Prudential settlement agreement
Sept. 22, 1996
The page numbers at the bottom of each section are the page numbers as they appear on the actual document. They probably will not correspond to the pages if you decide to print them out. We included the original page numbers because they will be referred to in any legal documents or briefs.
Sections of this document:
United States District Court of New Jersey
In Re The Prudential Insurance Company of America Sales Practices Litigation
This document relates to: All actions listed on Exhibit A
MASTER DOCKET NO. 95-4704 (AMW) MDL NO. 1061
1. WHEREAS, numerous actions that have been filed against defendant The Prudential Insurance Company of America, and certain employees, officers and directors of the foregoing, have been centralized by the Judicial Panel on Multidistrict Litigation in the United States District Court for the District of New Jersey as In re The Prudential Insurance Company of America Sales Practices Litigation. MDL Docket No. 1061 before the Honorable Alfred M. Wolin (the "Centralized Proceeding");
2. WHEREAS, the named plaintiffs in several of the constituent putative class actions to the Centralized Proceeding filed a Consolidated Amended Class Action Complaint on October 24, 1995, integrating the claims raised in several of the original complaints which were filed in the actions beginning in February, 1995;
3. WHEREAS, the Defendants moved to dismiss the Consolidated Amended Complaint, pursuant to Federal Rule of Civil Procedure 12(b)(6), and the Court, by Order
dated May 10, 1996 (as amended June 10, 1996), dismissed portions of the aforesaid complaint without prejudice;
4. WHEREAS, on April 25, 1995, in part in response to allegations made in the Actions, the New Jersey Commissioner of Insurance formed a Multi-State Task Force on Life Insurance Practices (the "Task Force") to examine the sales and marketing practices in the life insurance industry, in general, commencing with a market conduct examination of Prudential, the largest life insurer in the United States;
5. WHEREAS, thirty states and jurisdictions agreed to participate on the Task Force;
6. WHEREAS, in connection with its examination, the Task Force stated it reviewed and analyzed: (i) numerous documents; four (4) electronic data bases created by Prudential at the Task Force's request consisting of millions of complaint, policy transaction, agent discipline and commission recapture data records; and (ii) market conduct examinations of Prudential from other individual state Task Force members that had been conducted during the period under review; and further, they also stated they interviewed 283 Prudential agents and 27 Vice Presidents of Regional Marketing or Executive Directors;
7. WHEREAS, the Task Force issued a report on July 9, 1996, setting forth the findings of its market conduct examination (the "Report");
8. WHEREAS, as part of its Report and in accordance with one of its stated objectives, the Task Force also developed, with Prudential, a remediation plan which both the Task Force and Prudential determined would provide fair and appropriate relief to Policyholders who may have been harmed by misrepresentations made in the sale of their
Policies (the "Task Force Remediation Program"), and also fined Prudential in the amount of $35 million;
9. WHEREAS, forty-three states and the District of Columbia have executed consent orders adopting the Report and directing Prudential to implement the Task Force Remediation Program (the "Consent Orders"), and have received payments of fines from Prudential in accordance with the Report;
10. WHEREAS, during the pendency of the Task Force examination, and continuing to date, counsel for the putative class action plaintiffs in the Centralized Proceeding (i) have conducted an extensive investigation of Prudential's sales practices throughout the United States, including interviews of Policyowners as well as former and present Prudential employees; (ii) were provided all documentation, electronic data, and other information produced to the Task Force in connection with its examination and used in the development of its Report; (iii) were provided additionally with over 800,000 pages of documents, 160 computer diskettes and cartridges, and 450 video and audiotapes, concerning a wide variety of matters and business functions at Prudential, pursuant to their requests which were made periodically throughout the pending litigation; and (iv) have conducted depositions and interviews of Prudential executives, senior management and other personnel;
11. WHEREAS, on September 20, 1996, plaintiffs in the constituent actions identified in Exhibit A (collectively, the "Actions") filed a Consolidated Second Amended Class Action Complaint in the Centralized Proceeding (the "Consolidated Complaint") against Prudential and the Individual Defendants reflecting both the Court's prior rulings on substantive issues and the knowledge obtained by counsel for plaintiffs through the formal and informal discovery they have conducted;
12. WHEREAS, the Consolidated Complaint was brought on behalf of a purported class of persons who purchased permanent life insurance policies from Prudential during the period January 1, 1982 through December 31, 1995;
13. WHEREAS, the Consolidated Complaint asserts claims relating to the Defendants' sales practices during the Class Period and contains allegations, among other things, concerning: (i) the use of an existing policy's cash value or dividend stream to purchase or maintain a new Policy or other policy by means of a surrender, withdrawal/partial surrender or loan; (ii) representations regarding the number of out-of-pocket cash premium payments required to be paid for a policy and/or the benefits to be realized or paid based on a particular number of cash premium payments; and (iii) representations that the product being sold was solely an investment or savings vehicle rather than a life insurance policy and/or the relative appropriateness of permanent life insurance versus other financial services products;
14. WHEREAS, the Defendants make no admissions respecting the merits of the allegations made in the Actions nor any facts or claims that have been or could have been alleged against them in the Actions, but consider it desirable for the Actions to be dismissed because this Agreement will, among other things, (i) further Prudential's objective to fully and fairly remedy any legitimate claims of policyowners, (ii) provide substantial benefits to Prudential's present and former policyowners in addition to those provided in the Task Force Remediation Program, (iii) finally put Plaintiffs' claims (including claims that were or could have been asserted against other officers and directors other than the Individual Defendants) and the underlying matters to rest, and (iv) avoid the substantial expense, burdens and
uncertainties associated with continued litigation of those claims, including indemnification obligations and expenses;
15. WHEREAS, based upon Lead Counsel's extensive discovery and investigation through the date of this Agreement, and its evaluation of the facts and law relating to the matters alleged in the pleadings, Lead Counsel and the Defendants have agreed to settle the Actions pursuant to the provisions of this Settlement Agreement (hereinafter referred to as this "Settlement Agreement" or this "Agreement"), after considering such factors as (i) the substantial additional benefits to Plaintiffs and the Class provided under the terms of this Agreement, (ii) the risks of litigation, including the defenses of the Defendants to the Consolidated Complaint, (iii) the desirability of consummating settlement of these disputes promptly, and (iv) the benefits provided in the Settlement to Plaintiffs and the Class; and
16. WHEREAS, Plaintiffs and Lead Counsel have concluded that this Settlement Agreement is fair, reasonable and adequate because it provides substantial benefits to the Class and is in the best interests of the Class;
NOW, THEREFORE, IT IS HEREBY SETTLED AND AGREED, by, between and among Plaintiffs (individually and in their respective capacities as representatives of the Class) and the Prudential Insurance Company of America, by and through its duly authorized counsel, and the Individual Defendants, that the Actions and the matters raised by the Actions hereby are settled, compromised and dismissed on the merits and with prejudice on the following terms and conditions, subject only to the conditions specified herein and the approval of the Court.
1. As used in this Agreement and the annexed Exhibits (which are an integral part of this Agreement and are incorporated in their entirety by reference), the following terms shall have the following meanings (unless a part or subpart of this Agreement or its Exhibits otherwise provides):
a. "Action" or "Actions" shall mean the Consolidated Complaint and the Consolidated Policyholders Class Actions in In re The Prudential Insurance Company of America Sales Practices Litigation, Master Docket No. 95~704(AMW), MDL No. 1061, pending for pre-trial purposes in the United State District Court for the District of New Jersey, as further described in Exhibit A hereto.
b. "ADR Guidelines" shall mean the "Prudential Alternative Dispute Resolution Guidelines" attached hereto as Exhibit B.
c. "ADR Manual" or "Manual of Procedures" shall mean the "Manual of Procedures for Resolving Claims Under the Prudential Alternative Dispute Resolution Guidelines" attached hereto as Exhibit C.
d. "Agent" shall mean any agent or other representative of Prudential in respect of the sale, delivery and/or service of the Policy or Policies which is/are the subject of the Claim.
e. "Agreement" or "Settlement Agreement" shall mean this Settlement Agreement and the attached Exhibits.
f. "Alternative Dispute Resolution Process" or "ADR Process" shall mean the procedures for presentation to and evaluation of Claims by the Claim Evaluation Staff, the Policyholder Representative, the Claim Review.Staff and the Appeals Committee, as described in the ADR Guidelines and the ADR Manual taken together.
g. "Appeals Committee" or "APCOM" shall have the meaning set forth in the ADR Manual.
h. "Attorneys' Fees" shall mean such funds as may be awarded to Lead Counsel and all other plaintiffs' counsel in the Actions to compensate them for their fees and expenses in connection with the Actions.
i. "Basic Claim Relief" shall mean, as more particularly described in the "Guidelines for Prudential Basic Claim Relief," attached as Exhibit D hereto, that relief comprising the following: Optional Premium Loans, Enhanced Value Policies and Enhanced Value Annuities.
