Opinion ID: 1357701
Heading Depth: 2
Heading Rank: 3

Heading: Challenges to the Approval of the Gallagher Settlement

Text: In the Gallagher Settlement, the District Court utilized the same approach it used in approving the Zurich Settlement with respect to the Rule 23 requirements for approving class action settlements. The District Court addressed the prerequisites of Rule 23(a) and concluded that the existence of over 288,000 potential class members easily satisfies the numerosity requirement [of subsection (a)(1)], as numbers in excess of forty, particularly those exceeding one hundred or one thousand have sustained the requirement; the commonality requirement of subsection (a)(2) was clearly satisfied because of the many common questions of law and fact; the typicality requirement of subsection (a)(3) was met because the claims made by named Plaintiffs and those made on behalf of the Settlement Class Members are indistinguishable, encompassing identical allegations and such claims arose in each case from the same course of action taken by the Gallagher Defendants; and the adequacy of representation requirement of subsection (a)(4) was met because Class Counsel were clearly well qualified and experienced class action attorneys who have been involved in similar ... litigation around the country, and because it is clear that the named Plaintiffs' interests are not antagonistic to those of the absent class members. Gallagher Settlement Final Approval Opinion at -11 (internal quotation marks omitted). With respect to Rule 23(b)(3), the District Court concluded that the predominance requirement was met because the identical claims of both the named Plaintiffs and the absent class members arise from the same set of facts regarding the alleged collusive and anticompetitive behavior of the Gallagher Defendants. Id. at . The District Court also determined that the superiority requirement of Rule 23(b)(3) was satisfied by the class action in light of the presence of more than 288,000 potential class members and millions of pages of documents, which, according to the District Court, made it more desirable to litigate these claims in one action, rather than in numerous, separate actions litigating the same issue. Id. at . The District Court also concluded that the Settlement Agreement satisfied Rule 23(e) because the agreement was fair, reasonable, and adequate. The District Court reached this conclusion after analyzing each of the Girsh factors and determining that the first five factors overwhelmingly weigh in favor of approval of settlement and the final four factors weigh slightly or moderately in favor of approval. Id. at . [29] Prior to certifying the class and approving the Gallagher Settlement Agreement, the District Court addressed and rejected the challenges raised by the two objectors.
As previously mentioned, Van Enterprises is the only objector-appellant with respect to the Gallagher Settlement. Van Enterprises presents nearly identical challenges to the District Court's approval of the Gallagher Settlement as it did with respect to the Zurich Settlement, arguing that the named plaintiffs lack standing, the Settlement Class is overbroad and the certification requirements of Rule 23(a) and (b)(3) were not satisfied, and the Plan of Allocation is not fair.
Unlike the Zurich Settlement, Van Enterprises did object in writing to the Gallagher Settlement on the basis of the named plaintiffs' lack of standing, and therefore these arguments were considered by the District Court. The District Court found that [t]he named Plaintiffs here have sufficiently alleged injury in factartificially inflated insurance premiumsas a result of the Gallagher Defendants' participation in the alleged customer allocation scheme and other alleged conduct, and that, as a result, unnamed Plaintiffs in the class need not make a separate showing of injury in fact, and standing is not an obstacle to certification for the class for settlement purposes. Id. at . Van Enterprises contends that the named plaintiffs do not allege and have not shown that any of their policies were subject to the improper use of contingent commission agreements and that [n]one of the named plaintiffs claim that the receipt of contingent commissions caused any broker to steer them to a policy that cost more than it should have. Van Enterprises argues that, at best, the plaintiffs assert that they have standing because the Insurer Defendants `passed through' their payments of contingent commission to all of their insureds, regardless of the geographic area or the line of commercial insurance and that this amounts to a non-particularized and conjectural allegation of injury. The defendants respond that Van Enterprises' arguments are unavailing because three different named class members purchased insurance coverage through Gallagher that included policies issued by Defendant Insurers who had entered into contingent commission agreements with Gallagher, and these named plaintiffs were individually harmed by the existence of undisclosed contingent commissions. The plaintiffs add that