United States District Court, D. Rhode Island
STEPHEN DEL SESTO, AS RECEIVER AND ADMINISTRATOR OF THE ST. JOSEPH HEALTH SERVICES OF RHODE ISLAND RETIREMENT PLAN, ET AL. Plaintiffs,
PROSPECT CHARTERCARE, LLC, ET AL., Defendants.
MEMORANDUM AND ORDER
WILLIAM E. SMITH, CHIEF JUDGE
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”), and CharterCARE Community Board
(“CCCB”)(collectively, the “Settling
Defendants”). Two groups of defendants - the Diocesan
Defendants and the Prospect Entities (collectively,
the “Non-Settling Defendants”) - object to
approval of the settlement.
preliminary approval of the settlement, a fairness hearing
was held on September 10, 2019. See Min. Entry for
Sept. 10, 2019. For the reasons stated in this memorandum and
order, the Court GRANTS final approval of the settlement and
certifies the class, class representatives, and class
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.
number of defendants have agreed to settle with Plaintiffs,
resulting in two separate settlement agreements. The Court
approved the settlement reached between Plaintiffs and
SJHSRI, RWH, CCCB, and CharterCARE Foundation
(“CCF”) (“Settlement B”) for the
reasons stated in its Memorandum of Decision Entering Final
Approval of the Settlement, ECF No. 162. The settlement
currently before the Court, “Settlement A, ” was
reached between Plaintiffs and SJHSRI, RWH, and CCCB.
See Joint Mot. for Class Certification, Appointment
of Class Counsel, and Preliminary Settlement Approval
(“Joint Mot. for Prelim. Approval”) 1, ECF No.
terms of Settlement A are set forth in the parties'
settlement agreement, ECF No. 63-2. In sum, following
approval, the Settling Defendants will transfer to the
Receiver an initial lump sum payment in an amount not less
than $11, 150, 000. See Settlement A ¶¶
1(q), 10. Additionally, the Settling Defendants will assign
to the Receiver all rights in an escrow account held by the
Rhode Island Department of Labor and Training with a current
balance of $750, 000. Id. ¶¶ 15-16. CCCB
will also assign its rights in CCF to the Receiver, and the
Settling Defendants will hold CCCB's interest in
non-settling defendant Prospect CharterCARE in trust for the
Receiver. See id. ¶¶ 1(c), 1(d), 13, 17.
Finally, the Settling Defendants agree to petition the Rhode
Island Superior Court to initiate judicial liquidation
proceedings, pursuant to which their remaining assets will be
distributed to creditors, including Plaintiffs. See
id. ¶¶ 21-26. In exchange, Plaintiffs will
release the Settling Defendants and their agents, officers,
and directors serving after June 20, 2014 from liability as
it relates to the Plan. See id. ¶ 11, Exs. 9, 10,
11 at 1-2.
and Settling Defendants sought preliminary approval of the
settlement, to which the Non-Settling Defendants objected.
See generally Joint Mot. for Prelim. Approval;
Diocesan Defs. Resp. in Opp'n To Joint Mot. for Prelim.
Approval (“Diocesan Opp'n to Prelim.
Approval”), ECF No. 73; Prospect Entities Opp'n To
Joint Mot. for Prelim. Approval (“Prospect Opp'n to
Prelim. Approval”), ECF No. 75. On June 6, 2019, the
Court preliminarily approved the settlement and directed the
settling parties to give notice to the purported class. Order
Granting Prelim. Approval 15, 20, ECF No. 124.
and Settling Defendants now seek final approval of the
settlement. See Pl. Mem. in Supp. of Mot. for Final
Approval of Class Action Partial Settlement 1, ECF No. 149
(“Final Approval Mem.”). The Non-Settling
Defendants object to final approval on several grounds. Some
of the objections relate to the merits of the case - whether
ERISA applies to the Plan and the consequences flowing from
that determination. See Diocesan Opp'n to Final
Approval 2. The Non-Settling Defendants also object on the
basis that R.I. Gen. Laws § 23-17.14-35 is
unconstitutional or preempted by ERISA. See id. The
Non-Settling Defendants' central argument, however, is
that the settlement should not be approved because it is the
product of collusion between the Receiver and the Settling
Defendants. Id. at 3; Prospect Entities' Obj. to
Final Settlement Approval 1 (“Prospect Obj. to Final
Approval”), ECF No. 147.
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.
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).
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).
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.” 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.”)).
the Court finds that it has jurisdiction over the subject
matter and parties in this dispute.
Final Approval Under Rule 23(e)
may approve a settlement in a class action only upon a
finding that the settlement is “fair, reasonable, and
adequate.” Fed.R.Civ.P. 23(e)(2). ...