Company of America.
k. "Claim" shall mean a claim by a Claimant submitted to the ADR Process and meeting the criteria for eligibility set forth in Exhibits B and C hereto..
1. "Claim Evaluation Staff" shall mean the qualified professional and administrative staffs established by Prudential, wholly independent from Prudential's marketing or sales functions, composed solely to perform the evaluation of Claims, and to score and determine the level of relief of all Claims, all as described in the ADR Manual.
m. "Claim Form" shall mean the form submitted by each Claimant to establish his, her or its Claim pursuant to the ADR Guidelines.
"Board" shall mean the Board of Directors of The Prudential Insurance
n. "Claim Resolution Factor" shall have the meaning set forth in Section I.B. of the ADR Guidelines.
o. "Claim Review Staff" shall mean the qualified professional and administrative staffs established by Prudential, wholly independent from Prudential's marketing or sales functions, composed to perform the oversight functions, all as described in the ADR Manual.
p. "Claimant" shall mean all such Policyholder(s) having, individually or together, a complete ownership interest in a Policy which is the subject of a Claim.
q. "Claimant Group Administrator" shall mean any third party, agent or administrator, including Boston Financial Data Services, Inc., which may be retained by Prudential and must be approved by Lead Counsel and the Regulatory Oversight Staff, to help implement the ADR Process Basic Claim Relief and the terms of the Settlement.
r. "Claimant Support Team" shall mean that wholly independent entity designated and retained by Prudential, and approved by the Regulatory Oversight Staff and Lead Counsel to provide administrative assistance to Claimants in the preparation of their respective Claims, including providing aid in completing Claim Forms and responding to inquiries respecting the ADR Process during the time prior to the submission of the Claim Form. Lead Counsel and the Regulatory Oversight Staff shall monitor from time to time the Claimant Support Team's training and telephone calls.
s. "Class" and "Class Members" shall mean, individually or collectively, all persons or entities who are Policyholders, as defined herein.
t. "Class Notice" shall mean the notice mailed to Class Members informing them of the Proposed Settlement.
u. "Class Period" shall mean the period commencing January 1, 1982 and
terminating on December 31, 1995, inclusive.
v. "Defendants" shall mean, individually or collectively, The Prudential Insurance Company of America and the Individual Defendants.
w. "Defendants' Counsel" shall mean the law firm of Sonnenschein Nath & Rosenthal.
x. "Department" shall mean those state insurance departments set forth on Exhibit 1 to the ADR Guidelines.
"Election Form" shall mean the form on which each Policyholder elects (i) Basic Claim Relief or (ii) participation in the ADR Process.
z. "Enhanced Value Annuity" or "EVA" shall mean a currently issued, non-qualified single premium deferred fixed annuity with the characteristics described in Section D of this Agreement and the Guidelines for Prudential Basic Claim Relief.
ea. "Enhanced Value Policy" or "EVP" shall mean an Enhanced Value Whole Life Policy, made available pursuant to the terms and conditions set forth in Section D of this Agreement and the Guidelines for Prudential Basic Claim Relief.
ate. "Existing Policy" shall mean an insurance policy issued by Prudential which funds, in whole or in part, a New Policy issued by Prudential.
act "File" shall mean all documents submitted by or on behalf of the Claimant (including the Claim Form), the Agent and Prudential to the Claim Evaluation Staff in connection with the Claim.
ad. "Final Order and Judgment" shall mean the order approving the Proposed Settlement and the judgment entered pursuant to that order.
ae. "Final Settlement Date" shall mean the date on which the Final Order and Judgment approving the Proposed Settlement becomes final. For purposes of the Proposed Settlement: (1) if no appeal has been taken from the Final Order and Judgment, Final Settlement Date means the date on which the time to appeal therefrom has expired; or (2) if any appeal has been taken from the Final Order and Judgment, Final Settlement Date means the date on which all appeals therefrom, including petition for rehearing or reargument, petition for rehearing en bane and petitions for certiorari or any other form of review have been finally disposed of in a manner that affirms the Final Order and Judgment.
aft "Hearing Order" shall mean the order entered by the Court concerning Notice, Settlement Hearing and Administration, unless otherwise agreed by the parties.
ag. "Individual Defendants" shall mean, in their official capacities as officers and/or directors of The Prudential Insurance Company of America, Robert A. Beck, Ronald D. Barbaro and Robert C. Winters.
ah. "Individualized Relief" shall mean that relief to be received by Claimants in the ADR Process, as described in Section C herein.
se. "Lead Counsel" shall mean the law firms of Milberg Weiss Bershad Hynes & Lerach LLP and Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C.
aj. "Misstatement" shall mean in respect of any Claim Resolution Factor
(a) An untrue statement of material fact; or
(b) The failure to disclose a material fact necessary to make the
statements made not materially misleading, under the circumstances.
ak. "New Policy" shall mean an insurance policy issued by Prudential which is funded, in whole or in part, by an Existing Policy.
al. "Notice Date" shall mean the date when the Class Notice is first mailed or published to Class Members.
am. "Optional Premium Loan" shall mean a loan offered to Class Members subject to the terms and conditions set forth in Section D of this Agreement and the Guidelines for Prudential Basic Claim Relief.
an. "Plaintiffs" shall mean the named plaintiffs in the Actions.
ao. "Policy" or "Policies" shall mean one or more individual permanent life insurance policies issued in the United States by Prudential with an issue date during the Class Period.
apt "Policyholder Representative" shall mean that person, and his or her two assistants, selected by Lead Counsel to act on the behalf of a Claimant as described in the ADR Manual. Expenses directly incurred by, and the compensation of, the Policyholder Representative shall be borne by Prudential, on behalf of the Defendants, as more fully provided for in the ADR Guidelines.
aq. "Policyholders" shall mean all Policyowners of one or more Policies issued during the Class Period, but do not include (unless such persons or entities are Policyholders by virtue of other Policies) (i) Policyowners represented by counsel who executed a document in connection with a settlement of a claim, action, lawsuit or proceeding, pending or threatened, that released Prudential with respect to such Policies, (ii) Policyowners who exclude themselves from participation under this Agreement, (iii) Policyowners which are corporations, banks, trusts or non-natural entities, which
purchased Policies as corporate- or trust-owned life insurance and under which either (a) there are 50 or more separate insured individuals _ (b) the aggregate premium paid over an eight (8) year period ending with the Final Settlement Date exceeds one million dollars, or (iv) Policyowners who were issued Policies in 1995 by Prudential Select Life Insurance Company of America.
ar. "Policyowners" shall mean all persons or entities who (i) own a life insurance policy or other contract issued by Prudential in the United States, or (ii) owned at its termination a life insurance policy or other contract issued by Prudential in the United States.
as. "Post-Settlement Notice" shall mean the notice to be sent within 90 days after the Final Settlement Date to each of the Policyholders at his, her or its last known address, informing Policyholders of the Consent Orders between Prudential and the Department where applicable, and that the Settlement Agreement between Prudential and the Plaintiffs has become final.
at. "Post-Settlement Notice Date" shall mean the date on which the PostSettlement Notice first is mailed to each individual Policyholder at his, her or its last known address.
au. "Post-Settlement Summary Notice" shall mean the published summary of the Post-Settlement Notice, unless otherwise agreed by the parties, as more fully described below.
av. "Proposed Settlement" shall mean the terms of settlement as set forth in
aw. "Prudential" shall mean The Prudential Insurance Company of America, a mutual insurance company domiciled in the State of New Jersey and each of its U.S. life insurance subsidiaries with respect to Policies issued by them.
ax. "Regulatory Oversight Staff" shall mean those persons, appointed or designated by the Department, assembled to provide oversight of the programs described in the ADR Manual.
ay. "Releasees" shall mean the Defendants, individually and collectively, and any other current, former and future parents, subsidiaries, affiliates, partners, predecessors, successors and assigns of Prudential, and each of their respective past, present and future officers, directors, employees, agents, independent contractors, brokers, representatives, attorneys, heirs, administrators, executors, predecessors, successors and assigns, or any of them.
az. "Released Transactions" shall mean the marketing, solicitation, application, underwriting, acceptance, sale, purchase, operation, retention, administration, servicing, or replacement by means of surrender, partial surrender, loans respecting, withdrawal and/or termination of the Policies or any insurance policy or annuity sold in connection with, or relating in any way directly or indirectly to the sale or solicitation of, the Policies.
ha. "Settlement" shall mean the Proposed Settlement, with such modifications as made and approved by the Court, as set forth in the Final Order and Judgment.
bb. "Settlement Hearing" shall mean the hearing at or after which the Court will make a final decision whether to approve this Settlement Agreement as fair, reasonable and adequate.
be. "Settling Parties" shall mean Plaintiffs (in their individual and representative capacities) and the Defendants, collectively.
ted. "Summary Notice" shall mean the published summary of the Class Notice, including notice of the Proposed Settlement, the Settlement Hearing and potential Class Members' exclusion rights, as described more fully below.
