IN RE METLIFE DEMUTUALIZATION LITIGATION

689 F.Supp.2d 297

In re METLIFE DEMUTUALIZATION LITIGATION.

No. 00 CV 2258.

United States District Court, E.D. New York.

February 12, 2010.

Stamell & Schager, LLP by Jared B. Stamell, Esq., New York, NY, Mandel & Mandel, LLP, by David S. Mandel, Esq., Miami, FL, Berman DeValerio, by Joseph J. Tabacco, Jr., Esq., San Francisco, CA, for Federal Plaintiffs.

Weiss & Lurie, by Joseph H. Weiss, Esq., Lovell Stewart Halebian, LLP, by Christopher Lovell, Esq., Ian T. Stoll, Esq., Jody Krisilott, Milberg, LLP, by Barry A. Weprin, Esq., New York, NY, Mark Smilow, Esq., for State Plaintiffs.

Stull, Stull & Brody, by Mark Levine, Esq., New York, NY, for State Plaintiff Mark Smilow.

Debevoise & Plimpton, LLP, by Bruce E. Yannett, Esq., Carl Micarelli, Esq., Jennifer Spain, Esq., Metlife, Inc., by Teresa Wynn Roseborough, Esq., Duncan J. Logan, Esq., New York, NY, for Defendants.

Roy Jacobs & Associates, by Roy L. Jacobs, Esq., New York, NY, Attorneys for Steven Waldman.

John J. Pentz, Esq., Maynard, MA, Attorney for Thomas Bell & John Pentz, Jr.

Richard J. Davis, Esq., Special Master.

MEMORANDUM, ORDER AND JUDGMENT ON FINAL APPROVAL OF SETTLEMENT, FEES, EXPENSES AND COMPENSATION AWARDS

JACK B. WEINSTEIN, Senior District Judge:

Table of Contents
I.   Introduction ................................................................306
II.  Facts........................................................................307
     A. MetLife's Plan of Reorganization..........................................308
        1. New York Insurance Law § 7312 ....................................308
        2. Features of the Plan...................................................310
        3. Exercise of Board's Business Judgment in Selecting Method of
              Demutualization ....................................................310
        4. Reliance on Superintendent.............................................311
     B. Solicitation of Policyholder Votes........................................312
        1. Mailings...............................................................312
        2. Telephone..............................................................314
     C. Superintendent's Investigation and Approval...............................314
        1. Appointment and Reliance on Advisors ..................................314
        2. Public Hearing ........................................................315
        3. Written Submissions....................................................316
        4. Opinion and Decision...................................................316
     D. Demutualization Procedure.................................................318
     E. Related Lawsuits..........................................................320
     F. Class Certification and Notice............................................321
     G. Discovery and Preparation for Trial.......................................322
     H. Settlement Negotiations...................................................322
     I. Terms of Settlement.......................................................322
     J. Notice of Settlement......................................................323
     K. Objections................................................................323
III. Hearings on Proposed Settlement and Related Applications.....................323
     A. Trial and November 2, 2009 Preliminary Fairness Hearing...................323
     B. December 30, 2009 Fairness Hearing........................................326
        1. History of Litigation, Discovery and Readiness for Trial ..............326
        2. Arguments of Parties...................................................327
        3. Statements of Objectors ...............................................327
           a) Thomas Sterrett Bell and John J. Pentz, Jr..........................327
           b) Steven Waldman......................................................327
           c) Thomas Tierney .....................................................327
        4. Statement of State Plaintiff Mark Smilow...............................328
        5. Continuance of Hearing.................................................328
     C. February 9, 2009 Hearing on Applications for Fees, Expenses, and
          Compensation............................................................328
IV. Law and Application of Law to Facts...........................................328
    A. Standard of Review.........................................................329
    B. Presumption of Fairness....................................................330
    C. Criteria for Approval of Settlement........................................331
       1. Complexity, Expense, and Likely Duration of Litigation..................331
       2. Favorable Reaction of Class.............................................333
       3. Stage of Proceedings and Amount of Discovery Completed..................333
       4. Risks of Establishing Liability and Risks of Establishing Damages.......334
          a) Difficulty of Establishing Material Misrepresentation or Omission....335
 

b) Difficulty of Establishing Intent to Deceive.........................337 c) Difficulty of Proving Injury to Class Members........................337 d) Other Defenses.......................................................338 e) Difficulty of Proving Claims in State Action.........................339 5. Risks of Maintaining Action Through Trial...............................339 6. Ability of MetLife to Withstand a Greater Judgment .....................339 7. Range of Reasonableness of Settlement Fund in Light of Possible Recovery and Risks of Litigation.......................................340 8. Attorneys' Fees and Expenses............................................341 D. Manner of Allocation of Settlement Funds...................................341 1. $32.5 Million Allocation to the Closed Block............................341 2. $2.5 Million Cy Pres Allocation................................343 3. Division of Settlement Amount Between Closed-Block and Non-Closed-Block Allocations...........................................344 E. Notice of Settlement.......................................................345 F. Objections to Settlement ..................................................346 1. Steven Waldman..........................................................346 2. John J. Pentz, Jr. and Thomas Sterrett Bell.............................350 3. Robert Gould............................................................351 4. Christopher P. Mueller..................................................353 5. Lawrence Kuczynski .....................................................353 6. Thomas P. Tierney, in Support of Mueller's Objection....................354 V. Fees and Expenses .............................................................356 A. Class Counsel's Joint Application for Fees and Expenses ....................356 B. Standard of Review for Award of Fees and Expenses to Class Counsel..........356 C. Criteria for Approval of Fees and Expenses..................................358 1. Percentage-of-the-fund Method............................................358 2. Lodestar Method .........................................................359 3. Other Factors............................................................360 a) Time and Labor Expended...............................................360 b) Magnitude and Complexity of the Litigation............................361 c) Risk of the Litigation................................................361 d) Quality of Representation.............................................362 e) Requested Fee in Relation to the Settlement ..........................362 f) Public Policy Considerations..........................................363 4. Class Counsel's Expenses.................................................363 5. Reaction of the Classes to Fee and Expense Application ..................364 6. Award of Fees and Expenses to Class Counsel..............................364 D. Notice of Applications for Fees and Expenses...............................365 E. MetLife's Objections to Class Counsel's Application for Fees and Expenses.................................................................366 F. Objector Steven Waldman's Application for Attorney's Fees..................367 VI. Compensation to Class Representatives.........................................369 A. Federal Plaintiffs' Applications for Compensation Pursuant to PSLRA .......369 B. State Plaintiffs' Applications for Compensation............................370 1. New York Law Concerning "Incentive Awards"..............................371 2. Plaintiffs Theresa Hazen, Mark Smilow, and Vijay Shah...................371 3. Compensation for Efforts on Behalf of the Class.........................372 VII. Conclusion..................................................................373

I. Introduction

This case and a related case in New York Supreme Court, Fiala v. Metropolitan Life Ins. Co., Index No. 601181/2000, are class actions arising out of Metropolitan Life Insurance Company's ("MetLife") demutualization—its conversion from a mutual insurance company to a stock corporation. The classes consist of individuals who held MetLife mutual insurance policies at the time of the demutualization in 2000 who were allegedly harmed by the demutualization. The parties in this action and the Fiala action have arrived at a joint proposed settlement disposing of all claims in both cases.

The parties seek final approval of the proposed settlement. Plaintiffs' counsel, and counsel for one objector to the settlement, have applied for attorneys' fees and expenses, to be paid out of the settlement fund. Named plaintiffs in both actions have applied for compensation in recognition of time and...