Opinion
Civil Action No. 01-4675 (JBS).
April 16, 2003
Natalie Finkelman Bennett, Esquire (Argued), James C. Shah, Esquire, SHEPHERD, FINKELMAN, MILLER SHAH, L.L.C., Washington Professional Campus, Turnersville, New Jersey, Counsel for Plaintiffs.
Edward S. Wardell, Esquire, KELLEY, WARDELL CRAIG, Haddonfield, New Jersey, and Burt M. Rublin, Esquire (Argued), Raymond A. Quaglia, Esquire, BALLARD SPAHR ANDREWS INGERSOLL, L.L.P., Philadelphia, Pennsylvania, Counsel for Defendants.
OPINION
The two named plaintiffs in this ERISA putative class action accepted a Rule 68, Fed.R.Civ.P. offer of judgment from defendant equal to the total amount of their individual claims plus reasonable costs and attorneys' fees in an amount to be determined by the Court. Presently, the Court must determine whether the proposed judgments are subject to Rule 23(e), Fed.R.Civ.P., which requires court approval for any dismissal or compromise of a class action, and if so, whether the judgments are fair, adequate, and reasonable to the two named plaintiffs and to the putative class.
The judgments offered to the named plaintiffs only affect the individual claims of the named plaintiffs; they neither grant nor deny any relief of any kind to the putative class. For reasons expressed in this opinion, the Court finds that the individual judgments for these two individual plaintiffs will not prejudice the unnamed members of the putative class. Importantly, the recovery for the two named plaintiffs is relatively small and will not deplete the defendant's funds in a way that will affect the future rights of the putative class, nor does it appear that the putative class will be deprived of effective representatives.
Aside from the judgments for the two named plaintiffs, however, the Court is also asked to voluntarily dismiss without prejudice the claims of the putative class. The Court will approve this dismissal, but only because the rights of the putative class are currently being simultaneously represented by the same counsel in another identical action before this Court captionedRothenberg v. Aetna U.S. Healthcare, Civ. No. 02-6122 (JBS), for reasons now explained.
I. BACKGROUND
Plaintiffs Caroline Carducci and David Labinski filed a class action complaint in New Jersey Superior Court in Camden County on August 27, 2001 alleging that their health insurer, Aetna U.S. Healthcare, was unjustly enriched because it placed subrogation and reimbursement liens on their personal injury lawsuit settlements for amounts of health care benefits paid to the plaintiffs by reason of the injury which was the subject of each plaintiff's tort recovery. Aetna had collected $180.40 from Ms. Carducci's settlement proceeds and $536.50 from Mr. Labinski's settlement proceeds. This case was filed based on the Perreira v. Rediger decision, 169 N.J. 399 (2001), where the New Jersey Supreme Court held that, under New Jersey law, a health insurer who expended funds on behalf of an insured cannot recoup the funds through a subrogation lien on the recovery the insured obtains from a tortfeasor.
Defendant removed the case to this Court on October 5, 2001, arguing that there was federal jurisdiction pursuant to the Employee Retirement Income Security Act of 1974 ("ERISA") because plaintiffs were subject to plans governed by ERISA and were seeking to recover benefits due under those plans. Plaintiffs filed a motion to remand the action to state court for lack of subject matter jurisdiction; defendant filed a motion to dismiss.
Meanwhile, six similar ERISA cases about health insurance subrogation clauses were filed in New Jersey court and were removed to this Court. Defendants moved for consolidation of the actions with the Carducci action because they involved similar legal issues on motions to remand and motions to dismiss. This Court heard oral argument and granted the motion to consolidate on January 28, 2002, but only for the limited purpose of considering the motions for remand and for dismissal. See Carducci, et al. v. Aetna U.S. Healthcare, Civil No. 01-4675 (JBS).
Consolidated under the Carducci docket were: Levine v. United Healthcare Corp., Civ. No. 01-4964 (JBS); West v. Health Net of the Northeast, Civ. No. 01-5217 (JCL); Collins v. Oxford Health Plans, Civ. No. 01-5237 (JWB); Borgurski v. Horizon Blue Cross Blue Shield of New Jersey, Civ. No. 01-5339 (AMW); andEdmonson v. Horizon Blue Cross Blue Shield of New Jersey, Civ. No. 01-5812 (JBS). Kane v. Aetna U.S. Healthcare, Civ. No. 01-5347 (KSH), was not consolidated as it involved a different statute from the other actions. Later, the parties in Bibbs v. Amerihealth, Inc., Civ. No. 02-1155 (JBS), agreed to consolidate under the Carducci docket for the remand motion, and the parties in Barbour v. Cigna Corp., Civ. No. 02-417 (JBS), agreed to consolidate under the Carducci docket for the motion to dismiss. The more recently filed Rothenberg v. Aetna U.S. Healthcare, Civ. No. 02-6122 (JBS), as mentioned supra, asserts the same claims as the present case against this defendant, but has not yet been formally consolidated.
