Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_06-cv-03903/USCOURTS-cand-3_06-cv-03903-15/pdf.json

Nature of Suit Code: 442
Nature of Suit: Civil Rights Employment
Cause of Action: 42:2000e Job Discrimination (Employment)

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United States District Court

For the Northern District of California

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 Although the Court explicitly sought additional submissions “from the parties only,”

counsel for Objectors have sought leave to file a 20-page brief and nearly two and half inches of 

supporting documents that address Ms. Curtis-Bauer’s adequacy as a representative and point out

perceived deficiencies in the settlement agreement. The request for leave to file additional

submissions is DENIED. The Court will not consider a motion for reconsideration of this Order.

Counsel for the Moore Group Objectors are forewarned that further repetitive submissions may

subject them to sanctions under 28 U.S.C. § 1927 for vexatiously multiplying this litigation. 

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

DAISY JAFFE, et al.,

Plaintiffs,

v.

MORGAN STANLEY & CO., 

INC., 

Defendant.

NO. C 06-3903 TEH 

ORDER (1) PRELIMINARILY 

APPROVING CLASS ACTION 

SETTLEMENT; (2) 

PROVISIONALLY CERTIFYING

SETTLEMENT CLASSES; (3)

DIRECTING DISTRIBUTION OF

NOTICE OF THE SETTLEMENT;

(4) SETTING A SCHEDULE FOR

THE FINAL APPROVAL PROCESS;

(5) DENYING OBJECTORS’

MOTION FOR LEAVE TO FILE

ADDITIONAL BRIEFS, AND (6)

DENYING MOTION FOR ACCESS

TO DOCUMENTS FILED UNDER

SEAL

This matter came before the Court on December 3, 2007 on the Parties’ Joint Motion

for Preliminary Approval of Class Action Settlement, Provisional Certification of Settlement

Class, Approval and Distribution of Notice of Settlement, and Approval of a Schedule for the

Final Settlement Approval Process. The Court did not grant preliminary approval of the

settlement at that time. Instead, by Order dated December 12, 2007 (“Order”), the Court

invited the parties to submit additional evidence and briefing in support of the settlement. 

Both parties submitted additional briefs and declarations in support of the settlement,

including an amended settlement agreement and notice.1

 Objectors to the settlement (“the

Moore Group”) have also requested discovery and move for access to certain documents

filed in support of the settlement under seal. 

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The Court has carefully reviewed all the documents filed by the Parties in this action

in support of the settlement, and all the documents properly filed by Objectors. As set out

more fully below, because the Court now has sufficient facts before it to evaluate the

settlement, the Objectors’ request for discovery is DENIED, and their request to obtain

access to documents filed under seal is also DENIED. The Court finds that the Parties’

additional submissions have assuaged its concerns about both the adequacy of representation

and the fairness of the settlement, which appears at this stage to be fundamentally fair,

adequate and reasonable when viewed as a whole. The Court therefore GRANTS

provisional class certification and preliminary approval of the settlement. 

I. JURISDICTION

This Court has jurisdiction over the subject matter of the litigation and over all parties

to this litigation, including all members of the Settlement Classes, as defined below.

II. NO DETERMINATION

This Court hereby decrees that neither the Settlement Agreement, nor this preliminary

approval order, nor the fact of a settlement, are an admission or concession by the Defendant

of any liability or wrongdoing.

III. REQUEST FOR DISCOVERY

The Moore Group Objectors seek discovery from the parties. First, they want “the

workforce data Morgan Stanley provided to plaintiff’s counsel,” including human resources,

payroll, account transfer and team data. Second, the Moore Group also asks the Court to

require Morgan Stanley to respond to several questions in order to allow it to evaluate the

adequacy of the injunctive relief. Third, Objectors seek disclosure of the Power Ranking and

the adverse impact studies Plaintiffs performed on the Power Ranking formula, along with

the underlying data. Finally, Objectors want to be permitted to depose or cross-examine

named Plaintiff Margaret Benay Curtis-Bauer.

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This Court may, in its discretion, grant discovery necessary to enable objectors to

have meaningful participation in settlement proceedings. As one California district court

recently summarized: 

Class members who object to a class action settlement do not have an absolute

right to discovery; the Court may, in its discretion, limit the discovery or presentation

of evidence to that which may assist it in determining the fairness and adequacy of the

settlement. See e.g., In re Domestic Air Transp. Antitrust Litig., 144 F.R.D. 421, 424

(N.D.Ga.1992); In re Lorazepam & Clorazepate Antitrust Litig., 205 F.R.D. 24, 26

(D.D.C.2001); In re Ford Motor Co. Bronco II Prods. Liability Litig., Civ. A. No.

MDL-991, 1994 WL 593998, 1994 U.S. Dist. LEXIS 15867 (E.D.La. Oct. 28, 1994);

Glicken v. Bradford, 35 F.R.D. 144, 148 (S.D.N.Y.1964); see generally A. Conte and

H. Newberg, NEWBERG ON CLASS ACTIONS § 11:57 at 184 (4th ed.2002)

(“NEWBERG”). “While objectors are entitled to ‘meaningful participation’ in the

settlement proceedings, Girsh v. Jepson, 521 F.2d 153, 158 (3rd Cir.1975) and ‘leave

to be heard,’ Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir.1977), they are not

automatically entitled to discovery or ‘to question and debate every provision of the

proposed compromise.’ ” In re General Tire & Rubber Co. Sec. Litig., 726 F.2d 1075,

1084 n. 6 (6th Cir.1984), citing Cotton, 559 F.2d at 1331. Objectors should be allowed

“meaningful participation in the fairness hearing without unduly burdening the parties

or causing an unnecessary delay.” Domestic Air, 144 F.R.D. at 424. The fundamental

question is whether the district judge has sufficient facts before him to intelligently

approve or disapprove the settlement. In re General Tire & Rubber Co. Sec. Litig., 726 F.2d at 1084 n. 6, citing Detroit v. Grinnell, 495 F.2d 448, 463-468 (2d Cir.1974).

