Case 1:18-cv-00328-WES-LDA Document 162 Filed 09/30/19 Page 1 of 14 PageID #: 6833

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
STEPHEN DEL SESTO, AS RECEIVER AND )
ADMINISTRATOR OF THE ST. JOSEPH )
HEALTH SERVICES OF RHODE ISLAND )
RETIREMENT PLAN, ET AL. )
)
Plaintiffs, )
) C.A. No. 18-328 WES
v. )
)
PROSPECT CHARTERCARE, LLC, ET AL., )
)
Defendants. )
___________________________________)

MEMORANDUM OF DECISION

WILLIAM E. SMITH, Chief Judge.

Before the Court is a request for final approval of a

settlement reached between Plaintiff Stephen Del Sesto

(“Receiver”), as state appointed receiver and administrator of the

St. Joseph Health Services of Rhode Island Retirement Plan

(“Plan”), Named Plaintiffs Gail J. Major, Nancy Zompa, Ralph

Bryden, Dorothy Willner, Caroll Short, Donna Boutelle, and Eugenia

Levesque, individually and on behalf of others similarly situated

(collectively, “Plaintiffs”), and Defendants St. Joseph Health

Services of Rhode Island (“SJHSRI”), Roger Williams Hospital

(“RWH”), CharterCARE Community Board (“CCCB”), and CharterCARE

Foundation (“CCF”)(collectively, the “Settling Defendants”). Two

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groups of defendants -- the Diocesan Defendants 1 and the Prospect

Entities 2 (collectively, the “Non-Settling Defendants”) -- object

to approval of the settlement.

Following preliminary approval of the settlement, a fairness

hearing was held on August 29, 2019. At the conclusion of that

hearing, the Court GRANTED final approval of the settlement. See

Docket Min. Entry for Aug. 29, 2019. This memorandum addresses

the reasons for the Court’s decision and also certifies the class,

class representatives, and class counsel. 3

I. Background

This action stems from alleged underfunding of a retirement

plan for nurses and other hospital workers employed by SJHSRI.

Am. Compl. ¶ 54, ECF No. 60. According to the amended complaint,

the Plan, which has 2,729 participants, is insolvent. Id. After

the Plan was placed into receivership in 2017, the Receiver and

several named participants, individually and on behalf of a

purported class of plan participants, filed a twenty-three-count

1
The Diocesan Defendants consist of the Roman Catholic Bishop of
Providence, a corporation sole, the Diocesan Administration
Corporation, and the Diocesan Service Corporation.
2
The Prospect Entities include Prospect CharterCARE, LLC, Prospect
CharterCARE SJHSRI, LLC, Prospect CharterCARE RWMC, LLC, Prospect
East Holdings, Inc., and Prospect Medical Holdings, Inc.
3 This memorandum addresses only the merits of this settlement

agreement. Plaintiffs’ Motion for Attorneys’ Fees in connection

with the settlement, ECF No. 78, is currently being reviewed by
the Special Master appointed by the Court on September 5, 2019.
See Order Appointing Special Master, ECF No. 152.
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complaint in this Court against several defendants, alleging

violations of the Employee Retirement Income Security Act

(“ERISA”) for failure to meet minimum funding requirements and

breach of fiduciary duty, as well as various state law claims.

See generally Am. Compl.

A number of defendants have agreed to settle with Plaintiffs,

resulting in two separate settlement agreements. This memorandum

addresses the settlement agreement between Plaintiffs and

Defendants SJHSRI, RWH, CCCB, and CCF, ECF No. 77-2 (“Settlement

B”). 4 Pursuant to Settlement B, the Receiver will be transferred

$4.5 million for deposit into the Plan assets by CCF and its

insurer. See Settlement B 13; Joint Motion for Settlement Class

Certification, Appointment of Class Counsel, and Preliminary

Settlement Approval 8 (“Joint Mot.”), ECF No 77-1. In exchange,

Plaintiffs and Defendants SJHSRI, CCCB, and RWH will release CCF

and the Rhode Island Foundation 5 from liability. See Settlement

Agreement B 13. In addition, the Receiver will transfer to CCF

any rights he holds in CCF. See Joint Mot. 8.

Plaintiffs and Settling Defendants sought preliminary

approval of the settlement, to which the Non-Settling Defendants

objected. See generally Joint Mot.; Diocesan Defs. Response in

4 Final approval of the other settlement, “Settlement A,” is

currently pending before this Court.
5 The Rhode Island Foundation is a custodian for CCF’s investment
assets. See Joint Mot. 4 n.4.
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Opp. To Joint Mot., ECF No. 80; Prospect Entities Opp. To Joint

Mot., ECF No 81. On May 17, 2019, the Court preliminarily approved

the settlement and directed the settling parties to give notice to

the purported class. See Order Granting Preliminary Approval 13,

16, ECF No. 123.

