Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Del Sesto v. Prospect Chartercare, LLC

United States District Court, D. Rhode Island

October 14, 2019

STEPHEN DEL SESTO, AS RECEIVER AND ADMINISTRATOR OF THE ST. JOSEPH HEALTH SERVICES OF RHODE ISLAND RETIREMENT PLAN, et al. Plaintiffs,
v.
PROSPECT CHARTERCARE, LLC, et al. Defendants.

          SPECIAL MASTER'S REPORT AND RECOMMENDATION ON AWARD OF ATTORNEYS' FEES

          Deming E. Sherman Special Master.

         This Report and Recommendation is filed pursuant to the Order Appointing Special Master entered September 5, 2019, ECF No. 152. In the Order, p. 4, this Court stated:

The role of the Special Master is limited. The Special Master's objective is to review the motions for attorneys' fees and make a recommendation as to those requests. The Special Master is directed to review the attorney fee motions, ECF Nos. 64 and 78, the objections, the declarations related thereto, and any other document the Special Master deems necessary to perform the scope of his duties.

         In compliance with the Order, I have reviewed the Motions for Award of Attorneys' Fees filed by the plaintiffs' counsel, the Objections thereto filed by certain non-settling defendants, and the several related declarations, settlements, and other relevant documents. I also met with interested parties on September 26, 2019.

         Background

         This case arises out of a 2017 receivership proceeding in the Rhode Island Superior Court for the St. Joseph Health Services of Rhode Island Retirement Plan (the “Plan”), St. Joseph Health Services of Rhode Island, Inc. v. St. Joseph Health Services of Rhode Island Retirement Plan, C.A. No. PC-2017-3856. Declaration of Max Wistow in Support of Joint Motion for Class Certification, etc. (hereinafter “Wistow Declaration”), Ex. 1, ECF No. 65-1. According to the petition, the Plan was seriously underfunded[1] and insolvent at the time of the sale of assets of Roger Williams Hospital and Our Lady of Fatima Hospital in 2014. Id. ¶¶8-10; First Amended Complaint, ¶54. The Plan had more than 2700 participants, and, because of the underfunding, the petitioner sought a 40% reduction in retirement benefits. Petition ¶15, ECF No. 65-1; Wistow Declaration ¶3, ECF No. 65. The Plan, at least until some point prior to the receivership, was a “church plan” associated with the Catholic Diocese, Petition ¶6, ECF No. 65-1, but had not received contributions from St. Joseph Health Services since 2008 except for a $14 Million contribution in 2014 from the sale the hospital assets. Plaintiffs' Counsel's Final Approval Memorandum (Settlement A), p. 11, ECF No. 150; Wistow Declaration ¶37, Ex. 24, ECF Nos. 65, 65-24. The Receiver who was appointed by Judge Brian Stern of the Superior Court, Stephen Del Sesto, engaged the firm of Wistow Sheehan and Loveley, PC (“WSL”) as special counsel to investigate the matter and commence litigation against potentially liable parties to recover monies for the Plan and its participants. To this end, the Receiver contracted with WSL as special counsel, and agreed to pay WSL based on $375/hour for the investigative work and on a contingency basis after litigation commenced. Wistow Declaration Exs. 3, 5, ECF Nos. 65-3, 65-5; Declaration of Stephen Del Sesto, Ex. 1, ECF No. 144. Specifically, the engagement letter (hereinafter the “Fee Agreement”) was approved by the Superior Court and provided for a fee of 23.3% of funds recovered for the Plan after commencement of litigation.[2] WSL also entered into similar fee agreements with the individual plaintiffs. Wistow Declaration, Exs. 12-18, ECF Nos. 65-12 to 65-18. The investigation involved the issuance of 12 subpoenas duces tecum by the Receiver, some of which were contested, and the obtaining and review of more than a million documents.[3] Plaintiffs' Counsel's Memorandum in Support of Motion for Award of Attorneys' Fees, pp. 3-4, ECF No. 64-1; Wistow Declaration ¶16, ECF No. 65. For this work, WSL was paid $552, 281.25 (1472 hours @ $375/hour). Wistow Declaration ¶18, ECF No. 65.

