In the
United States Court of Appeals
For the Seventh Circuit
Nos. 10-1978, 10-2175 & 10-3713
G ARY W ILLIAMS and N ANCY M EEHAN,
Plaintiffs-Appellees,
v.
R OHM AND H AAS P ENSION P LAN,
Defendant-Appellee.
A PPEALS OF:
R EGINA A DAMSKI, et al., and M ARK JACKSON
Appeals from the United States District Court
for the Southern District of Indiana, New Albany Division.
No. 4:04-CV-0078—Sarah Evans Barker, Judge.
A RGUED M AY 6, 2011—D ECIDED S EPTEMBER 2, 2011
Before B AUER, K ANNE, and E VANS , Circuit Judges.
K ANNE, Circuit Judge. After eight years, the end is near
for this dispute between the Rohm and Haas Company
Circuit Judge Evans died on August 10, 2011, and did not
participate in the decision of this case, which is being
resolved by a quorum of the panel under 28 U.S.C. § 46(d).
2 Nos. 10-1978, 10-2175 & 10-3713
Retirement Plan (the “Plan”) and all Plan participants and
beneficiaries who took a lump sum distribution after
January 1, 1976 (the “Class”). After this court affirmed
the district court’s grant of summary judgment on
liability, the Class and the Plan negotiated a $180 mil-
lion settlement, of which Class counsel asked for
$43.5 million in attorney’s fees. Numerous Class mem-
bers objected, but the district court approved the settle-
ment and awarded the requested attorney’s fees. Some
of the objecting Class members appealed, and we now
affirm the settlement approval and fee award.
I. B ACKGROUND
When Cory Williams left Rohm and Haas in 1997, he
chose to take a $47,850 lump sum distribution of his
Plan pension. He later came to believe that the payment
he received should have included the present value of
future cost of living adjustments (“COLAs”) that would
have been included had he chosen to receive his pension
as an annuity. In 2002, he filed a class action suit
against the Plan in federal district court on behalf of
himself and the Class. The district court eventually
granted summary judgment on liability in the Class’s
favor. The Plan made an interlocutory appeal, and we
affirmed. See Williams v. Rohm & Haas Pension Plan, 497
F.3d 710 (7th Cir. 2007) (reporting the history of this
litigation in greater detail).
Reviewing the grant of summary judgment, we ad-
dressed one issue: whether the COLA was an accrued
benefit, such that ERISA § 204(c)(3), 29 U.S.C. § 1054(c)(3),
Nos. 10-1978, 10-2175 & 10-3713 3
would apply. We concluded that a COLA is an accrued
benefit, as defined in ERISA § 2(23)(A), 29 U.S.C.
§ 1002(23)(A), and we remanded for a determination of
damages. The Supreme Court denied the Plan’s petition
for certiorari. Rohm & Haas Pension Plan v. Williams, 552
U.S. 1276 (2008). On remand before the district court, the
Plan regrouped and pressed two arguments. First, it
argued that some or all of the Class’s claims were
barred by the appropriate (then-undetermined) statute
of limitations. Second—and more relevant to this ap-
peal—it argued that most or all Class members who
had taken subsidized early retirement were entitled to
no damages.
The Plan based its early retirement argument on the
language of ERISA § 204(c)(3), which provides: “[I]f an
employee’s accrued benefit is to be determined as an
amount other than an annual benefit commencing at
normal retirement age . . . the employee’s accrued bene-
fit . . . shall be the actuarial equivalent of such benefit . . . .”
29 U.S.C. § 1054(c)(3). According to the Plan’s interpreta-
tion, an early retiree who takes a lump sum is entitled
only to a sum that was no less than the actuarial
equivalent of a COLA-enhanced annuity based on the
normal retirement age. The early retirees had received
more (because of the early-retirement subsidy), and the
Plan argued the early retirees thus were entitled to no
damages.
The Class vehemently contested the Plan’s position
on the early retirees’ damages, basing their argument on
26 C.F.R. § 1.411(a)-11(a)(2). This Treasury Regulation
4 Nos. 10-1978, 10-2175 & 10-3713
provides that when a plan specifies that an early-retire-
ment lump sum is to be the actuarial equivalent of the
early-retirement annuity, the lump sum must include
a COLA based on the full lump sum. In response to
the Class’s § 1.411(a)-11(a)(2) argument, the Plan
pointed to McCarter v. Ret. Plan for the Dist. Managers of
Am. Family Ins. Grp., where we held that § 1.411(a)-
11(c)(2)(I) does not regulate a pension plan’s lawfulness,
but only its tax-qualified status. 540 F.3d 649, 651 (7th
Cir. 2008). The Plan argued that McCarter’s reasoning
applies to all of § 1.411(a)-11.