Plaintiffs and Settling Defendants now seek final approval of

the settlement. One class member objects on the basis that the

$4.5 million amount transferred to the Plan is insufficient. The

Non-Settling Defendants also reiterate their objections to the

settlement, which will be explained in further detail below.

II. Discussion

a. Jurisdiction

In order to approve the settlement, the Court must first

determine that it has jurisdiction over the dispute. A federal

court has subject matter jurisdiction under 28 U.S.C. § 1331 so

long as “the plaintiff’s well-pleaded complaint. . . exhibit[s],

within its four corners, either an explicit federal cause of action

or a state-law cause of action that contains an embedded question

of federal law that is both substantial and disputed.” R.I.

Fishermen’s All. v. R.I. Dept. of Envtl. Mgmt., 585 F.3d 42, 48

(1st Cir. 2009); see 28 U.S.C. § 1331. Plaintiffs’ complaint

alleges four claims which arise under ERISA -- a federal statute.

Moreover, Plaintiffs must meet statutory and constitutional

requirements for standing as part of the threshold jurisdictional

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analysis. See In re Deepwater Horizon, 739 F.3d 790, 798 (5th

Cir. 2014). As to statutory standing, the civil enforcement

provision under ERISA, 29 U.S.C. § 1132, allows claims by plan

participants, beneficiaries, and fiduciaries for breach of

fiduciary duty and equitable relief. See 29 U.S.C. § 1132(a)(2)

& (3). The named plaintiffs are all current participants of the

Plan, and the purported class includes participants and

beneficiaries of the Plan. Am. Compl. ¶¶ 3-9, 35. Furthermore,

the Receiver is an ERISA fiduciary because he, as Plan

administrator, “exercises discretionary control or authority over

the plan’s management, administration, or assets[.]” Mertens v.

Hewitt Assoc., 508 U.S. 248, 251 (1993); 29 U.S.C. § 1102(a).

Constitutional standing under Article III requires an injury

in fact, a causal connection between the injury and the defendant’s

conduct, and the likelihood that a favorable outcome will redress

the injury. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61

(1992). While an injury must be particularized and concrete,

“[t]his does not mean, however, that the risk of real harm cannot

satisfy the requirement of concreteness.” Spokeo, Inc. v. Robins,

136 S.Ct. 1540, 1549 (2016). “At the pleading stage, general

factual allegations of injury resulting from the defendant’s

conduct may suffice[.]” Lujan, 504 U.S. at 561; see In re

Deepwater Horizon, 739 F.3d at 804 (“[I]t is sufficient for

standing purposes that the plaintiffs seek recovery for an economic

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harm that they allege they have suffered because for each class

member we must assume arguendo the merits of his or her legal claim

at the Rule 23 stage.”) (internal citation omitted).

In the amended complaint, Plaintiffs allege that the Plan is

“grossly underfunded” because the Plan’s sponsor did not make

required contributions for many years, particularly from 2010 to

2016, and that Defendants knew that the sponsor of the Plan faced

liabilities well exceeding its assets as of 2014. Am. Compl. ¶

63, 448. Plaintiffs also allege that, “[a]s a result of SJHSRI’s

failure to fund the Plan in accordance with ERISA’s minimum funding

standards, Plaintiffs pensions will be lost or at least severely

reduced.” 6 Id. ¶ 458. Given that the Court must accept these

allegations as true at this stage of the proceedings, the Court is

satisfied that Plaintiffs have alleged an injury sufficient for

standing. See Dezelan v. Voya Ret. Ins. Annuity Co., No. 3:16-

cv-1251, 2017 WL 2909714, at *5 (D. Conn. July 6, 2017)(“Generally,

a plaintiff has standing to bring an ERISA claim where the

plaintiff alleges a causal connection between defendants’ actions

and actual harm to an ERISA plan in which the plaintiff

participates.”)(citing LaRue v. DeWolff, Boberg & Assoc., Inc.,

552 U.S. 248, 255-56 (2008)(recognizing that an ERISA claim for

6 The Plaintiffs further allege that when the Plan was placed
into receivership, there was a request that “the Rhode Island
Superior Court approve a virtually immediate 40% across-the-board
reduction in benefits.” Am. Compl. ¶ 54.
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breach of fiduciary duty “does not provide a remedy for individual

injuries distinct from plan injuries” and stating that

“[m]isconduct by the administrators of a defined benefit plan will

not affect an individual’s entitlement to a defined benefit unless

it creates or enhances the risk of default by the entire plan.”)).

