On Behalf of Themselves and
All Others Similarly Situated,







CASE NO. 96 10706-GAO



Class member-objector Senator Howard M. Metzenbaum has objected to the proposed settlement on the ground that the class notices do not adequately apprise class members of the relief to which they are entitled. On this score, the settling parties' responses miss the mark, and the Court should not approve the settlement unless the settling parties agree to amend the post- settlement notice to rectify the flaws identified by Senator Metzenbaum.

In addition, because class counsel's fee request is in no way tied to the benefits that the class members will actually receive, it should be denied. Simply put, class counsel is unable to show why they should receive $39 million up front, without having to show the extent to whichtheir clients actually benefit from the settlement. Instead, to be fair to both class members and Plaintiffs' counsel, the Court should adopt a staged approach to awarding attorneys' fees, with counsel receiving some fees up front to compensate them for their achievement in negotiating the settlement and an appropriate amount of fees later, when the settlement's actual monetary value to the class is known.
Adequacy of the Notice Senator Metzenbaum objected that the pre- and post-settlement notice packages do not adequately inform class members that individuals who have policies with premiums that have not yet failed to vanish may make a claim in the ADR Process. He also objected that the descriptions of Special Circumstances ADR Relief are incomplete and confusing. As a result of these defects in the notice, class members are unlikely to understand the value of this relief, and that if they did nothing more than purchase a policy in one of eight special circumstances, they are automatically entitled to relief if they file a claim in the ADR Process.

Rather than rectifying these defects, the settling parties simply claim that the defects do not exist. The settling parties' responses to Senator Metzenbaum's objections are noteworthy not for what they say_little more than quoting the relevant provisions of the notice packages and proclaiming that they are clear and adequate_but for what they do not say. For example, the settling parties do not contest the objection that the description of Special Circumstances ADR Relief is incomplete_omitting, for example, the fourth special circumstance involving a "College Savings Plus" plan. They do not dispute that Special Circumstances ADR Relief is not even mentioned in the main text of either the pre- or the post-settlement notice, or in the two question- and-answer brochures. They do not dispute that a class member with a policy whose premiumshave not yet failed to vanish must piece together widely scattered provisions of the notices to realize that he has a present claim which he must file in the ADR Process or forever waive. Furthermore, the settling parties do not dispute that the notices do not clearly state that qualifying class members automatically receive Special Circumstances ADR Relief; indeed, class counsel explicitly acknowledges that this relief is automatic. See Pls.' Supp. Mem. at 20. In short, why should class members be kept in the dark about this issue?
? Even if there were legitimate grounds to argue that the notices, as presently drafted, are adequate, the settling parties' responses miss the mark. Nowhere do they deny that the enhancements to the notice which we propose would increase the likelihood that class members with policies whose premiums have not yet failed to vanish or who qualify for Special Circumstances ADR Relief will receive compensation through the ADR Process. This is not a mere technical question of notice, such as whether the pre-settlement class notice adequately describes the precise contours of the claims for relief. Rather, this objection is intimately tied to the substance of the relief itself. The settlement purports to hold out the prospect of Special Circumstances ADR Relief, for example, but the flaws of the notice packages make it unlikely that eligible class members will obtain it. It is thus mystifying why the settling parties, if they are sincere about paying vanishing premium and Special Circumstances ADR claims, object to improving the post-settlement notice, which has not been approved by the Court, let alone sent out to class members.
? Therefore, Senator Metzenbaum urges the Court not to approve the settlement unless the post-settlement notice package is amended to accommodate the concerns he raises about theadequacy of the notice.See footnote 1 Through his counsel, he has already proposed modifications to the post- settlement notice package to class counsel, and his counsel are ready to continue to work with the settling parties to devise appropriate language.
Attorneys' Fees

Class counsel strenuously assert that they should receive $39 million in attorneys' fees up front, before the actual value to the class of the settlement is known. None of counsel's arguments, however, supports this assertion.