because the Settlement Class is limited to those policyholders with a `direct and immediate relationship' to a Broker Defendant co-conspirator in this Action, and because all Settlement Class Members purchased insurance at prices elevated by Defendants' unlawful scheme, all members of the Settlement Class have standing and have been injured by the anticompetitive conduct described in the Complaints. The plaintiffs also contend that they have suffered immediate concrete economic harman out-of-pocket costat the point they purchased their insurance policies through the Broker Defendants. Because the plaintiffs alleged that several of the named plaintiffs utilized the Gallagher Defendants' brokerage services in order to obtain insurance and that the plaintiffs suffered economic harm in the form of higher premiums as a result of the defendants' anticompetitive conduct, the named plaintiffs have standing for purposes of the class certification. The allegations demonstrate that the named plaintiffs suffered an injury in fact that is concrete and particularized and which was proximately caused by the actions of the Gallagher Defendants, and this is sufficient to establish their standing. We do not need to assess the merits of the plaintiffs' argument that, having purchased insurance at higher prices, all of the class members have standing, because the critical question is whether the named plaintiffs who were actually before the District Court had standing irrespective of whether each absent class member could establish standing. The named plaintiffs only needed to allege that they suffered an injury in fact and were not required to prove the merits of their case against the Gallagher Defendants to establish standing. Accordingly, we conclude that the District Court correctly determined that the named plaintiffs had standing and that the case could proceed.
Van Enterprises' challenges to the certification of the Gallagher Settlement Class mimic its challenges to the certification of the Zurich Settlement Class. In general terms, Van Enterprises argues: A review of the pleadings, RICO statement, orders of dismissal and arguments and evidence submitted by the Settling Parties in favor of certifying this Settlement Class make clear that this incredibly broad Settlement Class does not meet the requirements of Rule 23. More specifically, Van Enterprises contends that the predominance requirement of Rule 23(b)(3) was not met because common questions did not predominate for the antitrust claims and antitrust impact or injury could not be shown with common proof. As for the RICO claims, Van Enterprises argues the predominance requirement is not met because there were not standard, uniform misrepresentations to the class and it was questionable whether any violation of RICO caused loss to the class. Van Enterprises also argues that the District Court, by appl[ying] the commonality standard of [Rule] 23(a)(2) to determine whether questions of law or fact common to the members of the class predominate over any questions affecting only individual members, used the incorrect legal standard in making its Rule 23(b)(3) determination. As these challenges were preserved in Van Enterprises' written objection, we will consider each of them in turn. Although Van Enterprises' arguments are primarily focused on the predominance requirement of Rule 23(b)(3), we will briefly address the commonality and typicality requirements of Rule 23(a) as it specifically challenged these requirements in its written objection. The District Court found that the commonality requirement was satisfied because there are many common questions of law and fact, listing, among others, questions such as whether the Gallagher Defendants entered into a contract, combination or conspiracy to allocate the market for sale of insurance and whether the Gallagher Defendants engaged in a pattern of racketeering activity. Gallagher Settlement Final Approval Opinion at . Because the commonality requirement is satisfied if the named plaintiffs share at least one question of fact or law with the grievances of the prospective class, Newton, 259 F.3d at 183 (internal quotation marks omitted), we do not discern any error in the District Court's finding that the commonality requirement was satisfied. As for the typicality requirement, the District Court found that the claims made by named Plaintiffs and those made on behalf of the Settlement Class Members are indistinguishable, encompassing identical allegations that the Gallagher Defendants violated RICO, federal and state antitrust laws, and the common law obligations. These claims arise in each case from the same course of action taken by the Gallagher Defendants. Consequently, the named Plaintiffs' claims are typical of those brought by the Settlement Class Members at large. Gallagher Settlement Final Approval Opinion at . We agree with the District Court that the claims of the named plaintiffs and the class members stem from the conduct of the Gallagher Defendants and that the interests of the named plaintiffs are sufficiently aligned with the