Before the district court had ruled on the early retirees’
damages, the parties reached a settlement. The pro-
posed settlement provided that each early retiree
would receive roughly 3.5% of her original lump
sum, unless the COLA on a normal-retirement-age-
based annuity outweighed her early-retirement subsidy—
a rare situation. Several groups objected to the pro-
posed settlement. One of them, a subset of early retirees
whom we call “the Adamski Objectors,” argued that
early retirees should have received separate counsel
and that the settlement was “blatant discrimination”
against the early retirees. They also objected to class
counsel’s request for $43.5 million in fees, which repre-
sented 24.17% of the total settlement. One of the other
objectors was Mark Jackson, who argued that the settle-
ment improperly released his unrelated claims against
the Rohm and Haas disability plan and that he should
have been allowed to opt out of the settlement. After
briefing and an extensive fairness hearing, the district
court approved the proposed settlement and awarded
Nos. 10-1978, 10-2175 & 10-3713 5
the requested attorney’s fees. Jackson was not allowed
to opt out. The Adamski Objectors and Jackson
appealed the settlement approval, and the Adamski
Objectors also appealed the award of attorney’s fees.
II. A NALYSIS
A. Settlement Approval
A district court must not approve a class action set-
tlement unless it is convinced the settlement is “fair,
reasonable, and adequate.” Fed. R. Civ. P. 23(e)(2).
Before approving, the district court must scrutinize
and evaluate the settlement. See Synfuel Techs., Inc. v. DHL
Express (USA), Inc., 463 F.3d 646, 652-53 (7th Cir. 2006)
(comparing the district court to a fiduciary of the class).
Once the district court has approved the settlement, we
review to determine whether the district court abused
its discretion in doing so. Mirfasihi v. Fleet Mortg. Corp.,
450 F.3d 745, 748 (7th Cir. 2006).
1. Fairness to Early Retirees
The Adamski Objectors claim the district court abused
its discretion in approving the settlement without cal-
culating the net expected value of the litigation to
the Class. A district court cannot make an informed
judgment about the fairness of a proposed class settle-
ment without assessing the likelihood and value to the
class of the case’s possible outcomes. Synfuel, 463 F.3d
at 653. A district court must take special care in
6 Nos. 10-1978, 10-2175 & 10-3713
performing this assessment when the proposed settle-
ment evinces certain warning signs. See, e.g., id. at 654
(settlement bias toward in-kind compensation); Mirfasihi
v. Fleet Mortg. Corp., 356 F.3d 781, 785 (7th Cir. 2004)
(large subset of the class receiving “a big fat zero” in
settlement); Reynolds v. Beneficial Nat’l Bank, 288 F.3d
277, 283 (7th Cir. 2002) (evidence of collusion between
defendants and class counsel).
The Adamski Objectors argue that the settlement at
issue here evinces the same warning sign that was
present in Mirfasihi: discrimination against a subset of
the Class. We reject this comparison. In Mirfasihi,
the proposed settlement would have extinguished
1.4 million (facially colorable) claims at no cost to the
defendant. 356 F.3d at 783, 785. As we have noted in
other contexts, even a weak claim may have significant
settlement value when brought as a class action. See
Blair v. Fairfax Check Servs., Inc., 181 F.3d 832, 834 (7th
Cir. 1999). Accordingly, when a settlement confers no
benefit on a subset of the class, the district court should
take special care to determine that the relevant claims
actually have no settlement value. Here, the early
retirees will receive $60 million, and every early retiree
will receive a non-trivial amount. While the parties
may quibble over whether $60 million accurately reflects
the value of the early retirees’ claims, the proposed settle-
ment does not raise the same concerns as the “big fat
zero” many class members were to receive in the pro-
posed Mirfasihi settlement. 356 F.3d at 785.
We find that the district court adequately assessed the
expected value of the early retirees’ claims. The Adamski
Nos. 10-1978, 10-2175 & 10-3713 7
Objectors’ actuary concluded that the settlement gives
early retirees about 24.3% of what they would have
received had the COLA applied to their full lump sum
and about 35.5% of what they would have received had
the COLA applied to the portion of the lump sum based
on a normal-retirement-age annuity. Class counsel, the
Plan, and the Adamski Objectors all agreed (give or
take) with these percentages. The only issue for the
district court to decide, then, was whether the early re-
tirees’ litigation risks justified the compromise em-
bodied by the proposed settlement.