         On June 18, 2018, WSL filed in this Court a class action Complaint on behalf of the Receiver and seven Plan participants, as representatives of a class of participants, against fourteen corporate defendants[4] alleging a federal claim under ERISA and state claims of fraud and breach of fiduciary duty, among others.[5] Wistow Declaration, Ex. 7, ECF No. 65-7. The plaintiffs filed a First Amended Complaint on October 5, 2018. ECF No. 60. Thereafter, the action was approved as a class action, with the individual plaintiffs as class representatives, and WSL as class counsel. Memorandum of Decision, pp. 13-14, ECF No. 162; Memorandum and Order, pp. 18-19, ECF No. 164.

         In addition, WSL, on behalf of the Receiver and the individual plaintiffs, sought and was granted intervention in a cy pres proceeding in the Superior Court[6] that involved the alleged fraudulent transfer of some $8.2 Million of charitable assets by St. Joseph Health Services of Rhode Island and Roger Williams Hospital into a foundation, CharterCARE Foundation, LLC (“CCF”), to the detriment of the Plan and its participants. Plaintiffs' Counsel's Memorandum (Settlement A), pp, 10-11, ECF No. 64-1; Plaintiffs' Counsel's Final Approval Memorandum (Settlement B), p. 6, ECF No. 140; Wistow Declaration ¶21, ECF No. 65; Wistow Supplemental Declaration, Ex. 3, ECF No. 79-3. In the Superior Court there was also related litigation concerning settlement instructions the Receiver sought from the Court. Plaintiffs' Counsel's Memorandum (Settlement A), pp. 6-9, ECF No. 64-1.

         Not long after the litigation commenced, WSL, consistent with the instructions of the Superior Court, Wistow Declaration ¶¶33-34, Ex. 21, ECF No. 65, Wistow Supplemental Declaration, Ex. 7, ECF No. 79-7, negotiated two settlement agreements with certain defendants, the first on August 31, 2018, Wistow Declaration, Ex. 25, ECF No. 64-1, and the second approved by the Rhode Island Superior Court on October 2, 2018. Wistow Supp. Declaration, Ex. 7, ECF No. 79-7. In the settlement agreements, the settling defendants agreed to WSL seeking attorneys' fees to be paid out of the settlement fund. Settlement Agreement (A), p. 21, ¶36, ECF No. 63-2; Settlement Agreement (B), p. 26, ¶9, ECF No. 77-2.

         The Settlements

         The two settlements, designated A and B, reached in this case are:

         Settlement A: The settling defendants, namely CharterCARE Community Board (“CCCB”) (the parent of the heritage St. Joseph and Roger Williams Hospitals), St. Joseph Health Services of Rhode Island, and Roger Williams Hospital, have agreed to pay $11, 150, 000 to the Receiver (that will be paid into the Plan), and also agreed to the assignment of interests of CCCB's interest as a member of CharterCARE Foundation, LLC (“CCF”) and CCCB's interest (about 15%) in Prospect Chartercare, the entity that currently directly or indirectly operates the Roger Williams Hospital and Fatima Hospital. The former assignment is of questionable value if the settlements are approved; the latter could be of significant value, but the value is not known at this time and the assignment is contested. Plaintiffs' Counsel's Memorandum (Settlement A), pp. 11-15, ECF No. 64-1.