On January 25, 2002 and on April 4, 2002, this Court heard oral argument on the remand motions. The principal issue was whether the monies that plaintiffs sought — which were monies that the insurers took pursuant to the subrogation clauses in the employee benefit healthcare contracts — were "benefits due" under ERISA section 502(a)(1)(B). This Court, in an Opinion and Order dated May 28, 2002, agreed with defendants' position and determined that the monies were "benefits due" under section 502(a)(1)(B), so that the state law unjust enrichment claims were completely preempted by federal law and were properly removed to federal court. See Carducci, et al. v. Aetna U.S. Healthcare, 204 F. Supp. 2d 796 (D.N.J. 2002).
Plaintiffs then filed a motion to alter or amend the May 28, 2002 Opinion and Order to allow an interlocutory appeal of the decision. This Court treated the motion as seeking certification of an interlocutory appeal to the United States Court of Appeals for the Third Circuit pursuant to 28 U.S.C. § 1292(b). On July 24, 2002, in an Opinion and Order, this Court denied the motion without prejudice because plaintiffs had not met their burden of showing that there was a substantial ground for difference of opinion on the issue or that an interlocutory appeal would materially advance the ultimate termination of the litigation. See Carducci, et al. v. Aetna U.S. Healthcare, 2002 WL 31262100 (D.N.J. Jul. 24, 2002).
On August 28, 2002, a panel of the United States Court of Appeals for the Third Circuit filed its opinion in Colbert v. Dymacol, Inc., No. 01-4397, 2002 WL 1974538 (3d Cir. Aug. 28, 2002), a case unrelated to Carducci, but a case that would greatly influence the parties' behavior in Carducci. InColbert, in the district court, the defendants had made an Offer of Judgment to a named plaintiff pursuant to Rule 68, Fed.R.Civ.P., before he had filed a motion for class certification. The offer provided the plaintiff with the maximum monetary statutory relief that he could obtain if he won on the merits plus attorneys' fees and costs. The named Colbert plaintiff rejected the offer of judgment and moved for class certification, which was granted. Defendants filed an interlocutory appeal from the class certification under Rule 23(f), Fed.R.Civ.P., arguing that defendants' tendering of an offer of judgment to the named plaintiff, prior to class certification, provided full relief to the plaintiff, mooted his claim, and precluded further maintenance of the class action. Initially, a panel of the Third Circuit agreed with the defendants and found that the offer of full monetary relief to the individual named plaintiff constituted complete relief, which mooted the plaintiff's claim, left the case without a plaintiff who had a justiciable claim, and required the court to dismiss the action for lack of case or controversy. The Third Circuit panel held that the only exception to this "class action mootness precept" would occur if a plaintiff filed a class certification motion before receiving the Offer of Judgment; then he could continue to argue the class certification motion before the district court and on appeal. The Third Circuit panel's Colbert decision was filed on August 28, 2002.
Based on the Colbert decision, defendant Aetna on August 29, 2002 made an offer of judgment to plaintiff Carducci for $180.40 plus reasonable attorneys' fees and costs incurred to date and to plaintiff Labinski for $536.50 plus reasonable attorneys' fees and costs incurred to date, representing the maximum monetary relief that plaintiffs could obtain for their individual claims if they won on the merits. Plaintiffs accepted the offers of judgment on August 30, 2002 because they felt that the Colbert decision gave them no choice but to accept. They filed their notices of acceptance of the offer of judgment in September and October 2002. [Docket Items 55-1, 57-1.] Plaintiffs received the offers of judgment on August 29, 2002 before they filed their motion for class certification, though the motion was filed later in the day on August 29, 2002.
At oral argument on March 27, 2003, counsel for plaintiff stated on the record their withdrawal of their motion for class certification in this matter. The Court will dismiss the motion in accordance with this withdrawal in the Order of today's date which accompanies this Opinion.