Hemphill v. San Diego Ass'n of Realtors, Inc. 225 F.R.D. 616, 619-620 (S.D.Cal. 2005).

As set out more fully below, this Court finds that Objectors have had meaningful

participation in the settlement proceedings, the Court has sufficient facts before it to

intelligently evaluate the settlement, and discovery would cause unnecessary delay. 

Accordingly, the Moore Group’s request for discovery is DENIED. Each individual request

is discussed below in the context of provisional class certification or approval of the

settlement. 

IV. CERTIFICATION OF SETTLEMENT CLASSES

This Court must review the propriety of class certification under Fed. R. Civ. Pro.

23(a) and (b) in order to preliminarily approve a settlement under Fed. R. Civ. Pro. 23(e). 

Staton v. Boeing Co., 327 F.3d 938, 952 (9th Cir. 2003). The Court “must pay ‘undiluted,

even heightened, attention’ to class certification requirements....” Id. (citation omitted). 

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For settlement purposes, the Parties have proposed conditional certification of the

following settlement classes:

• For purposes of the injunctive and declaratory relief provided in the Settlement

Agreement, an injunctive-relief class certified under Federal Rules of Civil Procedure

23(a) and 23(b)(2) and consisting of:

All African-Americans and Latinos employed as Financial Advisors or

Registered Financial Advisor Trainees in the Global Wealth Management

Group of Morgan Stanley & Co. Incorporated or its predecessor, Morgan

Stanley DW Inc. at any time between October 12, 2002 and December 3, 2007.

• For purposes of the monetary relief provided in the Settlement Agreement, a

Settlement Class certified under Federal Rules of Civil Procedure 23(a) and 23(b)(3)

and consisting of:

All African Americans and Latinos employed as Financial Advisors or

Registered Financial Advisor Trainees in the Global Wealth Management

Group of Morgan Stanley & Co. Incorporated or its predecessor, Morgan

Stanley DW Inc. at any time between October 12, 2002 and December 3, 2007,

who do not timely opt out.

The injunctive relief and monetary relief settlement classes allege claims for race and color

discrimination under 42 U.S.C. § 1981.

The Court hereby FINDS and CONCLUDES that these classes satisfy all the

requirements for certification under Rule 23.

A. Rule 23(a)

Rule 23(a)(1) requires that the class be “so numerous that joinder of all members is

impracticable.” The proposed classes of approximately 1200 Financial Advisors (“FAs”)

and Registered Financial Advisor Trainees (“FA trainees”) is sufficiently numerous that

joinder is impracticable.

Rule 23(a)(2) requires that “there are questions of law or fact common to the class.” 

Commonality focuses on the relationship of common facts and legal issues among class

members, and has been construed permissively. Dukes v. Wal-Mart, Inc., 509 F.3d 1168,

1177 (9th Cir. 2007), citing Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir.1998). Class

members share common issues of fact and law regarding whether defendant Morgan

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 The Court has no doubt that Plaintiffs are represented by qualified and competent counsel.

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Stanley’s policies and practices had an adverse impact on them and whether Morgan Stanley

violated 42 U.S.C. § 1981.

Rule 23(a)(3) requires that “the claims or defenses of the representative parties be

typical of the claims or defenses of the class.” The Court should consider whether the injury

allegedly suffered by the named plaintiff and the rest of the class “resulted from the same

allegedly discriminatory practice.” Dukes, 509 F.3d at 1184. In its December 12, 2007

Order, the Court found that the claims of the named Plaintiff, Ms. Curtis-Bauer, are typical

because she was allegedly injured by the same discriminatory nationwide policies and

practices with respect to account distribution, business opportunities, and compensation as

other class members. See Second Amended Complaint (“SAC”) ¶¶ 30-32 (alleging

discriminatory practices and policies). The Court rejected the objection that Ms. CurtisBauer’s claims could not be typical of those of Latino FAs and FA Trainees, even if AfricanAmerican employees suffered greater harm from the same practices. Cf. Dukes, 509 F.3d at

1184 (claims typical even if some class members received different levels of pay or were

denied promotion at different rates because alleged discrimination stemmed from common

practice).

The Court expressed concerns, however, about whether Ms. Curtis-Bauer could be an

adequate representative under Rule 23(a)(4), which permits certification only if “the

representative parties will fairly and adequately protect the interests of the class.” This factor

requires the Court to inquire whether named plaintiffs and their counsel have any conflicts of

interest with other class members, and whether they will prosecute the action vigorously on

behalf of the class. Hanlon, 150 F.3d at 1020.2

 Although the Court found that Ms. CurtisBauer could adequately represent Latino FAs and FA trainees and Morgan Stanley

employees with other levels of production or tenure, December 12, 2007 Order at 3-5, the

Court questioned 1) how it could evaluate whether Ms. Curtis-Bauer’s interests were aligned

with those of the class when she was slated to receive a far greater payment in combined

incentive and non-class settlement awards than the average class member; and 2) how it

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could be assured that Ms. Curtis-Bauer has been and will be an adequate, engaged

representative who can vigorously represent the interests of the class when she joined the

litigation late in the settlement process. Order at 2-3. The Court invited additional briefing

and submission of evidence relating to how it should judge Ms. Curtis-Bauer's adequacy as a

representative under these conditions.

The additional briefing and submissions by the Parties provide information apart from

the economic incentives created by the class and additional awards by which the Court can

judge Ms. Curtis-Bauer’s adequacy as a class representative, and show that her interests

parallel those of the class.

1. Ms. Curtis-Bauer Can Vigorously Represent The Class Despite Her

Late Involvement

Courts have found that even class representatives who join litigation after a settlement

has been reached can adequately represent the class. See, e.g., Olden v. LaFarge Corp., 472

F.Supp.2d 922, 937-39 (E.D.Mich. 2007), citing Moore's Federal Practice § 23.25[6] (court

may substitute a new representative after class certification); Heit v. Van Ochten, 126

F.Supp.2d 487, 494 -495 (W.D.Mich. 2001)(relying on the assertion of Plaintiffs’ counsel

that substitute named plaintiff has requisite judgment and experience to represent class well

in order to approve new class representative).

