Stoetzner v. U.S. Steel Corp.

• Decision Date: 09 March 1990
• Docket Number: No. 88-3571,88-3571
• Citation: 897 F.2d 115
• Parties: Herbert T. STOETZNER, R.E. Autrey, J.M. Dobos, M.T. Layman, B.W. Fox, R.J. Sims, Marilyn Y. Sartain, C.W. Moore Jr., R.D. Strickland, Ruth R. Thornton, David B. Groman, F.R. Bobek, D.F. Defazio, Martha A. Jones, Carolyn K. Neeld, R.H. Clark Jr., Appellants, v. UNITED STATES STEEL CORPORATION, United States Steel and Carnegie Pension Fund, United States Steel Corporation Plan for Employee Pension Benefits, United States Steel Corporation Savings Fund Plan for Salaried Employees, United States Steel Corporation Severance Pay Program for Management Employees, Lehigh Portland Cement Company, Lehigh Portland Cement Company Salaried Employees Savings and Profit Sharing Plan, Lehigh Portland Cement Company Retirement Income Plan for Salaried Employees, Trustee, Lehigh Portland Cement Company Salaried Employees Savings and Profit Sharing Plan, Trustee, Lehigh Portland Cement Company Retirement Income Plan for Salaried Employees and Unknown Other Individuals, Unincorporated Associations and Corporations, United States Steel Corp Severance Pay Plan, Heidelberger Zement Ag and Heidelberg Cement, Inc.
• Court: U.S. Court of Appeals — Third Circuit

Page 115

897 F.2d 115

15 Fed.R.Serv.3d 1325

Herbert T. STOETZNER, R.E. Autrey, J.M. Dobos, M.T. Layman B.W. Fox, R.J. Sims, Marilyn Y. Sartain, C.W. Moore Jr. R.D. Strickland, Ruth R. Thornton, David B. Groman, F.R Bobek, D.F. Defazio, Martha A. Jones, Carolyn K. Neeld, R.H Clark Jr., Appellants, v. UNITED STATES STEEL CORPORATION, United States Steel and Carnegie Pension Fund, United States Steel Corporation Plan for Employee Pension Benefits, United States Steel Corporation Savings Fund Plan for Salaried Employees, United States Steel Corporation Severance Pay Program for Management Employees, Lehigh Portland Cement Company, Lehigh Portland Cement Company Salaried Employees Savings and Profit Sharing Plan, Lehigh Portland Cement Company Retirement Income Plan for Salaried Employees, Trustee, Lehigh Portland Cement Company Salaried Employees Savings and Profit Sharing Plan, Trustee, Lehigh Portland Cement Company Retirement Income Plan for Salaried Employees and Unknown Other Individuals, Unincorporated Associations and Corporations, United States Steel Corp Severance Pay Plan, Heidelberger Zement Ag and Heidelberg Cement, Inc.

No. 88-3571.

United States Court of Appeals, Third Circuit.

Argued Sept. 8, 1989.

Decided Feb. 26, 1990.

As Corrected March 9, 1990.

Daniel M. Schember (Argued), Gaffney, Schember and Kete, P.C., Washington, D.C., for appellants.

Michael D. Brophy (Argued), George J. Lavin, Jr. Associates, Philadelphia, Pa., amicus curiae.

Matthew M. Strickler, Ballard, Spahr, Andrews & Ingersoll, Philadelphia, Pa., Dawne S. Hickton (Argued), USX Corp., Pittsburgh, Pa., for appellees.

Before BECKER, NYGAARD and ROSENN, Circuit Judges.

OPINION OF THE COURT

NYGAARD, Circuit Judge.

Before the court is a motion to approve a proposed settlement. The action was filed by a class of formerly salaried employees of United States Steel Corporation's Universal Atlas Cement Division (USX), claiming they are entitled to pension or severance benefits resulting from USX's sale of the division in 1980. Following a bench trial, the district court denied relief and the class appealed. The class representatives and USX then negotiated a proposed settlement. Notice of the proposed settlement was sent to the class, and several members filed objections. We appointed Michael D. Brophy, Esquire, as friend of the court ("Amicus"), to file a letter brief on behalf of the objectors, and invited USX and the class representatives to do likewise. For the reasons that follow, we will remand the case to the district court with instructions to approve the settlement.

I.

The class action was filed in 1983 by employees of USX's Atlas Cement Division (UAC). On the day the case was to be tried, the district court certified the class pursuant to Fed.R.Civ.P. 23(b)(2). The class presented two claims for trial; first, that they were entitled to "shutdown pensions" following USX's sale of UAC to Lehigh Portland Cement Company (Lehigh) in 1980; and second, that they were entitled to severance pay following the sale. The primary issue before the district court was whether the pension benefits package to which class members were entitled at Lehigh was comparable to the benefits available at UAC. ¹ Following a non-jury trial, the court made findings of fact, conclusions of law and denied the class members relief. Specifically, the court found that the sale cost no employee at UAC his or her job; that Lehigh was required to provide comparable salaries, jobs and benefits; and, that the assistant to the vice-president of the pension fund, following a detailed comparison of Lehigh and USX benefit packages, correctly concluded they were equivalent. The district court found that the plaintiffs failed to sustain their burden of proof and concluded that the plan administrator's determinations; (1) that the pension benefits of UAC and Lehigh were similar; and, (2) that no permanent shutdown occurred, were neither arbitrary nor capricious. The court, applying a de novo review, also concluded that the defendants did not breach their fiduciary duty to beneficiaries of the plans by denying plaintiff's claims for severance pay and retirement benefits.