The district court was well suited to decide that issue,
and—having already heard the parties’ arguments on
the merits—it recognized that the early retirees’ claims
rested on unsettled law. The district court also knew
that an appellate court would ultimately decide the
relevant legal issues. The prospect of appellate review
affects the risk and costs (in time and money) of the
litigation.1 Based on the evidence and arguments before
it, the district court concluded that the early retirees’
success was uncertain and that the settlement rea-
sonably compensated them for their claims. That conclu-
sion was not so clearly erroneous as to make approval
of the proposed settlement an abuse of discretion.
1
As the district court noted, the timing of recovery may be
particularly important for this Class. While prejudgment
interest may compensate plaintiffs for delayed payment,
discount rates for pensioners can be tricky. See Richard A.
Posner, Aging and Old Age 70-72 (1995).
8 Nos. 10-1978, 10-2175 & 10-3713
Nor did the district court abuse its discretion by not
creating a separately represented subclass of early re-
tirees. The Adamski Objectors tried to convince the
district court that Mirfasihi required separate representa-
tion for early retirees, but the district court disagreed
and found that Class counsel had vigorously advocated
on the early retirees’ behalf.
We note that two subclasses already existed: the Past
Subclass—of which the early retirees were part—and the
Future Subclass. Moreover, other Class members
argued that separate subclasses should be created to
account for potentially different outcomes based on the
statute of limitations. “[I]f subclassing is required for
each material legal or economic difference that distin-
guishes class members, the Balkanization of the class
action is threatened.” John C. Coffee Jr., Class Action
Accountability: Reconciling Exit, Voice, and Loyalty in Repre-
sentative Litigation, 100 Colum. L. Rev. 370, 398 (2000); see
also UAW v. General Motors Corp., 497 F.3d 615, 629
(6th Cir. 2007). The Adamski Objectors have not con-
vinced us that the district court abused its discretion
by finding that Class counsel had adequately repre-
sented the early retirees and that further subclasses
were unnecessary.
2. Jackson’s Opt-Out Request
Jackson argues that the district court should not have
approved the settlement—without first allowing him to
opt out—because it improperly releases his and similar
claims against Rohm and Haas. Specifically, Jackson
Nos. 10-1978, 10-2175 & 10-3713 9
argues that the settlement may prevent him from
pursuing complaints about Rohm and Haas’s disability
plan. A facial reading of the settlement’s release pro-
vision affects only claims relating to or arising out of
the Rohm and Haas Company Retirement Plan, and
Jackson has not offered any other reading of the
provision to include the disability plan. Moreover, as the
district court noted when discussing another class of
objectors, opt out is usually inappropriate in this type of
ERISA class litigation. See Berger v. Xerox Corp. Ret. Income
Guarantee Plan, 338 F.3d 755, 763-64 (7th Cir. 2003). The
district court did not abuse its discretion by denying
Jackson’s opt-out request and approving the settlement.
B. Attorney’s Fees
When attorney’s fees are deducted from class damages,
the district court must try to assign fees that mimic a
hypothetical ex ante bargain between the class and its
attorneys. In re Synthroid Mktg. Litig., 264 F.3d 712, 718-
19 (7th Cir. 2001). The court must base the award on
relevant market rates and the ex ante risk of nonpayment.
Id. To determine the market for attorney’s fees, the
court should look to “actual fee contracts that were pri-
vately negotiated for similar litigation, information
from other cases, and data from class-counsel auctions.”
Taubenfeld v. AON Corp., 415 F.3d 597, 599 (7th Cir. 2005).
“We review the district court’s methodology de novo
to determine whether it reflects procedure approved for
calculating awards,” and we review the reasonableness
of the award for an abuse of discretion. Sutton v.
10 Nos. 10-1978, 10-2175 & 10-3713
Bernard, 504 F.3d 688, 691 (7th Cir. 2007) (quotation
marks omitted).
Apparently trying to insert their claims into de novo
review, the Adamski Objectors conflate their methodo-
logical and substantive reasonableness arguments in
their opening brief. We need not spend much time on
the district court’s methodology: the court recognized
that its task was to assign fees in accord with a hypotheti-
cal ex ante bargain, see Synthroid, 264 F.3d at 718; it
weighed the available market evidence, see Taubenfeld,
415 F.3d at 599; and it assessed the amount of work in-
volved, the risks of nonpayment, and the quality of repre-
sentation, see Synthroid, 264 F.3d at 721.