Plaintiffs argue that the Court may conclude Ms. Curtis-Bauer is an adequate

representative where the settlement secured for the class members is fair, adequate, and

reasonable: 

It is, ultimately, in the settlement terms that the class representatives’ judgment and

the adequacy of their representation is either vindicated or found wanting. If the terms

themselves are fair, reasonable and adequate, the district court may fairly assume that

they were negotiated by competent and adequate counsel; in such cases, whether

another team of negotiators might have accomplished a better settlement is a matter

equally comprised of conjecture and irrelevance.

Hemphill v. San Diego Ass'n of Realtors, Inc., 225 F.R.D. 616, 622 (S.D.Cal. 2005), quoting

In re Corrugated Container Antitrust Litig., 643 F.2d 195, 212 (5th Cir.1981). However, the

Supreme Court teaches that the Court cannot look to the settlement itself to determine that

Rule 23(a) and (b)’s requirements have been met – “whether a proposed class has sufficient

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unity so that absent members can fairly be bound by decisions of class representatives.” 

Amchem Products, Inc. v. Windsor, 521 U.S. 591, 619-622 (1997). But while the fact of or

terms of the settlement cannot show commonality, typicality, or whether there are conflicting

interests within the putative class, a good settlement can, logically speaking, show that the

representative was engaged, informed, and able to represent others vigorously. 

Both the fairness of the settlement, discussed more fully below, and Ms. CurtisBauer’s supplemental declaration show that she is an “adequate” representative in this sense. 

Her declaration explains that she is serving as class representative primarily because she

wants to effect systemic change at Morgan Stanley. Supplemental Declaration of Margaret

Benay Curtis-Bauer (“Suppl. Curtis-Bauer Decl.”) ¶ 10. Her first discussion with Plaintiffs’

counsel about the case was in May, 2007. Id. ¶ 12. She was not presented with the

settlement as a fait accompli before joining the suit; instead, she expressed interest in

becoming a plaintiff, became a plaintiff, and then evaluated the proposed settlement. Id. ¶

13. Her declaration shows that she was aware of her fiduciary duties to the class, felt capable

of assessing the settlement and the approach of counsel, and found that approach appropriate

to meeting the goals of the suit. Id. ¶¶ 10, 14. She suggested substantive changes which

were ultimately incorporated into the settlement agreement. Id. ¶ 14. 

2. Payments to Curtis-Bauer 

The most problematic part of the request for certification and approval of the

settlement remains the large payments to Ms. Curtis-Bauer. Ms. Curtis-Bauer will seek a

$25,000 incentive payment for serving as the named Plaintiff, but the Court is not obliged to

approve of the payment, and Ms. Curtis-Bauer states she will support the settlement whether

or not she receives the incentive payment. Suppl. Curtis-Bauer Decl. ¶11. This payment is

not before the Court at this time. 

In addition, as a material part of the Settlement Agreement, see Settlement Agreement 

§§ III.C and V.D, Ms. Curtis-Bauer is to receive $125,000 for releasing her non-class claims.

The portion of Ms. Curtis-Bauer’s declaration filed under seal shows that the nonclass claims she is releasing are distinct from the class claims asserted in this action. She

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 A four-year statute of limitations applies to Ms. Curtis-Bauer's non-class claims (under 42

U.S.C. § 1981, for contract claims in California, and for "unlawful" business practices under Cal.

Bus. & Prof. Code § 17200). Ms. Curtis-Bauer was terminated from Morgan Stanley in November,

2002, and the tolling agreement for class race claims in this case became effective only on January

23, 2007 (more than four years later). Plaintiffs argue that they have “legitimate” arguments that

Curtis-Bauer's individual claims are timely under tolling agreements between the Objectors and

Morgan Stanley, which tolled the Moore Group's individual and class race discrimination claims as

of August 8, 2006, or, alternately, that Curtis-Bauer's individual claims “relate back” to the

amendment of this case in October, 2006 to include plaintiff Denise Williams’s individual race

claims.

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alleges that she endured racial harassment, including being exposed to derogatory epithets,

during her employment. Although she complained about the offensive comments and

conduct, Morgan Stanley allegedly failed to respond and then terminated her. 

These claims may well be time-barred.3

 On the other hand, Morgan Stanley may have

determined it is in its interest to forego a statute of limitations defense and settle the claims

rather than defend against the suit and suffer adverse publicity stemming from allegations of

racial harassment. But this Court is not called upon to determine the merit of Ms. CurtisBauer’s separate claims or the wisdom of the settlement. Instead, it must determine whether

the settlement of her non-class claims renders Ms. Curtis-Bauer an inadequate class

representative (or makes the class settlement as a whole unfair). 

Courts are traditionally concerned that plaintiffs who receive large incentives may be

“tempted to accept suboptimal settlements at the expense of the class members whose

interests they are appointed to guard,” and become “more concerned with maximizing those

incentives than with judging the adequacy of the settlement as it applies to class members at

large.” Staton v. Boeing Co., 327 F.3d 938, 975, 977 (9th Cir. 2003). Here, there is no

evidence that Ms. Curtis-Bauer did, in fact, fail to evaluate the settlement, sacrifice the

interests of absent class members to her own, or accept an unfair settlement. As discussed

more fully below, the settlement meets the standards for preliminary approval under Fed. R.

Civ. Pro. 23(e). The Court is swayed by the fact that the District Court for the District of

Columbia approved of a nearly identical settlement in Augst-Johnson v. Morgan Stanley,

United States District Court for the District of Columbia Case No. 06-1142, with a monetary

fund that provided a similar per-plaintiff award when controlled for length of service. The

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 Objectors are not entitled to view those portions of her declaration filed under seal. 

