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E.E.O.C. v. COM. OF PA.

August 13, 1991

EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, ET AL., PLAINTIFFS,
v.
COMMONWEALTH OF PENNSYLVANIA, PENNSYLVANIA STATE POLICE, AND THE COMMISSIONER OF THE PENNSYLVANIA STATE POLICE, DEFENDANTS.



The opinion of the court was delivered by: Caldwell, District Judge.

  MEMORANDUM

Pending is a motion for court approval of a settlement of this litigation, entered into by plaintiff, the Equal Employment Opportunity Commission ("EEOC"), and defendants, the Commonwealth of Pennsylvania and the Pennsylvania State Police. This action was filed by the EEOC on behalf of certain members of the State Police, alleging they were forced to retire at age 60 in violation of the Age Discrimination in Employment Act ("ADEA"), 29 U.S.C. § 626 et seq. After several years of negotiations, which involved the consideration of the status of 130 individuals who may have been entitled to relief, the parties reached a settlement agreement which provides awards to 83 former state policemen in the amount of $2,643,036.43. Six individuals have filed objections to the proposed agreement. They object either because they were not included in the group to receive damages, or because they are dissatisfied with the amount they will receive. On June 3, 1991, a hearing was held and the objectors presented their grievances. At that time, we permitted the parties and objectors to submit briefs concerning the objections, and the role of the court with regard to them.

  The objectors contend that the proposed settlement should be
disapproved because it is unfair. It is well established that
a district court generally plays a limited role in reviewing
proposed settlement agreements in litigation initiated by the
EEOC. The Court in EEOC v. Consolidated Edison Co., 557 F. Supp. 468
 (S.D.N.Y. 1983) said:
  This suit is not a class action nor does it fall
  within any other of the limited categories of
  cases in which a court is called upon to determine
  the fairness or desirability of a proposed
  settlement. In approving this settlement, this
  court merely acknowledges that the parties have
  exercised the right, which they have, to
  discontinue this litigation.

We recognize, however, as the court did in Consolidated Edison, supra, that in certain instances the court may exercise an inherent power to determine the fairness and reasonableness of a proposed settlement. In such cases, "[t]he sole question before the district court in reviewing a settlement agreement is whether the agreement is fundamentally fair or just." Moore v. San Jose, 615 F.2d 1265, 1271 (9th Cir. 1980). See Officers for Justice v. Civil Service Com., 688 F.2d 615, 625 (9th Cir. 1982) (The "[u]niversally applied standard [for reviewing a settlement agreement under Rule 23(e)] is whether the settlement is fundamentally fair, adequate and reasonable"); Berkman v. New York, 705 F.2d 584, 597 (2nd Cir. 1983) (a district court should not approve a Title VII settlement that contains provisions that are unreasonable, unlawful or against public policy).

There is a limited right of an individual objector to alter, or otherwise interfere with, a settlement agreement negotiated by the EEOC in an ADEA action. The EEOC is charged with "the responsibility of investigating, litigating, and, if possible, settling claims on behalf of both the general public and individual victims of discrimination." Consolidated Edison, supra, 557 F. Supp. at 473. Further, an individual's right to bring suit "terminates upon the filing of a suit by the EEOC to enforce such employee's ADEA-granted rights." Id. at 471; Section 7(c)(1) of the ADEA, 29 U.S.C. § 626(c)(1). In other words, "once the EEOC commences an enforcement suit, an employee who has failed to file his own action and on whose behalf relief is sought is not permitted to intervene as a party pursuant to Fed.R.Civ.P. 24(a)(2) in the ongoing suit." Id. at 472.

