FOR IMMEDIATE RELEASE:
February 26, 2001
FOR MORE INFORMATION CONTACT:
Jonathan Hutson, 202-797-8600 x 246
PROPOSED MASS MUTUAL NATIONAL CLASS ACTION SETTLEMENT WITHDRAWN AFTER TLPJ OBJECTS TO OUTRAGEOUS TERMS
Proposal Would Have Paid Class Members Zero, Two Class Reps $350,000, and Class Counsel $5 Million Cash, $3 Million in Insurance, and $250,000 Annually for Life
A proposed national class action settlement of consumer protection claims by the Massachusetts Mutual Life Insurance Company was withdrawn and a hearing on the fairness of the settlement scheduled for today was cancelled after Trial Lawyers for Public Justice (TLPJ) challenged the deal as an abuse of both the class action device and class members. The formal notice withdrawing the settlement was filed on February 19, but TLPJ just received notice of it - and the cancellation of the hearing - late Friday.
The withdrawn settlement proposal in Wilson v. Massachusetts Mutual Life Insurance Company, currently pending in the First Judicial District Court of New Mexico in Santa Fe County, would have paid nothing to the 6.5 million class members. The two class representatives, however, would have received a total of $350,000 and class counsel would have been paid $5 million in cash, a $3 million life insurance policy, and annual payments of $250,000 for life.
"TLPJ objected to the proposed settlement as a rare but outrageous abuse of the kind of class action litigation that has historically protected consumers," stated TLPJ's local counsel, William E. Snead of the Law Office of William E. Snead in Albuquerque. "Both the class and our system of justice are better off with this deal dead."
The class action lawsuit charges that MassMutual failed to disclose adequately the fees that its life and disability policyholders would incur if they chose to pay their premiums on a monthly, quarterly, or semiannual basis, instead of in a yearly lump sum. The complaint in the case, filed in 1998 on behalf of approximately 6.5 million MassMutual policyholders, seeks both damages and injunctive relief, i.e., a court order requiring appropriate disclosures in the future.
Under the terms of the proposed settlement, the Springfield, Massachusetts-based insurer would have provided better disclosures in the future, but would have paid no damages to the class. Even the improved disclosures, moreover, would not have benefited most of the class members - approximately 5 million of the class members are no longer MassMutual policyholders. All of the class members, however, would have released their potential claims against the insurer.
For helping obtain this deal for the class, the two named class representatives would have received one-time "incentive payments" of $250,000 and $100,000, respectively. Class counsel George Gary Duncan of Santa Fe would have received an immediate payment of $5 million in cash, plus a $3 million guaranteed life insurance policy, and annuity payments of $250,000 annually for life.
TLPJ's objections, filed February 5 in New Mexico, charged that the proposed settlement was blatantly unfair and urged the court to reject the proposed deal, the incentive payments, and class counsel's requested fee. The objections were filed on behalf of class members from California, Connecticut, Kansas, Massachusetts, Pennsylvania, Texas, and West Virginia. TLPJ also provided formal notice that it intended to appear and oppose approval at the hearing on the fairness of the proposed settlement, scheduled for February 26 in Santa Fe. Late last week, TLPJ was notified that the hearing was cancelled and the proposed settlement had been withdrawn by class counsel.
"We are gratified that class counsel recognized that the settlement simply could not be approved," said TLPJ Staff Attorney F. Paul Bland, Jr., who was >scheduled to appear at the hearing for the TLPJ objectors. "It violated class members' rights and paid the attorney and class representatives unreasonable sums, while letting the defendant off the hook for failing to adequately notify its policyholders of unfair, hidden fees."
In addition to challenging the amounts to be paid under the settlement, TLPJ objected both to the notice sent to class members and to the secrecy surrounding parts of the deal. The Class Notice states in capital letters that "THE CLASS WILL NOT HAVE TO PAY ANY ATTORNEYS' FEES OR EXPENSES." But MassMutual is a mutual insurance company - that is, a company owned by its policyholders - and the 1 million class members still holding policies would, therefore, inevitably bear the cost of the fees indirectly, in the form of reduced dividends.
The settlement agreement also referred to a "Supplemental Agreement" between the named plaintiffs and MassMutual, but gave no hint of the contents of that secret agreement. Similarly, it required MassMutual to provide class counsel with a record of how many policyholders change their payment practices as a result of the new improved disclosures - but provided that all such records be kept secret from the public.
"The notice and the secrecy in this deal were no more acceptable than MassMutual's willingness to pay everyone but the 6.5 million class members," said TLPJ Executive Director Arthur H. Bryant, co-counsel for the TLPJ objectors. "MassMutual took a legitimate class action and tried to turn it into a poster child for class action abuse. We weren't going to let that happen."
Class counsel Duncan stated in a notice filed on February 19 that he was withdrawing the settlement proposal in "light of the many objections to the proposed Settlement Agreement that have expressed displeasure that class members have no opportunity to obtain restitution for past overpayments as the agreement is presently structured." Duncan explained, "Class counsel concludes that the Court cannot reasonably find that the public benefit of the proposed disclosures alone is of such overriding importance as to allow it to find that the agreement is fair, adequate and reasonable to the inactive class members."
TLPJ's objections to the settlement in Wilson were filed as part of its Class Action Abuse Prevention Project, a nationwide campaign dedicated to monitoring, exposing, and fighting class action abuse nationwide. In addition to Snead, Bland and Bryant, TLPJ's legal team includes TLPJ Staff Attorney Leslie A. Brueckner and Consumer Rights Fellow Michael Quirk.
Trial Lawyers for Public Justice is the only national public interest law
firm dedicated to using trial lawyers' skills and resources to advance the
public good. Founded in 1982, TLPJ utilizes a nationwide network of more
than 2,400 outstanding trial lawyers to pursue precedent-setting and
socially significant litigation. It has a wide-ranging litigation docket
the areas of environmental protection, toxic torts, consumer rights, worker
safety, civil rights and liberties, and access to the courts. TLPJ is the
principal project of The TLPJ Foundation, a not-for-profit membership
organization. It has offices in Washington, DC, and Oakland, CA. TLPJ's
State Coordinator for New Mexico is Daymon B. Ely, 505-248-0370.