2. All other capitalized terms used in this document shall have the meanings - ascribed to them by this Settlement Agreement, the ADR Guidelines, the ADR Manual or the Guidelines for Prudential Basic Claim Relief, respectively.
B. SETTLEMENT RELIEF
1. Pursuant to this Settlement Agreement, Prudential, on behalf of the Defendants, will make available to Class Members two alternative types of relief: Individualized Relief and Basic Claim Relief. Basic Claim Relief may take the form of an Optional Premium Loan, an Enhanced Value Policy and/or an Enhanced Value Annuity, as described below in Section D. A Class Member may seek either Individualized Relief or Basic Claim Relief, but not both, as to each Policy owned by that Class Member.
2. Notwithstanding any other provision in this Agreement, where more than one person has an ownership interest or right in a Policy, all persons having such an interest or right in such Policy must act jointly in exercising any right (including any right to exclude him or herself from the Class) created under this Agreement or the ADR Guidelines.
3. Any amounts required to be paid hereunder shall be paid by or on behalf of all of the Defendants. C.
ALTERNATIVE DISPUTE RESOLUTION PROCESS 1. Subject to and in accordance with the provisions of this Settlement Agreement. Prudential, on behalf of the Defendants, will provide Individualized Relief via the ADR Process. The ADR Process is based on an individual analysis and determination of Policyholders' claims arising out of Misstatements or improper sales practices by Prudential in connection with individual sales of life insurance. Prudential's ADR Guidelines, attached as Exhibit B hereto, set forth the categories of Claims, scoring process and rules, and remedies that will be available to Policyholders based on the nature of their Claims and theevidence available to establish them. Taken as a whole, the ADR Guidelines provide for an individualized review of the Claims that are filed, with remedies tailored to the type of Claim and the weight of the evidence available from the Policyholder and from Prudential's files. 2. Claims will be evaluated under four general categories, as set forth in the ADR Guidelines and as summarized below:
(i) "Financed Insurance," where there have been alleged Misstatements as to the use of loans, dividends or other values on Existing Policies to pay premiums on New Policies (sometimes referred to as "twisting" or "churning");
(ii) "Abbreviated Payment" or "APP," where there have been alleged Misstatements as to the use of a Policy's dividends or contract values to pay premiums on the same Policy (sometimes referred to as "vanishing premium");
(iii) The sale of a Policy, where there have been alleged Misstatements as to such Policy's being primarily an investment, savings or retirement product, and not life insurance; and (iv) Other alleged Misstatements and improper sales practices, not
included in the previous categories.
3. Scoring is based on the weight of evidence concerning the sale contained in the Claim File. The Claim File itself will consist of information drawn from a number of sources within Prudential, as well as that supplied by the Policyholder, including statements made by the Policyholder on the Claim Form. Information in the Claim File must meet the criteria set forth in Exhibits B and C in order for the Policyholder to obtain relief. For each factor analyzed within the general categories, the score determines the nature and the choices of relief.
4. Subject to and in accordance with the provisions of the ADR Manual, attached as Exhibit C hereto, the Settling Parties hereto will provide a comprehensive plan for the efficient and effective processing, administration and resolution of Claims. This will include (i) assistance of the Claimant Support Team to Policyholders in the preparation and submission of their Claims; (ii) both internal and external review and an independent audit of Claims and the claims processing system; and (iii) a fully-independent appeals process in order to resolve Policyholders' objections to the determination of their Claims.
5. Remediation provided for in the ADR Process will be paid for by, or on behalf of, the Defendants. The following additional amounts, as specified in this Section C.5, will be provided by or on behalf of the Defendants.
(a) The aggregate pre-tax cost for remedies in the ADR Process for each 110,000 of Claims Remedied (as defined below) will be $260 million (up to a maximum number of 330,000 Claims Remedied). For purposes of this Section C.5, "Claims Remedied" shall mean all Claims receiving a remedy of any type through the conclusion of the ADR Process. In the event 330,000 or fewer Claims are remedied through conclusion of the ADR Process, and the total pre-tax cost for the Claims Remedied is less than the Allocated Cost (as defined below) for such Claims Remedied, the difference shall be added to the Additional Remediation Amount (as described below). In the event more than 330,000 Claims are remedied through the conclusion of the ADR Process, the total pre-tax cost for such Claims Remedied divided by the total number of Claims Remedied shall be multiplied by 330,000, and such amount, if less than the Allocated Cost, shall be added to the Additional Remediation Amount. The "Allocated Cost" shall be the product obtained by multiplying $260 million by a fraction (i) the numerator of which shall be the actual number of Claims Remedied and (ii) the denominator of which shall be 110,000; provided, however, in no event shall the numerator in the immediately preceding clause (i) be greater than 330,000.
(b) An Additional Remediation Amount, which will be a fixed dollar
amount for a specified number of Claims, as set forth below for Claims Remedied, will be provided by or on behalf of the Defendants. The Additional Remediation Amount will be paid with respect to the Claims Remedied on a proportional basis based on the actual number of Claims Remedied (fig., the Additional Remediation Amount for 165,000 actual Claims Remedied shall be $200 million).
Claims Remedied Non-Cumulative Additional Remediation Amount (in millions) 110,000 $150 220,000 $250 330,000 $300 440,000 $250 550,000 $150 660,000 and above $ 50
(c) The distribution of the Additional Remediation Amount (including any
further amount determined in accordance with Section C.5.a. above) to Claimants will be made upon the completion of the ADR Process as set forth in the ADR Guidelines. The Additional Remediation Amount, as finally determined upon the completion of the ADR Process, shall bear interest beginning from the date of the Notice of Hearing by the Court in the Actions with respect to the allocation of the Additional Remediation Amount (the "Notice Date"), and shall accrue as part of the Additional Remediation Amount until distributed. Interest shall be based upon the weekly average yield on U.S. Treasury Securities adjusted to a constant maturity of one year as made available by the Federal Reserve Board, adjusted and compounded annually upon the anniversary of the Notice Date.
(d) In no event will Defendants expend less than a total amount of $410 million, which shall include both the pre-tax cost for remedies to Claimants in the ADR Process and the Additional Remediation Amount regardless of the number of Claims Remedied.
(e) In determining whether the amounts specified in Section C.5.a-d. have been properly calculated, incurred and/or disbursed, as soon as practicable after the conclusion of the ADR Process, Prudential shall provide such data, information and reports regarding such matters to an actuary, actuaries, and such other consultants designated by Lead Counsel as are reasonably necessary to permit him or them to perform this function. If Lead Counsel and Prudential cannot agree as to whether the amounts specified in Section C5.a-d. have been properly calculated, incurred and/or disbursed, the Court in the Actions will resolve any such dispute.
D. BASIC CLAIM RELIEF
Subject to and in accordance with the provisions of this Agreement, Prudential, on behalf of the Defendants, will make Basic Claim Relief available to all eligible Policyholders who purchased individual permanent life insurance policies from Prudential during the period from January 1, 1982 through December 31, 1995. These Policyholders may, in their discretion, elect to receive this Basic Claim Relief, on a "no-proof" basis without the submission of a claim requiring proof or other evidence. Basic Claim Relief, as more fully described in the Guidelines for Prudential Basic Claim Relief, attached as Exhibit D hereto, will be offered in the form of (i) a low-interest rate "optional premium loan" that can be used to pay for insurance policy premiums, (ii) a life insurance policy with an enhanced death benefit, and/or (iii) an annuity with an enhanced fund amount.
E. BINDING EFFECT OF THIS AGREEMENT
1. The terms of the Proposed Settlement as set forth in this Agreement (i) reflect the knowledge Lead Counsel has obtained through its extensive informal and formal discovery completed prior to the execution of this Agreement and (ii) include modifications
and additions to the Task Force Remediation Program to ensure implementation of the mutually shared goal of Lead Counsel and the Defendants that legitimately aggrieved Policyholders recei`.'e fair and appropriate remediation.
2. Lead Counsel and the Defendants have entered into this binding Agreement based upon their belief that it is fair, reasonable and adequate. In this respect and subject to the conditions set forth in Section F hereof, this Agreement shall be binding upon the Settling Parties.