On October 3, 2002, the Third Circuit vacated its decision inColbert and ordered the matter to be reheard en banc. Colbert v. Dymacol, Inc., 305 F.3d 1256 (3d Cir. 2002). On October 4, 2002, counsel for plaintiffs, Natalie Finkelman Bennett, Esquire, sent the Court a copy of the Colbert Order and requested "a hearing concerning the pending Notices of Acceptance of Defendant's Offer of Judgment Pursuant to Fed.R.Civ.P. 68 and accompanying requests for Entry of Judgment." (10/4/02 Letter.) The Court replied with a letter to all counsel in the consolidated cases on October 16, 2002. (10/16/02 Letter.) The Court explained that "from her letter, it is not clear what relief Ms. Bennett seeks," and asked that "Ms. Bennett clarify her request and state her position on the merits" regarding the offers of judgment before the Court set a hearing date. (Id.)
Ms. Bennett responded on October 22, 2002 that "the request for a hearing stems from our desire to comply in all respects with the requirements of Rule 23(e), which provides that a class action may not be compromised without court approval and notice to absent class members." (10/22/02 Letter.) Although theColbert panel decision had by that time been vacated, Ms. Bennett did not ask the Court to invalidate plaintiffs' acceptances of the offers of judgment; instead she asked the Court to approve the offers pursuant to Rule 23(e) prior to entering judgment pursuant to Rule 68. She explained that she had not previously asked for a Rule 23(e) inquiry because she did not think Colbert required it. (Id.) However, "now that Colbert is no longer controlling, we return to our pre-Colbert position that no Offer of Judgment under Fed.R.Civ.P. 68 can be accepted without court approval pursuant to Rule 23(e)." (Id.)
This Court has not determined whether or not plaintiffs were constrained to continue in their acceptance of the offers of judgment after the Colbert decision was vacated. At oral argument, counsel for plaintiffs stated that they decided to avoid the potential further litigation regarding the contract rescision that seeking a revocation would likely provoke.
For purposes of this motion, the Court does not need to determine the effect that an Offer of Judgment accepted by plaintiffs has on the pendency of a putative class action afterColbert. It is enough for this motion to recognize that under appropriate circumstances a named plaintiff may settle his individual claims without affecting the rights of a putative class, see Phillips v. Allegheny County, Penn., 869 F.2d 234, 237 (3d Cir. 1989), and that named plaintiff may settle his individual claims by accepting a Rule 68 Offer of Judgment, see section II(A), infra, subject to approval under Rule 23(e).
On November 8, 2002, plaintiff, in filing a fee petition to determine the amount of "reasonable fees and costs" referred to in the offers of judgment, informed the Court that "plaintiffs will not be filing a request to substitute additional plaintiffs in the current action," so that the claims of the putative class in Carducci should be dismissed without prejudice. (11/8/02 Letter.) Counsel for plaintiffs stressed that they had "protected the interests of all of the Class by filing a new action against Aetna U.S. Healthcare on behalf of new individual plaintiffs with the same claims," so that theCarducci class's interest, if dismissed in Carducci would continue in the new action. (Atty Fee Reply Br. at 2 n. 3.) At oral argument on March 25, 2003, plaintiffs' counsel informed the Court that this "new action" is Rothenberg v. Aetna U.S. Healthcare, Civil No. 02-6122, which was removed to this Court on December 27, 2002.
Plaintiffs' counsel in Carducci sought attorneys' fees in the amount of $83,626.00 and costs of $3,007.14, which was strenuously opposed as grossly disproportionate to the relief achieved in the Rule 68 judgment, namely, $716.90.
Meanwhile on March 4, 2003, the Court denied the motions to dismiss that were pending in all of the consolidated cases except for Carducci itself, finding that the state law claims were not completely preempted under ERISA section 502(a) and were not conflict preempted under ERISA section 514(a). See Carducci v. Aetna U.S. Healthcare, ___ F. Supp. 2d ___, 2003 WL 722477 (D.N.J. Mar. 4, 2003).
On March 10, 2003, the Third Circuit, after rehearing Colbert en banc, dismissed the appeal as improvidently granted. See Colbert v. Dymacol, et al., 2003 LEXIS 4531 (3d Cir. Mar. 10, 2003). As defendants had argued before the initial Third Circuit panel, they again argued before the en banc court that the offer of judgment given to the named plaintiff for the full monetary amount of the named plaintiff's individual claim mooted his case and required dismissal of the putative class action. Therefore, according to the Colbert defendants, the district court's October 2, 2001 order granting class certification was improper because there was no live case or controversy before the court. In its dismissal order, the Third Circuit disagreed, stating:
[T]he question presented by Appellants in their Application Pursuant to Fed.R.Civ.P. 23(f) for Permission to Appeal from the October 2, 2001 Order was inaccurate in that Appellee had not received all relief requested in his complaint.
