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CCH® PENSION — 11/23/11

District court's approval of class action settlement less favorable to early retiree class members not abuse of discretion

A district court did not abuse its discretion when it approved an agreement settling an ERISA class action containing provisions less favorable to early retirees than to other members of the class, the U.S. Court of Appeals in Chicago (CA-7) has ruled.

Class prevails on merits

The Seventh Circuit had previously affirmed the lower court's ruling that a defined benefit plan providing a cost of living adjustment to the monthly benefits of its retirees must also provide the actuarial equivalent of the COLA to participants who choose to receive their pension as a lump-sum distribution. The appellate court then ordered the district court to construct a damage award.

On remand, the plan argued that the early retirees were entitled to no damages. Before the district court could rule on that issue, the parties reached a settlement agreement. The agreement provided in part that each early retiree would receive 3.5% of his or her original lump-sum amount. A group of early retirees objected to both the settlement amount and the class counsel's fee request. After a fairness hearing, the district court approved the settlement and the requested attorney's fees.

Fairness of settlement

Applying an abuse of discretion standard, the appellate court determined the settlement award to be fair to the early retirees. The district court properly weighed the early retirees' risks in further pursuing the litigation, concluding their ultimate success to be uncertain and finding the settlement amount to be reasonable compensation for their claims.

Source: Williams v. Rohm and Haas Pension Plan (CA-7).

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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