F. CONDITIONS SUBSEQUENT
The binding effect of this Agreement is subject to the satisfaction of the following conditions subsequent to the date of execution (written below) of this Agreement:
1. The Settling Parties agree to stipulate to, and the Court shall enter in the Actions, an order (i) conditionally certifying the Class as a class, for settlement purposes only, (ii) staying all other pending motions in the Actions, and (iii) designating the Plaintiffs as class representatives, Lead Counsel as lead counsel for the Class and Arnzen, Parry & Wentz, P.S.C.; Hopkins Goldenberg, P.C.; and Perry & Windels (who are Executive Committee Members), and Goldstein, Till & Liter Bonnett, Fairbourn, Friedman, Hienton, Miner & Fry, P.C.; Cantilo, Maisel & Hubbard, LLP.; DeFalice & Coleman, P.C.; Law Offices of Douglas B. Thayer; Drubner, Hartley, O'Connor and Mengacci; Law Office of Jay R. Tomerlin; Specter Law Offices; Ziegler, Ziegler & Altman; Heins, Mills & Olson, P.L.C.; Giebel, Gilbert & Mandel; Levin, Fishbein, Sedran & Berman; Allen, Lippes & Shonn; Zwerling, Schachter, Zwerling & Koppell, L.L.P.; Goodkind, Labaton, Rudoff & Sucharow, L.L.P. and The Law Offices of Eric D. Freed, all as additional counsel for the Class.
2. Unless Lead Counsel shall have, in good faith, (i) via appropriate and adequate formal and informal additional discovery (including extensive document review, depositions and interviews) initiated subsequent to the date of this Agreement and completed prior to October IS, 1996 (the "Further Discovery"), found that the underlying facts (including those with respect to Complaint History and Pattern of Financing Activity (each as defined in the ADR Guidelines)) are inconsistent with its understandings gained through its formal and informal discovery conducted prior to or on the date of the execution of this Agreement, and (ii) concluded that the Proposed Settlement is not fair, reasonable and adequate, this Agreement may not be modified, amended or supplemented and, in the case of any such findings and conclusions, Lead Counsel shall promptly discuss with Defendants' Counsel, prior to October 25, 1996, why the Proposed Settlement is not fair, reasonable and adequate, in light of such Further Discovery.
3. On or before October 28, 1996, the Settling Parties shall execute a stipulation of settlement (the "Stipulation of Settlement").
4. Lead Counsel and Prudential (in consultation with the Regulatory Oversight Staff) agree, in good faith, to draft and finalize the Class Notice, Summary Notice, the PostSettlement Notice, Post-Settlement Summary Notice, Claim Form, and any other documents sent to Class Members about the Settlement, including, but not limited to, the cover letter and questions and answers brochure referenced in Section G. 1 (collectively, all above documents shall be referred to as "Notices"). In this respect, Lead Counsel and Defendants' Counsel shall have agreed to the form and substance of the Notices. Lead Counsel and Defendants further agree that the Court in the Actions shall approve the Class Notice, Summary Notice, Post-Settlement Notice, Post-Settlement Summary Notice, Claim Form,
and any other notices or letters about the Settlement to be sent or provided to Class Members. 5. 6.
The Board shall have approved this Agreement.
Prudential shall have the right to terminate this Settlement Agreement within five (5) business days of its execution in the event that it has not obtained from the carriers of its directors' and officers' liability insurance their consent to enter into the Settlement.
7. Pursuant to the Consent Orders agreed to by Prudential and each of forty-three states and the District of Columbia, Prudential is currently obligated to offer the Task Force Remediation Program to eligible Policyholders. Prudential shall be obligated to make available Individualized Relief and Basic Claim Relief, as provided in this Settlement Agreement to the Policyholders in each such jurisdiction only if it modifies its respective Consent Order to substitute the terms and provisions of Exhibits B. C, and D hereto in lieu of the Task Force Remediation Program. In addition, in the event that any such jurisdiction refuses to so modify its Consent Order, Plaintiffs or Prudential shall have the right to terminate this Settlement Agreement.
8. Neither of the Settling Parties shall have exercised any of its rights under the termination provisions in Section N herein.
9. The Court shall have entered the Final Order and Judgment, dismissing, with prejudice, the Consolidated Complaint and each of the Actions described in Exhibit A hereto, from which the time to appeal has expired and which has remained unmodified after any appeal(s) in any material respect in the sole judgment and discretion of either of the Settling Parties.
G. NOTICE TO THE CLASS AND COMMUNICATIONS WITH CLASS MEMBERS
1. Overview. (a) Subject to the requirements of the Hearing Order, no later than 60 days before the Settlement Hearing, the Settling Parties will send individual notices to all Class Members by first-class mail, postage prepaid, to their last known addresses. The Class Notice will also include Prudential's cover letter summarizing the Class Notice as well as a brochure in question-and-answer format responding to anticipated questions. The Class Notice will include, to the extent practicable, (i) each Class Member's name and address, (ii) the policy number of each Policy in which the Class Member has or had an ownership interest, (iii) a notation as to the form(s) of relief for which the Class Member may be eligible; and (iv) the identity of any co-owners of the Policies as reflected in Prudential's records. In addition, notice will be published as further described below in subsection G.2. (b) General Terms of Class Notice. The Class Notice will inform Class Members that, depending on the status of their Policies, if they do not exclude themselves from the Class with respect to a particular Policy, they will be eligible to receive one or more forms of Basic Claim Relief or to participate in the ADR Process with respect to that Policy. The Class Notice will (i) contain a short, plain statement of the background of the Actions, the conditional Class certification and the Proposed Settlement; (ii) describe the proposed Basic Claim Relief outlined above in section D; (iii) describe the ADR Process outlined above in Section C; (iv) explain the procedures for receiving Basic Claim Relief or participating in the ADR Process; and (v) state that any relief to Class Members is contingent on the Court's final approval of the Proposed Settlement. The Class Notice also will conform to all applicable requirements of Rule 23 of the Federal Rules of Civil Procedure
and the Due Process Clause of the United States Constitution and will otherwise be in the manner and form agreed upon by the Settling Parties and approved by the Court.
(c) Notice of Exclusion. Objection and Appeal Rights. The Class Notice will advise potential Class Members that (i) they may exclude themselves from the Class by submitting written exclusion requests postmarked no later than 21 days before the date of the Settlement Hearing, (ii) any Class Member who has not submitted a written request for exclusion may object to the Proposed Settlement by filing and serving a written statement of same, no later than 21 days before the Settlement Hearing, (iii) any Class Member who has filed and served a written objection to the Proposed Settlement may enter an appearance at the Settlement Hearing either personally or through counsel; and (iv) any judgment entered in the Actions, whether favorable or unfavorable to the Class, will include and be binding on all Class Members who have not been excluded from the Class, even if they have objected to the Proposed Settlement and even if they have any other claim, lawsuit or proceeding pending against Prudential.
(d) Notice of Fees and Costs. The Class Notice will provide information about the Attorneys' Fees to be paid by, or on behalf of, the Defendants, which will be in addition to the relief provided by the ADR Process and Basic Claim Relief. It will also state that any costs arising from notifying the Class, administering the Settlement and the ADR Process, and the performance of the Policyholder Representative, will be provided by or on behalf of Defendants, except that individual Class Members will be responsible for any fees and costs of any counsel they may retain to represent them individually at the Settlement Hearing or thereafter, or in connection with the ADR Process.
2. Publication of Notice. In addition to mailing the Class Notice to potential Class Members, Prudential will publish notice of the Proposed Settlement, the Settlement Hearing and Class Members' exclusion, objection and appeal rights in the national editions of The New York Times (business section) and The Wall Street Journal, in USA Today, The Star Ledger and in such other newspapers and/or periodicals and on such dates as are determined by Prudential in consultation with Lead Counsel and subject to approval by the Court as to the form and dates of such notice. Notice will be published at least once in each of the above-named publications no later than 50 days before the Settlement Hearing.
Remailing and Additional Notice. Prudential, or the Claimant Group Administrator, shall (i) remail any notices returned by the United States Postal Service (the "Postal Service") with a forwarding address that are received by Prudential or the Claimant Group Administrator at least 30 days, if practicable, before the Settlement Hearing, (ii) retain an address research firm to research any returned notices that do not include a
forwarding address and (iii) provide copies of any returned notices to the address research firm as soon as is practicable following receipt. The address research firm will return to Prudential or the Claimant Group Administrator, promptly after receipt of a returned notice, either an updated address or a statement that, following due research, it has not been possible to update the address. Prudential or the Claimant Group Administrator will remail notice to any Class Member for whom the address research firm provides an updated address, so long as the updated address is provided to Prudential or the Claimant Group Administrator at least 30 days before the Settlement Hearing.
