreement. plications for late claims for a settlement calls and letters to the claims adminis- That was made easy by regular discus- and to quickly and publicly set a policy trator’s office were often long on anger sion with class counsel as administration for responding to late claims. and short on support. Subsequent call- issues arose. ers were often quick to express gratitude Class counsel was Eric Kennedy from Get Money Out the Door Quickly or relief and to say that the settlement Weisman, Kennedy & Berris in Cleve- Class members in the Sulzer settlement was a lone bright spot in a process that land, Ohio. Also from Kennedy’s firm, were seriously injured. The surger- had been distinctive, until then, only for David Landever and Dan Goetz were ies many underwent were grueling its figurative and literal pain. engaged intently on the settlement not and painful. Many of their lives were Those nods of appreciation didn’t just before the deal was concluded, but forever changed by the treatment they just make all parties feel good, but for years afterwards. Together, they took underwent. While many stood to receive they also represented a reservoir of the lead in coordinating policy positions

16 - 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. among the plaintiffs’ bar as a whole. All of this meant that the defen- questions pertaining to implementa- Similarly, David Brooks and Andrew dants, by operation of the settlement tion.15 Judge Kathleen McDonald Carpenter from Shook, Hardy & Bacon agreement, had no financial incentive O’Malley has proven a strong and cer- and Barry Alexander from Nelson to tinker with administration except to tain leader. The court regularly provided Mullins remained active and engaged in aid in the overall success of the settle- strong guidance to the parties, includ- the settlement as liaisons for the defen- ment, including the appropriate paying on how the agreement ought to be dant. Glenn Zuckerman, with Weitz ment of every dime of the settlement implemented (in careful accordance with & Luxenberg, and Steven McCarthy, trust to eligible claimants. Of course, all its terms and purposes) and whether col- with Blizzard, McCarthy & Nabers, as defendants want their settlements to be lateral attacks to the settlement might be lawyers who represented large numbers successful. But allowing the defendant encouraged. of class members and part of the court’s to participate in benefit determinations, The court also ruled quickly on is- Special State Counsel Committee, were particularly when its participation is sues as they arose. These ranged from constant and excellent sounding boards tied to ongoing funding obligations, review of insurance agreements to rul- for possible settlement procedures. can create conflicting incentives. On ing on collateral challenges to benefit These collaborative efforts were es- the one hand, the defendant might seek awards to resolving certain attorney fee sential to the successful implementation to pay claimants to achieve the settle- disputes between class members and of the settlement. Good lawyers hardly ment’s purpose of buying peace. On the their counsel.16 need to be told to collaborate with their other hand, a defendant might have an The court’s leadership gave the settle- adversaries when circumstances dictate, incentive to use its administration rights ment a strong sense of direction and but many settlements regrettably do not to minimize payments as a means to urgency. Whenever there was a choice enjoy that sort of collaborative effort. safeguarding its own purse. That kind of between payment being made quickly settlement may be successful, but it re- or slowly, the claims administrator paid Structure the Settlement to quires a claims administrator to contend quickly. The court’s ruling on whether Incentivize Collaboration with multiple constituencies who have certain claimants could challenge Structurally, the Sulzer settlement some claim to the settlement trust. their benefit determinations after their encouraged major constituencies to Of course, the defendants’ peace in settlement-prescribed administrative work collaboratively with one another. the Sulzer settlement was imperfect. rights had been exhausted was careful Perhaps the most important feature of The defendant ultimately was required and well-reasoned, explicitly endorsed the settlement in this regard is the severe to make approximately $75 million in on appeal in the U.S. Court of Appeals limitations it imposed on the role of the additional payments to the Trust. Most for the Sixth Circuit, and survived a cer- defendant. The Sulzer defendants were of these were anticipated by the settle- tiorari petition to the Supreme Court.17 required to fund more than 90 percent ment agreement itself in the event of of the more than $1 billion dollar settle- greater-than-projected claim activity. In Conclusion ment trust within six months of the addition, a $25 million payment was the After eight years, 20,000 claims, and $1 settlement’s approval. In exchange for subject of some closely contested nego- billion dollars, there are surely lessons the quick funding, and with less than a tiations. The parties were not of a single other than these that one might draw hundred class members who opted out mind on all questions. from the Sulzer settlement. And, it is of the settlement, the Sulzer defendants One lesson worth drawing, though, true that some of the lessons from this achieved the much-touted, and often is that a settlement ought to limit the case are those any of us might draw elusive, goal of global peace. What areas where the parties, post settlement, from litigation and law practice more the defendants did not get, though, may continue the adversarial process by generally. But, in this context and on speaks volumes. other means. That does not necessarily this scale, these principles merit special Defendants did not get the right mean a diminution in the defendant’s consideration. to provide documents to the claims role or an elevation of class counsel’s. administrator that might be relevant to What it should mean, though, is that if a Cullen D. Seltzer is a member of Seltzer- a claim. They did not get the right to settlement is intended to achieve global Greene, PLC, in Richmond, Virginia, and an review claim submissions, see claim- peace, then the settlement’s operating adjunct professor at the University of ant records, audit benefit awards, or assumption should be that the parties Richmond School of Law. challenge a benefit award as improperly will substantially lay down their arms. made or providing too great a benefit. Most importantly, if the settlement Have a Strong and Engaged Endnotes trust had money remaining after all Supervising Judge 1. In re Sulzer Hip Prosthesis and Knee claims were paid, the defendants had The settlement agreement in the Sulzer Prosthesis Product Liability Litigation, 01- no right to any of it because the trust case vested the trial court with exclu- CV-9000 (N.D. Ohio) (O’Malley, J.). was non-reversionary. sive and continuing jurisdiction over 2. The opinions expressed in this article are