         Settlement B (“the CCF Settlement”): The principal settling defendant here is CCF, the recipient of certain assets of Roger Williams Hospital and St. Joseph Health Services of Rhode Island. The other settling defendants are CharterCARE Community Board, St. Joseph Health Services of Rhode Island, and Roger Williams Hospital, but they are not making any monetary contributions. Plaintiffs' Counsel's Memorandum (Settlement B), p. 1, fn 2, ECF No. 78-1. CCF has agreed to pay $4, 500, 000 to the Receiver, almost half of its charitable assets that were valued at approximately $9, 108, 334 as of April 30, 2018. Plaintiffs' Counsel's Memorandum (Settlement B), p. 6, ECF No. 78-1. The Superior Court approved this settlement as in the best interests of the Plan on December 27, 2018, Plaintiffs' Counsel's Memorandum (Settlement B), pp. 6-7, ECF No. 78-1, at which time the Court found the contingent fee of 23.3% of the recovery to be “fair, reasonable, and very much a benefit to the receivership estate.” Wistow Supp. Declaration, Ex. 6, p. 16, ECF No. 79-6.

         With respect to the non-settling defendants, the litigation against them will continue. The WSL may have to defend additional litigation relating to the dissolution and liquidation of the settling defendants for which no further compensation would be due. Id., pp. 16-17.

         This Court has approved both Settlements A and B. Memorandum and Order, ECF No. 164; Memorandum of Decision, ECF No. 162.

         Fees Requested

         The Receiver retained plaintiff's counsel pursuant to an Order of the Superior Court dated October 17, 2017, and the Superior Court approved the Engagement and Fee Agreement between the Receiver and WSL. ECF Nos. 65-3, 65-5. Under that Agreement, as noted, WSL was paid on an hourly basis of $375/hour[7] for investigation of the potential claims related to the transaction in question, and is to be paid 23.3% of monies recovered for the Plan after the commencement of litigation. Id. WSL was paid for 1472 hours of work at $375/hour, for a total of $552, 281.25. Wistow Declaration ¶18, ECF No. 65.

         WSL has stated that it was not prepared to take this case on a pure contingency basis because of the substantial investigation required in order to evaluate the litigation risk. As a result, WSL agreed to a hybrid arrangement with the Receiver that provided for discounted hourly compensation for the investigation and contingent compensation for the litigation. Wistow Second Supplemental Declaration ¶¶9-10, ECF No. 145. WSL seeks an award of fees consistent with the Fee Agreement, that is, fees based on a percentage of the funds recovered for the Plan.

         The individual plaintiffs' retainer agreements with WSL that mirror the Agreement with the Receiver and provide for the payment of fees to plaintiffs' counsel essentially on the same basis as the agreement with the Receiver. Wistow Declaration, Exs. 12-18, ECF Nos. 65-12 to 65-19.

         WSL does not break down the fees for the class as opposed to the Receiver. Since WSL was working toward a common goal for both the Receiver and the class members for the ultimate benefit of the Plan participants, it is difficult to distinguish hours spent for the class versus the Receiver. Plaintiffs' Counsel's Memorandum (Settlement A), p. 28, ECF No. 64-1. This is understandable and is reasonable.

         With respect to Settlement A, the fee requested is 23.3% of $11, 150, 000, or $2, 597, 950, With respect to Settlement B, the fee requested is 23.3% of $4, 500, 000, or $1, 048, 500. In addition, WSL seeks 23.3% of additional sums recovered.

         These fees total $3, 646, 450. While the Fee Agreement does not require this, WSL has agreed that the $552, 281.25 that it received for the investigation should be deducted from the contingent fees awarded.[8] Plaintiffs' Counsel's Memorandum (Settlement A), p. 18, ECF 64-1; Plaintiffs' Counsel's Memorandum (Settlement B), p. 3, ECF No. 78-1. Thus, the net fees requested are $3, 094, 168.75. Declaration of Stephen P. Sheehan, ECF No. 161 (corrected for a minor mathematical error).

         WSL advises that its costs have been reimbursed by the Receiver, hence, there is no request for costs in this case. Plaintiffs' Counsel's Final Approval Memorandum (Settlement A), p. 26, ECF No. 150.

         Hours ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.