Plaintiff has identified her agreement regarding non-class claims made in connection with the

settlement, as required by Fed. R. Civ. Pro. 23(e)(2), to the satisfaction of the Court. As the

Advisory Committee Notes to the 2003 Amendments to the Rule state, “[f]urther inquiry into the

agreements identified by the parties should not become the occasion for discovery by the parties or

objectors.... Some agreements may include information that merits protection against general

disclosure.” Here, the Court found good cause to allow the declaration describing Ms. CurtisBauer’s allegations to be filed under seal because Morgan Stanley would suffer the loss of the

confidentiality it bargained for if the allegations were made public. See Phillips ex rel. Estates of

Byrd v. General Motors Corp., 307 F.3d 1206, 1212 (9th Cir. 2002)(courts have granted protective

orders to protect confidential settlement agreements). 

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fact that the relief agreed to here is so close to that approved in Augst-Johnson is persuasive

evidence that Ms. Curtis-Bauer did not bargain away absent class members’ claims in

exchange for settlement of her non-class claims. While Ms. Curtis-Bauer may or may not

have been able to settle her non-class claims without the class action, there is no evidence

that she has benefitted at the expense of the class. The Court declines to reject her as a

representative merely because Objectors perceive an appearance of impropriety where there

is no evidence and only Objectors’ speculation that any improprieties have taken place. 

Nor are Objectors entitled to discovery about “the nature and precise timing of [her]

involvement in this lawsuit and the settlement negotiations as well as the nature and

settlement of her non-class claims” to support their speculation. Because there is no

evidence of collusion between the parties during the settlement negotiations process, see

December 12, 2007 Order at 6 n.2, Objectors are not entitled to discovery concerning

settlement negotiations between the parties. See In re Domestic Air Transp. Antitrust

Litigation, 144 F.R.D. 421, 424 (N.D.Ga.,1992), citing Mars Steel Corp. v. Continental

Illinois Nat'l Bank & Trust Co., 834 F.2d 677, 684 (7th Cir.1987). Moreover, Ms. CurtisBauer’s supplemental declaration provides this Court with sufficient facts to determine that

she is an engaged representative, that she has taken her duties as a class representative

seriously, that she has released distinct non-class claims, and that her interests are aligned

with those of the class.4

 Accordingly, at this juncture, the Court finds Ms. Curtis-Bauer is an

adequate representative.

//

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B. Rule 23(b)

In addition to meeting the prerequisites of Rule 23(a), a proposed class must be

appropriate for certification under one of the categories in Rule 23(b). Plaintiffs seek

provisional certification under both Rule 23(b)(2) and (b)(3). 

To be entitled to certification under Rule 23(b)(2), Plaintiffs must show that “the

party opposing the class has acted or refused to act on grounds generally applicable to the

class, thereby making appropriate final injunctive relief ... with respect to the class as a

whole.” Fed.R.Civ.P. 23(b)(2). Civil rights cases alleging unlawful class-based

discrimination are “prime examples” of such cases, Amchem Prods. Inc. v. Windsor, 521

U.S. 591, 614 (1997), which can include claims for monetary damages so long as such

damages are not the “predominant” relief sought. Dukes, 509 F.3d at 1186. To certify a

class under Rule 23(b)(2), the court must satisfy itself that:

 (1) even in the absence of a possible monetary recovery, reasonable plaintiffs would

bring the suit to obtain the injunctive or declaratory relief sought; and (2) the

injunctive or declaratory relief sought would be both reasonably necessary and

appropriate were the plaintiffs to succeed on the merits.

Id. (citations omitted). 

This action clearly alleges that Morgan Stanley acted on grounds generally applicable

to the class – specifically, that it had “nationwide account distribution policies and practices”

(including nationwide use of the Power Ranking formula) and other practices and policies

that denied or restricted availability of business opportunities, compensation, and other

favorable employment conditions on the basis of race. Second Amended Complaint, ¶¶ 27-

33. The parties have agreed upon extensive injunctive relief which reasonable plaintiffs

would have brought suit to obtain. Moreover, because Plaintiffs complain primarily of

ongoing discriminatory practices, declaratory and injunctive relief would be necessary and

appropriate were Plaintiffs to succeed. Accordingly, the Court hereby CERTIFIES the

injunctive-relief class under Rules 23(a) and 23(b)(2).

Certification of the monetary-relief Settlement Class described above is appropriate 

under Rule 23(b)(3) if the Court finds that common questions of law or fact predominate

over questions affecting only individual members. Here, common questions of law or fact

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clearly predominate, and a class action is superior to other available methods for the fair and

efficient adjudication of the controversy. Because the Plaintiffs seek class certification for

settlement purposes, the Court need not inquire whether the case, if tried, would present

intractable management problems. Amchem Products, Inc., 521 U.S. at 620. Accordingly,

the Court CERTIFIES the monetary relief Settlement Class as set forth above, under Rules

23(a) and 23(b)(3).

V. APPOINTMENT OF CLASS REPRESENTATIVE AND CLASS COUNSEL

As set out above, the Court finds that Class Representative Margaret Benay CurtisBauer has claims typical of class members and is an adequate representative of class

members. The Court appoints her to serve as Class Representative of both the injunctive

relief and monetary relief classes.

The Court finds that Lieff, Cabraser, Heimann & Bernstein, LLP, Altshuler Berzon

LLP, and Outten & Golden LLP, have, separately and collectively, extensive experience and

expertise in prosecuting employment discrimination class action cases. The Court appoints

these firms as Class Counsel for both the injunctive relief and monetary relief classes. 

VI. PRELIMINARY APPROVAL OF SETTLEMENT AGREEMENT

The Court has reviewed the terms of the [Proposed] Settlement Agreement attached as

Exhibit 1, including specifically the injunctive relief provisions and the plan of allocation,

and the description of the settlement in both Parties’ briefs in support of preliminary

approval. The Court has also read and considered the declarations, and, in some cases,

supplemental declarations of plaintiff Curtis-Bauer, attorneys Kelly M. Dermody, Adam T.

Klein, James M. Finberg, Mark S. Dichter, and Alexa B. Pappas, and industrial psychologists

Kathleen K. Lundquist and Irwin L. Goldstein, and the report of mediator Hunter R. Hughes,

in support of preliminary approval. The Court has also carefully considered the arguments

of Objectors presented in their properly filed briefs and motions, specifically, in Docket Nos.

