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Cappello v. Franciscan Alliance, Inc.

United States District Court, N.D. Indiana, South Bend Division

February 28, 2017

LORAINE CAPPELLO, et al . on behalf of themselves and all others similarly situated, Plaintiffs,
FRANCISCAN ALLIANCE, INC., et al., Defendants.



         Pending and ripe before the Court is the Motion to Appoint Interim Lead Counsel filed by Plaintiffs Jean L. Jewett, Lenore Owens, and Lori Buksar (collectively “the Jewett Plaintiffs”) on September 16, 2016. [DE 65]. Also before the Court is the Motion for Entry of Pretrial Order No. 1 Appointment Interim Class Counsel filed by Plaintiffs Lorraine Cappello and Jeffrey O'Barski (collectively “the Cappello Plainitiffs”) on August 9, 2016.[1] [DE 26]. Counsel for each set of Plaintiffs seek appointment as Interim Lead Class Counsel for the entire putative class in this consolidated ERISA “church plan” action against Defendant Franciscan Alliance, Inc., et al. The Court then heard arguments from all parties on the competing requests for appointment at a hearing on February 24, 2017.[2]

         I. Relevant Background

         This consolidated action[3] stems from allegations that Defendant, Franciscan Alliance Inc., et al. improperly claimed the “church plan” exemption from the Employee Retirement Income Security Act of 1974 (“ERISA”). Plaintiffs allege that in so doing, Franciscan Alliance has avoided providing protections to its employees and pension plan participants. More specifically, Plaintiffs contend that Franciscan Alliance has failed to fund their pensions in compliance with ERISA's minimum funding obligations, to insure the benefits through the federal benefit guaranty corporation, and to provide ERISA-required notices and information to participants in the Franciscan Alliance Pension Security Plan.

         On April 22, 2016, the Jewett Plaintiffs initiated their ERISA church plan class action against Franciscan Alliance in the Northern District of Illinois represented by the law firms of Cohen Milstein Sellers & Toll PLLC (“Cohen Milstein”) and Keller Rohrback, LLP. The Jewett Plaintiffs served and received limited discovery requests, including the Franciscan Alliance Plan documents, which led them to file their First Amended Complaint on August 10, 2016. The Jewett Amended Complaint alleges twelve causes of action, including a constitutional claim based on the Establishment Clause and a claim based on allegations that Franciscan Alliance improperly required five years of service before employees would qualify as fully vested participants in the Plan. With the agreement of all parties, the Northern District of Illinois issued an order transferring Jewett to this Court on August 16, 2016. Jewett arrived in this District on September 6, 2016.

         In the mean time, the Cappello Plaintiffs filed their church plan complaint against Franciscan Alliance in this Court on May 12, 2016, represented by the law firms of Kessler Topaz Meltzer & Check, LLP (“Kessler Topaz”), Izard, Kindall & Raabe LLP, and Sopko, Nussbaum, Inabnit & Kaczmarek. The Cappello complaint lacked the constitutional claim, the vesting claim, and other claims raised by the Jewett Plaintiffs in their Amended Complaint. The Cappello Plaintiffs engaged in no discovery, but filed their first motion to appoint interim lead counsel on June 24, 2016. On June 30, 2016, this Court denied the Cappello Plaintiffs' motion without prejudice. [DE 25 at 1].

         On August 9, 2016, with the expectation that the Jewett Plaintiffs were going to agree to transfer their case to this District, the Cappello Plaintiffs filed their second motion to appoint interim lead counsel. The Cappello Plaintiffs' motion became ripe on September 2, 2016, with a timely response from Defendants and their reply brief. The Jewett Plaintiffs filed their competing motion for appointment of counsel on September 16, 2016. The Jewett motion became ripe on October 6, 2016, after the Cappello Plaintiffs and Defendants filed response briefs and the Jewett Plaintiffs filed a reply.

         Briefing on both motions showed that Kessler Topaz, a Cappello firm, and Cohen Milstein, a Jewett firm, have worked together on some other church plan cases and have competed against each other for the position of lead counsel in others. The Cappello and Jewett Plaintiffs also established that on occasion, counsel's efforts to work together in other similar cases had failed even on basic tasks such as preparing a consolidated amended complaint. As such, the Cappello and Jewett Plaintiffs argued that either Cappello's counsel or Jewett's counsel should be appointed here. Defendants expressed no preference for any firm, but explicitly contended that its interests would be best served if only one firm were to be appointed. Specifically, Defendants contended that appointment of more than one firm would magnify Defendants' fee exposure and would complicate Defendants' ability to coordinate effectively with opposing counsel.

         The arguments at the hearing before this Court on February 24, 2017, were similar, but slightly modified from the briefing. Defendants held firm in their opposition to more than one firm serving as Interim Lead Class Counsel. The Jewett Plaintiffs also maintained their position that their lawyers were best suited to protect the interests of the class as a whole without any assistance from the Cappello Plaintiffs' counsel. Jewett's counsel reiterated their history of collaboration on “church plan” litigation including cases now before the United States Supreme Court.[4] Jewett's counsel also emphasized the challenges they have faced in the early stages of this case trying to coordinate and collaborate with the Cappello Plaintiffs' counsel.

         The Cappello Plaintiffs, however, shifted their position and argued that the interests of the class would be best protected if its lawyers at Kessler Topaz were appointed Co-Interim Lead Class Counsel with the lawyers representing the Jewett Plaintiffs at Cohen Milstein. The Cappello Plaintiffs supported its modified position by noting that both Kessler Topaz and Cohen Milstein are eminently qualified firms in this type of litigation, that both firms have a history of working together, and that the firms' distinctive litigation strategies would work to the putative class members' benefit.

         II. Analysis

         Federal Rule of Civil Procedure 23(g) governs the appointment of class and interim class counsel in class action litigation. The designation of interim class counsel promotes more orderly and efficient prosecution of complex litigation. See Annotated Manual for Complex Litigation § 10.22 (4th ed. 2011) (“Manual”). In determining lead counsel, the court should “conduct an independent review (usually a hearing is advisable) to ensure that counsel appointed to leading roles are qualified and responsible, that they will fairly and adequately represent all of the parties on their side, and that their charges will be reasonable.” Id. The most important factor is “achieving efficiency and economy without jeopardizing fairness to parties.” Id. § 10.221.

         Rule 23(g)(2) specifically provides that “[w]hen one applicant seeks appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1) and (4).” However, in cases where “more than one adequate applicant seeks appointment, the court must appoint the applicant best able to ...

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