interests of the entire class such that the typicality requirement is satisfied. Accordingly, we discern no error in the District Court's finding on this Rule 23(a) requirement of class certification. Turning to Van Enterprises' challenge to the predominance requirement of Rule 23(b)(3), the District Court provided a nearly verbatim analysis of this element in its Gallagher Settlement opinion as it did in its Zurich Settlement opinion. The District Court noted that in order to satisfy this element of Rule 23(b)(3) parties must do more than merely demonstrate a `common interest in a fair compromise'; instead, they must provide evidence that the proposed class is `sufficiently cohesive to warrant adjudication by representation.' Id. at  (quoting Amchem, 521 U.S. at 623, 117 S.Ct. 2231). The District Court referred back to its Rule 23(a) commonality analysis in which it identified the following issues as being common to the class: whether: (1) the Gallagher Defendants entered into a contract, combination or conspiracy to allocate the market for sale of insurance; (2) the Gallagher Defendants' contract, combination or conspiracy had the purpose and effect of reducing and unreasonably restraining competition in the sale of insurance; (3) the Gallagher Defendants' conduct violated § 1 of the Sherman Act; (4) the Gallagher Defendants engaged in a pattern of racketeering activity; and (5) the Gallagher Defendants violated RICO. Id. at . However, one notable difference between the District Court's analysis of predominance in the Gallagher Settlement in contrast to its discussion of this requirement in the Zurich Settlement is that the District Court was able to specifically address Van Enterprises' challenge to the predominance requirement because Van Enterprises had provided a more thorough explanation of its objection in its written submission to the District Court. Thus the District Court noted that Van Enterprises objected to the following: [W]hether any antitrust injury is common to the class; whether Plaintiffs can show a uniform fraudulent representation sufficient to certify a RICO class; and whether common unjust enrichment issues predominate throughout the class. Id. at . Notwithstanding the reasons for Van Enterprises' objection, the District court determined: [N]amed Plaintiffs and absent class members are asserting identical claims that arise from the same set of facts regarding collusive and anticompetitive behavior of the Gallagher Defendants. Consistent with the law of the Third Circuit, this satisfies the commonality requirement of [Rule] 23(a). Id. While we acknowledge that the District Court was imprecise when it referred to Rule 23(a) at this point of its analysis, as opposed to Rule 23(b)(3), it is clear from the entirety of the District Court's discussion that it was assessing whether the predominance component of Rule 23(b)(3) was satisfied. Similarly, at another point in its discussion, the District Court referred to the commonality requirement of [Rule] 23(b)(3) as opposed to the predominance requirement of Rule 23(b)(3). Id. Although it is appropriate to consider the commonality requirement of Rule 23(a) together with the predominance requirement of Rule 23(b)(3), see In re Warfarin Sodium Antitrust Litig., 391 F.3d at 528, district courts must take care not to conflate the terminology because doing so results in confusion and may undermine the district court's conclusions. Therefore, to ensure that the predominance requirement of Rule 23(b)(3) was satisfied, we will briefly analyze whether common questions of law and fact predominate over individual ones with respect to the plaintiffs' federal antitrust and RICO claims. As we discussed in the context of the Zurich Settlement, because the first and third elements of a Sherman Act violation focus on the conduct of the defendants, it is not difficult to identify common questions relevant to establishing these elements, such as whether the Gallagher Defendants agreed with any of the Insurer Defendants to steer customers to those insurers in exchange for the payment of contingent commissions, whether the Gallagher Defendants conspired with any Insurer Defendants to reduce competition in the insurance market by soliciting non-competitive bids, whether the Gallagher Defendants agreed with other Broker Defendants to share their contingent commission arrangements with each other but not to disclose these arrangements to their customers, whether the Gallagher Defendants actually engaged in collusive actions with other Broker Defendants as opposed to merely taking unilateral actions in their own best interest, whether any of the Gallagher Defendants' agreements constituted horizontal restraints of trade, and whether the Gallagher Defendants succeeded at allocating their business among a select group of insurers in restraint of trade. Common questions that are relevant to the second element of a Sherman Act violation include whether the Gallagher Defendants' actions reduced competition for insurance, whether the Gallagher Defendants' actions resulted in an allocation of customers