Erie County Retirees Ass'n v. County of Erie, Pa.

• Decision Date: 20 March 2002
• Docket Number: Civil Action No. 98-272 Erie.
• Citation: 192 F.Supp.2d 369
• Parties: ERIE COUNTY RETIREES ASSOCIATION and Lyman H. Cohen, for himself and all others similarly situated, Plaintiffs, v. The COUNTY OF ERIE, PENNSYLVANIA and Erie County Employees' Retirement Board, Defendants.
• Court: U.S. District Court — Western District of Pennsylvania

192 F.Supp.2d 369

ERIE COUNTY RETIREES ASSOCIATION and Lyman H. Cohen, for himself and all others similarly situated, Plaintiffs, v. The COUNTY OF ERIE, PENNSYLVANIA and Erie County Employees' Retirement Board, Defendants.

Civil Action No. 98-272 Erie.

United States District Court, W.D. Pennsylvania.

March 20, 2002.

Richard A. Lanzillo, Mark J. Kuhar, Knox, McLaughlin, Gornall & Sennett, Erie, PA, for plaintiffs.

John E. Cooper, Erie, PA, for defendants.

MEMORANDUM OPINION

McLAUGHLIN, District Judge.

Plaintiffs have filed a Stipulation for Settlement of Class Action ("Settlement") [Doc. No. 95] and an Application for Approval of Attorneys' Fees [Doc No. 99]. Previously, they commenced this class action alleging that their former employer, the County of Erie, discriminated against them in violation of the Age Discrimination in Employment Act ("ADEA") when it required them to accept health care coverage under an HMO plan while offering younger retirees health care coverage under a traditional indemnity plan.¹ The Plaintiff class is comprised of retirees of the County who are ages 65 and older, and therefore eligible for Medicare. For the reasons set forth below, we will approve the Settlement and grant the Application for Approval of Attorneys' Fees in part.

I. FACTS AND PROCEDURAL HISTORY

A. Facts

On February 1, 1998, the County of Erie required that its Medicare-eligible retirees accept health care coverage under SecurityBlue, an HMO plan, or forfeit health care benefits from the County altogether. At the same time, younger, non-Medicare-eligible retirees were permitted to utilize a traditional indemnity plan. This Court has previously set forth the extensive differences between the two insurance plans and it is unnecessary to do so in detail again here. Erie County Retirees Ass'n v. Erie County, 91 F.Supp.2d 860, 868-880 (W.D.Pa.1999), rev'd, 220 F.3d 193 (3d Cir. 2000), cert. denied, 532 U.S. 913, 121 S.Ct. 1247, 149 L.Ed.2d 153 (2001). Briefly, however, under SecurityBlue Plaintiffs were required to coordinate their health care services through a primary care physician they selected from a list of authorized providers. The plan itself did not require Plaintiffs to pay deductibles and copayments were generally very low or nonexistent. In exchange for the lower cost, Plaintiffs were required to stay within a provider network for most services and were limited to a formulary for prescription drugs. In order to maintain coverage under SecurityBlue, Plaintiffs were required to pay their Medicare Part B premiums, which were $50 per month as of January 1, 2001. The younger retirees utilizing the traditional indemnity plan were, however, not required to remain within a provider network or prescription drug formulary but were required to pay deductibles. Additionally, since the younger retirees were not Medicare-eligible, they were not required to pay Medicare Part B premiums.

On October 1, 1998, the County replaced the younger retirees' traditional indemnity coverage with SelectBlue, a hybrid "point-of-service" plan that combined the features of an HMO with the features of a traditional indemnity plan. Under this plan, the younger retirees were permitted to select HMO or traditional indemnity coverage on an as-needed basis. They were not restricted to a prescription drug formulary. Pursuant to Highmark's underwriting criteria, Medicare-eligible retirees such as the Plaintiff class were ineligible for coverage under SelectBlue. Plaintiffs filed this class action alleging that the County violated the ADEA when it required them to accept SecurityBlue while offering younger retirees allegedly superior health care coverage, first under the traditional indemnity plan and subsequently under SelectBlue. Various state law theories of liability were also asserted.

B. Procedural History

This case has an extensive procedural background. On the parties' original cross-motions for summary judgment, this Court held that the ADEA, as amended by the Older Workers' Benefit Protection Act of 1990 ("OWBPA"), did not afford relief in the context of alleged discrepancies in health care plans offered by employers to their retirees. Erie County Retirees Ass'n v. Erie County, 91 F.Supp.2d 860, 868-880 (W.D.Pa.1999). On appeal, the Court of Appeals for the Third Circuit reversed and remanded for a determination of whether the safe harbor set forth in 29 U.S.C. § 623(f)(2)(B)(i) applied. Erie County Retirees Ass'n v. County of Erie, 220 F.3d 193 (3d Cir.2000). The United States Supreme Court denied Defendants' Petition for Certiorari. Erie County, Pa. v. Erie County Retirees Ass'n, 532 U.S. 913, 121 S.Ct. 1247, 149 L.Ed.2d 153 (2001).

