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In re American Investors Life Insurance Co. Annuity Marketing and Sales Practices Litigation

February 22, 2010

IN RE: AMERICAN INVESTORS LIFE INSURANCE CO. ANNUITY MARKETING AND SALES PRACTICES LITIGATION


The opinion of the court was delivered by: McLaughlin, J.

MDL DOCKET No. 1712

MEMORANDUM

The plaintiffs are a class of annuities holders who brought suit against the defendants, the annuities companies, alleging violations of the Federal Racketeer Influenced and Corrupt Organizations Act ("RICO") and various state laws. The plaintiffs' claims against the defendants were settled by the Court's order and judgment certifying the class and approving the parties' settlement ("final order"). One class member, Martha Michael, who objected to the settlement, filed a notice of appeal of the final order. In response, the plaintiffs filed the instant motion before the Court to enforce the Court's final order and for related relief with respect to Ms. Michael's appeal.

In their motion, the plaintiffs request that the Court order Ms. Michael to post a bond for $569,618,666.70 to effect a stay, as an appropriate bond, and as a sanction for her contempt of the Court's final order to the extent that Ms. Michael failed to comply with the appeal procedures outlined therein. In the alternative, they request a cost bond for $12.75 million. The plaintiffs also urge the Court to order Ms. Michael's counsel to demonstrate that the counsel made certain disclosures of representation to clients allegedly affected by a conflict of interest.

The Court ordered expedited briefing and supplemental briefing on the plaintiffs' motion. Upon consideration of the parties' briefs and an on-the-record telephone conference attended by the plaintiffs' counsel, the defendants' counsel, and Ms. Michael's counsel, the Court will grant in part and deny in part the plaintiffs' motion.

I. Background

The underlying action was a multidistrict litigation involving six consolidated putative class action lawsuits that were transferred to this Court on October 26, 2005. Over the course of four years, the plaintiffs and defendants actively litigated this matter through motions to dismiss, a motion for class certification, and a motion for summary judgment. After protracted negotiations that lasted almost one year, the parties reached a settlement and filed their settlement stipulation with the Court on July 19, 2009. On July 28, 2009, the Court preliminarily approved the parties' settlement stipulation and notice. Eight hundred forty class members were excluded from the settlement and twelve class members, including Ms. Michael, objected. Of those who opted out of the settlement, thirty-nine are represented by Ms. Michael's counsel.*fn1

The Court held a fairness hearing on November 6, 2009. No class members appeared to voice objections to the settlement. Although counsel for Ms. Michael filed a notice of appearance for the fairness hearing, they withdrew their notice on November 5, 2009.

On December 18, 2009, The Court issued a memorandum and order that certified the class and approved the class settlement valued at $185,250,000 to $549,250,000. The Court analyzed the objections from the twelve class members, including Ms. Michael, and the concerns raised by the Pennsylvania and Texas Attorneys General. See Memorandum Dec. 18, 2009, 33-40.*fn2 After careful analysis, the Court found the objections and concerns unpersuasive and the settlement to be fair.

Within the final order, the Court included specific provisions with respect to any appeal:

Any appeal from this Final Order and Judgment must be preceded by (i) a timely objection to the Settlement filed in accordance with the requirements of the Settlement Stipulation and Preliminary Approval Order or a request to intervene upon a representation of inadequacy of counsel, (ii) a request for a stay of implementation of the Settlement, and (iii) posting of an appropriate bond. Absent satisfaction of all three of these requirements, Defendants are authorized, at their sole option and in their sole discretion, to proceed with implementation of the Settlement, even if such implementation would moot any appeal.

Final Order § 10.

On January 18, 2010, Ms. Michael filed a notice of appeal of the Court's final order. She did not request a stay and she did not post a bond of any amount. On January 27, 2010, the plaintiffs filed the instant motion. At the request of plaintiffs' counsel, the Court ordered expedited briefing. Counsel for Ms. Michael filed their opposition on February 3, 2010.*fn3 The plaintiffs' counsel filed their reply on February 8, 2010. The Court held an on-the-record telephone conference with counsel for the plaintiffs, defendants, and Ms. Michael on February 11, 2010. During the call, the Court ordered the plaintiffs and Ms. Michael to file a supplemental brief with respect to the components and value of an appeal bond, and both complied.

II. Analysis

The plaintiffs move the Court to enforce its final order and for miscellaneous relief. They request that the Court order Ms. Michael to comply with paragraph ten of the Court's final order, namely to request a stay of implementation of the settlement and to post an appropriate bond. They argue that a supersedeas bond in the amount of $569,618,666.70 is appropriate to effect a stay and because Ms. Michael's appeal is frivolous and meant to obtain leverage for the thirty-nine individuals represented by Ms. Michael's counsel who opted out of the settlement. They also urge the Court to issue the sanction of a supersedeas bond upon finding Ms. Michael and her counsel in contempt of the Court's final order for their failure to comply with the order's outlined appeal procedures. They argue in the alternative for a cost bond totaling $12.75 million, based on the plaintiffs' and defendants' attorneys' fees for the appeal and the benefits of the settlement lost to the class because of the delay incident to the appeal. Finally, alleging a conflict of interest of Ms. Michael's counsel with respect to their representation of Ms. Michael and thirty-nine individuals who opted out of the class, the plaintiffs request the Court order Ms. Michael's counsel to demonstrate that all necessary disclosures were made to, and consents were obtained from, the affected clients.

A. A Supersedeas Bond Is Inappropriate

The plaintiffs seek a supersedeas bond pursuant to Federal Rule of Civil Procedure 62(d) and the Court's final order. Rule 62(d) states:

If an appeal is taken, the appellant may obtain a stay by supersedeas bond . . . . The bond may be given upon or after filing the notice of appeal or after obtaining the order allowing the appeal. The ...


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