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Del Sesto v. Prospect Chartercare, LLC

United States District Court, D. Rhode Island

September 30, 2019



          WILLIAM E. SMITH, Chief Judge.

         Before the Court is a request for final approval of a settlement reached between Plaintiff Stephen Del Sesto (“Receiver”), as state appointed receiver and administrator of the St. Joseph Health Services of Rhode Island Retirement Plan (“Plan”), Named Plaintiffs Gail J. Major, Nancy Zompa, Ralph Bryden, Dorothy Willner, Caroll Short, Donna Boutelle, and Eugenia Levesque, individually and on behalf of others similarly situated (collectively, “Plaintiffs”), and Defendants St. Joseph Health Services of Rhode Island (“SJHSRI”), Roger Williams Hospital (“RWH”), CharterCARE Community Board (“CCCB”), and CharterCARE Foundation (“CCF”)(collectively, the “Settling Defendants”). Two groups of defendants -- the Diocesan Defendants[1] and the Prospect Entities[2] (collectively, the “Non-Settling Defendants”) -- object to approval of the settlement.

         Following preliminary approval of the settlement, a fairness hearing was held on August 29, 2019. At the conclusion of that hearing, the Court GRANTED final approval of the settlement. See Docket Min. Entry for Aug. 29, 2019. This memorandum addresses the reasons for the Court's decision and also certifies the class, class representatives, and class counsel.[3]

         I. Background

         This action stems from alleged underfunding of a retirement plan for nurses and other hospital workers employed by SJHSRI. Am. Compl. ¶ 54, ECF No. 60. According to the amended complaint, the Plan, which has 2, 729 participants, is insolvent. Id. After the Plan was placed into receivership in 2017, the Receiver and several named participants, individually and on behalf of a purported class of plan participants, filed a twenty-three-count complaint in this Court against several defendants, alleging violations of the Employee Retirement Income Security Act (“ERISA”) for failure to meet minimum funding requirements and breach of fiduciary duty, as well as various state law claims. See generally Am. Compl.

         A number of defendants have agreed to settle with Plaintiffs, resulting in two separate settlement agreements. This memorandum addresses the settlement agreement between Plaintiffs and Defendants SJHSRI, RWH, CCCB, and CCF, ECF No. 77-2 (“Settlement B”).[4] Pursuant to Settlement B, the Receiver will be transferred $4.5 million for deposit into the Plan assets by CCF and its insurer. See Settlement B 13; Joint Motion for Settlement Class Certification, Appointment of Class Counsel, and Preliminary Settlement Approval 8 (“Joint Mot.”), ECF No 77-1. In exchange, Plaintiffs and Defendants SJHSRI, CCCB, and RWH will release CCF and the Rhode Island Foundation[5] from liability. See Settlement Agreement B 13. In addition, the Receiver will transfer to CCF any rights he holds in CCF. See Joint Mot. 8.

         Plaintiffs and Settling Defendants sought preliminary approval of the settlement, to which the Non-Settling Defendants objected. See generally Joint Mot.; Diocesan Defs. Response in Opp. To Joint Mot., ECF No. 80; Prospect Entities Opp. To Joint Mot., ECF No 81. On May 17, 2019, the Court preliminarily approved the settlement and directed the settling parties to give notice to the purported class. See Order Granting Preliminary Approval 13, 16, ECF No. 123.

         Plaintiffs and Settling Defendants now seek final approval of the settlement. One class member objects on the basis that the $4.5 million amount transferred to the Plan is insufficient. The Non-Settling Defendants also reiterate their objections to the settlement, which will be explained in further detail below.

         II. Discussion

         a. Jurisdiction

         In order to approve the settlement, the Court must first determine that it has jurisdiction over the dispute. A federal court has subject matter jurisdiction under 28 U.S.C. § 1331 so long as “the plaintiff's well-pleaded complaint. . . exhibit[s], within its four corners, either an explicit federal cause of action or a state-law cause of action that contains an embedded question of federal law that is both substantial and disputed.” R.I. Fishermen's All. v. R.I. Dept. of Envtl. Mgmt., 585 F.3d 42, 48 (1st Cir. 2009); see 28 U.S.C. § 1331. Plaintiffs' complaint alleges four claims which arise under ERISA -- a federal statute.

         Moreover, Plaintiffs must meet statutory and constitutional requirements for standing as part of the threshold jurisdictional analysis. See In re Deepwater Horizon, 739 F.3d 790, 798 (5th Cir. 2014). As to statutory standing, the civil enforcement provision under ERISA, 29 U.S.C. § 1132, allows claims by plan participants, beneficiaries, and fiduciaries for breach of fiduciary duty and equitable relief. See 29 U.S.C. § 1132(a)(2) & (3). The named plaintiffs are all current participants of the Plan, and the purported class includes participants and beneficiaries of the Plan. Am. Compl. ¶¶ 3-9, 35. Furthermore, the Receiver is an ERISA fiduciary because he, as Plan administrator, “exercises discretionary control or authority over the plan's management, administration, or assets[.]” Mertens v. Hewitt Assoc., 508 U.S. 248, 251 (1993); 29 U.S.C. § 1102(a).

         Constitutional standing under Article III requires an injury in fact, a causal connection between the injury and the defendant's conduct, and the likelihood that a favorable outcome will redress the injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992). While an injury must be particularized and concrete, “[t]his does not mean, however, that the risk of real harm cannot satisfy the requirement of concreteness.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1549 (2016). “At the pleading stage, general factual allegations of injury resulting from the defendant's conduct may suffice[.]” Lujan, 504 U.S. at 561; see In re Deepwater Horizon, 739 F.3d at 804 (“[I]t is sufficient for standing purposes that the plaintiffs seek recovery for an economic harm that they allege they have suffered because for each class member we must assume arguendo the merits of his or her legal claim at the Rule 23 stage.”) (internal citation omitted).

         In the amended complaint, Plaintiffs allege that the Plan is “grossly underfunded” because the Plan's sponsor did not make required contributions for many years, particularly from 2010 to 2016, and that Defendants knew that the sponsor of the Plan faced liabilities well exceeding its assets as of 2014. Am. Compl. ¶ 63, 448. Plaintiffs also allege that, “[a]s a result of SJHSRI's failure to fund the Plan in accordance with ERISA's minimum funding standards, Plaintiffs pensions will be lost or at least severely reduced.”[6] Id. ¶ 458. Given that the Court must accept these allegations as true at this stage of the proceedings, the Court is satisfied that Plaintiffs have alleged an injury sufficient for standing. See Dezelan v. Voya Ret. Ins. Annuity Co., No. 3:16-cv-1251, 2017 WL 2909714, at *5 (D. Conn. July 6, 2017)(“Generally, a plaintiff has standing to bring an ERISA claim where the plaintiff alleges a causal connection between defendants' actions and actual harm to an ERISA plan in which the plaintiff participates.”)(citing LaRue v. DeWolff, Boberg & Assoc., Inc., 552 U.S. 248, 255-56 (2008)(recognizing that an ERISA claim for breach of fiduciary duty “does not provide a remedy for individual injuries distinct from plan injuries” and stating that “[m]isconduct by the administrators of a defined benefit plan will not affect an individual's entitlement to a defined benefit unless it creates or enhances the risk of default by the entire plan.”)).

         Therefore, the Court finds that it has jurisdiction over the subject ...

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