4. Post-Settlement Notice. Within 90 days after the Final Settlement Date, subject to the requirements of the Final Order and Judgment contemplated by Section M of
this Agreement, Prudential will send the Post-Settlement Notice to all Class Members who have not timely requested exclusion from the Class.
(a) The Post-Settlement Notice will inform Class Members that the order approving the Proposed Settlement has become final and no longer subject to appeal, and will invite Class Members to choose the type of relief they prefer.
(b) Each Post-Settlement Notice will include a separate Election Form for each Policy in which the Class Member has or had an ownership interest. Each Election Form will include, to the extent practicable, (i) the Class Member's name and address, (ii) the policy number of the Policy in which he or she has or had an ownership interest, (iii) the status of each Policy as of a date to be specified by Prudential, but not more than 90 days before the date on which the Post-Settlement Notice is first mailed to Class Members, (iv) a notation as to the form(s) of Basic Claim Relief that the Class Member is eligible to receive. Election Forms will also include a statement of the Class Member's eligibility for the ADR Process; and (v) the identity of any co-owners of the Policies as reflected in Prudential's records. Class Members will be told to return the Election Form(s), no later than 75 days after the mailing of the Post-Settlement Notice.
(c) Class Members who wish to obtain an Optional Premium Loan, an Enhanced Value Policy and/or an Enhanced Value Annuity, will be instructed to (i) return their Election Forms no later than 75 days after the mailing of the Post-Settlement Notice, (ii) complete any necessary application or other forms for the loan, policy, annuity or mutual fund shares (after receipt of prospectus), (iii) provide the information and cooperate in the procedures required for underwriting, if any, and (iv) make the required payments for the
product being obtained. The Post-Settlement Notice will further inform Class Members that a failure to comply with these requirements will result in making them ineligible for relief.
(d) Class Members who want to participate in the ADR Process will be instructed (i) to return their Election Forms no later than 75 days after the mailing of the Post-Settlement Notice and (ii) to file the Claim Form within 90 days after the mailing by Prudential of the Claim Form. The Post-Settlement Notice will inform Class Members that each claim should consist of (w) all documents related to the sale of the Policy, and which the Class Member believes are proof or other evidence of the alleged claim, (x) all other documents in the Claimant's possession relating to his or her Policy and claim, (y) a completed Claim Form, to be provided by Prudential, including a declaration, given under penalty of perjury, attesting to the nature, history and authenticity of any documents submitted and representing that the Claimant has submitted all documents in his or her possession relating to the Policy, and (z) any other affidavits or materials the Claimant wishes to file. The Post-Settlement Notice will further inform Class Members that a to provide a completed Claim Form (or other material information) may result in the Policyholder being ineligible for relief or an adverse scoring determination under the ADR Process.
Publication of Post-Settlement Notice and Publicity. (a) In addition to mailing the Post-Settlement Notice to Class Members, Prudential will publish a Post-Settlement Summary Notice in the national editions of The New York Times (business section) and The Wall Street Journal, in USA Today, The Star Ledger, such regional newspapers so that publication would occur in each of the 50 states and the District of Columbia, and in such other newspapers and/or periodicals and on such dates as
are determined by Prudential in consultation with Lead Counsel; subject to the approval of the Court as to the form and publication dates of the Post-Settlement Summary Notice. The Post-Settlement Summary Notice will be published twice in each of the above-described publications.
(b) In addition, Prudential, in consultation with Lead Counsel, in order to reach out to former and current Policyholders who may have legitimate grievances regarding improper sales practices, will conduct a comprehensive communication program aimed at publicizing the Post-Settlement Notice and advising aggrieved Policyholders to seek relief under the Settlement. This communication program shall be implemented through the following means: (i) selected television advertisements on stations having representative regional coverage (with video limited to text only); (ii) radio advertisements on stations having representative regional coverage; and (iii) print advertising in the publications described in Section G.5.(a) above. All the communications described in this Section G.5(b) will be in such form and content as agreed to by Prudential in consultation with Lead Counsel. If Prudential and Lead Counsel cannot agree on the form, frequency or content of these communications, either party shall have the right to ask the Court to resolve the dispute.
6. Retention of Claimant Group Administrator. Prudential may retain, with agreement of Lead Counsel and the Regulatory Oversight Staff, one or more Claimant Group Administrators, including Boston Financial Data Services, Inc., to help implement the ADR
Process, Basic Claim Relief and the terms of the Settlement.
7. Right of Communication with Claimants. Prudential expressly reserves the right to communicate with and respond to inquiries from Class Members orally and/or in
writing in connection with the Settlement, and it may do so through any appropriate means, including (without limitation) in the following respects:
(a) The Settling Parties will establish, at Prudential's expense, a telephone bank with a toll-free "800" telephone number for responding to inquiries from Class Members about the Settlement and any issues related to the Actions. Prudential, with monitoring of Lead Counsel as described below, will be responsible for (i) staffing the telephone bank with telephone representatives, (ii) educating the telephone representatives about the background of the Actions, all product concepts relevant to the Settlement, and the notice, terms and chronology of the Settlement, (iii) training the telephone representatives to answer Claimants' and palicyowners' inquiries, (iv) providing scripts and model questions and answers for the telephone representatives to use in answering Claimants' and policyowners' inquiries, and (v) taking any other steps to promote accurate and efficient communications with Claimants and policyowners. Lead Counsel may monitor the education and training process by reviewing drafts of telephone scripts before their use and by observing training sessions to ensure proper communication and conformance to the Settlement. Additionally, Lead Counsel may monitor the calls to the toll-free "800" telephone number.
(b) Prior to the Final Settlement Date (and up until such later date as Prudential may determine in its sole discretion, not to be later than the Post-Settlement Notice Date), Prudential, through its Policyholder Relations Center, will continue to process in the ordinary course and respond to complaints from Class Members that may concern claims that otherwise could be eligible for Basic Claim Relief or relief under the ADR Process.
H. REQUESTS FOR EXCLUSION
1. Any potential Class Member who wishes to be excluded from the Class must mail a written request for exclusion to the Clerk of the Court, in care of the post-office box rented for that purpose, postmarked no later than 21 days before the Settlement Hearing, or as the Court otherwise may direct. The original requests for exclusion shall be filed with the Court by Lead Counsel at or before the Settlement Hearing.
2. Any potential Class Member who does not file a timely written request for exclusion with respect to a Policy as provided in the preceding subsection H. 1 shall be bound with respect to that Policy by all subsequent proceedings, orders and judgments in the Actions, even if he or she has pending or subsequently initiates litigation against Defendants or any of them relating to that Policy and the claims released in the Actions.
I. OBJECTIONS TO SETTLEMENT
1. Any Class Member who has not filed a written request for exclusion for all of his or her Policies and who wishes to object to the fairness, reasonableness or adequacy of this Settlement Agreement or the Proposed Settlement must serve on Lead Counsel and Defendants' Counsel and file with the Court, no later than 21 days before the Settlement Hearing or as the Court otherwise may direct, a statement of the objection, as well as the specific reason(s), if any, for each objection, including any legal support the Class Member wishes to bring to the Court's attention and any evidence the Class Member wishes to introduce in support of the objection. Class Members may do so either on their own or through an attorney hired at their own expense. Class Members and their own attorneys at their expense may obtain access to the deposition transcripts and attached exhibits generated in the Actions by entering into a confidentiality agreement acceptable to Lead Counsel and
Defendants' Counsel. These documents will be made available at the offices of Lead Counsel at One Pennsylvania Plaza, New York, New York. Lead Counsel will inform Defendants' Counsel promptly of any requests by Class Members or their attorneys for access to such documents. If a Class Member hires an attorney to represent him or her, the attorney must (i) file a notice of appearance with the Clerk of Court, no later than 21 days before the Settlement Hearing or as the Court otherwise may direct, and (ii) serve on Lead Counsel and Defendants' Counsel no later than 21 days before the Settlement Hearing a copy of the same.
2. Any Class Member who files and serves a written objection, as described in the preceding subsection, may appear at the Settlement Hearing, either in person or through personal counsel hired at the Class Member's expense, to object to the fairness, reasonableness or adequacy of this Settlement Agreement or the Proposed Settlement. Class Members, or their attorneys, intending to make an appearance at the Settlement Hearing must serve on Lead Counsel and Defendants' Counsel and file with the Court, no later than 21 days before the Settlement Hearing or as the Court otherwise may direct, a notice of intention to appear.