Following an appeal by the class, the parties reached a tentative settlement, and notice was sent to the class. The settlement contained the following:

1. Class members will abandon the claims made in the lawsuit;

2. Defendant/appellees will pay $125,000 to law firm representing the class, Gaffney, Schember & Kete;

3. The law firm will deposit the proceeds in its trust account and distribute the funds as follows:

a. $25,000 to Claude C. Poulin, the expert retained by the class, in full payment for his services;

b. $8,100 to attorney Stephen R. Bruce, who served as counsel to the class prior to the law firm;

c. $62,500 to the firm of Gaffney, Schember & Kete, P.C., which has agreed to satisfy the class' obligations to all other attorneys who have provided services to the class during the course of the lawsuit and to accept the remainder in full satisfaction of their legal fees;

d. $29,400 to the UAC Legal Fund, an organization established by the class members to raise funds for the prosecution of the appeal, which will pay any outstanding costs and will distribute the remainder, as well as the remaining amount in the Fund bank account, to individual class members in proportion to their past contributions over a minimum amount to be determined by the Fund.

Twenty-nine class members filed objections to the settlement.

The issues raised on appeal were two legal claims presented in the Amicus Brief, that; (1) the district court err in applying the arbitrary and capricious standard in light of the Supreme Court's decision in Firestone Tire and Rubber Company v. Bruch, --- U.S. ----, 109 S.Ct. 948, 103 L.Ed.2d 80 (1989); and, (2) the court erred in certifying the class on the day of trial without proper notice of the trial or of the certification and the objector's claim, essentially that the verdict is not supported by the evidence.

II.

A.

This case presents an unusual situation in which an appellate court must do that which is normally done by a trial court and decide whether or not to approve the proposed settlement. The standard of review which a district court must apply in reviewing a class settlement ² is "whether the settlement is fair, adequate, and reasonable." Walsh v. Great Atlantic and Pacific Tea Co., Inc., 726 F.2d 956, 965 (3d Cir.1983); accord Van Horn v. Trickey, 840 F.2d 604, 607 (8th Cir.1988); Grant v. Bethlehem Steel Corp., 823 F.2d 20, 24 (2d Cir.1987); EEOC v. Hiram Walker and Sons, Inc., 768 F.2d 884, 889 (7th Cir.1985); cert. denied, Agee v. EEOC, 478 U.S. 1004, 106 S.Ct. 3293, 92 L.Ed.2d 709 (1986); see also Reed v. General Motors Corp., 703 F.2d 170, 172 (5th Cir.1983).

In Girsh v. Jepson, 521 F.2d 153 (3d Cir.1975), we set forth several factors a district court must consider when evaluating the fairness, adequacy, and reasonableness of a proposed settlement in a class action. They 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 in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation. 521 F.2d at 157, citing City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir.1974).

In Girsh, settlement was proposed to the district court soon after discovery commenced. Here, the litigation ran its full course and the class lost. Thus, some factors which a trial court is required to consider in evaluating a proposed settlement are inapposite when, as here, the case has been tried to judgment. Other Girsh factors, such as the stage of the proceeding, the expense of the appeal, and the possibility of further litigation thereafter, are implicit in the inquiry we employ. As applied to this settlement proposal, the Girsh factors condense essentially into a two-step inquiry by which we determine if this post-trial settlement is fair, adequate, and reasonable. First, we consider the response of the class to the settlement. Next, we examine the ratio which the reasonableness of the settlement bears to the possibility of success on the merits of the appeal.

B.

Applying the first factor, out of 281 class members, only twenty-nine, filed objections to the proposed settlement. The reasons given are (1) they disagree with the district court's decision and argue that they are entitled to greater pension benefits, ³ and (2) they believe the proceeds of the settlement are divided incorrectly, favoring the attorneys who represent the class. ⁴ Counsel for the class sent a letter to each of the 23 objectors who provided a return address. This letter reminded the objectors of both the outstanding debt for attorney and actuary fees and that additional fees would accrue on appeal. It asked the objectors to state the amount they would be willing to contribute toward current obligations and future costs if settlement were disapproved. Only four persons replied. Two respondents indicated they would be unwilling to make any more financial contributions; one would be willing to contribute $3,000; the fourth would contribute $1000.

Class members who favor settlement in this case do so because "[t]hey recognize that pursuing the appeal entails risks that the judgment against them will be affirmed," and that they "... do not want to take this risk." These class members recognize that they are already in debt to both their attorney and expert witness, and that the appeal would obligate...