(Id.) The Rule 68 relief in Colbert was thus not all that plaintiff had requested because it did not include class certification. The Colbert plaintiff was thus free to reject the Rule 68 offer, even though it offered all monetary relief, because it did not offer class relief.
This Court heard oral argument on March 25, 2003 to determine whether judgment should be entered in favor of plaintiffs in accordance with the offers of judgment accepted from defendant Aetna, considering the effect of the Third Circuit's dismissal inColbert on this action and the requirements of Rules 68 and 23(e), Fed.R.Civ.P.
The Court also heard argument regarding plaintiffs' petition for reasonable attorneys' fees and costs in connection with the offer for judgment. Subsequent to oral argument, the parties reached agreement upon a compromise of the fee request. By Stipulation and Consent Order also filed today, the sum of $15,000.00 will be paid by defendant to plaintiffs' counsel for fees and costs within ten days after approval of the Stipulation, which is itself necessarily contingent upon approval, under Rule 23(e), of the plaintiffs' acceptance of the Rule 68 offers for judgment. The Stipulation also provides that the remainder of the requested fees and costs (approximately $71,600.00) may be preserved by plaintiffs' counsel to be sought in the event plaintiffs prevail in the Rothenberg class action case. Defendant preserves its right under the Stipulation to challenge these fees on other grounds. Upon approval of the Stipulation, the fee petition in Carducci is withdrawn.
For the reasons that follow, this Court will approve the judgments accepted by plaintiffs and will allow the claims of the putative class to be dismissed without prejudice. The Courtonly does so because the individual judgments offered to the named plaintiffs do not in any way affect the claims of the putative class, and because the rights of the putative class are currently being simultaneously represented in another action before this Court captioned Rothenberg v. Aetna U.S. Healthcare, Civil No. 02-6122.
II. DISCUSSION
Before entering judgment for the named plaintiffs and dismissing without prejudice the claims of the putative class, this Court must determine (1) whether a Rule 68 offer of judgment can be made in the class action context; (2) whether a Rule 68 offer of judgment made to plaintiffs in a putative class action is subject to Rule 23(e) approval; and (3) whether the Rule 68 offers of judgment and the voluntary dismissals without prejudice of the claims of the putative class in this case should be approved pursuant to Rule 23(e).
A. Rule 68 Offers of Judgment in Class Actions
This Court finds that a Rule 68 offer of judgment can be used to settle the claims of the named plaintiffs in this putative class action. Rule 68 allows a defendant to offer his adverse party a judgment in that party's favor for a certain specified amount prior to trial. Fed.R.Civ.P. 68. The "plain purpose of Rule 68 is to encourage settlement and avoid litigation." see also Marek v. Chesny, 473 U.S. 1, 5 (1985). If the defendant's offer is accepted, judgment is entered against the defendant and the parties are spared the expense of trial. If the offer is rejected, the parties proceed to trial but, if the plaintiff does not obtain a judgment that is more favorable than what she was offered, she must pay any costs incurred after defendant made the offer. Fed.R.Civ.P. 68. An offer of judgment, thus, forces a plaintiff to weigh her own exposure to liability for the defendant's subsequent costs against her own expected recovery and encourages settlement by "shift[ing] the risk of going forward with a lawsuit to the [plaintiff], who becomes exposed to the prospect of being saddled with the substantial expense of trial." Mallory v. Eyrich, 922 F.2d 1273, 1277-78 (6th Cir. 1991).
Fed R. Civ. P. 68 provides in part:
At any time more than 10 days before the trial begins, a party defending against a claim may serve upon the adverse party an offer to allow judgment to be taken against the defending party for the money or property or to the effect specified in the offer, with costs then accrued. If within 10 days after the service of the offer, the adverse party serves written notice that the offer is accepted, either party may then file the offer and notice of acceptance together with proof of service thereof and thereupon the clerk shall enter judgment. An offer not accepted shall be deemed withdrawn and evidence thereof is not admissible except in a proceeding to determine costs. If the judgment finally obtained by the offeree is not more favorable than the offer, the offeree must pay the costs incurred after the making of the offer . . .