and a consolidation of the insurance market, and whether the Gallagher Defendants' actions caused an increase in the cost of premiums for insurance. As for the fourth element, we likewise conclude that there are common questions relevant to proving antitrust injury. The plaintiffs alleged that premiums throughout the insurance industry were artificially inflated as a result of the contingent commission agreements and other allegedly anticompetitive practices that the Gallagher Defendants engaged in. Based on this theory, antitrust injury is susceptible to proof on a class-wide basis and involves common questions. Turning to the plaintiffs' RICO claim, many of the same common questions that we identified in the context of the Zurich Settlement are also relevant here. The first element of a RICO violation involves the common question of whether the Gallagher Defendants participated or engaged in conduct with other Insurer Defendants and Broker Defendants. The second element, whether an enterprise existed, also involves common questions of law and fact, such as whether the Broker Defendants and Insurer Defendants were part of an association in fact or whether they formed an enterprise through the legally recognized Counsel of Insurance Agents and Brokers. Similarly, the third and fourth elements involve common questions of law and fact as well, including whether the enterprise was being used to commit mail or wire fraud, or other acts that constitute racketeering, and whether such activities occurred often enough to establish a pattern. Again, we recognize that establishing liability under RICO also requires demonstrating that the plaintiffs suffered an injury to their property or business, which may require individual proof in some cases, but in this case the plaintiffs' premium buildup theory lends itself to proof on a class-wide basis. In sum, we conclude that, because the essential elements of the plaintiffs' federal claims involve common questions of law and fact, such common questions predominate over any individual ones, and Rule 23(b)(3) is satisfied.
Van Enterprises also contends that separate subclasses should have been certified to ensure adequate representation and a fair allocation of the settlement. Van Enterprises argues that the six categories of claimants among whom the settlement fund is allocated are subject to disparate treatment and that antagonistic interests exist between these groups. As an initial matter, we note that Van Enterprises made only a passing reference to the use of subclasses in its written objection to the Gallagher Settlement, which falls far short of the sufficient specificity standard of presenting an issue for consideration before the District Court in order to preserve it for appeal. Keenan, 983 F.2d at 471; accord Shell Petroleum, 182 F.3d at 218. Van Enterprises also failed to substantiate its argument that the Plan of Allocation was unfair, other than to state that there is significant disparate treatment of the six claimant groups. Nonetheless, to the extent that Van Enterprises' arguments contest the adequacy of representationa challenge which it did preserve in its written objectionwe will consider all of these arguments on appeal. The District Court found that Van Enterprises' challenge to the Plan of Allocation was actually a challenge to the certification of the class because Van Enterprises' arguments related to the adequacy of representation as opposed to the fairness of the amounts of the fund that were allotted to each group of claimants. See Gallagher Settlement Final Approval Opinion at . We agree with the District Court that Van Enterprises did not raise any substantive challenges to the Plan of Allocation, nor does it articulate any such challenge on appeal. Accordingly, we find no error in the District Court's conclusion that the Settlement Agreement and the Plan of Allocation satisfied the requirements of Rule 23(e). Addressing Van Enterprises' challenges in the context of the adequacy of representation requirement of Rule 23(a), the District Court found that there were not any antagonistic interests among the Class Members. Specifically, the District Court determined: Here, it is clear that the named Plaintiffs' interests are not antagonistic to those of the absent class members. The central questions in this case regarding the Gallagher Defendants' alleged conduct, and the impact of that conduct on both the named Plaintiffs and the absent class members, animates in an identical fashion the claims of both groups. [I]n addressing these common questions, the named Plaintiffs have advocated as vigorously for the absent class members as they have for themselves. Id. at . The District Court found that the named plaintiffs did not have any divergent or conflicting interests with the absent class members and were therefore adequate representatives of the class, and we discern no error in this finding. Moreover, in the absence of divergent interests among the class members, we conclude that the District Court did not abuse its discretion by choosing not to utilize subclasses.