1 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Official Court Reporter: Elaine Cropper, RDR, CRR, CCP Sandra Day O'Connor U.S. Courthouse 401 West Washington Street, Suite 312, Spc. 35 Phoenix, Arizona 85003-2150 (602) 322-7245 Proceedings Reported by Stenographic Court Reporter Transcript Prepared by Computer-Aided Transcription United States District Court REPORTER'S TRANSCRIPT OF PROCEEDINGS FAIRNESS HEARING BEFORE: THE HONORABLE ROSLYN O. SILVER, JUDGE Barbara Allen, et al., UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA _________________ ) ) Plaintiffs, ) ) vs. ) ) Honeywell Retirement Earnings ) Plan, et al., ) ) Defendant. ) ___________________________________)
CV 04-0424-PHX-ROS
Phoenix, Arizona February 7, 2008 9:08 a.m.
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 1 of 35
2 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court T E S T I M O N Y
I N D E X
Page (NONE)
Line
E X H I B I T S
(NONE)
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 2 of 35
3 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court For the Plaintiffs: SUSAN J. MARTIN, ESQ. DANIEL J. BONNETT, ESQ. JENNIFER KROLL, ESQ. Martin & Bonnett, P.L.L.C. 3300 North Central Ave., Suite 1720 Phoenix, AZ 85012-2517 602.240.6900 For the Defendants: DAVID B. ROSENBAUM, ESQ. Osborn Maledon, P.A. 2929 North Central Avenue 21st Floor Phoenix, AZ 85012-2794 602.640.9000 HOWARD SHAPIRO, ESQ. Proskauer Rose, L.L.P. 909 Pydras Street, Suite 1100 New Orleans, LA 70112-4017 504.310.4088 MICHAEL L. BANKS, ESQ. Morgan, Lewis & Bockius 1701 Market Street Philadelphia, PA 19103 215.963.5000 CHRISTOPHER LANDAU, ESQ. Kirkland & Ellis, LLP 655 15th St., N.W. Washington, D.C. 20005 202.879.5087/(fax) 202.654.9532 A P P E A R A N C E S
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 3 of 35
4 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 P R O C E E D I N G S (Court was called to order by the courtroom deputy.) THE COURT: Please be seated. This is CV-04-424, Allen v.
09:08:17
COURTROOM DEPUTY:
Honeywell, on for fairness hearing. Counsel, please announce. MS. MARTIN: Good morning, Your Honor. Susan Martin,
Martin Bonnett, for the plaintiffs. is Daniel Bonnett and Jennifer Kroll. THE COURT: Thank you.
With me at counsel table
09:08:27
MR. ROSENBAUM:
Good morning, Your Honor.
David
Rosenbaum from the Osborn Maledon firm representing the Honeywell plan defendants. With me are Howard Shapiro from Proskauer Rose -MR. SHAPIRO: MR. ROSENBAUM: Good morning, Your Honor. -- Michael Banks from Morgan, Lewis
09:08:38
and I don't believe before that you've met Chris Landau from Kirkland & Ellis. MR. LANDAU: THE COURT: Good morning. All right. Thank you.
09:08:48
Counsel, and this is the time for the fairness hearing on the proposed settlement of a partial settlement of the matter before me Allen v. Honeywell. I have a received a motion, under Rule 54, for approving the partial settlement. I have reviewed it. I have
09:09:07
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 4 of 35
5 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 some questions and I presume that both counsel or all counsel are prepared to answer my questions. First, the benefits to
09:09:12
the class members have been determined to retroactively be recalculated and paid with interest. MS. MARTIN: How was that done? We had extensive We had our
09:09:49
Your Honor, if I may.
negotiations to determine the method of payment. actuaries involved in that process.
The actual calculations
have not yet been done because it's dependent on claim forms being submitted. And I could advise Your Honor that as of this
09:10:11
date, approximately 10,000 class members have submitted claims. Once the claims period closes, as the partial settlement becomes final, the defendant plan will take all of the claim forms, determine first who are the participants in the 35-year reduction class, and those participants' claims -those participants' benefits will be recalculated based on a calculation that has the reduction that was in the Garrett plan for reducing the offset after 35 years. As far as the interest rate is concerned, if the court is concerned about that, we had extensive discussions about what interest rate would be appropriate. intensely negotiated. It was
09:10:41
09:11:00
We had the advice of both actuaries on
both sides and we settled on an interest rate that is rather complicated but takes a moving interest rate over the period of years. THE COURT: Okay. Thank you.