~ Any Class Member who fails to comply with the provisions of the preceding subsection shall waive and forfeit any and all rights he or she may have to appear separately and/or object, and shall be bound by all the terms of this Settlement Agreement and by all proceedings, orders and judgments in the Actions.
J. RELEASE AND WAIVER. ORDER OF DISMISSAL
1. Release and Waiver. Plaintiffs and all Class Members will agree to a release and waiver as follows:
a. Plaintiffs and all Class Members hereby expressly agree that they shall not now or hereafter institute, maintain or assert against the Releasees, either directly or indirectly, on their own behalf, on behalf of the Class or any other person, and release and discharge the Releasees from, any and all causes of action, claims, damages, equitable, legal and administrative relief, interest, demands or rights, of any kind or nature whatsoever, whether based on federal, state or local statute or ordinance, regulation, contract, common law, or any other source, that have been, could have been, may be or could be alleged or asserted now or in the future by Plaintiffs or any Class Member against the Releasees in the Actions or in any other court action or before any administrative body (including any state Department of Insurance or other regulatory commission), tribunal or arbitration panel on the basis of, connected with, arising out of, or related to, in whole or in part, the Released Transactions and servicing relating to the Released Transactions, which include without limitation:
(i) any or all of the acts, omissions, facts, matters, transactions or occurrences
that were directly or indirectly alleged, asserted, described, set forth or referred to in the Action;
(ii) any or all of the acts, omissions, facts, matters, transactions, occurrences, or
any oral or written statements or representations allegedly made in connection with or directly or indirectly relating to the Released Transactions, including without limitation any acts, omissions, facts, matters, transactions? occurrences, or oral or written statements or representations relating to:
(a) the number of out-of-pocket payments that would need to be paid for
(b) the ability to keep or not to keep a Policy in force based on a fixed
number and/or amount of premium payments (less than the number and/or amount of payments required by the terms of such Policy), and/or the amount that would be realized or paid under a Policy based on a fixed number and/or amount of cash payments (less than the number and/or amount of payments required by the terms of such Policy), whether in the form of (x) cash value and/or (y) death, retirement or periodic payment benefits and/or (z) investment plan-type benefits;
(c) the nature, characteristics, terms, appropriateness, suitability,
descriptions and operation of Policies;
(d) whether such Policies were, would operate or could function as
investment, savings or retirement funding vehicles, or investment plans;
(e) the relationship between a Policy's cash surrender value and the
cumulative amount of premiums paid;
(f) the fact that a part of the premiums paid would not be credited toward
an investment or savings account or a Policies' cash value, but would be used to offset the Prudential's commission, sales, administration and/or mortality expenses;
(g) the rate of return on premiums paid in terms or cash value or cash
(h) the relative suitability or appropriateness of life insurance policies,
versus other investment plans;
(i) the use of an existing policy's or Policy's cash value or cash--
surrender value by means of a surrender, withdrawal/partial surrender or loan to purchase or maintain a Policy;
(j) the Prudential's dividend, interest crediting and cost of insurance and
administrative charge policies; dividend scales; illustrations of dividend values, cash values or death benefits; or any other matters relating to dividends, interest crediting rates or illustrations, or cost of insurance and administrative charges;
(k) the adequacy of the description of those items in clause (I) above;
(1) the use of loans or contract values from existing policies or Policies to
pay premiums on new policies, or any representations, promotions or advertising regarding such matters;
(m) the "Abbreviated Payment Plan" or "APP", or the use of a Policy's dividends or other contract values to pay premiums on the same policy, or any representations, promotions or advertising regarding such matters;
(n) the sale of Policies as investment, savings or retirement funding
vehicles, or any representations, promotions or advertising regarding such matters;
(o) violations of the "twisting" or "churning" statutes or regulations under
applicable state law;
(p) violations of the "replacement" statutes or regulations under applicable
(q) the suitability of particular types of life insurance policies or products
for particular types of Policy purchasers;
(r) any actual or alleged violation of any state statute or regulation
relating to life insurance sales practices; and
(iii) any or all acts, omissions, facts, matters, transactions, occurrences or oral or written statements or representations in connection with or directly or indirectly relating to the Settlement Agreement or the settlement of the Actions, except as provided in paragraph g below.
b. Plaintiffs and all Class Members expressly agree that this Release will be, and may be raised as, a complete defense to and will preclude any action or proceeding encompassed by the release of Defendants herein.
c. Nothing in this Release shall be deemed to alter a Class Member's contractual rights (except to the extent that such rights are altered or affected by the election and award of benefits under the Settlement Agreement) to make a claim for benefits that will become payable in the future pursuant to the express written terms of the policy form issued by Prudential; provided, however, that this provision shall not entitle a Class Member to assert claims which relate to the allegations contained in the Actions or to the matters described in Paragraph J.1.a. above.
d. Without in any way limiting the scope of the Release, this Release covers, without limitation, any and all claims for attorneys' fees, costs or disbursements incurred by Lead Counsel or any other counsel representing Plaintiffs or Class Members (including counsel to Claimants in the ADR Process), or by Plaintiffs or the Class Members, or any of them, in connection with or related in any manner to the Actions, the settlement of the Actions, the administration of such settlements and/or the Released Transactions except to the extent otherwise specified in the Settlement Agreement.
e. Plaintiffs and Class Members expressly understand that Section 1542 of the Civil Code of the State of California provides that a general release does not extend to claims which a creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor pertaining to the Defendants' insurance sales practices. To the extent that, notwithstanding the choice of law provisions in the Settlement Agreement, California or other law may be applicable, Plaintiffs and the Class Members hereby agree that the provisions of Section 1542 and all similar federal or state laws, rights, rules, or legal principles of any other jurisdiction (including, without limitation, North Dakota and South Dakota) which may be applicable herein, are hereby knowingly and voluntarily waived and relinquished by Plaintiffs and the Class Members with respect to the Defendants' insurance sales practices, and Plaintiffs and the Class Members hereby agree and acknowledge that this is an essential term of this Release.
from the Court before which the Actions are pending, as a condition of settlement, a Final Order and Judgment (as to which the time for appeal had expired without any modifications in the Final Order and Judgment). The Final Order and Judgment shall, among other things, (i) approve the Settlement Agreement as fair, adequate and reasonable, (ii) dismiss the'
Actions with prejudice and on the merits, and (iii) incorporate the terms of the Release.
K. ATTORNEYS' FEES. COSTS AND EXPENSES
[Payment of Attorneys' Fees]
The following additional expenses reasonably incurred after the execution of this Settlement Agreement will be paid by or on behalf of the Defendants: publication, printing and mailing costs of the Class Notice, the Summary Notice, the Post-Settlement Notice and the Post-Settlement Summary Notice; post-office box rental costs; telephone costs for establishing and using the 800 telephone numbers set forth in this Settlement Agreement; any processing costs for requests for exclusion; fees and disbursements to the Claimant Group Administrator and any other third-party contractors or administrators; any processing costs for Election Forms; administration costs of Optional Premium Loans and other forms of Basic Claim Relief; all other administration costs and expenses of the ADR Process not specified in this paragraph; and fees and disbursements to the Policyowner Representative, the Representatives, the Independent Claim Evaluation Team and Appeals Committee
members as provided for in the ADR Manual. In connection with the payment of the costs and expenses specified in the prior sentence, none of such payments shall directly or indirectly reduce, limit or modify the remedies provided in the ADR Process or Basic Claim Relief.
3. Neither Prudential nor its current, former and future parents, subsidiaries, affiliates, partners, predecessors, successors and assigns, nor any of their respective past, present and future officers, directors, employees, agents, independent contractors, brokers, representatives, attorneys, heirs, administrators, executors, predecessors, successors and assigns shall be liable or obligated to pay any fees, expenses, costs or disbursements to, or incur any expense on behalf of, any person, either directly or indirectly, in connection with the Actions, this Settlement Agreement, or the Proposed Settlement, other than the amount or amounts expressly provided for in this Settlement Agreement.
