Opinion ID: 1357701
Heading Depth: 2
Heading Rank: 1

Heading: The Zurich Settlement

Text: In August 2005, the Zurich Defendants were added to the Commercial Case putative class action. [3] At the same time as the litigation was proceeding, the Zurich Defendants were also the subject of investigations conducted by various state attorneys general and state departments of insurance stemming from the same alleged practices in the marketing and sale of commercial insurance. On October 14, 2005, the Zurich Defendants and the plaintiffs entered into a Memorandum of Understanding (MOU), which set forth the principal terms of a settlement of the claims against the Zurich Defendants. Specifically, the MOU established that any claims arising out of transactions with the Zurich Defendants from August 26, 1994 through September 1, 2005 would be resolved by the settlement and that, in return, the Zurich Defendants would establish a $100,000,000 settlement fund for the benefit of the Settlement Class. The Settlement Class included all individuals or entities, who during the Settlement Class Period, engaged the services of (i) one of the Broker Defendants or any subsidiary or affiliate of a Broker Defendant in connection with a Settlement Class Policy Purchase from any Zurich Insurer, any Insurer Defendant or any insurance company that is not an affiliate or subsidiary of a Zurich Insurer, or (ii) any other broker... in connection with a Settlement Class Policy Purchase from any Zurich Insurer. The MOU was subject to the completion of full confirmatory discovery and the plaintiffs reserved the right to terminate the MOU if, following completion of the confirmatory discovery, they reasonably and in good faith did not believe the terms of the settlement were fair, reasonable, and adequate. The MOU was also contingent upon the successful resolution of the ongoing state investigations and the successful negotiation and execution of a stipulation of settlement between the Zurich Defendants and the plaintiffs. On March 20, 2006, the Zurich Defendants reached an agreement (Multi-State Agreement) with ten statesCalifornia, Florida, Hawaii, Maryland, Massachusetts, Oregon, Pennsylvania, Texas, Virginia, and West Virginiawhich resolved the investigations of the attorneys general in those states against the Zurich Defendants. At the same time, the Zurich Defendants reached a Regulatory Settlement Agreement with fifteen state departments of insurance, which contained provisions that mirrored those contained in the Multi-State Agreement and resolved the investigations of the insurance departments in those various states against the Zurich Defendants. [4] Under the terms of the Multi-State Agreement, the Zurich Defendants agreed to provide $51,700,000 in restitution to the Settlement Class, which would supplement the settlement relief to be provided pursuant to any final settlement agreement reached by the parties and would be distributed to the Settlement Class in accordance with the plan of allocation set forth in such a settlement agreement. [5] On March 27, 2006, the Zurich Defendants executed a separate agreement with the attorneys general in the states of New York, Connecticut, and Illinois (Three-State Agreement), which resolved the investigations against the Zurich Defendants in those states. The Three-State Agreement required the Zurich Defendants to establish an $88,000,000 settlement fund to provide relief to a group of policyholders specified in the Three-State Agreement. Any distributions made pursuant to the Three-State Agreement were to be separate from those made pursuant to any final settlement agreement reached by the parties and the Multi-State Agreement. On July 26, 2006, following the resolution of the state investigations, the Zurich Defendants entered into a Stipulation of Settlement with the plaintiffs (Zurich Settlement Agreement). The terms of the Zurich Settlement Agreement provided that the Zurich Defendants would pay $100,000,000 to the policyholders who meet the definition of the Settlement Class; however, because some of the potential Settlement Class Members were also eligible to seek relief under the separate Three-State Agreement, the Zurich Settlement Agreement allowed the Zurich Defendants to initially create a fund in the amount of $70,100,000 while designating the remaining $29,900,000 for policyholders who qualify as Settlement Class Members but opt to claim reimbursement under the Three-State Agreement instead of the Zurich Settlement Agreement. Only if the Zurich Defendants failed to disburse at least $29,900,000 through the Three-State Agreement (all of which would go to policyholders who were eligible for relief under the Zurich Settlement Agreement) would the Zurich Defendants be required to fund the balance to the Settlement Class fund. Thus, the Zurich Defendants were required to pay $70,100,000 under the terms of the Zurich Settlement Agreement and $51,700,000 under the terms of the Multi-State Agreement for a total fund of $121,800,000 for the Settlement Class Members, while $29,900,000 of the amount designated for the Settlement Class in the MOU would be used to fund the $88,000,000 award established by the Three-State Agreement. Under the terms of the Zurich Settlement Agreement, 51.7% of the settlement fund is allotted to Zurich policyholders who purchased excess casualty insurance during the 2001 to 2004 time period, while Zurich policyholders who purchased other lines of commercial insurance, or who purchased excess casualty policies in other time periods, are allotted 33.9% of the settlement fund, and those Settlement Class Members who are not Zurich policyholders are allotted 9% of the settlement fund. [6] The Zurich Defendants also agreed to separately pay any administration