Most courts allow defendants to make Rule 68 offers to named plaintiffs in class actions. See Gordon v. Gouline, 81 F.3d 235, 239 (D.C. Cir. 1996); White v. Alabama, 74 F.3d 1058, 1062-63 (11th Cir. 1996); Blair v. Shanahan, 28 F.3d 1514, 1517-18 (9th Cir. 1994); Cotton v. Hinton, 559 F.2d 1326, 1329 (5th Cir. 1977). Entering judgment pursuant to the offer of judgment in the class action, however, is subject to Fed.R.Civ.P. 23(e) which states:
A class action shall not be dismissed or compromised without the approval of the court, and notice of the proposed dismissal or compromise shall be given to all members of the class in such a manner as the court directs.
Therefore, when an offer of judgment is made in a class action, the court must hold a Rule 23(e) fairness hearing to approve the judgment before judgment is entered according to the offer. See Gordon, 81 F.3d at 239 (citing cases); Wright and Miller, 12 Federal Practice Procedure Civil 2d § 3005 (stating "in class actions the court has an independent duty under rule 23(e) to decide whether a settlement is acceptable, and Rule 68 cannot remove that authority and duty").
A few courts, however, have found that Rule 68 offers are incompatible with class actions, based mainly on the reasons expounded in a footnote in Justice Brennan's dissent in Marek v. Chesny, 473 U.S. 1 (1985). See Bryant v. Bonded Accounts Servs., Civ. No. 00-1072, 2000 WL 33955881 (D. Minn. Aug. 2, 2000) (stating that "circumstances could exist where the policies behind Rules 68 and 23(e) could come into conflict"); Martin v. Mabus, 734 F. Supp. 1216, 1222 (D. Miss. 1990) (stating that procedures of rule 68 are "literally inapplicable" when rule 23(e) requires court approval); Gay v. Waiters' and Dairy Lunchmen's Union, 86 F.R.D. 500, (N.D. Cal. 1980) (holding "Rule 68 Offers of Judgment have no applicability to matters legitimately brought as class actions pursuant to Rule 23"). Justice Brennan in his Marek dissent listed three reasons why Rule 68 could be found incompatible with class actions in footnote 49. Marek, 473 U.S. at 33 n. 49. First, an offer of judgment could create a conflict of interest between the named plaintiff and other members of the class because it could "burden a named representative with the risk of exposure to heavy liability [for costs and expenses] that could not be recouped from unnamed class members" which could cause the plaintiff to accept an offer that was advantageous to him personally, but not to the entire class. Id. Second, the plain language of Rule 23(e) which requires the court to approve settlements in class actions conflicts with the plain language of Rule 68 which states that upon receipt of plaintiff's acceptance of an offer "the clerk shall enter judgment." Id. (quoting Fed.R.Civ.P. 68) (emphasis in opinion). Third, Rule 68 "sets a nondiscretionary 10-day limit on the plaintiff's power of acceptance — a virtually impossible amount of time in many cases to consider the likely merits of complex claims of relief, give notice to class members, and secure the court's approval." Id.
The Third Circuit has not determined whether Rule 68 offers of judgment may be accepted by the named plaintiffs in class actions. This Court will follow the majority of circuit courts and will allow the Rule 68 offers of judgment to be used in this putative class action. First, as Justice Brennan acknowledged, "Rule 68 makes no distinctions between individual and class actions." Marek, 473 U.S. at 33 n. 49. Second, Rule 1, Fed.R.Civ.P., states that the Federal Rules of Civil Procedure apply to "all suits of a civil nature" unless exempted by Rule 81, Fed.R.Civ.P., and Rule 81 does not exempt class actions. Therefore, Rule 68 should apply to all civil suits, including class actions. Third, encouraging settlement and avoiding litigation is still a goal in class actions that can be met through a Rule 68 offer, and, with the tempering of Rule 23(e)'s approval requirement, the court can ensure that the named plaintiff only accepts offers that are fair to unnamed plaintiffs. Fourth, the named plaintiff can still express his intention to accept the offer within ten days, even if the Court does not have sufficient time to consider the offer and enter judgment within ten days. Such an expression of plaintiff's intention will provide the defendant with notice that further work on the case should be deferred until the Court is able to determine the reasonableness of the judgment offered under the prism of Rule 23(e).
For these reasons, therefore, this Court will allow the defendant's offer of judgment and plaintiffs' acceptance to stand in spite of the putative class action nature of their action, but will require the offer to stand up to the scrutiny of Rule 23(e) approval.