09:11:18
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 5 of 35
6 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 How was it calculated and determined and agreed to regarding the amount that would be litigated for the remaining claims? That is, the amount is capped at $500 million. MS. MARTIN: Here again, Your Honor, if I may, the
09:12:03 09:11:43
parties -- the negotiation process took almost seven months or eight months. It was intensely negotiated. There were at
least 12 in-person meetings between the parties including mediators and actuaries. A lot of information regarding
actuarial calculations was exchanged so that the parties were -- both sides I believe were well-informed regarding the actual potential liabilities in the case. The $35 million up-front payment, which the plaintiffs believe is a significant achievement, was the product of give and take that included the ability for the defendants to cap their exposure in the ongoing three remaining claims. We believe that the $500 million cap represents a
09:12:51 09:12:30
significant amount of the total potential liability here and that it is, in fact, a fair and reasonable amount considering all of the factors. THE COURT: And as far as I can tell, the notice of
09:13:28
the partial settlement and request for class member inquiries has been accomplished. Have there been class member inquiries? MS. MARTIN: Yes, Your Honor. I think -- I would
09:13:47
like to point out that there's an affidavit attached to the United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 6 of 35
7 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 motion from the vice president of Garden City, which was the company retained to assist both parties in providing the notice and in answering inquiries. There were approximately 19,000 notices mailed and an additional number of notices were mailed after addresses were corrected. According to Garden City -- well, let me step back. The plaintiffs arranged in this case for there to be an interactive voice response system set up with an 800 number and in addition to that, explaining frequently asked questions regarding the settlement and how to fill out the claim form. On that voice response system there were two places to leave information. One was if you had additional questions
09:14:32 09:14:08 09:13:50
that weren't answered, you could leave a message and ask for a call back. You could also ask for a claim form. In addition to the voice response system, the named plaintiffs who are in court by the way, this morning, Your Honor. I would just like to have them stand. THE COURT: Certainly.
09:15:07 09:14:54
(Named plaintiffs stand.) THE COURT: affidavits? MS. MARTIN: THE COURT: MS. MARTIN: Yes, they are. And I have reviewed your affidavits. Thank you. And they are all of those that filed
09:15:16
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 7 of 35
8 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 The named plaintiffs have maintained -- established and maintained a website. On the website was a claim form that
09:15:16
could be downloaded and also a written questions and answers for frequently asked questions. To get to the answer to Your Honor's question, the Garden City group has reported that they received approximately 3,000 telephone calls to the frequently asked questions. In
09:15:29
addition, there were several hundred call backs based on people leaving messages. Our firm also received inquiries. We have a record Several
09:15:49
of 86 inquiries including 49 phone calls, 28 letters.
class members, about seven of them, came to our office in person for questions about how to fill out the claim form. In addition to that, the class members, the named plaintiffs have responded to inquiries. We think about 100
09:16:09
inquiries were made to the named plaintiffs that have been responded to. So we think that there have been at least approximately a thousand responses to inquiries from individual responses to inquiries from individual plaintiffs in addition to the 3,000 calls to the voice active -- interactive voice response system. I think I stated that there were approximately -- as of this date, there are 10,000 claims have been filed. In addition, the partial settlement agreement, which United States District Court
09:16:50 09:16:28
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 8 of 35
9 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 had a January 28 postmark cutoff for sending in a claim form, the partial settlement agreement also grants class counsel the right to accept claim forms for good cause in the next 30-day period between -- after the court signs -- if the court were to sign the partial settlement judgment and the period before it becomes final, which would be 30 days after the court signs the order. THE COURT: all of the inquiries? MS. MARTIN: We believe we have, yes, Your Honor. I
09:17:37 09:17:18 09:16:53
Were you able to adequately respond to
think that the comments we have received -- and we have received many. We received a lot of positive feedback, a lot
of thank yous, a lot of people said the claim form they thought was fairly easy to understand and fill out. Some people had
09:17:54