and distribution costs associated with the Zurich Settlement Agreement. On November 8, 2006, the District Court entered an order preliminarily certifying the Settlement Class and preliminarily approving the proposed Zurich Settlement Agreement. The District Court set January 11, 2007 as a deadline for filing any objections to the Zurich Settlement Agreement and scheduled a fairness hearing for January 26, 2007. Pursuant to the District Court's order, an administrator mailed notice of the proposed settlement to over 3,790,000 Settlement Class Members and also published notice of the fairness hearing in multiple periodicals, including The New York Times, The Wall Street Journal, USA Today, Business Insurance Magazine, Risk Management Magazine, and the newspaper with the largest circulation in each of the fifty states and the District of Columbia. The administrator also established a website and toll-free number to provide details of the proposed settlement and offer assistance to the Settlement Class Members. A total of fifteen potential Settlement Class Members filed timely objections to the proposed Zurich Settlement Agreement. [7] The objections pertained to the sufficiency of the notice, scope of the release and bar order, requirements for submitting claims forms, procedures for requesting exclusion, Plan of Allocation, class certification, and attorneys' fees. At the scheduled fairness hearing before the District Court, eight of the objectors were represented by counsel; however, Van Enterprises, Inc. (Van Enterprises), one of the current appellants, was not among the objectors who appeared before the District Court, despite having filed a Notice of Appearance. In addition to Class Counsel, the Zurich Defendants, and eight of the objectors, a representative from the Office of the Attorney General of Texas appeared at the fairness hearing on behalf of the intervening attorneys general. [8] On February 16, 2007, the District Court issued an opinion granting the Zurich Defendants' and the plaintiffs' motion for final approval of the settlement and dismissing, with prejudice, the Zurich Defendants from the litigation. In re Ins. Brokerage Antitrust Litig., 2007 WL 542227 (D.N.J. Feb.16, 2007) (Zurich Settlement Final Approval Opinion). In explaining its decision to grant final approval of the settlement, the District Court chose not to summarize each of the individual challenges raised by the objectors, but it did discuss the general categories of objections that were raised and dismissed each of these types of objection. After rejecting all of the objections, the District Court certified the Settlement Class, finding that it met all of the requirements of Rule 23(a) and (b)(3), [9] and approved the Zurich Settlement Agreement, finding that all of the fairness requirements of Rule 23(e) were met. Additionally, the Zurich Defendants agreed with the plaintiffs to pay up to $29,950,000 for attorneys' fees, expense reimbursements, and incentive awards for the named plaintiffs, which would not be subtracted from the Settlement Class fund. The parties also agreed that if the District Court granted less than the requested fees and expenses or if this amount was later reduced, the Zurich Defendantsnot the Settlement Class Memberswould be entitled to the difference in amount. Class Counsel filed a motion for an award of fees in the District Court, requesting that the District Court distribute the $29,950,000 as follows: $3,957,000 for reimbursement of litigation expenses; $150,000 for payment of incentive awards to fifteen Plaintiffs; and $25,803,000 for attorneys fees incurred in the prosecution of this litigation. [10] Various Settlement Class Members filed objections in opposition to the motion for an award of fees. The objections challenged the value of benefits to Settlement Class Members created by Class Counsel in light of the involvement of the attorneys general, the inclusion of time spent on non-Zurich Settlement matters in the calculation of the lodestar, Class Counsel's performance of their gatekeeper function, and the overall amount of the fees. On June 5, 2007, the District Court approved the requested fee award, rejecting all of the objections. In re Ins. Brokerage Antitrust Litig., 2007 WL 1652303 (D.N.J. June 5, 2007) (Zurich Settlement Attorneys' Fees Opinion). The following objectors filed timely notices of appeal from the District Court's order granting the settling parties' motion for final approval of the settlement: Shapiro & Lodwick Co., LPA, Sports & Spine Physical Therapy, Inc., Irene Pekoe, Hoffman Legal Group, LLC, Lacy Redd and Cross & Sir (07-1759); Romero General Construction Group (07-1763); Dan C.D. Sturdevant (07-1769); Van Enterprises, Inc. (07-1779); Iaad O., Inc. (Trustee of 8 Pacific Street Trust) and Zorkess LLC (07-1786); Emerald Financial Group, Inc. (07-1793); Palomar Grading and Paving, Inc. (07-1796); and Harold Folsom Jensen (07-1826). The following objectors filed timely notices of appeal from the District Court's order awarding attorneys' fees and expenses: Van Enterprises, Inc. (07-2935); Iaad O., Inc. (Trustee of 8 Pacific Street Trust) and Zorkess LLC (07-2957); Shapiro & Lodwick Co., LPA and Sports & Spine Physical Therapy, Inc. (07-3037); Lacy Redd and Cross & Sir (07-3038); Irene Pekoe and Hoffman Legal Group, LLC (07-3039); Romero General Construction Corp. (07-3040); Dan C.D. Sturdevant (07-3042); Emerald Financial Group, Inc., Palomar Grading and Paving, Inc., and Harold Folsom Jensen (07-3041). [11] Through various consolidations, the appeals of these objectors from both the District Court's final approval order and its attorneys' fees order have been joined together. Altogether, there are sixteen consolidated appeals related to the Zurich Settlement.