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 The revised Settlement Agreement submitted by the parties contains typographical errors

in the Table of Contents. The Parties are ordered to submit a revised Settlement Agreement with a

Table of Contents that correctly reflects page numbers in the agreement within five court days of the

date of this Order.

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95, 129, and 152 and the declarations and other documents supporting them, and the

arguments of both the Parties and Objectors at the hearing held December 3, 2007. 

At the December 3, 2007 hearing and in its December 12, 2007 Order, the Court

found that despite the Moore Group’s suspicions, there was no evidence of collusion between

the Parties during the settlement process. The settlement and Settlement Agreement are the

result of extensive, arms’ length negotiations between the Parties after Class Counsel

investigated the class claims and became familiar with the strengths and weaknesses of

Plaintiffs’ case. The involvement of an experienced mediator in the settlement process and

the submission of supplemental evidence concerning Plaintiffs’ analysis of workforce data it

received from Morgan Stanley confirm that the settlement was not collusive. 

The Court’s review of the materials listed above and its familiarity with the case lead

it to conclude that the proposed Settlement Agreement5

 is within the range of possible

settlement approval, such that notice to the Class is appropriate.

In its December 12th Order, the Court concluded that the settlement was not unfair

because it included Latinos as well as African Americans. The Moore Group objectors now

seek discovery of the workforce data Morgan Stanley provided to Plaintiffs’ counsel,

including human resources, payroll, account transfer, and team data. They again argue that

they believe Latino and African-American financial advisors have had different experiences

at Morgan-Stanley, stemming from different stereotypes, the existence of a Latino client

base, and Objectors’ understanding that Latinos are not excluded from teams to the same

extent that African-Americans are. They claim that access to the workforce data will show

the impact of these differences on tenure and attrition, inclusion in teams, and compensation.

As set out in this Court’s December 12, 2007 Order, the core allegation of the Second

Amended Complaint is that unitary practices and policies of distributing accounts (and,

therefore, compensation and business and advancement opportunities) applied to AfricanCase 3:06-cv-03903-TEH Document 158 Filed 02/07/08 Page 12 of 24
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 This same information satisfies the Court that there is no disparity so great as to create a

conflict of interest between the two groups, such that subclasses are necessary.

13

Americans and Latinos. The Court is satisfied by the information provided in the

Supplemental Declaration of Adam T. Klein, filed under seal for in camera inspection,

that the disparities in compensation are not so great that it is unfair or inappropriate to treat

African-Americans and Latinos in a similar fashion for the purposes of monetary relief.6

 To

the extent that African-American financial advisors earned less than their Latino

counterparts, that difference will be accounted for in part by the Earnings Regression

Component of the monetary relief, described in the § VIII.D.1 of the Settlement Agreement, 

which will account for 15% of the monetary relief to each plaintiff. To the extent that

African-Americans experienced higher termination or attrition rates due to low production

caused by discriminatory account distribution procedures, they will be able to seek

additional compensation through the Claim Form Survey component relating to termination.

Settlement Agreement § VIII.D.2. 

The settlement is not unfair, either overall or to African-Americans as a subgroup,

because it chooses to compensate class members primarily on the basis of their tenure at

Morgan Stanley during the class period. Compensation shortfalls are susceptible of easy

calculation, and the complaint alleges that the shortfalls stem in part from nationwide use of a

formula with an adverse impact on class members. Termination claims are far more difficult

to prove. The Parties can reasonably choose to focus monetary relief on the strongest or

most easily proved portion of their claims as a means of compromising their claims. 

Accordingly, Objectors are not entitled to discovery of workforce data to attack the fairness

of the settlement for African-Americans versus Latinos.

The supplemental information contained the Declaration of Adam T. Klein and

supporting documents also satisfies this Court’s concerns about how it could evaluate

monetary relief. This declaration provides a basis for the Plaintiffs’ claim at the preliminary

approval hearing that the $16,000,000 settlement fund represented approximately 43% of the

approximately $36,000,000 total observed race-based compensation disparities during the

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class period. The estimate of the amount of compensation shortfalls does not capture 

emotional distress damages, or damages for terminations arising from low production or

constructive terminations. But again, Plaintiffs can reasonably choose to focus on pay

disparities for FAs who are working at Morgan Stanley – disparities they allege stem from

nationwide use of a certain formula – rather than on substantially more difficult termination

claims. 

This is not a case like Acosta v. Trans Union, LLC, 243 F.R.D. 377, 396 (C.D.Cal.

2007), where the court denied approval under Rule 23(e) because plaintiffs’ counsel had

acquired virtually no information from the defendants (other than a procedures manual so

heavily redacted as to be “worthless”), failed to engage an expert until after the settlement

had been reached, and had only a thin understanding of the factual basis for plaintiffs’

claims, how the proposed settlement remedy would work, or cost to the defendants of the

settlement. Id. Here, in contrast, the Plaintiffs have had access to extensive data, have had

an economics professor analyze it as part of the settlement negotiation process, have

extensive knowledge of Morgan Stanley’s policies and practices and of the proposed

injunctive relief gained from months of active involvement in the case, and have negotiated

a settlement fund that represents over 40% of the predicted disparity in compensation. The

settlement amount could undoubtedly be greater, but it is not obviously deficient, and a

sizeable discount is to be expected in exchange for avoiding the uncertainties, risks, and costs

that come with litigating a case to trial. Again, the issue is not whether the settlement “could

be better,” but whether it falls within the range of appropriate settlements. Hanlon, 150 F.3d

at 1027. This settlement does so. Accordingly, this Court will not grant Objectors discovery

of workforce data, or order disclosure of the privileged work product in Mr. Klein’s

declaration filed under seal, so that Objectors can provide an alternative valuation of

damages. 

Next, in its December 12, 2007 Order, the Court concluded that the substantial

injunctive relief provided by the settlement is an expansion, rather than a dilution, of the

relief provided in the Augst-Johnson settlement, but expressed concerns about how to judge

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the value of that relief. Morgan Stanley submitted further briefing on the injunctive relief

and the supplemental declaration of Kathleen Lundquist, one of the industrial psychologists

already appointed under the Augst-Johnson settlement to work on gender issues at Morgan

Stanley, and slated to work on race issues under the proposed settlement here. 