not filled out those claim forms correctly and were working with Garden City group. For example, a few people forgot to
sign the claim form or might have circled the wrong information. With that, those people are being reviewed and we're endeavoring to get all of the claim forms correctly filled out if there was a problem. THE COURT: I noted that in your explanation of the
09:18:12
settlement, you set forth that there are remaining claims and they will be vigorously litigated. about that? United States District Court Was there much inquiry
09:18:57
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 9 of 35
10 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MS. MARTIN: Your Honor. There has been some inquiry about that,
09:19:00
I think some people were concerned that the $35
million not be the sum total of the settlement and we have tried to explain, yes, that the $500 million cap on the three remaining claims enables the parties to vigorously address and continue to litigate those claims. As the court has previously I believe taken notice, the three remaining claims or the main claims that have been in this case from the outset, those claims continue to be litigated. There are currently, as Your Honor is well aware, motions addressed to those claims including a second motion for reconsideration filed by the defendants and cross-motions for summary judgment addressed to defendants' statute of limitations defense which could also impact those claims. So we have explained that because of the significant risks in the lawsuit that plaintiffs' class members might not have any recovery. We thought structuring the settlement in
09:19:59 09:19:39 09:19:20
this way so that there would be a guaranteed recovery of $35 million was a fair and reasonable way to structure the settlement. THE COURT: Concerning the notice that you gave to
09:20:20
the potential recipients, you have indicated that we would have a hearing today. Did you receive any timely objections? No, Your Honor. We have not received a
09:20:44
MS. MARTIN:
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 10 of 35
11 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 single objection. I think it was clearly stated in the claim
09:20:48
form what the procedure -- within the notice what the procedure was for filing a timely objection and I have checked with opposing counsel. Neither of us have received a single
09:21:07
objection to either the partial settlement or the application for attorneys' fees and costs. And I might add, on the application for attorneys' fees and costs, the precise dollar amount being requested as well as the percentage being requested was in the notice very clearly stated. It was also in the newspaper summary that was The court will recall that we
09:21:27
published in five newspapers.
published a notice in "USA Today," the "Los Angeles Times," "Arizona Republic", "Arizona Daily Star," and the Torrance, California, "Daily News." Did I leave one out? MR. SHAPIRO: MS. MARTIN: No. So our effort was to give the best
09:21:52
notice possible and I believe we've accomplished that, Your Honor. MR. SHAPIRO: Your Honor, I want to just confirm that
09:22:01
as counsel for defendants, we have not received -- first of all, as Your Honor knows, there's been no objection filed of record. Counsel for the defendants have not received any type
of objection, either formally or informally, by mail, e-mail, or any other media. United States District Court
09:22:19
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 11 of 35
12 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 name. MR. GILMORE: My name is Jack Gilmore.
09:23:36
THE COURT:
And I have, Mr. Shapiro, asked a number Do you have anything to add or do
09:22:26
of questions of Ms. Martin. you differ in any respect? MR. SHAPIRO:
I do not, Your Honor.
I note for the
09:22:35
record that there have been no objections filed and that the notice in this case was comprehensive given the size of the class and the effort to publish in as many newspapers reflecting the geographic dispersion of the class members. THE COURT: I also have before me a motion for the
award of attorney's fees which I will consider in just a bit. Now, let me ask, are there any potential class members or class members who have objections? Yes, sir. your name. Would you come forward to the microphone? I need to have you come forward to the microphone. MR. GILMORE: THE COURT: Which one, there in the middle? Yes. And start by setting forth your Please come forward and please set forth
09:23:01
09:23:21
In the paperwork that was sent out to the people, it was not quite explanatory to individuals like myself and probably a few other members that do not know the law. didn't know that we could object to anything. I
If I knew we
09:24:04
could have objected, I would have objected for the amount of United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 12 of 35
13 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 settlement. The $500 million on my calculation, what I have
09:24:07
got from my SBA and for the Social Security offsets and everything, my calculation on me alone amount up to $150,000. And if I am just one individual and there's 19,000 people involved, I think that's more than $500 million. THE COURT: Okay.