L. ORDER OF NOTICE. SETTLEMENT HEARING AND ADMINISTRATION
1. Within 10 days after execution of the Stipulation of Settlement, the Settling Parties will submit the Stipulation of Settlement to the Court and apply for a Hearing Order, unless otherwise agreed to by the Settling Parties:
(a) providing for the conditional certification of the Class for settlement
notice to the Class;
(c) scheduling the Settlement Hearing to be held on such date as the Court may direct, to consider the fairness, reasonableness and adequacy of the Proposed Settlement and whether it should be approved by the Court;
(b) finding that the Proposed Settlement is sufficient to warrant sending
d) approving the proposed Class Notice, publication of the notice and notice methodology described in the Settlement Agreement;
(e) directing Prudential, on behalf of the Defendants (or their assignees), to cause the Class Notice to be mailed to all Class Members by first class mail, postage prepaid, at their last known address no later than 60 days before the Settlement Hearing;
(f) directing Prudential, on behalf of the Defendants, or their designee(s) to publish the Summary Notice as provided in the Settlement Agreement no later than 50 days before the Settlement Hearing;
(g) determining that the Class Notice, together with the Summary Notice, is reasonable and the best practicable notice; is reasonably calculated, under the circumstances, to apprise Class Members of the pendency of the Actions and of their right to object to or exclude themselves from the Proposed Settlement; constitutes due, adequate and sufficient notice to all persons entitled to receive notice; and meets the requirement of due process, the Federal Rules of Civil Procedure, and the Rules of the Court;
(h) ruling that Prudential, or the Claimant Group Administrator, shall (i) remail any notices returned by the Postal Service with a forwarding address that are received by Prudential or the Claimant Group Administrator at least 30 days before the Settlement Hearing;
(i) requiring Prudential to file proof of the mailing of the Class Notice, and the Summary Notice, at or before the Settlement Hearing;
as further described above in subsection G.7, authorizing Prudential, including its representatives and any other retained personnel, to communicate with potential Class Members, Class Members and other present or former Policyowners about the Actions
and the terms of the Proposed Settlement, subject to monitoring by Lead Counsel, and to engage in any other communications within the normal course of Prudential's business;
(k) requiring each potential Class Member who wishes to exclude himself or herself from the Class to submit an appropriate written request for exclusion, postmarked no later than 21 days before the date of the Settlement Hearing, to the Clerk of the Court, in care of the post-office box rented for that purpose;
(1) declaring that no Class Member can exclude any other Class Member from the Class and preliminarily enjoining all Class Members unless and until they have timely excluded themselves from the Class from filing, commencing, prosecuting, continuing, litigating, intervening in or participating as class members in, or seeking to certify a class in, any lawsuit in any jurisdiction based on or relating to the facts and circumstances underlying the claims and causes of action in the Actions and/or the Released Transactions:
(m) ruling that any Class Member who does not submit a timely, written request for exclusion will be bound by all proceedings, orders and judgments in the Actions, which will be preclusive in all pending or future lawsuits or other proceedings;
(n) requiring each Class Member who wishes to object to the fairness, reasonableness or adequacy of the Proposed Settlement to serve on Lead Counsel and Defendants' Counsel and to file with the Court, no later than 21 days before the Settlement Hearing, or at such other time as the Court may direct, a statement of the objection, as well as the specific reasons, if any, for each objection, including any legal support the Class Member wishes to bring to the Court's attention and any evidence the Class Member wishes
to introduce in support of his or her objection, or be forever barred from separately
(o) requiring any attorneys hired by Class Members at Class Members' expense for the purpose of objecting to the Proposed Settlement to file and serve on Lead Counsel and Defendants' Counsel a notice of appearance with the Clerk of Court, no later than 21 days before the Settlement Hearing or as the Court otherwise may direct;
(p)requiring any Class Member who files and serves a written objection and who intends to make an appearance at the Settlement Hearing, either in person or through personal counsel hired at the Class Member's expense, in order to object to the fairness, reasonableness or adequacy of the Proposed Settlement, to serve on Lead Counsel
and Defendants' Counsel and file with the Court, no later than 21 days before the Settlement Hearing or as the Court otherwise may direct, a notice of intention to appear;
(q) authorizing Prudential to establish the means necessary to administer the Proposed Settlement relief, process Election Forms and implement the ADR Process, subject to monitoring from time to time by Lead Counsel, and authorizing Prudential to retain the Claimant Group Administrator to help administer the Proposed Settlement, including the notice provisions;
(r) directing Prudential or its designated agents to rent a post-office box in the name of the Clerk of the Court, to be used for receiving requests for exclusion and any other communications, and providing that, other than the Court or the Clerk of Court, only Prudential, Lead Counsel and their designated agents shall have access to this post-office box;
(s) directing Defendants' Counsel, Lead Counsel, and any other counsel for Plaintiffs or the Class promptly to furnish each other and any counsel who has filed a notice of appearance with copies of any and all objections or written requests for exclusion that might come into their possession;
(t) providing a means for those filing objections to obtain access at Lead Counsel's office to depositions and deposition exhibits in the Actions at the expense of those filing objections, provided that such individuals enter into a confidentiality agreement;
(u) containing any additional provisions that might be necessary to implement and administer the terms of the Settlement Agreement and the Proposed Settlement.
2. Lead Counsel will recommend to Plaintiffs that they should not request exclusion from the Class, object to the Proposed Settlement, or file an appeal from or seek review of any order approving the Proposed Settlement.
M. FINAL APPROVAL AND FINAL ORDER AND JUDGMENT
1. After the Settlement Hearing, and upon the Court's approval of the Settlement Agreement, the Court shall enter a Final Order and Judgment. The Final Order and Judgment will (among other things):
(a) find that the Court has personal jurisdiction over all Class Members and that the Court has subject matter jurisdiction to approve the Settlement Agreement and all exhibits thereto;
(b) approve the Proposed Settlement as fair, reasonable and adequate; direct the Settling Parties and their counsel to comply with and consummate the terms of the
Settlement Agreement; and declare the Settlement Agreement to be binding on all Class Members and preclusive in all pending and future lawsuits or other proceedings;
(c) certify the Class for settlement purposes only;
(d) find that the Class Notice, the Summary Notice and the notice methodology implemented pursuant to the Settlement Agreement (i) constitute reasonable and the best practicable notice; (ii) constitute notice that is reasonably calculated, under the circumstances, to apprise Class Members of the pendency of the Actions, their right to object to or exclude themselves from the Proposed Settlement and to appear at the Settlement Hearing; (iii) constitute due, adequate and sufficient notice to all persons entitled to receive notice; and (iv) meet the requirements of due process, the Federal Rules of Civil Procedure, and the Rules of the Court;
(e) find that the Post-Settlement Notice, the Post-Settlement Summary Notice and the Post-Settlement Summary Notice methodology to be implemented pursuant to the Settlement Agreement (i) constitute the most effective and practicable notice of the Final Order and Judgment, the relief available to Class Members pursuant to the Final Order and Judgment, and applicable time periods, and (ii) constitute due, adequate and sufficient post-settlement notice for all other purposes to all Class Members;
(f) find that Lead Counsel and the Plaintiffs adequately represented Class for purposes of entering into and implementing the Settlement;
(g) dismiss the Actions on the merits and with prejudice, without fees or costs to any party except as provided in the Settlement Agreement;
(h) incorporate the Release set forth above in Section J. and forever discharge the Releasees from any claims or liabilities constituting the Released Transactions;
(i) bar and enjoin (i) all Class Members who have not been excluded from the Class from filing, commencing, prosecuting, participating or intervening in any lawsuit in any jurisdiction based on or relating to the facts and circumstances underlying the claims and causes of action in the Actions and/or the Released Transactions, and (ii) all Class Members who have not been excluded from the Class, from organizing Class Members into a separate class for purposes of pursuing as a purported class action any lawsuit (including by seeking to amend a pending complaint to include class allegations, or seeking class certification in a pending action) based on or relating to the claims and causes of action, or the facts and circumstances relating thereto, in the Actions and/or the Released Transactions;
(j) retain jurisdiction over the administration of the Settlement, to
supervise the Settlement relief, to protect and effectuate the Final Order and Judgment, and
for any other necessary purpose.
N. MODIFICATION OR TERMINATION OF THE SETTLEMENT AGREEMENT
1. The terms and provisions of this Agreement may be amended, modified or expanded by agreement of the Settling Parties.
2. The Settlement Agreement will terminate at the sole option and discretion of Defendants or Plaintiffs if:
(a) the Court, or any appellate court(s), rejects, modifies or denies
approval of any portion of the Proposed Settlement that the terminating party in its (or their) sole judgment and discretion reasonably determines is material; or
(b) the Court, or any appellate court(s), does not enter or completely
affirm, or alters or expands, any portion of the Final Order and
Judgment that the terminating party in its (or their) sole judgment and discretion believes is material. The terminating party must exercise the option to withdraw from and terminate the Settlement Agreement, as provided in this subsection N.2, no later than 10 days after receiving conclusive written notice of the event prompting the termination.
3. Notwithstanding the preceding subsection N.2, Plaintiffs may not terminate the Settlement Agreement solely because of the amount of Attorneys' Fees awarded by the Court or any appellate court(s). Prudential, however, may elect to terminate the Settlement Agreement, on or before October 25, 1996, if the Settling Parties cannot agree on the amount of Attorneys' Fees that Plaintiffs will apply for and Prudential will not oppose.