Lundquist explains that based on her extensive experience, she believes that the

programmatic changes that Morgan Stanley will make as a result of the settlement and of her

recommendations will improve productivity, retention, and hiring of minority financial

advisors. Supp. Lundquist Decl. ¶ 8. She explains that even a conservative estimate of

success in those areas will increase the collective compensation to African-American and

Latino FAs and FA trainees by millions of dollars over the life of the settlement agreement. 

Id. ¶ 9. In addition, although nothing in the settlement obliges Morgan Stanley to follow the

recommendations of the industrial psychologists, Dr. Lundquist states that based on Morgan

Stanley’s “stated commitment to bring about change” and the “enthusiastic feedback” she

and Dr. Goldstein have already received as they start their work, she has “a high degree of

confidence that our recommendations will be accepted by Morgan Stanley.” Id. ¶ 7.

Next, Morgan Stanley’s counsel has submitted a declaration stating that Morgan

Stanley estimates it will spend $7.5 million on “diversity initiatives that are aimed squarely at

class members in this case.” Suppl. Pappas Decl. ¶ 9. 

The injunctive relief in this case seems comparable to that found to be substantive and

meaningful in several other race discrimination cases. See, e.g., Thomas v. Christopher, 169

F.R.D. 224, 232-233 (D.D.C. 1996), rev’d in part on other grounds, Thomas v. Albright, 139

F.3d 227 (D.C. Cir. 1998)(programmatic relief in settlement of foreign service officers’ race

discrimination case, under which defendant would create a group to monitor and advance

equal employment opportunities in the Department; hire an expert consultant to evaluate job

requirements, revise and expand diversity training, appoint working group to review an

awards nomination process, make efforts to include an African-American on certain selection

panels, improve employment data collection, revise its affirmative action plan, and agree to

allow for monitoring of compliance with settlement, provided “significant reforms”);

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 Nor will this Court require disclosure of the Power Ranking formula. The Power Ranking

formula is already in place as part of the Augst-Johnson settlement; disclosure of the formula here

will serve no purpose. Objectors are plainly not entitled to Plaintiffs’ adverse impact analysis of the

Power Ranking formula performed during settlement negotiations, which is their privileged work

product. 

16

Plummer v. Chemical Bank, 579 F.Supp. 1364, 1374 (D.C.N.Y.,1984)(accelerating

affirmative action goals, implementing a dispute resolution procedure, and appointing a

special master to hear complaints is significant injunctive relief in race discrimination case

against bank); Lurns v. Russell Corp, 604 F.Supp. 1335, 1337 (D.C.Ala. 1984)(settlement

that provides “backpay fund, scholarships, a minority vendor program, and substantially

increased opportunities for hiring, training, transfer, and promotion,” recruiting efforts, and

hiring goals provides “broad and substantial benefits to class members”). 

Finally, this Court notes that in the Augst-Johnson case the district court for the

District of Columbia approved of a less extensive version of the injunctive relief proposed

here.

Together, all these factors convince the court that the programmatic relief set out in

the Settlement Agreement is substantive, meaningful, and valuable to the class. Because the

information cited above is sufficient for the Court to evaluate the proposed settlement, the

Court will not allow Objectors to serve its proposed interrogatories about the adequacy of

injunctive relief.7

 

 Finally, the Court invited the Parties to correct the Settlement Agreement so that the

formula for the Claim Form Component of class member compensation would correspond to

the formula described in the proposed Class Notice. The Parties have done so.

The Court concludes that the proposed settlement is sufficiently “fair, adequate, and

reasonable” viewed as a whole, such that preliminary approval of the settlement is warranted. 

See Officers for Justice v. Civil Service Commission of the City and County of San Francisco,

688 F.2d 615, 625 (9th Cir. 1982)(“universally applied standard” is whether the settlement is

“fundamentally fair, adequate, and reasonable”). 

//

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Therefore, IT IS HEREBY ORDERED THAT:

1. The [Proposed] Settlement Agreement (with the changes required in footnote 5,

supra) and the settlement it embodies are hereby PRELIMINARILY APPROVED. Final

approval and entry of the Settlement Agreement is subject to the hearing of any objections of

members of the Settlement Class to the proposed settlement embodied in the Settlement

Agreement, other than objections by members of the Moore Group that this Court has

already considered and ruled upon.

2. Pending the determination of the fairness of the Settlement Agreement, all

further litigation of this action is hereby STAYED.

VII. CONFIDENTIALITY

The Court hereby enjoins disclosure to third parties of the documents and information

discussed or exchanged during the Parties’ confidential settlement negotiations and

mediation to any third party not specified in the Parties’ confidentiality agreements.

VIII. OTHER CASES ENJOINED

Pending Final Approval, the Court hereby preliminarily enjoins each member of the

Settlement Classes, including any member who makes an irrevocable election to exclude

himself or herself from the monetary relief Settlement Class, from commencing, prosecuting

or maintaining in any court other than this Court any claim, action or other proceeding that

challenges or seeks review of or relief from any order, judgment, act, decision or ruling of

this Court in connection with the Settlement Agreement. The Court further enjoins any

member of the Settlement Class who has not, by the deadline for opting out, made a timely,

irrevocable election to exclude himself or herself from the monetary relief provisions of the

Settlement Class from commencing, prosecuting or maintaining, either directly,

representatively or in any other capacity, any claim that is subsumed within the Settlement

Agreement.

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IX. APPROVAL OF THE FORM AND MANNER OF DISTRIBUTING CLASS

NOTICE AND CLAIM FORM

The parties have also submitted for this Court’s approval a proposed Class Notice,

attached hereto as Exhibit 2, and a proposed Claim Form, attached hereto as Exhibit 3, which

the Court has carefully reviewed. The Court finds and concludes as follows:

1. The proposed Class Notice is the best notice practicable under the

circumstances and allows Class Members a full and fair opportunity to consider the proposed

Settlement. The proposed plan for distributing the Class Notice and Claim Form, which are

attached as exhibits to the Settlement Agreement, likewise is a reasonable method calculated

to reach all members of the Class who would be bound by the Settlement. Under this plan,

the Claims Administrator will distribute the Class Notice and Claim Form to Settlement

Class Members by first class U.S. Mail to their last known addresses. There is no additional

method of distribution that would be reasonably likely to notify Class Members who may not

receive notice pursuant to the proposed distribution plan.

