Virginia Lawyers Weekly VA Lawyers Weekly
The settlement of a class action alleging that Genworth made false representations when offering contractual options to its long-term care policyholders and failed to disclose anticipated premium rate increases, was given final approval after a factual finding that it was fair and adequate.
Background
Plaintiffs initiated this class action, on behalf of themselves, and all others similarly situated, to secure redress for alleged false representations made by Genworth when offering various contractual options to its policyholders and alleged failures to disclose anticipated premium rate increases.
After the court granted in part and denied in part defendants’ motion to dismiss, the parties entered settlement negotiations. After considerable negotiation, and with the assistance of an independent mediator, the parties reached a settlement.
Under the settlement agreement, all class members will receive enhanced disclosures regarding Genworth’s future rate increases. settlement agreement. And class members who opt-in to the settlement will be able to choose among five new special election options through which class members can elect to either stop paying premiums and receive enhanced benefits or to receive various combinations of reduced benefits in exchange for reduced premiums and cash damage awards.
This matter is before the court on plaintiffs’ motion for final approval of class action settlement.
Fairness
The court must first assess the procedural fairness of the settlement negotiations. The relevant factors to evaluate the fairness of the settlement negotiations are “(1) the posture of the case at the time settlement was proposed; (2) the extent of discovery that had been conducted; (3) the circumstances surrounding the negotiations and (4) the experience of counsel.” Here, all four fairness factors point to a conclusion that the settlement negotiations in this case were procedurally fair.
In a case where, as here, the parties “vigorously” contested the motion to dismiss and engaged in negotiations with the assistance of a professional mediator, there is less risk of any improper collusion. Second, significant discovery had been conducted before the parties entered into settlement negotiations.
Third, three formal negotiation sessions took place over approximately three weeks and the “parties also held several days of additional telephone conferences and email communications directly and indirectly through [the mediator] before, during, and after each of the in person sessions.” These negotiations were “complex and highly adversarial,” and “the advocacy on both sides of the case was outstanding.” Finally, class counsel and their firms have extensive backgrounds in complex and class action litigation.
Adequacy
The relevant factors to evaluate the adequacy of the settlement are “(1) the relative strength of the plaintiffs’ case on the merits, (2) the existence of any difficulties of proof or strong defenses the plaintiffs are likely to encounter if the case goes to trial, (3) the anticipated duration and expense of additional litigation, (4) the solvency of the defendants and the likelihood of recovery on a litigated judgment, and (5) the degree of opposition to the settlement.” Here, all five factors suggest that the result achieved for the class and the other terms of the settlement agreement are adequate.
The first two adequacy factors together suggest that the settlement is substantively adequate. As the parties and their mediator note, the outcome at trial was uncertain given that both parties possessed “strong, nonfrivolous arguments on the merits.” Third, because of the risks plaintiffs would face if the case continued to trial, and the costs of litigation generally, there was a real risk that “the length of time and expense required to resolve” these issues “and the risk of no recovery for the Class, would [have been] considerable.”
Regarding the fourth factor, according to Genworth, “any combination of Special Election Options” elected by the class members is expected to improve Genworth’s “financial condition relative to its existing liabilities.” Finally, of slightly more than 207,000 potential class members, only 191 opted out and only 32 objected.
Motion for final approval granted.
Skochin v. Genworth Financial Inc., Case No. 3:19-cv-49, Nov. 12, 2020. EDVA at Richmond (Payne). VLW 020-3-566. 12 pp.