17 - 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. the author’s and do not necessarily reflect the 7. Claims Administrator Procedure 2 Submission Deadlines for Class Members), views of the parties, their lawyers, or the court (Payment of Settlement Benefit Checks to http://sulzerimplantsettlement.com/pdfs/ that supervised this case. Class Members and to Attorneys Represent- cap29.pdf. 3. Judge McMonagle engaged my former ing Class Members). The Claims Administra- 14. Class Action Settlement Agreement, firm, Bowman and Brooke, LLP, to provide tor Procedures are available at www. Article 8 (Guaranteed Payment Option), http:// both services. Later, BrownGreer, PLC, sulzerimplantsettlement.com/claimsadmin.htm. sulzerimplantsettlement.com/article7.htm. performed those services when that firm was 8. Claims Administrator Procedure 6 (Claims 15. Class Action Settlement Agreement formed from Bowman and Brooke alumni in Pursuant to Agreements Between Sulzer and § 9.1, http://sulzerimplantsettlement.com/ 2000. I continue to represent Judge McMon- Third Party Payors Against the Subrogation and article9.htm. agle in the Sulzer matter, while BrownGreer Uninsured Expenses Sub-Fund). 16. See, e.g., In re Sulzer Hip Prosthesis continues to provide excellent claims adminis- 9. Claims Administrator Procedure 9 and Knee Prosthesis Product Liability Litiga- tration services. (Contingent Fee Contracts Entered into after tion, slip op. 1:01-cv-9000 (N.D. Ohio, Apr. 4. Class Action Settlement Agreement, February 2, 2002). 2, 2003) (MDL No. 1401) (clarifying what at- § 4.6(i), http://sulzerimplantsettlement.com/ 10. Claims Administrator Procedure 30 (Pro- torney fees plaintiffs’ counsel may collect from article4.htm. Claims Administrator cedures for Appealing a Final Determination). settlement awards) (available at http:// Procedure 1 set out the process for promulgat- 11. Class Action Settlement Agreement, sulzerimplantsettlement.com/pdfs/sebastien.pdf). ing Claims Administrator Procedures. http:// Article 4 (Claims Administration), www. 17. See In re Sulzer Orthopedics and Knee sulzerimplantsettlement.com/pdfs/CAP%201.pdf. sulzerimplantsettlement.com/article4.htm. Prosthesis Products Liability Litigation, Certi- 5. The Settlement Agreement is available 12. See, e.g., Ortiz v. Fibreboard Corp., 527 fied Class, et al. v. Sulzer Medica, et al., and at http://sulzerimplantsettlement.com/ U.S. 815, 856–57 (1999) (noting the require- Sulzer Settlement Trust, 398 F.3d 782 (6th Cir. classactionsettlement.htm. ment that dissimilarly situated class members 2005) (affirming district court holding regard- 6. Claims Administrator Procedure 28 be represented separately to ensure each sub- ing ineligibility of late claims and that claims (APRS Fund Benefits if Revision Surgery group’s interests are adequately represented). administration process contractually limited Requires Multiple Procedures), http:// 13. Claims Administrator Procedure to extra-judicial determinations of eligibility). sulzerimplantsettlement.com/pdfs/cap28.pdf. 29 (Extensions from Claim Processing and

Procedural Misjoinder Mass Torts Wyeth v. Levine Continued from page 6 Continued from page 13 Loan of Miss., 338 F. Supp. 2d 691, 695 on the Web 5. Id. at 1198. (N.D. Miss. 2004), Barron v. Miraglia, 6. Id. at 1204. 2004 WL 1933225, at *2 (N.D. Tex. Aug. 7. City of Joliet v. New West, L.P., 30, 2004), Rudder v. Kmart Corp., 1997 562 F.3d 830 (7th Cir. 2009). WL 907916, *6 (S.D. Ala. Oct. 15, 1997), 8. 12 U.S.C.S. § 17151. Terrebonne Parish School Board v. 9. 42 U.S.C.S. § 1437f. Texaco, Inc., 1998 WL 160919 (E.D. La. 10. Id. at 835. April 3, 1998), Koch v. PLM Int’l, Inc., 11. 71 Fed. Reg. 3934–35. 1997 WL 907917 (A.D. Ala. Sept. 24, 12. Wyeth, 129 S. Ct. at 1201–02. 1997), In re Rezulin Prods. Liab. Litig., • View our directories 13. City of Joliet, 562 F.3d at 835. 168 F. Supp. 2d 136, 147 S.D. N.Y. 2001)). of leadership and 14. Dooner v. DiDonato, 971 A.2d 23. Kirkland et al. v. Wyeth et al., 1187 (Pa. 2009). Eighth Circuit Court of Appeals, No. 09- subcommittee listings 15. Id. at 1190. 1205 (consolidated with Jasperson et al. v. • Find additional resources 16. Id. at 1200. Wyeth et al., No. 09-1250 and Allen et al. • View our newsletter 17. Id. v. Wyeth et al., No. 09-1373) (Jan. 6, 2010, archive 18. Saleh v. Titan Corp., 580 F.3d 1, slip. opinion at 19). 4 (D.C. Cir. 2009). 24. Rutherford, at 852–53 (citing Burns • Plan to attend 19. Id. at *10–11. v. Western S. Life Ins. Co. 298 F. Supp. 2d committee events 20. Cook v. Ford Motor Co., 913 401 (S.D. W. Va. 2004); In re Rezulin, 168 N.E.2d 311 (Ind. Ct. App. 2009). F. Supp. 2d 136). Visit the Section of Litigation 21. Id. at 316 Mass Torts Committee Website at 22. Geier v. American Honda Motor www.abanet.org/litigation/ Co., Inc., 529 U.S. 861 (2000). committees/masstorts. 23. Epstein, supra note 2.

18 - 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.