Opinion ID: 755571
Heading Depth: 2
Heading Rank: 3

Heading: Other Sales Claims

Text: The final issue we address with respect to fairness relates to the category of other sales claims. Krell raises two arguments in opposition to this broad category of claims. First, Krell contends that the other claims were improperly added at the last minute to secure an all-encompassing release for Prudential. Second, Krell contends the notice provided under the settlement did not adequately explain the category to absentee members, and consequently millions of policyholders would inadvertently waive their right to recover for Prudential's fraudulent acts.
According to Krell, the class definition was at the last minute expanded to release nearly 8 million additional policyholders not included in the class pled only 3 days earlier. Krell Brief at 4. 80 In addition to the previously-noted ramifications of this expansion with respect to the Rule 23 certification prerequisites, Krell also contends the release of these claims is improper because it exceeds the scope of the class complaint. Prudential and Lead Counsel counter that the certified class is actually smaller than the putative class defined in plaintiffs' initial pleadings and that the Task Force remediation plan also included an other claims category. As Lead Counsel explains, plaintiffs have contended from the outset that Prudential's common course of deceptive conduct extended beyond the churning, vanishing premium, and investment sales tactics and permeated its product design, agent training and oversight, sales activities, and dividend, expense and investment practices. Lead Counsel Brief at 20. The settling parties maintain that, even if such claims were not included in the Second Amended Consolidated Complaint, those claims could still be released because they arose from the conduct alleged in the Complaint. The district court held the release was not unfairly broad, finding it generally corresponded with the allegations in the Second Amended Consolidated Complaint. The court also found that releases may include all claims, including unpleaded claims that arise out of the same conduct alleged in the case. 81 Fairness Opinion, 962 F.Supp. at 558 (citing Grimes v. Vitalink Communications Corp., 17 F.3d 1553, 1563 (3d Cir.), cert. denied, 513 U.S. 986, 115 S.Ct. 480, 130 L.Ed.2d 393 (1994); Sandler Assocs., L.P. v. Bellsouth Corp., 818 F.Supp. 695, 704-05 (D.Del.1993), aff'd, 26 F.3d 123 (3d Cir.1994)). The crux of the plaintiffs' complaint was that Prudential engaged in a common scheme of deceptive sales practices. Although the Second Amended Consolidated Complaint specifically lists three types of deceptive sales claims--the churning, vanishing premium and investment plan claims--other allegations address conduct which supports the common scheme theory and which does not fall neatly within the three enumerated categories. See supra note 11. Therefore, we agree with the district court the other claims were properly released. 82 While it is essential to protect the interests of absentee class members, we believe the claims of the absentees here are adequately incorporated in the terms of the settlement. The category of other claims are part and parcel of the common scheme which underlies plaintiffs' entire case, and are separately addressed in the procedural guidelines which forms the basis for the ADR process. Finally, the settling parties have represented that the settlement does not release unknown claims relating to the servicing or administration of class members' policies, but is limited to claims relating to the actual sale of insurance policies. 83 Lead Counsel Brief at 62-63. Consequently, we believe the other claims were appropriately included in the release.
Rule 23 of the Federal Rules of Civil Procedure contains two distinct notice provisions. Rule 23(c)(2) requires notice be given to all potential members of a Rule 23(b)(3) class informing them of the existence of the class action, the requirements for opting out of the class and/or entering an appearance with the court, and the applicability of any final judgment to all members who do not opt out of the class. 84 Rule 23(e) requires all members of the class be notified of the terms of any proposed settlement. 85 The Rule 23(e) notice is designed to summarize the litigation and the settlement and to apprise class members of the right and opportunity to inspect the complete settlement documents, papers, and pleadings filed in the litigation. 2 Newberg on Class Actions § 8.32 at 8-109. In this instance, the parties prepared a joint notice, combining the information required by Rules 23(c)(2) and 23(e). The district court's October 28, 1996 order required the settling parties to mail individual notice 86 to the last known address of the over 8 million present and former policyholders who comprised the putative class. 87 In addition, the Order required the parties to publish notice in the national editions of The New York Times, The Wall Street Journal, USA Today and The Newark Star Ledger. 88 Prudential went even further, publishing notice in the largest circulating newspaper in each of the fifty states and the District of Columbia. Fairness Opinion, 962 F.Supp. at 495. The notices were published over a three day period, from November 20, 1996 until November 22, 1996. 89 The district court described the notice and outreach program as unparalleled and found the comprehensive notice program in this case far exceeded the requirements of Rule 23 and due process. Id. at 526. The district court also examined and rejected various objections to the form and content of the notice. Id. at 528-34. We agree with the district court's assessment of the scope of the outreach program. 90 Providing individual notice to over 8 million class members is a daunting task, and no doubt an expensive one. In addition, the combination of individual and publication notice, combined with the unsolicited news coverage the settlement received, greatly increased the possibility that Prudential will ultimately compensate a greater number of injured policyholders than would otherwise have been possible. 91 The parties also provided additional notices to the class, each designed to update the parties as to their rights and obligations under the settlement. 92 We agree with the district court that the notice provided all of the required information concerning the class members' right and obligations under the settlement. It detailed the procedures for opting out, entering an appearance, and filing objections, and notified the policyholders that if they did not opt out of the class they would be bound by the settlement if approved. It explained the ADR process and Basic Claim Relief available to the class, provided the text of the release, and provided notification that all related documents were available for public inspection. Finally, it explained the nature of the claims covered under the settlement, and provided an 800 number through which class members could obtain information and make further inquiries. The fact that approximately 1.8 million inquiries have already been processed through the 800 number supports the conclusion that the class notice was effective. The only legitimate concern raised with respect to the notice provided relates to the category of other claims. After a careful review of the record, we hold the notice provided with respect to the category of other claims provided sufficient information to apprise the class of the scope of the allegations against Prudential. While this catch-all category is by its nature difficult to describe, we believe the class notice makes clear that additional claims which do not fit neatly into one of the other three categories may nonetheless be remedied through the ADR process. The third page of the cover letter to the class notice specifically sets forth the four categories of sales claims--financed insurance, abbreviated payment, investment plan, and other improper sales practices. The types of relief available for each of the four categories of claims are clearly listed on pages 10-11 of the Notice of Class Action, Proposed Settlement, Settlement Hearing And Right To Appear. 93 The four categories of claims are also listed in the question-and-answer pamphlet included with the Class Notice. Compared to the first three categories of claims, which require some understanding of insurance policies, the catch-all category of other improper sales practices is arguably easier for the uninformed layman to comprehend, and may in fact encourage class members to respond to the Class Notice. Consequently, we believe the notice provided to the absentee class members in this case supports the district court's finding that the settlement is fair and reasonable.