B. Rule 23(e) Approval of Putative Class Action Dismissals
Having found that Rule 68 may be used as a vehicle for settling a putative class action, the Court must determine whether the putative class action is subject to the same strictures of Rule 23(e) court approval as a certified class action. This Court finds that it is.
The Third Circuit has held that:
even though an action has not been certified as a class action, an action filed as a class action should be treated as if certification has been granted for the purposes of settlement until certification is denied.Phillips v. Allegheny County, Penn., 869 F.2d 234, 237 (3d Cir. 1989) (citing Kahan v. Rosenstiel, 424 F.2d 161, 169 (3d Cir. 1970)). Most courts that have considered this issue have also found that a putative class action should be treated as a class action, and thus subject to Rule 23(e) scrutiny in its pre-certification stage. See Crawford v. F. Hoffman-La Roche, Ltd., 267 F.3d 760, 764 (8th Cir. 2001); Diaz v. Trust Terr. of Pacific Islands, 876 F.2d 1401, 1408 (9th Cir. 1989); Glidden v. Chromalloy Am. Corp., 808 F.2d 621, 626 (7th Cir. 1986). But see Shelton v. Pargo, 582 F.2d 1298 (4th Cir. 1978). Rule 23(e) court approval of dismissals prior to certification "prevents the class action device from being used in an abusive manner as it allows a court to ensure that the representative plaintiffs have not settled or dismissed their claims to the prejudice of a prospective class," and "ensures the class action is not being used by plaintiffs to secure a collusive private settlement." In re Nazi Era Cases, 198 F.R.D. 429, 439 (D.N.J. 2000).
To ensure the appropriateness of the offers of judgment accepted here prior to class certification, therefore, this Court will consider whether they are fair, adequate and reasonable pursuant to Rule 23(e).
C. Rule 23(e) Consideration of Offers of Judgment
Under Rule 23(e), the court cannot dismiss or compromise a class action until (1) the court approves the dismissal or compromise, and (2) notice of the dismissal or compromise is given to all members of the class as the court directs.
(1) Court approval
Rule 23(e) requires the court to "act as a fiduciary guarding the rights of absent class members" and determine that any proffered settlement is "fair, adequate, and reasonable" before approving it. In re Cendant Corp. Litig., 264 F.3d 201, 231 (3d Cir. 2001). To do so, the court must consider nine factors:
(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 to a possible recovery in light of all the attendant risks of litigation.Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975). In a putative class action, the court's inquiry must include consideration of any possible prejudice from:
(1) class members' possible reliance on the filing of the action if they are likely to know of it either because of publicity of other circumstances,
(2) lack of adequate time for class members to file other actions, because of a rapidly approaching statute of limitations,
(3) any settlement or concession of class interests made by the class representative or counsel in order to further their own interests.Diaz, 876 F.2d at 1408 (citing Newman v. Stein, 464 F.2d 689 (2d Cir. 1972); Larkin Gen'l Hosp., Ltd. v. Am. Telephone and Telegraph Co., 93 F.R.D. 497 (E.D. Pa. 1982)).
Here, the plaintiffs wish the Court to enter judgment in their favor requiring defendant to pay plaintiff Carducci $180.40 and plaintiff Labinski $536.50 and reasonable attorneys fees and costs, and to dismiss without prejudice the claims of the putative unnamed plaintiff class. This Court finds that these terms are "fair, adequate, and reasonable" but only because the judgments in favor of plaintiffs Carducci and Labinski will not in any way effect the claims of the putative class members who will continue to be represented in a separate identical action.
The monetary amount offered plaintiffs Carducci and Labinski to settle their individual claims is clearly fair and reasonable to them individually considering the Girsh factors because it equals the total monetary amount that they could possibly had achieved for themselves individually at trial. Via the offers, they obtained their full recovery regardless of the complexity, expense, and likely duration of future litigation, the risks of establishing liability and damages, and the risks of maintaining a class action. The Court, however, must consider whether the interests of the putative class members will in any way be prejudiced if the named plaintiffs, Carducci and Labinski, are permitted to accept a judgment settling their individual claims and dismissing without prejudice of the claims of the putative class. The Court has considered the submissions and arguments of the parties and has found, for four reasons, that the remaining putative class will not be prejudiced by this judgment and dismissal.