4. Prudential may unilaterally withdraw from and terminate the Settlement Agreement if those persons, who elect to exclude themselves from the Class with respect to any Policy, together number more than such number which has been filed with the Court in camera. Such withdrawal and termination by Prudential must be made no later than 10 days after the expiration of the time period during which such exclusions must be filed and receipt of notice of this event.
5. If an option to withdraw from and terminate the Settlement Agreement arises under subsections N.2, N.3 or N.4, neither Defendants nor Plaintiffs are required for any reason or under any circumstance, to exercise their option.
6. N.4, then:
If the Settlement Agreement is terminated pursuant to subsections N.2, N.3 or
(a) this Agreement shall be null and void and shall have no force or effect, and no party to this Agreement shall be bound by any of its terms, except for the terms of this subsection N.6.a;
(b) this Agreement, all of its provisions, and all negotiations, statements and proceedings relating to it shall be without prejudice to the rights of Defendants, Plaintiffs or any other Class Member, all of whom shall be restored to their respective positions existing immediately before the execution of this Agreement;
(c) neither this Agreement, nor the fact of its having been made, shall be admissible or entered into evidence for any purpose whatsoever;
(d) any order or judgment entered after the date of this Agreement will be deemed vacated and will be without any force or effect; and
1. Lead Counsel represents and warrants that (i) it has undertaken appropriate and adequate formal and informal discovery (including extensive document review, depositions and interviews) and has performed an examination and evaluation of the relevant law and facts in order to assess the merits of the claims and potential claims of the Class, and (ii) as a result of such activities described in (i) above, the proposed settlement terms described herein are fair, reasonable and adequate, and no issue of law or fact has come to its attention which would (a) cause it not to enter into this Agreement with the Defendants, or (b) lead it to believe that the Further Discovery would preclude the satisfaction of the condition described in subsection F.2 herein.
2. Subject to approval by the court in the Actions, Lead Counsel represents and
warrants that it (i) believes that this Agreement is in the best interests of the Class and Class
Members, (ii) will recommend to Plaintiffs that they not exclude themselves from the Class, nor object to the Proposed Settlement, nor file an appeal from or seek review of any order approving the Proposed Settlement, (iii) is authorized to enter into this Agreement on behalf of any other attorneys who have represented or who now represent the Plaintiffs in the Actions, (iv) has the legally requisite ability to adequately represent the Plaintiffs and all Class Members, and (v) is seeking to protect the interests of the entire Class. In the event that Lead Counsel cannot represent and warrant prior to October 28, 1996 that it is authorized to enter into this Agreement on behalf of the Plaintiffs and all Class Members, Defendants shall have the right to terminate this Agreement.
3. Prior to October 28, 1996, each of the Plaintiffs shall represent and warrant that he or she (i) has agreed to serve as a representative of the Class proposed to be certified herein; (ii) is willing, able and ready to perform any of the duties and obligations of a representative of the Class including the need to be available for, and involved in, discovery and fact finding Plaintiffs' counsel; (iii) has read the pleadings in this action, including the Consolidated Complaint filed herein; (iv) is familiar with the results of the fact finding undertaken by Plaintiffs' counsel, (v) has consulted with Lead Counsel or any other counsel they may have about the Actions, the Settlement Agreement and the obligations of a Class representative; and (vi) will remain and serve as a representative of the Class, until the terms of the Settlement Agreement are effectuated, the Settlement Agreement is terminated in accordance with the terms of this Settlement Agreement, or the Court at any time determines that said Plaintiff cannot represent the Class.
4. Defendants' Counsel represents and warrants that it is authorized to enter into this Agreement on behalf of The Prudential Insurance Company of America and any attorneys who have represented or who now represent The Prudential Insurance Company of America in the Actions.
P. GENERAL MATTERS AND RESERVATIONS
1. Within thirty days after the conclusion of the ADR Process or promptly after the termination of this Agreement (unless the time is extended by agreement of the Settling Parties), whichever comes first, Plaintiffs and their counsel will return to Prudential all documents (and all copies of such documents in whatever form made or maintained) produced by Prudential in the Actions after August 20, 1996, as well as the transcripts of any deposition testimony provided by Prudential or its current or former employees and any exhibits to those depositions; provided, however, that (a) all such documents shall be preserved by Prudential, and (b) this subsection shall not apply to any documents gathered or made part of the record in connection with a claim made under the ADR Process.
2. By execution hereof, this Agreement does not release any claim of the Defendants against any insurer for any cost or expense hereunder, including attorneys' fees and costs.
3. This Agreement sets forth the entire agreement among the Settling Parties with respect to its subject matter, and it may not be altered or modified except by written instrument executed by Lead Counsel and Defendants' Counsel. The Settling Parties expressly acknowledge that no other agreements, arrangements or understandings not expressed in this Settlement Agreement exist among or between them.
4. This Agreement, its Exhibits and any ancillary agreements shall be governed by and interpreted according to the substantive law of the State of New Jersey, excluding its conflict of laws provisions.
5. Any action to enforce this Agreement shall be commenced and maintained only in the United States District Court for the District of New Jersey.
6.. Whenever this Agreement requires or contemplates that one party shall or may give notice to the others, notice shall be provided as follows:
(a) If to Plaintiffs, then to:
Melvyn I. Weiss, Esq.
Milberg Weiss Bershad Hynes & Lerach LLP
One Pennsylvania Plaza New York, New York 10119 and
Michael B. Hyman, Esq.
Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C.
200 North LaSalle Street, Suite 2100
Chicago, Illinois 60601
(b) If to Defendants, then to:
Reid L. Ashinoff, Esq.
· Sonnenschein Nath & Rosenthal
1221 Avenue of the Americas
New York, New York 10020
7. All time periods set forth herein shall be computed in calendar days unless
otherwise expressly provided. In computing any period of time prescribed or allowed by this Agreement or by order of court, the day of the act, event, or default from which the designated period of time begins to run shall not be included. The last day of the period so computed shall be included, unless it is a Saturday, a Sunday or a legal holiday, or, when the
act to be done is the filing of a paper in court, a day on which weather or other conditions have made the office of the clerk of the court inaccessible, in which event the period shall run until the end of the next day that is not one of the aforementioned days, As used in this paragraph, "legal holiday" includes New Year's Day, Birthday of Martin Luther King, Jr., Presidents' Day, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans Day, Thanksgiving Day, Christmas Day and any other day appointed as a holiday by the President or the Congress of the United States, or by the State of New Jersey.
8. The Settling Parties reserve the right, subject to the Court's approval, to make any reasonable extensions of tune that might be necessary to carry out any of the provisions of the Settlement Agreement.
9. In no event shall the Settlement Agreement, any of its provisions or any negotiations, statements or proceedings relating to it in any way be construed as, offered as, received as, used as or deemed to be evidence of any kind in she Actions, any other action or in any judicial, administrative, regulatory or other proceeding, except m a proceeding to enforce this Agreement Without limiting the foregoing, neither this Agreement nor any related negotiations, statements or proceedings shall be construed as, offered as, received as, used as or deemed to be evidence or an admission or concession of any liability or wrongdoing whatsoever on the part of any person, including but not limited to the Defendants, Plaintiffs or the Class, or as a waiver by the Defendants of any applicable defense m any legal proceeding including without limitation any applicable statute of limitations or statute of frauds, or as a waiver by Plaintiffs or the Class of any claims.
10. This Agreement neither constitutes an admission (i) by the Defendants respecting the merits of the allegations made in the Consolidated Complaint or any of the Actions, or regarding any facts or claims that have been or could have been alleged against them in this litigation, nor (ii) by Plaintiffs that any of the allegations made in the Consolidated Complaint or any of the Actions lack merit.
11. The Settling Parties, their successors and assigns, and their attorneys agree to cooperate fully with one another in seeking court approval of the Settlement Agreement and to use their best efforts to effect the prompt consummation of the Agreement and the Proposed Settlement.
IN WITNESS WHEREOF, the undersigned stipulate and have entered into this
Agreement as of the 22nd day of September, 1996.
APPROVED AND AGREED TO BY AND ON BEHALF OF THE NAMED PLAINTIFFS, IN THEIR INDIVIDUAL AND REPRESENTATIVE CAPACITIES
Melvyn I. Weiss, Esq.
Milberg Weiss Bershad Hynes & Lerach LLP
Michael B. Hyman, Esq.
Much Shelist Freed Denenberg Ament Bell & Rubenstein, P.C.
APPROVED AND AGREED TO BY AND BEHALF OF THE PRUDENTIAL INSURANCE COMPANY OF AMERICA
Reid L. Ashinoff, Esq. Sonnenschein Nath & Rosenthal
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