Therefore, the Court finds that it has jurisdiction over the

subject matter and parties in this dispute.

b. Final Approval Under Rule 23(e)

A Court may approve a settlement in a class action only upon

a finding that the settlement is “fair, reasonable, and adequate.”

Fed. R. Civ. P. 23(e)(2). Some of the factors in this

consideration include:

(1) the complexity, expense and likely duration of the

litigation, (2) the reaction of the class to the
settlement, (3) the stage of the proceedings and the
amount of discovery completed, (4) the risks of
establishing liability, (5) the risks of establishing
damages, (6) the risks of maintaining the class action
through the trial, (7) the ability of the defendants to
withstand a greater judgment, (8) the range of
reasonableness of the settlement fund in light of the
best possible recovery, and (9) the range of
reasonableness of the settlement fund to a possible
recovery in light of all the attendant risks of
litigation.

Baptista v. Mutual of Omaha Ins. Co., 859 F. Supp. 2d 236, 240-41

(D.R.I. 2012) (citing City of Detroit v. Grinnell Corp., 495 F.2d

448, 463 (2d Cir. 1974)). However, although “[t]he case law offers

‘laundry lists of factors’ pertaining to reasonableness. . . ‘the

ultimate decision by the judge involves balancing the advantages

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and disadvantages of the proposed settlement as against the

consequences of going to trial or other possible but perhaps

unattainable variations on the proffered settlement.’” Bezdek v.

Vibram USA, Inc., 809 F.3d 78, 82 (1st Cir. 2015) (quoting Nat’l

Ass’n of Chain Drug Stores v. New England Carpenters Health

Benefits Fund, 582 F.3d 30, 44 (1st Cir. 2009)).

Additionally, “[i]f the parties negotiated at arm’s length

and conducted sufficient discovery, the district court must

presume the settlement is reasonable.” Id. (quoting In re Pharm.

Indus. Average Wholesale Price Litig., 588 F.3d 24, 32-33 (1st

Cir. 2009)). “[T]he lack of any serious objection to the

settlement agreement from members of the class weighs in favor of

approving the settlement.” Medoff v. CVS Caremark Corp., No. 09-

cv-554-JNL, 2016 WL 632238, at *6 (D.R.I. Feb. 17, 2016); see Wal-

Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 118 (2d Cir.

2005) (“If only a small number of objections are received, that

fact can be viewed as indicative of the adequacy of the

settlement.”)(internal citation omitted).

The Court finds that this settlement has been entered into in

good faith and that its terms are fair, adequate, and reasonable.

See Fed. R. Civ. P. 23(e). Without question, this case involves

the determination of complex legal questions which would be costly

and time-consuming to litigate through trial. See Kemp-DeLisser

v. Saint Francis Hospital and Medical Center, No. 15-CV-1113(VAB),

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2016 WL 6542707, at *7 (D. Conn. Nov. 3, 2016)(“Many courts

recognize the particular complexity of ERISA breach of fiduciary

duty cases such as this one.”) Indeed, hundreds of pages of

briefing have already been filed at this stage of the litigation.

Furthermore, Plaintiffs have provided evidence demonstrating

that hundreds of class members support the settlement. See

Declaration of Christopher Callaci, ECF No. 141; Affidavit of

Arlene Violet, ECF No. 142; Declaration of Jeffrey W. Kasle, ECF

No. 143. Only one member of the purported class of more than 2,700

members has objected on the basis that the amount of money to be

transferred to the Receiver is only half of the money which should

have gone into the Plan. 7 See Response in Opp. to Settlement, ECF

No. 128. However, as Plaintiffs have acknowledged, given the

complexity of this case and lack of settled law with respect to

the claims asserted against CCF, Plaintiffs are not without risk

in proving liability should the case move forward. See Pl. Mem.

in Supp. of Mot. for Final Approval 9, 27, ECF No. 139. In light

of that risk, the settlement amount appears to be reasonable.

Additionally, as explained below, the Non-Settling Defendants

do not object to Settlement B on the basis that it is the product

of bad faith or collusion. On the contrary, as the Court noted in

7 The allegations against CCF in the complaint turn on an alleged

improper transfer of approximately $8.2 million in charitable
funds to CCF in a 2015 cy pres proceeding. Am. Compl. ¶ 390, 400-
09.
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its preliminary approval order, this settlement appears to be the

product of arm’s length negotiations by highly experienced and

informed counsel after significant document exchange by the

parties. Order Granting Preliminary Approval 4; see Pl. Mem. in

Supp. of Mot. for Final Approval 37.