The Adamski Objectors claim the district court’s
methods were flawed because it did not give proper
weight to the lodestar cross-check. But consideration of
a lodestar check is not an issue of required methodology.
See Cook v. Niedart, 142 F.3d 1004, 1013 (7th Cir. 1998)
(“[W]e have never ordered the district judge to ensure
that the lodestar result mimics that of the percentage
approach.”). Accordingly, we review the district court’s
application of the lodestar check for an abuse of discre-
tion. Id.
The Adamski Objectors’ lodestar argument—that any
percentage fee award exceeding a certain lodestar multi-
plier is excessive—echoes the “megafund” cap we
rejected in Synthroid. See 264 F.3d at 718 (reasoning that
“[p]rivate parties would never contract for such an ar-
rangement, because it would eliminate counsel’s
incentive to press for” a higher settlement). While the
Nos. 10-1978, 10-2175 & 10-3713 11
district court did not impose a lodestar cap, it did
consider Class counsel’s lodestar data before assessing
fees. It found, however, that a pure percentage fee ap-
proach best replicated the market for ERISA class
action attorneys. The Adamski Objectors have not
shown this finding to be an abuse of discretion.
The Adamski Objectors also take issue with the district
court’s weighing of the market evidence. Unfortunately,
the parties did not present to the district court much
evidence of the types we endorsed in Taubenfeld (private
fee contracts, class-counsel auctions, and fee awards
from other cases). While the Adamski Objectors did
point to one class-counsel auction—from In re Amino
Acid Lysine Antitrust Litigation, 918 F. Supp. 1190 (N.D. Ill.
1996)—Synthroid expressly criticizes the result of that
auction, 264 F.3d at 720-21. The Adamski Objectors
wisely ignore Amino Acid on appeal. The only useful
pieces of evidence left for the district court, then,
were the court-assigned fees in two other cases and
the declarations of several class action attorneys.
The Adamski Objectors highlight the fee awards in Kohl
v. Ass’n of Trial Lawyers of Am., 183 F.R.D. 475 (D. Md.
1998), and Laurenzano v. BCBS of Mass. Ret. Income Trust,
191 F. Supp. 2d 223 (D. Mass. 2002). Though the fee
award in each of these cases was based on a percentage of
the recovery (29% in Kohl and 33% in Laurenzano), the
Adamski Objectors report only the total dollar value of
the fees. The percentage awards in these cases were
consistent with the declarations, proffered by Class
counsel, that reported the market rate for ERISA class
12 Nos. 10-1978, 10-2175 & 10-3713
action attorney’s fees is a contingency fee between 25%
and 33%. The district court credited these declarations
and gave minimal weight to the dollar amounts of the
fees in Kohl and Laurenzano. This decision was well
within the district court’s discretion.
The Adamski Objectors’ most forceful argument is
that the district court improperly weighed the risk of
nonpayment. They urge that rulings from district courts
in other circuits paved the way for the Class’s victory on
the COLA issue, thus minimizing the risk in this case.
See Kohl, 183 F.R.D. at 483; Laurenzano v. BCBS of Mass.
Ret. Income Trust, 134 F. Supp. 2d 189, 200-01 (D. Mass.
2001). The prior decisions certainly bolstered the Class’s
argument that the Plan’s damages calculation would
violate ERISA. Still, no court of appeals had addressed
this issue before the district court approved the settle-
ment. And even if the Class had succeeded on that ar-
gument, many Class members’ damages would have
been at risk because of the statute of limitations.
The district judge has become intimately familiar
with this litigation over the past eight years, and we
are confident that she properly assessed the litigation
risks facing the early retirees. Although the Adamski
Objectors urge us to remand and instruct the district
court to perform a more thorough risk analysis, we rec-
ognize that the best we can hope for in awarding
attorney’s fees is rough justice. See In re Trans Union
Corp. Privacy Litig., 629 F.3d 741, 748 (7th Cir. 2011) (“[A]
remand would produce only speculative refinements . . .
and would do so at a heavy cost in judicial and party
Nos. 10-1978, 10-2175 & 10-3713 13
resources unlikely to be offset by any benefit in
greater precision, which would in any event be illu-
sory.”). Accordingly, we see no reason to disturb the
district court’s assessment of fees.
III. C ONCLUSION
We A FFIRM both the district court’s approval of the
settlement agreement and its award of attorney’s fees.
9-2-11