Under the safe harbor provision and the regulations promulgated thereunder, employers may provide different benefit plans to employees and remain ADEA compliant so long as the plans provide equal benefits to the employees or are of equal cost to the employer (the "equal cost/equal benefit" rule). On remand, this Court held that the County was not entitled to the safe harbor. Erie County Retirees Ass'n v. County of Erie, 140 F.Supp.2d 466 (W.D.Pa.2001). On subsequently filed motions in limine, this Court ruled that, (1) at trial, the County would be permitted to offer offset evidence of Plaintiffs' cost-savings under SecurityBlue; Erie County Retirees Ass'n v. County of Erie, 166 F.Supp.2d 310 (W.D.Pa.2001); (2) fact issues precluded summary judgment on the issue of wilfulness; and (3) Plaintiffs would not be permitted to present evidence of the cost incurred by the County in providing the choice option to younger retirees. Erie County Retirees Ass'n v. County of Erie, 166 F.Supp.2d 313 (W.D.Pa.2001). We also denied a motion to add class members. Erie County Retirees Ass'n v. County of Erie, 203 F.R.D. 225 (W.D.Pa. 2001). A Stipulation for Settlement of Class Action was thereafter negotiated, and a hearing on the fairness of the proposed settlement was held on December 20, 2001.

C. Proposed Settlement

In an effort to comply with the above rulings, the County eliminated SelectBlue as an option for the younger retirees and required them to accept Keystone, an HMO plan similar to SecurityBlue, effective July 1, 2001. The Keystone plan is, in all material respects, similar to the coverage provided under SecurityBlue. For instance, the younger retirees enrolled in the Keystone plan are required to coordinate their health care services with a primary care physician and to remain within a prescription drug formulary. Also effective July 1, 2001, the younger retirees are responsible for paying a monthly amount equal to the monthly amount of Plaintiffs' Medicare Part B premiums. Plaintiffs do not concede that the implementation of the Keystone plan and the monthly charge brought the County into compliance with the ADEA, but admit that all or almost all of the discrepancies in the cost and quality of their health care benefits and those provided to younger retirees prior to July 1, 2001 were eliminated when the County made the changes. Plaintiffs' Memorandum in Support of Settlement at 6-7.

The Settlement provides for a total payment of $350,000 from the County to Plaintiffs. Stipulation for Settlement of Class Action at ¶ 8. The class consists of 114 members. Of the $350,000, Plaintiffs' counsel request an award of fees and costs in the amount of $159,464.82. Application for Approval of Attorneys' Fees at 3. The Settlement further provides for the release of all claims asserted on behalf of the class through the date of court approval of the Settlement. Id.

II. DISCUSSION

A. The Stipulation for Settlement of Class Action

Federal Rule of Civil Procedure 23(e) provides that a class action may not be dismissed or compromised without the approval of the Court and the notification of all class members. Fed.R.Civ.P. 23(e). The Court of Appeals for the Third Circuit has directed that Rule 23(e) requires district courts to "independently and objectively analyze the evidence and circumstances before it in order to determine whether the settlement is in the best interest of those whose claims will be extinguished." In re Cendant Corp. Litigation, 264 F.3d 201, 231 (3d Cir.2001), cert. denied, 70 USLW 3445, ___ U.S. ___, 122 S.Ct. 1300, ___ L.Ed.2d ___ (Mar. 18, 2002) (quoting In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liability Litig., 55 F.3d 768, 785 (3d Cir.1995), cert. denied, 516 U.S. 824, 116 S.Ct. 88, 133 L.Ed.2d 45 (1995)). The District Court acts as a "fiduciary guarding the rights of absent class members and must determine that the proffered settlement is `fair, reasonable, and adequate.'" Id. (quoting GM Trucks, 55 F.3d at 785). In its analysis, the Court must consider nine factors first set forth in Girsh v. Jepson, 521 F.2d 153 (3d Cir.1975). These factors are:

(1) the complexity, expense and likely duration of the litigation;

(2) the reaction of the class to the settlement;

(3) the stage of the proceedings and the amount of discovery completed;

(4) the risks of establishing liability;

(5) the risks of establishing damages;

(6) the risks of maintaining the class action through the trial;

(7) the ability of the defendants to withstand a greater judgment;

(8) the range of reasonableness of the settlement fund in light of the best possible recovery; and

(9) the range of reasonableness of the settlement fund in light of all the attendant risks of litigation.

In re Cendant Corp. Litigation, 264 F.3d at 232 (citing Girsh, 521 F.2d at 157). The proponents of a settlement bear the burden of proving that these factors weigh in favor of approval. Id. (citing GM Trucks, 55 F.3d at 785). We will consider each factor in turn.

1. Complexity, Expense and Likely Duration of the Litigation

The first Girsh factor requires the Court to consider "the probable costs, in both time and money, of continued litigation." In re Cendant, 264 F.3d at 233 (quoting GM Trucks, 55 F.3d at 812). The...