09:24:33
Mr. Gilmore, do you know whether or not, as a part of this settlement, which is $35 million, whether or not you are to receive any benefit? MR. GILMORE: What is this $35 million? There was
09:24:54
nothing explained what -- the only thing that we know is partial settlement, bottom line. settlement? What is the partial
We don't know what it is what all does it curtail? All right. Mr. Gilmore, it is
09:25:15
THE COURT:
understandable -- first of all, I have to tell you that this area called ERISA is complex. It's complex for the lawyers. It's complex for the judges. I understand and appreciate the It took me
fact that you didn't understand it, all of it.
quite a while to understand it and I have been at it for a numbers of years since this lawsuit was filed, so I appreciate your coming forward and having the courage to tell us that you do not understand it. And I am going to ask counsel to explain it in as much detail as possible and as simply as possible. But let me
09:26:02 09:25:39
start with that if it wasn't clear, that this has been, number United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 13 of 35
14 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 one, negotiated for a long period of time. Number two, the
09:26:09
settlement has been negotiated and it was a consequence to some extent of a very unclear decision that I had to make concerning whether or not any of the class representatives were entitled to any benefits. As simply as I can state it, there was or there appeared to be at one time an entitlement by everyone. However, in the interim, from when this entitlement was relatively clear, the law changed and there is a question whether now under the law any of the class members are entitled to benefits. And at one time I ruled that because of the change in the law, that none of the class members were now entitled to benefits. That issue is still looming before this court. But
09:27:41 09:27:14 09:26:41
despite that, counsel on both sides engaged in aggressive and substantial efforts to settle the case. And because it has
been vigorously contested, only a partial settlement was reached, which doesn't surprise me, and it was -- as far as I am able to discern, only because the plaintiffs have more than adequately represented the class that there has at this point been a partial settlement and that the defendants have acquiesced in that. Now, that gives you some of the legal parameters of this case and I am going to now ask you to be seated for a moment and ask counsel to explain the nature of this partial United States District Court
09:28:43 09:28:17
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 14 of 35
15 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 settlement and what remains and give some perhaps -- if counsel can, although I guess there continues to be -- is it 19,000 or 1900 potential class members? MS. MARTIN: 19,000 or 1900?
09:28:49
If I can clarify that, Your Honor. But that included about 2500
09:29:08
There were 19,000 notices sent.
or 3,000 class members who had never had a vested right to a pension. And the reason that those persons got notices was And there is a
because they had secured benefit accounts.
provision in the partial settlement to eliminate administrative fees on those secured benefit accounts in exchange for giving up a claim for retroactive fees. So those persons got notice. But they are not part
09:29:34
of the three remaining claims going forward. The three remaining claims going forward address what the defendants -- the defendants had addresses for approximately 16,500 persons who were alive on January 1, 1984. And all of those persons, to the degree that they had addresses, received notices so that class is not quite as large as we are discussing because the 16,500 includes persons who were deceased at the time of the -- I believe it was July 2002. You had to be alive on that date to participate in the partial settlement. So what we're really talking about is 16,500 potential claimants but it has to be discounted for persons who were deceased between 1984 and 2002 so it is somewhat less. United States District Court
09:30:44 09:30:24 09:29:53
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 15 of 35
16 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: And at this point you are unable to make
09:30:53
that determination so it may be that someone is deceased as of 1985? MS. MARTIN: THE COURT: Right. And the amount of their recovery would be
09:31:00
substantially less than somebody who is still alive and was working between 1984 and 2002? MS. MARTIN: Right. Well, anyone who was deceased in The settlement
09:31:15
1985 would not be a settlement class member.
class is defined as persons who are alive in July 2002 when the administrative claims were filed in this case, Your Honor, which was also a subject, I would say, of intense negotiation because there are cases that say you had to be alive on the date the lawsuit was filed. We managed to get an agreement to bring that date backwards to the date the administrative claims were filed. we have encompassed a larger group of people than might otherwise be eligible to participate in this lawsuit including their heirs and derivative payments, but it is somewhat less than 16,000 because there have been some people that passed away. And that is a clarification that perhaps I can make to Mr. Gilmore how we have somewhat less than 16,000 people who will be participating in the litigation of the three remaining claims and also participating in the distribution of the $35 United States District Court So
09:31:34
09:31:59
09:32:21
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 16 of 35
17 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 million because while notices went to people who had secured benefit accounts about the elimination of administrative fees on those accounts going forward, if they did not have a vested right to a pension benefit under the retirement plan, they would not participate in the distribution of the settlement proceeds. THE COURT: And the specific amount that each of
09:32:41 09:32:25
these individuals will receive is based upon an actuarial determination which includes what their salary was and how long they worked. Is that right? Yes. Well, there are two groups of -09:33:01
MS. MARTIN:
there are two groups of beneficiaries under the partial settlement, Your Honor. The first group, as I've mentioned
before, was the group who had more than 35 years of service. They were a specific claim in this case that was litigated and which this court entered summary judgment -- partial summary judgment in favor of plaintiffs on. Those persons who filed
09:33:17
claim forms in a timely fashion will receive an actuarially determined amount, but they will get paid 90 percent of their actual damages less any amount that the court may award for attorney's fees and costs. MR. GILMORE: THE COURT: Go ahead. MS. MARTIN: The remaining part of the proceeds are
09:33:52 09:33:39
Your Honor, may I -Hold on for a second. Let her finish.