First and foremost, the Court should reject out of hand class counsel's suggestion that the Court should not "effectively rewrite" one-half of the settling parties' fee agreement and that the fee award should be controlled by their agreement with John Hancock. See Pls.' Supp. Mem. at 34_35. Such "clear-sailing" fee agreements should never be controlling because court scrutiny of fee requests is the principal check against collusion between plaintiffs' and defendants' counsel. Weinberger v. Great Northern Nekoosa Corp., 925 F.2d 518, 524, 525 (1st Cir. 1991) (holding that it is "self-evident that the inclusion of a clear-sailing clause in a fee application should put a court on its guard, not lull it into aloofness," even while not "imply[ing] that either collusion or extortion took place"); In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 819 (3d Cir.), cert. denied, 116 S. Ct. 88 (1995) ("[A] thorough judicial review of fee applications is required in all class action settlements."). Deference to the fee agreement isparticularly inapposite here, where each policyholder of a mutual insurance company has a financial interest in minimizing the company's fee payment, because each policyowner is, in effect, an "owner" of the company. Thus, all policyholders, including Senator Metzenbaum, have a direct interest in seeing that the fee is as low as possible.
Second, class counsel has not responded to Senator Metzenbaum's argument that percentage-of-recovery fee awards of 30 to 40 percent in non-class action cases and of 25 to 30 percent in a veritable grab-bag of common-fund class actions cannot, without a demonstration of why these cases are relevant, support their supposedly minimal requested fee award of between 8.2 and 9.3 percent of the estimated value of the settlement. The trend in settlements valued at more than $75 million_and class counsel claims that this settlement is just such a case_is to award a percentage of recovery of at most 6 to 10 percent. See Newberg, Attorney Fee Awards 2.09 (1986). For example, in the airline antitrust litigation, the court awarded a 4.71 percentage of recovery as attorneys' fees on a settlement fund of $305 million (the median value of the settlement's estimated range of values). In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 350_51 (N.D. Ga. 1993). In the Shiley heart valve litigation, the court awarded 10 percent of the present recovery as attorneys' fees and held back a large proportion of the fee award until the additional benefits to the class were actually paid into the class fund. Bowling v. Pfizer, Inc., 922 F. Supp. 1261, 1283_84 (S.D. Ohio ), aff'd, 102 F.3d 777 (6th Cir. 1996).
Particularly inapposite in this regard is class counsel's reliance on In re Thirteen Appeals Arising out of the San Juan Dupont Plaza Hotel Fire Litig., 56 F.3d 295 (1st Cir. 1995). In that case, the First Circuit affirmed an award of attorneys' fees of roughly $68 million out of the $200 million settlement fund, or about 30.9 percent. Class counsel asserts that Thirteen Appeals"disposes of" Senator Metzenbaum's claim that the percentage sought in this case is too high because applying the Thirteen Appeals percentage of 30.9 to $125 million, Senator Metzenbaum's worst-case valuation of the settlement, yields a fee award of $38,625,000. Pls.' Supp. Mem. at 29. Unlike this case, however, Thirteen Appeals was not a class action; rather, it was a consolidation of individual cases in which each plaintiff originally had an individual contingent-fee agreement with his or her lawyer. Unlike this case, which involves a settlement only, in Thirteen Appeals the case went to trial via the mechanism of representative cases. Finally, unlike this case, no one in Thirteen Appeals contested the overall fee, which was controlled by the aggregate effect of the individual retainer agreements; rather, the only question on that appeal was how the fee award should have been split up among the plaintiffs' lawyers. In short, Thirteen Appeals is irrelevant to this case and surely does not justify the fee award sought here.See footnote 2
Third, the trend among courts which have been faced with fee requests based on estimates of the value of a "future" settlement fund to the class has been to withhold a portion of the requested attorneys' fees until the actual value of the settlement is known as a result of the class's participation in the settlement. See, e.g., Perish v. Intel Corp., No. CV755101 (Cal. Sup. Ct. Oct. 6, 1997) (deferring award of attorneys' fees until actual, rather than estimated, percentage of class members who took advantage of settlement's coupon rebate offer could be knownSee footnote 3); Strong v. Bellsouth Telecommunications, Inc., 173 F.R.D. 167, 172 (W.D. La. 1997) (denying fee petitionin entirety because actual value of settlement fund based on credits sought by class members was $2 million, whereas class counsel had estimated its value beforehand at $64.5 million); Bowling, 922 F. Supp. at 1283_84 (holding back large proportion of fee award until additional "future" benefits to class were actually paid into class fund); Voege v. Ackerman, 67 F.R.D. 432, 436_37 (S.D.N.Y. 1975) (reserving fee determination until all claims of shareholders entitled to participate in settlement had been filed and adjudged because extent of settlement's benefit to class could not be determined with any degree of exactitude beforehand); Voege v. Ackerman, 70 F.R.D. 693, 695 (S.D.N.Y. 1976) (in above case, awarding plaintiffs' counsel less fees than they requested because shareholder participation in settlement had been minimal and actual financial benefit to them was "almost zero"). Cf. Charles v. Goodyear Tire & Rubber Co., No. CIV. 94- 5626(GEB), 1997 WL 557553 (D.N.J. Sept. 5, 1997) (choosing to use lodestar method to award fees out of settlement's so-called "future" common fund because of difficulty, despite existence of expert valuations, in making reasonable assessment of attorneys' fees based on percentage-of- recovery method, where valuation was based on estimates of class's utilization of credit vouchers/certificates). As noted in Senator Metzenbaum's objections, the court in In re Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 572, 588_89 (D.N.J. 1997), appeal filed, adopted a bifurcated system for awarding fees in which the second part of the fee award was conditioned on the number of forms filed by class members which elected the ADR Process.See footnote 4 TheCourt should adopt this sensible approach of a staged awarding of attorneys' fees, which eliminates the uncertainties associated with premature expert valuations of a settlement.
Finally, class counsel offers no support for its assertion that the information it submitted in support of its fee request is more than sufficient for use as a lodestar cross-check. See Pls.' Supp. Mem. at 33 n.35. Even if Plaintiffs' lawyers are not required to report every task in ten-minute intervals, a lodestar cross-check is meaningless if it involves only a gross statement of lawyers' time that is submitted by the fee-seeking lawyers themselves. If the lodestar cross-check is to perform its function, more detailed characterization in the fee application is necessary, including submission of class counsel's time records.