2. The Class Notice fairly, plainly, accurately, and reasonably informs Class

Members of: (1) appropriate information about the nature of this litigation, the settlement

class, the identity of Class Counsel, and the essential terms of the Settlement Agreement,

including injunctive relief and the plan of allocation; (2) appropriate information about Class

Counsel’s forthcoming application for attorneys’ fees, the proposed service payments to

Class Representative and other payments that will be deducted from the settlement fund; (3)

appropriate information about how to participate in the Settlement; (4) appropriate

information about this Court’s procedures for final approval of the Settlement Agreement and

Settlement, and about class members’ right to appear through counsel if they desire; (5)

appropriate information about how to challenge or opt-out of the Settlement, if they wish to

do so; and (6) appropriate instructions as to how to obtain additional information regarding

this litigation, the Settlement Agreement.

3. Similarly, the proposed Claim Form allows members of the Settlement Classes

a full and fair opportunity to submit a claim for proceeds in connection with the Settlement.

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Moreover, the Claim Form fairly, accurately, and reasonably informs Settlement Class

Members that failure to complete and submit a Claim Form, in the manner and time

specified, shall constitute a waiver of any right to obtain any share of the Settlement

Payment.

4. The Court finds and concludes that the proposed plan for distributing the

Notice and Claim Form (“Notice Materials”) will provide the best notice practicable, satisfies

the notice requirements of Rule 23(e), and satisfies all other legal and due process

requirements.

5. Accordingly, the Court hereby ORDERS as follows: 

A. The form of the Notice Materials is approved.

B. The manner of distributing the Notice Materials is approved.

C. Promptly following the entry of this Order, the Claims

Administrator shall prepare final versions of the Notice Materials, incorporating into the

Notice the relevant dates and deadlines set forth in this Order.

D. Within ten days following entry of this Order, Morgan Stanley shall

provide the Claims Administrator with computer readable information, in a format

acceptable to the Claims Administrator, that contains the full names, social security

numbers, last known addresses, start dates and, as applicable, end dates of employment in

Class positions with Morgan Stanley from October 12, 2002 to December 3, 2007.

E. Prior to the mailing of the Notices, the Claims Administrator will

update any new address information for potential class members as may be available

through the National Change of Address (“NCOA”) system.

F. Within 20 days of the Preliminary Approval Date, the Claims

Administrator shall mail, via first class postage, the Notice Materials to all known

potential Settlement Class members at their last known address or at the most recent

address that may have been obtained through the NCOA. The Claims Administrator will

trace all returned undeliverable notices and re-mail to the most recent address available.

G. The Claims Administrator shall take all reasonable steps to obtain

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the correct address of any Class Members for whom the notice is returned by the post

office as undeliverable. The Claims Administrator shall notify Class Counsel and

counsel for Morgan Stanley of any mail sent to Class Members that is returned as

undeliverable after the first mailing as well as any such mail returned as undeliverable

after any subsequent mailing(s).

H. The Claims Administrator shall take all other actions in

furtherance of claims administration as are specified in the Settlement Agreement.

X. PROCEDURES FOR FINAL APPROVAL OF THE SETTLEMENT

A. Fairness Hearing

The Court hereby schedules a hearing to determine whether to grant final certification

of the Settlement Classes, and final approval of the Settlement Agreement (including the

proposed plan of allocation, injunctive relief, payment of attorneys’ fees and costs, and

service payments to the Class Representative) (the “Fairness Hearing”) for June 16, 2008 at

10:00 a.m. at the United States District Court for the Northern District of California,

Courtroom 12, 19th Floor, 450 Golden Gate Avenue, San Francisco, California. 

B. Deadline to Request Exclusion from the Settlement

1. Class members may exclude themselves, or opt-out, of the monetary relief

provisions of the class settlement. Any request for exclusion must be in the form of a written

“opt-out” statement sent to Class Counsel and Counsel for Morgan Stanley. A person

wishing to opt-out must sign a statement which includes the following language:

I understand that I am requesting to be excluded from the class monetary settlement

and that I will receive no money from the settlement fund created under the Settlement

Agreement entered into by Morgan Stanley. I understand that if I am excluded from

the class monetary settlement, I may bring a separate legal action seeking damages,

but might receive nothing or less than what I would have received if I had filed a

claim under the class monetary settlement procedure in this case. I also understand

that I may not seek exclusion from the class for injunctive relief and that I am bound

by the injunctive provisions of the Settlement Agreement entered into by Morgan

Stanley.

2. To be effective, this opt-out statement must be received by Class Counsel and

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counsel for Morgan Stanley on or before sixty one (61) days after the Notice is to be

mailed to Class Members, that is, by April 28, 2008. Only those class members who request

exclusion in the time and manner set forth herein shall be excluded from the class for

monetary relief purposes. Pursuant to Federal Rules of Civil Procedure 23(b)(3) and (c)(2),

the terms and provisions of the Settlement Agreement concerning monetary relief shall have

no binding effect on any person who makes a timely request for exclusion in the manner

required by this Order.

3. Class Counsel shall file copies of all timely requests for exclusion, not

timely rescinded, with the Court prior to the Fairness Hearing, redacting Social Security

numbers and home addresses.

4. Class members shall be permitted to withdraw or rescind their opt-out

statements by submitting a “rescission of opt-out” statement to the Class counsel and counsel

for Morgan Stanley. The rescission of opt-out statement shall include the following language:

I previously submitted an opt-out statement seeking exclusion from the class monetary

settlement. I have reconsidered and wish to withdraw my opt-out statement. I

understand that by rescinding my opt-out I may be eligible to receive an award from

the claims settlement fund and may not bring a separate legal action against Morgan

Stanley seeking damages with respect to the Released Claims.