In the instant action, it is undisputed that the six objectors did not file suit prior to the initiation of the present action by the EEOC. "An employee who fails to file a law suit seeking redress of his ADEA-recognized rights prior to the EEOC's commencement of a suit on such employee's behalf lacks any power to assert such rights, regardless whether the assertion is attempted within or without the EEOC suit, or before or after judgment [or settlement] is entered." Id. (emphasis added). Similarly, in EEOC v. Pan American World Airways, Inc., 897 F.2d 1499, 1509 (9th Cir. 1990), the Court stated that: "[t]he objectors had no right to participate in the EEOC's lawsuit because they expressed their interest too late in the day. The objectors therefore have no standing to challenge the terms of the settlement agreement."

Unlike the objectors in EEOC v. Pan American, the six objectors here were included in the group represented by the EEOC, and thus are not completely without standing to question the overall fairness of the settlement agreement. To determine the reasonableness of the proposed settlement, however, we must consider the agreement taken as a whole, and not by examining the merits of individual claims. In this instance the objectors have not established the requisite fraud, collusion, unfairness, and unreasonableness that is required to reject the settlement agreement.

Three of the objectors, although not disputing the fairness of the settlement on a class-wide basis, contend that the settlement is unfair as it applies to their individual circumstances. According to Consolidated Edison, supra, this type of objection is insufficient to warrant a rejection of the terms of a settlement reached by the EEOC. The Court's role is not to make a de novo evaluation of whether the measures applied to all claimants provide each individual with a satisfactory recovery. Rather, the criteria or methodology employed by the litigants is sufficient if its terms, when applied to the entire group of individuals represented, appear reasonable. "It is the complete package taken as a whole, rather than the individual component parts, that must be examined for overall fairness." Officers for Justice, supra, 688 F.2d at 628.

Specifically, objectors, George Evan, Roy Titler, and Joseph Dean contend that a review of the settlement taken on the whole, rather than on an individual basis, is inappropriate. We agree that the settlement is comprised of individual components and is the product of individual reviews and calculations. However, each of the individual awards were determined by applying a uniform and general classwide formula. The formula was adjusted only to deal with unique individual circumstances which did not fit into the general mold.

We recognize that the Court in Officers of Justice, supra, stated that while "maximizing the overall gain is a valid pursuit in resolving a class action, a small minority of the class members may not be asked to bear an unduly disproportionate share of the accompanying burdens." Id. 688 F.2d at 624 (citations omitted). However, when courts are called upon to approve settlement agreements, it is recognized that there "exists the risk that the interests of some class members may be sacrificed in the effort to achieve the `greatest good for the greatest number.'" Officers for Justice, supra, 688 F.2d at 624, quoting Mandujano v. Basic Vegetable Products, Inc., 541 F.2d 832, 835 (9th Cir. 1976). In fact, the Court in Consolidated Edison, supra, emphasized that settlement distributions premised on a basis other than the merits of individual claims are common. Upon consideration of the agreement and release we believe that the EEOC's overall criteria for determining damages, as applied to all the individuals it represents, is appropriate and reasonable.

Titler and Evans object to the propriety of discounting lost retirement annuities to present value. We find the present value approach reasonable in this case. If the class members were to receive an undiscounted lump sum payment, they would gain a windfall because the payment could then earn interest, resulting in a receipt by the retiree of a higher amount than the annuity that was lost. The objectors argue that "the reduction of annuity benefits to present value leaves the officer with less than what they are entitled to as a matter of law and permits the Pennsylvania State Police to gain a significant economic advantage." We disagree. The class members will receive what they are entitled to because the value of the sum received at this time is greater than it would be if it were received over time in the future.

  We agree that the practice of discounting lost future
earnings to present value was abandoned by the Pennsylvania
Supreme Court, Kaczkowski v. Bolubasz, 491 Pa. 561,
421 A.2d 1027 (1980), and is not favored by the Third Circuit. Pfeifer
v. Jones & Laughlin Steel Corp., 678 F.2d 453 (3d Cir. 1982).
The Third Circuit stated as follows:

    . . the rate of future inflation will be
  equivalent to future interest rates. From a
  pragmatic viewpoint, lost future earnings need not
  be discounted to present value, although the
  formula calls for a ...

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