148 F.3d 283 (3rd Cir. 1998), 97-5155, In re Prudential Ins. Co. of America Sales Practices Litigation

Docket Nº:William Walton, Appellants at Nos. 97-5155/5156/5312.
Citation:148 F.3d 283
Party Name:In re: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA SALES PRACTICES LITIGATION. Richard P. KRELL, MDL transfer, N.D. Ohio, DNJ Civil Action No. 95-6062 v. PRUDENTIAL INSURANCE COMPANY OF AMERICA, Richard P. Krell, as well as Objectors Elizabeth Bajek, Amanda Bajek, Helen Bartsch, Mark Ciconte, Raymond Dolce, Margaret Dolice, Louise Duggan, Peter Dug
Case Date:July 23, 1998
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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148 F.3d 283 (3rd Cir. 1998)

In re: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA SALES

PRACTICES LITIGATION.

Richard P. KRELL, MDL transfer, N.D. Ohio, DNJ Civil Action No. 95-6062

v.

PRUDENTIAL INSURANCE COMPANY OF AMERICA,

Richard P. Krell, as well as Objectors Elizabeth Bajek,

Amanda Bajek, Helen Bartsch, Mark Ciconte, Raymond Dolce,

Margaret Dolice, Louise Duggan, Peter Duggan, Charles

Duncan, Mary Howe, Mary Krell, William Morris, Diana Racer,

Thomas Racer, Gweneth Reidel, The Estate of Carl J. Scalzo,

Marie Scalzo, Terry Sligar, Alice Smith, Jerry Smith, and

William Walton, Appellants at Nos. 97-5155/5156/5312.

In re PRUDENTIAL INSURANCE COMPANY AMERICA SALES PRACTICE

LITIGATION AGENT ACTIONS.

Richard Johnson, Intervenor-Plaintiff in District Court,

Richard E. Johnson, Appellant at No. 97-5217.

Nos. 97-5155, 97-5156, 97-5217 and 97-5312.

United States Court of Appeals, Third Circuit

July 23, 1998

Argued Jan. 26, 1998.

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Michael P. Malakoff (Argued), Malakoff, Doyle & Finberg, Pittsburgh, Pennsylvania, for Appellants Richard P. Krell, et al.

Lynde Selden, II, Lynde Selden Chartered, San Diego, California, for Appellant Richard E. Johnson.

Melvyn I. Weiss (Argued), Milberg, Weiss, Bershad, Hynes & Lerach, New York City, Allyn Z. Lite, Goldstein, Lite & DePalma, Newark, New Jersey, for Appellee George A. Zoller, Class Action Plaintiff Representative.

Reid L. Ashinoff (Argued), Michael H. Barr, Sonnenschein, Nath & Rosenthal, New

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York City, for Appellees Prudential Insurance Company of America and Ron D. Barbaro.

Brian S. Wolfman (Argued), Alan B. Morrison, Public Citizen Litigation Group, Washington, DC, for Amicus Curiae-Appellant Public Citizen, Inc.

John J. Gibbons, Gibbons, Del Deo, Dolan, Griffinger & Vecchione, Newark, New Jersey, for Appellee Robert C. Winters.

Frederick B. Lacey, LeBoeuf, Lamb, Greene & MacRae, Newark, New Jersey, for Appellee Frances K. Beck, as Executrix of the Estate of Robert A. Beck.

Before: SCIRICA, ROTH and RENDELL, Circuit Judges.

OPINION OF THE COURT

SCIRICA, Circuit Judge.

TABLE OF CONTENTS OPINION OF THE COURT .............................................................................288 I. BACKGROUND AND PROCEDURAL HISTORY ..........................................................290 A. The Multi-State Life Insurance Task Force ..............................................290 B. The Federal Class Action ...............................................................292 1. The Proposed Settlement ............................................................294 a. The Alternative Dispute Resolution Process .....................................295 b. Basic Claim Relief .............................................................296 c. Enhancements To the Task Force Plan ............................................296 2. The Fairness Hearing ...............................................................298 II. ISSUES RAISED ON APPEAL AND STANDARD OF REVIEW ............................................299 III. JURISDICTION ..............................................................................299 A. Subject Matter Jurisdiction ...........................................................299 1. Federal Question Jurisdiction as a Basis for Supplemental Jurisdiction ............300 2. Diversity Jurisdiction as a Basis for Supplemental Jurisdiction ...................303 B. Personal Jurisdiction .................................................................306 C. Article III ...........................................................................306 IV. CLASS CERTIFICATION .......................................................................307 A. Settlement-Only Class Certification ...................................................307 B. Class Certification under Rule 23 .....................................................308 1. The Rule 23(a) Criteria............................................................309 a. Numerosity ....................................................................309 b. Commonality ...................................................................309 c. Typicality ....................................................................310 d. Adequacy of Representation.....................................................312 2. The Rule 23(b) Criteria ...........................................................313 a. Predominance ..................................................................314 b. Superiority ...................................................................315 C. Conclusion ............................................................................316 V. THE FAIRNESS OF THE PROPOSED SETTLEMENT ...................................................316 A. The Girsh Factors .....................................................................318 1. The complexity and duration of the litigation .....................................318 2. The reaction of the class to the settlement .......................................318 3. The stage of the proceedings and amount of discovery completed.....................319 4. The risks of establishing liability and damages ...................................319 a. Replacement Claims.............................................................320 5. The risks of maintaining the class action through trial ...........................321 6. The ability of the defendants to withstand a greater judgment .....................321 7. The range of reasonableness of the settlement fund in light of the best possible recovery and all the attendant risks of litigation..................322 B. Other Objections ......................................................................324 1. The Rules Enabling Act and the McCarran-Ferguson Act ..............................324 2. Failure to Allow Discovery.........................................................324 C. "Other Sales Claims" ..................................................................325 1. The Alleged Expansion of the Class ................................................325 2. Adequacy of Class Notice...........................................................326 D. Conclusion.............................................................................328 VI. ATTORNEYS' FEES ...........................................................................329 A. The Fee Agreement .....................................................................329 B. Fee Opinion ...........................................................................330 C. Analysis ..............................................................................333 1. "Clear-Sailing" Fee Agreement .....................................................334 2. Adverse Effect on Class Members ...................................................335 3. Fairness of the Award .............................................................336 a. The Value of the Settlement....................................................336 b. The Appropriate Percentage Recovery............................................338 c. Lodestar Calculation ..........................................................340 i. Multiplier ...............................................................340 ii. Time Records..............................................................341 D. Conclusion.............................................................................342 VII. KRELL'S MOTION TO RECUSE...................................................................342 A. Procedural History ....................................................................342 B. Legal Standard.........................................................................343 C. Krell's Arguments on Appeal............................................................343 1. Ex Parte Meetings .................................................................343 2. The Conference With State Insurance Regulators.....................................344 3. Rutt v. Prudential ................................................................345 VIII. CONCLUSION ................................................................................

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This is an appeal from the approval of the settlement of a nationwide class action lawsuit against Prudential Life Insurance Company alleging deceptive sales practices affecting over 8 million claimants throughout the fifty states and the District of Columbia.

The class is comprised of Prudential policyholders who allegedly were the victims of fraudulent and misleading sales practices employed by Prudential's sales force. The challenged sales practices consisted primarily of churning, vanishing premiums and fraudulent investment plans, and each cause of action is based on fraud or deceptive conduct. There are no allegations of personal injury; there are no futures classes. The settlement creates an alternative dispute...

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