Prof'l Firefighters Ass'n of Omaha, Local 385 v. Zalewski

• Decision Date: 07 May 2012
• Docket Number: 11–3253.,Nos. 11–1817,s. 11–1817
• Citation: 82 Fed.R.Serv.3d 600,678 F.3d 640
• Parties: PROFESSIONAL FIREFIGHTERS ASSOCIATION OF OMAHA, LOCAL 385; Omaha Police Officers Association, Local 101; Omaha Civilian Employees Association, Local 251; Civilian Management, Professional and Technical Employees Council; Jim Anderlik; Michael Piernicky; Bill Love; Terry Leahy, Plaintiffs/Appellees, Rick Bergholz; Mark Allen Lloyd; Stephen Bosilevac; Stephen B. Tyler; Dale A. Gruber, Intervenor Plaintiffs/Appellees, City of Omaha, a Municipal Corporation; Jim Suttle, Omaha Mayor, each in their official capacity; Ben Gray, Omaha City Council Member, each in their official capacity; Pete Festersen, Omaha City Council Member, each in their official capacity; Chris Jerram, Omaha City Council Member, each in their official capacity; Jean Stothert, Omaha City Council Member, each in their official capacity; Franklin Thompson, Omaha City Council Member, each in their official capacity; Thomas Mulligan, Omaha City Council Member, each in their official capacity, Defendants/Appellees, v. James Conrad ZALEWSKI, Interested Party/Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

678 F.3d 640

82 Fed.R.Serv.3d 600

PROFESSIONAL FIREFIGHTERS ASSOCIATION OF OMAHA, LOCAL 385; Omaha Police Officers Association, Local 101; Omaha Civilian Employees Association, Local 251; Civilian Management, Professional and Technical Employees Council; Jim Anderlik; Michael Piernicky; Bill Love; Terry Leahy, Plaintiffs/Appellees,Rick Bergholz; Mark Allen Lloyd; Stephen Bosilevac; Stephen B. Tyler; Dale A. Gruber, Intervenor Plaintiffs/Appellees,City of Omaha, a Municipal Corporation; Jim Suttle, Omaha Mayor, each in their official capacity; Ben Gray, Omaha City Council Member, each in their official capacity; Pete Festersen, Omaha City Council Member, each in their official capacity; Chris Jerram, Omaha City Council Member, each in their official capacity; Jean Stothert, Omaha City Council Member, each in their official capacity; Franklin Thompson, Omaha City Council Member, each in their official capacity; Thomas Mulligan, Omaha City Council Member, each in their official capacity, Defendants/Appellees,

v.James Conrad ZALEWSKI, Interested Party/Appellant.

Nos. 11–1817, 11–3253.

United States Court of Appeals, Eighth Circuit.

Submitted: Nov. 17, 2011.

Filed: May 7, 2012.

John E. Corrigan, argued, Michael P. Dowd, Timothy S. Dowd, Dowd & Howard, Omaha, NE, for Plaintiffs/Appellees.

Maynard H. Weinberg, Weinberg & Weinberg, Omaha, NE, for Intervenor Plaintiffs/Appellees.

Robert F. Rossiter Jr., argued, Timothy J. Thalken, Rebecca Ann Zawisky, Fraser & Stryker, Omaha, NE, for Defendants/Appellees.

James C. Zalewski, Demars & Gordon, Lincoln, NE, for Interested Party/Appellant.

Before RILEY, Chief Judge, BEAM and BYE, Circuit Judges.

RILEY, Chief Judge.

James Conrad Zalewski (appellant), as counsel for a group of sixty-four retired City of Omaha (city) firefighters and their families, appeals the district court's ¹ approval of a class-action settlement agreementbetween the city and a certified class of active and retired city firefighters, police officers, civilian employees, and their unions. Appellant argues the district court abused its discretion in “fail[ing] to properly apply and interpret” Fed.R.Civ.P. 23 to “adequately address the conflict of interest” resulting from the same class counsel representing both active and retired employees. We disagree and affirm.

I. BACKGROUND

The city reports it faces a severe long-term financial crisis caused, in part, by the rising cost of healthcare benefits for various active and retired city employees. Before May 18, 2010, an assortment of collective bargaining agreements (CBAs) and ordinances required the city to offer thirty-four different benefit plans to active and retired employees. Under those plans, 84% of retirees paid no premium for healthcare coverage for themselves or their dependents.

On May 18, 2010, the Omaha City Council (city council) passed Ordinance No. 38733, which (1) required retirees to pay premiums for healthcare calculated as a percentage of their city pension, and (2) reduced the number of healthcare plans from thirty-four to three—one for police, one for firefighters, and one for civilians. Beginning July 1, 2010, retirees would receive the same healthcare benefits as active employees. The city expected to reduce its annual administrative fees by $419,400, reduce other yearly administrative costs by $473,000, and receive more than three million dollars per year in premium payments from retirees.