A class member wishing to submit such a rescission statement shall sign and date the

statement and cause it to be delivered to Class Counsel and counsel for Morgan Stanley no

later than 75 days after the Notice is to be mailed to class members, that is, before May 12,

2008.

C. Defendant’s Right to Rescind Agreement

If the number of individuals who opt out of the Settlement Class in the manner

provided in this Order exceeds the number in Appendix 1 to the Settlement Agreement,

Docket No. 100, filed in this Court under seal on November 15, 2007 (not including persons

who have, before August 2, 2007, filed and served lawsuits, alleging race or color

discrimination), Morgan Stanley, at its sole option, shall have the right to void the Settlement

on the 30th day after the deadline for requests for exclusion. If Morgan Stanley exercises

this option, all of Morgan Stanley’s obligations under the Settlement Agreement shall cease

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to be of any force and effect, and the Settlement Agreement and any orders entered in

connection therewith shall be vacated, rescinded, cancelled, and annulled, and the parties

shall return to the status quo in the Civil Action as if the parties had not entered into the

Settlement Agreement. In addition, in such event, the Settlement Agreement and all

negotiations, court orders, and proceedings related thereto shall be without prejudice to the

rights of any and all parties thereto, and evidence relating to the Settlement Agreement and

all negotiations shall not be admissible or discoverable in the Civil Action or otherwise.

D. Deadline for Filing Objections to Settlement and [Proposed] Settlement

Agreement

1. Any Class Member who has not opted out of the monetary relief Settlement

Class and wishes to object to the fairness, reasonableness or adequacy of the Settlement

Agreement or the Settlement must do so in writing. Class Members who have timely

objected to the Settlement in writing may also appear at the Fairness Hearing. To be

considered, any objection to the final approval of the Settlement Agreement must state the

basis for the objection and be mailed to Class Counsel and Counsel for Morgan Stanley, at

the addresses provided in the Class Notice, via First Class United States mail, postage

prepaid, received no later than sixty one (61) days after the Notice is to be mailed to Class

Members, that is, by April 28, 2008. An objector who wishes to appear at the Fairness

Hearing, either in person or through counsel hired by the objector, must state his or her

intention to do so at the time the objector submits his/her written objections. Objections

raised at the Fairness Hearing will be limited to those previously submitted in writing. Any

member of the class who does not timely file and serve such a written objection shall not be

permitted to raise such objection, except for good cause shown, and any member of the class

who fails to object in the manner prescribed herein shall be deemed to have waived, and shall

be foreclosed from raising, any such objection.

2. Class Counsel shall file copies of all timely objections with the Court prior to

the Fairness Hearing, redacting Social Security numbers and home addresses. 

//

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E. Deadline for Submitting Claims Forms

A Class Member who does not opt out will be eligible to a share of the settlement

benefit. To receive this share, such a Class Member must properly and timely complete a

Claim Form in accordance with the terms of the Settlement Agreement. To be effective, the

Claim Form must be sent to the Claims Administrator at the address provided in the Class

Notice postmarked no later than 86 days after the Notice is to be mailed to Class

Members, that is, by May 23, 2008. Failure to postmark a completed Claim Form by the

Claim Filing Deadline shall bar the Settlement Class member from receiving any monetary

award pursuant to the proposed Settlement Agreement. Absent a showing of good cause for

late Claim Form, Settlement Class members who do not file timely and valid Claim Forms

shall nonetheless be bound by the judgment and release in this action as set forth in the

proposed Settlement Agreement, unless that Settlement Class member timely opts out of the

Settlement.

It shall be the sole responsibility of each member of the Settlement Class who seeks a

monetary award to notify the Claims Administrator if the class member changes his or her

address. Failure of a Settlement Class member to keep the Claims Administrator apprised of

his or her address may result in the claim being denied or forfeited.

F. Deadline for Submitting Motion Seeking Final Approval

No later than 35 days before the Fairness Hearing, May 12, 2008, Plaintiff shall file a

Motion for Final Approval of the Settlement and Settlement Agreement. Any objections or

responses to the Motion shall be filed no later than 20 days before the Fairness Hearing, by

May 27, 2008. On or before 13 days before the Fairness hearing, June 3, 2008, the Parties

may file with the Court a reply brief responding to any filed objections.

G. Deadline for Petition for Attorneys Fees

Class Counsel shall file with this Court their petition for an award of attorneys’ fees

and reimbursement of expenses no later than 35 days before the Fairness Hearing, May 12,

2008. Any objections or responses to the petition shall be filed no later than 20 days before

the Fairness Hearing, by May 27, 2008. Class Counsel may file a reply to any opposition to

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memorandum filed by any objector no later than 13 days before the Fairness hearing, June 3,

2008.

H. Deadline for Petition for Approval of Service Payments

Class Counsel shall file with this Court their petition for an award of service payments

to the Class Representative no later than 35 days before the Fairness Hearing, May 12, 2008.

Any opposition or responses to the petition shall be filed no later than 20 days before the

Fairness Hearing, by May 27, 2008. Class Counsel may file a reply to any opposition to

memorandum filed by any objector no later than 13 days before the Fairness hearing, June 3,

2008.

XI. PLAINTIFF’S AND CLASS MEMBERS’ RELEASE

If, at the Fairness Hearing, this Court grants Final Approval to the Settlement and

Settlement Agreement, Named Plaintiff and each individual Settlement Class member who

does not timely opt out will release claims, as set forth in Settlement Agreement, by

operation of this Court’s entry of the Judgment and Final Approval, regardless of whether he

or she submits a Claim Form or receives any share of the Settlement Fund.

XII. APPOINTMENT OF CLAIMS ADMINISTRATOR

Settlement Services, Inc. of Tallahassee, Florida is hereby appointed Claims

Administrator to carry out the duties set forth in this Order and the Settlement Agreement.

IT IS SO ORDERED.

Dated: February 7, 2008 

THELTON E. HENDERSON, JUDGE

UNITED STATES DISTRICT COURT

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