 For the foregoing reasons, the proposed settlement and the fee request should be modified in accordance with these objections.
 Respectfully submitted,

Douglas L. Stevick
 (Texas Bar No. 00797498)
David C. Vladeck
 (D.C. Bar No. 945063)
1600 Twentieth Street, N.W.
Washington, DC 20009_1001
Dated: October 21, 1997Attorneys for Objector Howard M. Metzenbaum

Footnote: 1{C}

His objections suggested that one way to accommodate his concerns about the adequacy of the notice is to remail the pre-settlement notice packages to all potential class members. See Metzenbaum Objections at 4. A more cost-effective option, however, would be (a) to modify the post-settlement notice packages, which have not yet been approved by the Court or sent to class members, and (b) to send the post- settlement notice package to individuals who opted out with a short cover letter explaining the improvements in the notice and giving such individuals the opportunity to re-join the class{C}


Footnote: 2{C}


The factual and procedural background to the Thirteen Appeals litigation is stated in Thirteen Appeals, 56 F.3d at 299_300 and in In re Nineteen Appeals Arising out of the San Juan Dupont Plaza Hotel Fire Litigation, 982 F.2d 603, 605_08 (1st Cir. 1992).{C}


Footnote: 3{C}


The California court's judgment is attached as Attachment A. A news report of the court's decision that appeared in the Daily Journal on October 6, 1997, is attached as Attachment B.{C}


Footnote: 4{C}


Class counsel protests that Prudential is inapposite because a wide range of values was given to the settlement there, whereas in this case, the only credible (and only) valuation is that given by Mr. Hoyer. Pls.' Supp. Mem. at 35. This argument does not address the structural concern raised by Senator Metzenbaum's objection, which is that there is no good reason to award attorneys' fees beforehand based solely on an estimated value of the settlement when the Court can award part of them later, with full information, after the actual value of the settlement is known. Class counsel's argument does a better job in showing that they do not make the same mistakes twice in submitting expert valuations of a settlement than it does in respondingto the structural concern. Moreover, even were an objector to submit a credible expert counter-valuation, the Court would simply be presented with the same dilemma of conflicting valuations that faced the Prudential court. The solution is to avoid this structural problem by awarding fees in stages, with later awards based on the benefits actually realized by the class under the settlement.