For these reasons, the Court finds that Settlement B is the

product of good faith and is fair, reasonable, and adequate.

c. Non-Settling Defendants’ Objections

The Non-Settling Defendants have objected to final approval

of the settlement on several grounds. A number of these objections

turn on an unsettled legal question regarding whether ERISA applies

to the Plan or whether the Plan is exempt from ERISA as a “church

plan.” See Diocesan Defs. Opp. To Final Settlement Approval

(“Diocesan Opp.”) 2, ECF No. 136; Prospect Defs. Opp. To Final

Settlement Approval 3 n. 2 (“Prospect Opp.”), ECF No. 138; see

also Pl. Mem. in Supp. of Mot. for Final Approval 19. More directly

related to the settlement, the Non-Settling Defendants also argue

that R.I. Gen. Laws § 23-17.14-35 (“Settlement Statute”), a statute

specifically enacted to apply to settlements arising out of claims

brought by participants of the Plan, is preempted by ERISA or is

unconstitutional. 8 Diocesan Opp. 2-3; Prospect Opp. 3 n.2.

8 The Settlement Statute allows a settling tortfeasor to avoid

liability for contribution if the settlement has been judicially
approved and is the product of good faith. R.I. Gen. Laws § 23-
17.14-35. The Settlement Statute reads, in full:
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The Court is satisfied that it need not address questions

related to the applicability of ERISA in order to approve this

settlement. See Kemp-DeLisser, 2016 WL 65427, at *7-8 (approving

settlement prior to determining ERISA church-plan exemption

issue). Similarly, the Court need not determine the

constitutionality or potential preemption of the Settlement

Statute, and therefore expressly declines to rule on these issues

at this time. The Court’s approval of this settlement shall be

without prejudice to the Non-Settling Defendants’ right to assert

these arguments later in this litigation or in future proceedings.

The following provisions apply solely and exclusively to

judicially approved good-faith settlements of claims
relating to the St. Joseph Health Services of Rhode
Island retirement plan, also sometimes known as the St.
Joseph Health Services of Rhode Island pension plan:

(1) A release by a claimant of one joint tortfeasor,

whether before or after judgment, does not discharge the
other joint tortfeasors unless the release so provides,
but the release shall reduce the claim against the other
joint tortfeasors in the amount of consideration paid
for the release.

(2) A release by a claimant of one joint tortfeasor

relieves them from liability to make contribution to
another joint tortfeasor.

(3) For purposes of this section, a good-faith

settlement is one that does not exhibit collusion,
fraud, dishonesty, or other wrongful or tortious conduct
intended to prejudice the non-settling tortfeasor(s),
irrespective of the settling or non-settling
tortfeasors’ proportionate share of liability.
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d. Certification of Class, Class Representatives, and Class

Counsel

The Settling Parties also ask the Court to grant final

certification of the class, class representatives, and class

counsel under Rule 23. In order to meet the standard for class

certification, the purported class must meet the requirements

under Rule 23(a) and one of the categories of Rule 23(b). See

Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 621 (1997). A class

satisfies Rule 23(a) if

(1) the class is so numerous that joinder of all members

is impracticable; (2) there are questions of law or fact
common to the class; (3) the class or defenses of the
representative parties are typical of the claims or
defenses of the class; and (4) the representative
parties will fairly and adequately protect the interests
of the class.

Fed. R. Civ. P. 23(a). Moreover, Rule 23(b)(1)(B) requires a

purported class to demonstrate that separate actions by individual

members “would create a risk of. . . adjudications with respect to

individual class members that, as a practical matter, would be

dispositive of the interests of the other members not parties to

the individual adjudications or would substantially impair or

impede their ability to protect their interests[.]”

The Court outlined its reasons for finding these factors to

have been met in the order granting preliminary approval of the

settlement. See Order Granting Preliminary Settlement Approval 5-

9. The Court is satisfied that its analysis of these factors has

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not changed for purposes of final settlement approval.

Additionally, the Non-Settling Defendants’ objections do not

relate to certification of the class, its representatives, or its

counsel.

Accordingly, for purposes of this settlement only, the Court

certifies the following class: All participants of the St. Joseph

Health Services of Rhode Island Retirement Plan, including all

surviving former employees of St. Joseph Health Services of Rhode

Island who are entitled to benefits under the Plan and all

representatives and beneficiaries of deceased former employees of

St. Joseph Health Services of Rhode Island who are entitled to

benefits under the Plan. Furthermore, the Court appoints Gail J.

Major, Nancy Zompa, Ralph Bryden, Dorothy Willner, Caroll Short,

Donna Boutelle, and Eugenia Levesque as settlement class

representatives and Wistow, Sheehan & Lovely, P.C. as class

counsel.

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III. Conclusion

For the reasons stated herein, the court GRANTS final approval

of Settlement B and, for purposes of this settlement only,

certifies the class, class representatives, and class counsel.

IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: September 30, 2019

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