The day the ordinance passed, four labor organizations ² and four individual retirees ³ (collectively, plaintiffs) filed a nine-count declaratory judgment action against the city, Mayor Jim Suttle, and the members of the city council, seeking to enjoin them from enforcing the ordinance. The plaintiffs sought class certification for all active and retired city employees who received health benefits from the city. The city answered, asserting various affirmative defenses and counterclaims.

On June 10, 2010, the district court entered a preliminary injunction enjoining the city from enforcing the ordinance. On June 28, 2010, the district court permitted five retired firefighters represented by Maynard H. Weinberg to intervene and participate to protect their interests. On July 16, 2010, the district court certified the proposed class under Rule 23(b)(3) and adopted three subclasses identified by plaintiffs in the complaint:

(1) all former city employees who separated from employment for any reason and are entitled to and were receiving group healthcare coverage as city retirees as of May 18, 2010;

(2) all individuals who received group health coverage from the city because they were, or will be “covered dependents” or spouses or survivors of covered retirees; and

(3) all individuals who, as of May 18, 2010, were employed in positions within the city covered by CBAs or ordinances which entitle them to group health coverage when they retire or separate from city employment.

The certified class consisted of 10,286 active and retired city employees and their family members. The district court appointed Michael P. Dowd, John E. Corrigan, and Timothy S. Dowd of the law firm of Dowd, Howard & Corrigan, LLC as class counsel. In certifying the class, the district court found the unions and the individual retirees “are adequate class representatives and are appointed to represent the class of individuals meeting the class definition.” The district court did not enter any specific findings on the need for separate counsel for the identified subclasses. Class counsel represented both active and retired employees, and Weinberg continued to represent the intervenors. The district court ordered class counsel to mail notice to each known class member advising them of their right to have the district court exclude them from the class. After receiving notice, several retirees opted out of the class.

On August 30, 2010, the morning trial was scheduled to begin, the city, the plaintiffs, and the intervenors announced they had agreed on a tentative class-wide settlement. After a hearing regarding the tentative agreement, the district court continued the trial to allow the parties to negotiate the specific written terms of the settlement. The city, the plaintiffs, and the intervenors participated in extensive negotiations.

On October 5, 2010, the parties and their counsel participated in a settlement conference mediated by United States Magistrate Judge F.A. Gossett. The conference dealt extensively with protecting the rights of the retirees. The settlement conference resulted in a tentative settlement agreement subject to approval by the class representatives, the city, and the intervenors.

The settlement agreement resolved three primary issues related to the healthcare benefits provided by the city: (1) current retirees' health insurance premiums were held at the rates the retirees were paying on the date the ordinance passed; (2) the city could reduce the number of healthcare plans to three by transferring retirees to the current plan available for active employees in the same bargaining unit; and (3) because retirees generally share the same plan as their active counterparts, retirees in each class received the right to elect a representative to represent them in future collective bargaining negotiations related to any potential changes to the health plans for such class. The retiree representative received the right to object to proposed changes to the applicable health plan negotiated by the unions and, upon a vote of the affected retirees, request that a neutral arbitrator review a claim that a proposed change is not “fair and reasonable to the retirees.” If the arbitrator finds a proposed change is not fair and reasonable, the applicable union may not approve the tentative CBA and must renegotiate.

On October 20, 2010, the district court approved notice of the settlement and ordered the parties to provide the class with notice of the settlement agreement and advise the class members of their rights to (1) object to the settlement agreement in writing and at the fairness hearing, and (2) opt out of the case and exclude themselves from the class. Of the 10,286 class members, only seventeen opted out—five of whom were retirees. Only 4% of the class objected to the proposed settlement, including appellant. All of the plaintiffs and intervenors approved the settlement agreement.

On December 6, 2010, the district court held a fairness hearing on the proposed settlement agreement. At the hearing, the district court allowed the objecting class members, including appellant, to voice their objections. Appellant objected to the settlement agreement, arguing there was an inherent conflict of interest between active and retired employees and the arbitration provisions were inadequate to protect the retirees' interests. The district court considered each of the objections to the settlement agreement, including appellant's assertion that there was “a conflict of interest between current and retired employee representation [and] the possibility of the active members being able to change the contracts on a whim to their benefit and to the detriment of the retirees.”

On January 3, 2011, after “review[ing] the evidence and consider[ing] all objections,” the district court approved the settlement agreement with some administrative modifications, finding “the proposed settlement is in the best interests of the plaintiff class and the intervenors, based on the claims and defenses in this action, its procedural posture, the anticipated time and expense of protracted litigation, ... the fact that the available funds by the [c]ity are very limited, and failure to affirm this settlement may cause dire consequences for the [c]ity.” The district court also found “that although there are some conflicts within the classes, e.g., retired versus current employees, the parties have been well represented during this process.”

On January 24, 2011, the district court reiterated its...