First and foremost, while the parties ask this Court to dismiss the claims of the putative class, they are only doing so because the identical putative class is already being represented in another federal action. Presently before the Court is the matter of Rothenberg v. Aetna U.S. Healthcare, Civ. No. 02-6122, (D.N.J.) in which counsel for plaintiffs Carducci and Labinski filed the same claims through a different named plaintiff on behalf of the same putative class and against the same defendant. The action which was filed in state court was removed to this Court on December 27, 2002, and has been assigned to the undersigned's docket. Therefore, dismissing the plaintiff classes' claims without prejudice in Carducci will simply acknowledge that their claims are already under consideration inRothenberg. There, they will be represented by the same counsel before the same judge in the same court on the same issues. The United States District Court for the Eastern District of Pennsylvania considered a similar case and found:
Because there is an identical case pending in the United States District Court for the District of Columbia in which the plaintiffs seek to represent the identical class referred to in plaintiff's complaint in the instant case, I find that no possible prejudice to the absent class members can result from my approval of this dismissal. . . . . Indeed at oral argument, both plaintiff and defendants conceded that the class would be better off were this action to be dismissed without prejudice [or else] the ongoing District of Columbia action would impose duplicative costs of litigation on the class.Larkin, 93 F.R.D. at 502. This Court likewise finds that no prejudice to this putative class will result from a dismissal here because they will continue to be represented in ongoing litigation before this Court.
Second, the putative class will not be prejudiced by any reliance on this Carducci action. All parties agreed during oral argument that potential class members have not relied on finding relief through this Carducci action because they likely do not yet know that it was filed on their behalf. They have not been notified of the action in any way, through discovery or advertisements.
Third, the unnamed plaintiffs have not been prejudiced by any running of time under the applicable statute of limitations. On the date that the Carducci matter was filed, the statute of limitations in their case tolled in accordance with American Pipe Const. Co. v. Utah, 414 U.S. 538 (1974). The statute will continue to be tolled after this Court dismisses their claims without prejudice because it was also tolled on the date that plaintiffs' counsel filed the Rothenberg action. Because the pendency of the Carducci and Rothenberg actions overlap, the plaintiff class will not be affected in any way by the statute of limitations if this Court dismisses their claims without prejudice in Carducci.
Fourth, while the judgment here furthers the interests of the named plaintiffs because it grants judgment to them alone and removes them from further litigation, it does not do so to the detriment of the putative class. By approving plaintiffs' acceptance of the offer of judgment, this Court does not in any limit or affect the potential recovery of the putative class. They remain before this Court, albeit in a different action, and will be able to seek full relief there. There is no indication that defendant Aetna has limited funds from which to compensate plaintiffs.
The Court likewise approves the compromise allocation of counsel fees to be paid as part of this settlement, as discussed in notes 5 and 7, supra. The Rothenberg class will be pursued by Carducci counsel who are not precluded from seeking to recoup the remainder of their purported fees and costs — approximately $71,000 — for efforts expended in Carducci. The putative class will benefit from this arrangement, since class counsel in Rothenberg will have the added incentive of vigorously representing the Rothenberg class in order to trigger possible recovery of the large majority of fees left over from Carducci. The Court expresses no opinion regarding the recoverability of Carducci-related fees in the Rothenberg case in the event the Rothenberg class is certified and prevails.
For these reasons, the Court finds that the acceptance of the offers of judgment is fair and reasonable because representation of the putative class will continue in Rothenberg, unimpeded by the dismissal of Carducci.
(2) Notice to class
Rule 23(e) generally requires that notice be given to "all members of the class" before any proposed dismissal or compromise is granted. Notice to a putative class of a pre-certification dismissal is generally, but not always, required. Diaz, 876 F.2d at 1408, 1411; Larkin, 93 F.R.D. at 502-03. Under Rule 23(e), notice is to be given "in such manner as the court directs," language which "broadly interpreted . . . is sufficiently flexible to permit the court to approve a dismissal, but to determine that no notice at all is required, where the dismissal will not result in any prejudice to the class."Larkin, 93 F.R.D. at 502. The notice requirement serves three purposes pre-certification and, if they would not be served by providing pre-certification notice in a specific case, the Court may dispense of requiring notice to the putative class. Diaz, 876 F.2d at 1408-09. The Court finds that the three reasons would not be served by notice here and will not require notice of this dismissal without prejudice.
First, the notice requirement protects defendants by preventing plaintiffs from "appending class allegations to her complaint in order to extract a more favorable settlement" because it forces such plaintiffs to fulfill their duties to the named class once they extract such a settlement. Id. at 1409. "Absent any indication that these plaintiffs actually appended class allegations in an attempt to get favorable individual settlements, there is no reason to require notice as a deterrent to hypothetical abusive plaintiffs." Id. (emphasis in original).
