Jones v. Singing River Health Services Foundation
865 F.3d 285
5th Cir.2017Background
- Singing River Health System (SRHS), a county-owned hospital system in Mississippi, maintained a defined-benefit pension Plan; employees contributed 3% of pay and SRHS was required to make actuarial contributions.
- From 2009–2014 SRHS largely failed to make required contributions; the Plan was frozen in late 2014 and the Chancery Court later held SRHS indebted to the Plan for missed contributions and lost earnings (>$55 million).
- Three federal Rule 23 class actions (consolidated under Jones) challenged SRHS and related defendants; plaintiffs sought recovery for missed contributions and other claims.
- The parties negotiated a settlement requiring SRHS to pay $149.95 million over 35 years (present value ≈ $55M), Jackson County to pay $13.6M over eight years, and provided for monitoring by a Chancery Court special fiduciary; releases included SRHS entities, individuals, and non-party Jackson County.
- Objectors (many retirees) challenged certification and settlement approval, arguing the payout schedule was unsecured, speculative, lacked transparency about individual impacts (especially for current retirees), improperly released Jackson County, and improperly prioritized immediate counsel fees.
- The district court approved the settlement and certified the class under Rule 23(b)(1)(A). The Fifth Circuit vacated and remanded limited to further development on how the settlement will affect plan beneficiaries and SRHS’s ability to perform.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Class adequacy under Rule 23(a)(4) | Objectors: named reps and counsel were inadequate and conflicted; insufficient disclosure to class | Plaintiffs: counsel experienced; reps share same interests; settlement reflects realistic recovery | Court: district did not abuse discretion; representation adequate |
| Collusion / need for further discovery | Objectors: state-court irregularities and fee stipulation suggest collusion; requested more discovery | Plaintiffs: mediation and neutral mediator show arms-length negotiation; objections unsupported | Court: no record evidence of collusion; discovery request was speculative; finding affirmed |
| Fairness/adequacy of the settlement terms | Objectors: 35-year unsecured schedule is speculative; no transparency on individual payouts; immediate counsel fees shift risk to class; release of county improper | Plaintiffs/SRHS: settlement restores missed 2009–14 contributions in present value, provides some county contribution, avoids costly litigation and uncertain collection | Court: approval premature as to class effects; vacated and remanded for focused inquiry into SRHS’s ability to perform, impact on beneficiaries, treatment of third-party recoveries, and alignment of counsel fees with class risk |
| Release of non-party (Jackson County) | Objectors: county has statutory authority and potential duty to fund hospital/plan; release improper | Plaintiffs: county negotiated contribution; no statutory duty to levy taxes to fund pension; release needed for settlement | Court: district did not abuse discretion in approving release; no clear legal basis showing county liability that would make release inadequate |
Key Cases Cited
- Reed v. Gen. Motors Corp., 703 F.2d 170 (5th Cir. 1983) (provides multi-factor test for evaluating class settlements)
- In re Deepwater Horizon, 739 F.3d 790 (5th Cir. 2014) (abuse-of-discretion standard for settlement approval and class certification review)
- Newby v. Enron Corp., 394 F.3d 296 (5th Cir. 2004) (consideration of defendant solvency and collectability in settlement fairness)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (adequacy inquiry and conflicts in settlement classes)
- Union Asset Mgmt. Holding A.G. v. Dell, Inc., 669 F.3d 632 (5th Cir. 2012) (scope of fairness hearing and standards for approval)
- Mirfasihi v. Fleet Mortgage Corp., 450 F.3d 745 (7th Cir. 2006) (courts must vigilantly scrutinize settlements for collusion)
- In re Katrina Canal Breaches Litig., 628 F.3d 185 (5th Cir. 2010) (settlement must secure adequate advantage for class in exchange for surrendered rights)
- Ayers v. Thompson, 358 F.3d 356 (5th Cir. 2004) (evidence required to rebut district court’s finding of non-collusion)
- Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977) (role of counsel’s experience and discovery in settlement review)