Prudential Ins. Co. of America Sales Practices Litigation, In re, No. 95-6062

CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)
Writing for the CourtSCIRICA; ROTH
Citation148 F.3d 283
PartiesIn re: THE PRUDENTIAL INSURANCE COMPANY OF AMERICA SALES PRACTICES LITIGATION. Richard P. KRELL, MDL transfer, N.D. Ohio, DNJ Civil Actionv. 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/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 , 97-5156, 97-5217 and 97-5312.
Decision Date23 July 1998
Docket NumberNo. 97-5217,97-5156,No. 95-6062,97-5217 and 97-5312,Nos. 97-5155

Page 283

148 F.3d 283
41 Fed.R.Serv.3d 596
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.
Argued Jan. 26, 1998.
Decided July 23, 1998.

Page 287

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

Page 288

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 ........................................................ 346
                

Page 289

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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 resolution mechanism and establishes protocols to determine the kind and amount of relief to be granted. The relief awarded includes full compensatory damages consisting of what plaintiffs thought they were purchasing from the insurance agent. There is no cap on the amount of compensatory damages for those who qualify, and although punitive damages are not included in the settlement, Prudential has agreed to pay a remediation amount in addition to the payments made through dispute resolution process.

The case involves five consolidated appeals from the judgments of the District Court for the District of New Jersey approving the settlement and awarding attorneys' fees to class counsel. Appellants, members of the certified class who object to the settlement, challenge the district court's jurisdiction, the certification of the settlement class, the fairness of the settlement itself, the award of attorneys' fees, and the district court's refusal to disqualify itself.

We hold the district court properly exercised jurisdiction. Federal subject matter jurisdiction is properly grounded on the alleged violations of the federal securities laws. Although most of the claims implicate state law, supplemental jurisdiction is proper because all of the claims arise out of a common nucleus of operative fact. The district court had personal jurisdiction over the class because

Page 290

actual notice was given to each of the 8 million policyholders by direct mail, and disseminated through television, radio and print advertising throughout the fifty states and the District of Columbia. We also hold there was no reason for the district court to recuse itself from these proceedings.

The district court properly certified a national class under Fed.R.Civ.P. 23(b)(3). The court assessed the numerosity and commonality of the asserted claims, the typicality of those claims, and the adequacy of representation provided by the named plaintiffs and class counsel, and found they satisfied the certification standards. The court also concluded the proposed class action was the superior means of addressing plaintiffs' claims of widespread sales abuse, and the issues common to all members of the class predominated over individual issues related to the members of the class.

We hold the district court properly evaluated the settlement, finding it fair, reasonable and adequate. Prudential's deceptive practices occurred nationwide. It may be argued that problems national in scope deserve the...

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1007 practice notes
  • Steven J. Abraham, & H Ltd. v. WPX Energy Prod., LLC, No. CIV 12-0917 JB/CG
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • September 30, 2017
    ...held that oral misrepresentations are presumptively individualized."); In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 319 (3d Cir. 1998)(certifying class where alleged misrepresentations were written and uniform); Spencer v. Hartford Fin. Servs. Grp., Inc.,......
  • Espinosa v. Ahearn (In re Hyundai & Kia Fuel Econ. Litig.), No. 15-56014
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • January 23, 2018
    ...in state law within a single class" as illustrative) (citing In re Prudential Ins. Co. of Am. Sales Practice Litig. Agent Actions , 148 F.3d 283, 315 (3d Cir. 1998) ); In re Mex. Money Transfer Litig. , 267 F.3d 743, 747 (7th Cir. 2001) (noting that even though "state laws may differ in way......
  • Landsman & Funk Pc v. Skinder–strauss Associates, Nos. 09–3532
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • April 4, 2011
    ...v. Pension Plan of Bethlehem Steel Corp., 213 F.3d 124, 136 (3d Cir.2000) (citing In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283, 299 (3d Cir.1998)).B. The TCPA, which was passed in 1991 as part of an amendment to the Communications Act of 1934, declares it unlawful un......
  • Meritcare Inc. v. St. Paul Mercury Ins. Co., No. 98-3032
    • United States
    • U.S. Court of Appeals — Third Circuit
    • January 25, 1999
    ...have called attention to the problem, we have not been required to meet it. See In re Prudential Ins. Co. of America Sales Practices Lit., 148 F.3d 283, 303-06 (3d Cir.1998); Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1045 n. 9 (3d In Russ v. State Farm Mutual Automobile Insurance Co.,......
  • Request a trial to view additional results
1004 cases
  • Steven J. Abraham, & H Ltd. v. WPX Energy Prod., LLC, No. CIV 12-0917 JB/CG
    • United States
    • United States District Courts. 10th Circuit. District of New Mexico
    • September 30, 2017
    ...held that oral misrepresentations are presumptively individualized."); In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 319 (3d Cir. 1998)(certifying class where alleged misrepresentations were written and uniform); Spencer v. Hartford Fin. Servs. Grp., Inc.,......
  • Espinosa v. Ahearn (In re Hyundai & Kia Fuel Econ. Litig.), No. 15-56014
    • United States
    • United States Courts of Appeals. United States Court of Appeals (9th Circuit)
    • January 23, 2018
    ...in state law within a single class" as illustrative) (citing In re Prudential Ins. Co. of Am. Sales Practice Litig. Agent Actions , 148 F.3d 283, 315 (3d Cir. 1998) ); In re Mex. Money Transfer Litig. , 267 F.3d 743, 747 (7th Cir. 2001) (noting that even though "state laws may differ in way......
  • Landsman & Funk Pc v. Skinder–strauss Associates, Nos. 09–3532
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • April 4, 2011
    ...v. Pension Plan of Bethlehem Steel Corp., 213 F.3d 124, 136 (3d Cir.2000) (citing In re Prudential Ins. Co. of Am. Sales Practice Litig., 148 F.3d 283, 299 (3d Cir.1998)).B. The TCPA, which was passed in 1991 as part of an amendment to the Communications Act of 1934, declares it unlawful un......
  • Meritcare Inc. v. St. Paul Mercury Ins. Co., No. 98-3032
    • United States
    • U.S. Court of Appeals — Third Circuit
    • January 25, 1999
    ...have called attention to the problem, we have not been required to meet it. See In re Prudential Ins. Co. of America Sales Practices Lit., 148 F.3d 283, 303-06 (3d Cir.1998); Packard v. Provident Nat'l Bank, 994 F.2d 1039, 1045 n. 9 (3d In Russ v. State Farm Mutual Automobile Insurance Co.,......
  • Request a trial to view additional results
1 books & journal articles
  • Prospective injunctive relief and class settlements.
    • United States
    • Harvard Journal of Law & Public Policy Vol. 39 Nbr. 3, June 2016
    • June 22, 2016
    ...672, 677 (7th Cir. 2009); DG ex rel. Stricklin v. Devaughn, 594 F.3d 1188, 1198 (10th Cir. 2010); Krell v. Prudential Ins. Co. of Am., 148 F.3d 283, 306-07 (3d Cir. (212.) Theane Evangelis & Bradley J. Hamburger, Article 111 Standing and Absent Class Members, 64 EMORY L.J. 383, 393 (201......

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