Here, there is no indication at all that plaintiffs Carducci and Labinski filed this action to manipulate the defendant in any way. Instead, they sought recovery for themselves that was too small to make independent action feasible. Through this judgment, they recovered the same small amount they initially sought. In addition, counsel for plaintiffs represented that the plaintiffs have agreed to dismiss their class claims because their counsel continue to represent the putative class members in another action, eventually filed as the Rothenberg case. As a result, there is no reason to punish or deter plaintiffs Carducci and Labinski for filing their action as a putative class action because there is no indication that they filed the action in bad faith.
Second, the notice requirement protects a putative class by giving it a chance to be heard before it is subjected to structural relief that it does not desire or before limited funds of the defendant are depleted by a named plaintiff's settlement.Diaz, 876 F.2d at 1409. Here, notice would not serve this purpose because the judgment will not grant or deny any injunctive or structural relief at all and because defendant's funds are not depleted by a payment of $716.90 plus substantially-reduced fees to the named plaintiffs.
Third, the notice requirement protects the putative class from suffering any prejudice because of its reliance of the lawsuit.Diaz, 876 F.2d at 1409. Providing notice to a class which faces an imminent statute of limitations deadline ensures that they are aware that their prior action may be dismissed, and should file another action before the statute runs. Id. at 1409-10. Here, however, as this Court explained supra, there is no indication that this class relied on the Carducci action, and even if it did, they do not need to take any action at this time because they are already identical putative class members in theRothenberg action.
Therefore, this Court finds that notice to the unnamed putative class of this settlement would serve no purpose and would likely confuse any members of the class. There is no pertinent information about this settlement to relate to the class because their claims continue, albeit under the caption of Rothenberg rather than Carducci.
III. CONCLUSION
For these reasons, the Court will approve the judgments accepted by plaintiffs and will dismiss the claims of the putative class without prejudice. The fee petition has been withdrawn. The judgments in favor of plaintiffs Carducci and Labinski in no way affect the claims of the putative class which will continue to be represented before this Court in Rothenberg v. Aetna U.S. Healthcare, Civ. No. 02-6122 (JBS).
The accompanying Order is entered.
JUDGMENT
Defendant Aetna U.S. Healthcare having served on plaintiffs Caroline Carducci and David Labinski an offer of judgment pursuant to Fed.R.Civ.P. 68 in the amount of $180.40 for plaintiff Caroline Carducci and in the amount of $536.50 for plaintiff David Labinski, plus reasonable costs and attorneys' fees; counsel for plaintiffs having accepted that offer on August 30, 2002 and requested that the Court dismiss without prejudice the claims of the putative class; the Court having considered the submissions of the parties and their oral argument on March 25, 2003 and having determined, for reasons stated in the Opinion of today's date, that the judgment in favor of plaintiffs Carducci and Labinski and the dismissal without prejudice of the claims of the putative class is reasonable under Fed.R.Civ.P. 23(e) without notice because the claims of the putative class will continue to be represented in a separate action before this Court captioned Rothenberg v. Aetna U.S. Healthcare, Civ. No. 02-6122 (JBS), and for the reasons expressed in an Opinion of today's date;
IT IS this 16th day of April, 2003 hereby
ORDERED that Judgment be entered in favor of plaintiffs Caroline Carducci and David Labinski and against defendant Aetna U.S. Healthcare, pursuant to Fed.R.Civ.P. 68;
IT IS FURTHER ORDERED that defendant Aetna U.S. Healthcare pay plaintiff Caroline Carducci the sum of $180.40 and pay plaintiff David Labinski the sum of $526.50; and
IT IS FURTHER ORDERED that plaintiffs' motion for class certification [Docket Item 47-1] be, and hereby is, DISMISSED WITHOUT PREJUDICE ; and
IT IS FURTHER ORDERED that the claims of the putative class be DISMISSED WITHOUT PREJUDICE to their rights in Rothenberg v. Aetna U.S. Healthcare, Civ. No. 02-6122 (JBS); and
IT IS FURTHER ORDERED that plaintiffs' counsel's fee petition be withdrawn and that the Stipulation regarding fees be approved and that the Stipulation and Court Order be separately filed; and
IT IS FURTHER ORDERED that this case be dismissed, no claims remaining to be adjudicated herein.