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 17 of 35
18 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 based. to be distributed to all class members on an equal basis. are called the per capita benefit amount. And every class They
09:33:54
member, including the people with a 35 years of service or more at retirement, will receive an equal distribution of all $35 million of the proceeds. There is no distinction there. It is not actuarially
09:34:14
Everyone is going to receive exactly the same
settlement benefit, including Mr. Gilmore, based on the number of claimants and the number of claimants who filed 35-year reduction claims. So we have an agreement which is not the customary agreement, as I understand it, and, for example, in securities claims where the amount of the proceeds is based on the number of people who actually filed claims but then the defendants get to keep the rest of the money. case will be paid out. All of the proceeds in this
09:34:51 09:34:35
And that was a significant part of this
agreement, that all $35 million will be distributed to the class. THE COURT: MR. SHAPIRO: Mr. Shapiro? Your Honor, I would note one thing in At page 12, Your Honor,
09:35:07
response to Mr. Gilmore's statements.
of the notice document that was sent to all claimants, it says in bold, black letters at the bottom: In order to make an
objection or otherwise contest the approval of the terms and conditions of the partial settlement -- and then it goes on, United States District Court
09:35:30
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 18 of 35
19 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 perhaps. THE COURT: Wait, wait, wait one second. Your Honor, to say the deadline, the persons to whom mailing should be made. So it is incorrect, Your Honor, as a matter of record, that the notice did not inform class members of the date and mechanism for how to effect a proper objection. MS. MARTIN: Your Honor, if I could add something
09:35:46 09:35:33
And also, just so you know, Mr. Gilmore, on page 11, it explains, which I expect that you probably read, that you can make an objection at this hearing. Now -MS. MARTIN: Your Honor, if I may, perhaps it would
09:36:03
be helpful for the court to also understand that Mr. Gilmore knows class counsel quite well. ago asking for documents. He was in my office two days
09:36:18
He did not at that point indicate
that he did not understand the process and he has been in my office since this case has been filed I would say on at least four or five occasions. He was quite active in the group that
09:36:42
brought this claim to the lawyers. So we know Mr. Gilmore for some time. We've
corresponded with Mr. Gilmore on quite a number of occasions. And, Mr. Gilmore, when he was in my office two days ago to pick up some documents of his, did not indicate to anyone in my office that he did not understand the process. United States District Court
09:37:02
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 19 of 35
20 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 THE COURT: MR. GILMORE: Mr. Gilmore, any other questions? Well, Your Honor, I would like to say
09:37:06
on this SBA account, to my research of this and all of my records, I show at one time there was 23,000 participants in the SBA account. Now, that was prior to. Now, that was prior
09:37:25
to December 31, 1983.
And thereabouts on January 1 of 1984 the
number was down to 18,900 something as I recall. And to make the number -- numbers add up and to be correct for living, deceased and all that should be -- benefit from this, it's everybody that is after December 31, 1983. And to find out the exact number who is in ERISA, they should go to the Department of Labor, ERISA, in New York City, and get their original document of the SBA. And in that
09:38:01
original document it will tell you how many people who are eligible for the SBA in the future after 1984 because that was put into the money from our old severance account. On December 31, 1983, the severance account was terminated and the money was put into the new Garrett Secured Benefit Account and that account was sent to the Department of Labor, ERISA, in New York City and AlliedSignal -- I mean Allied did not become a part of the Signal companies until September 18, 1985. So the money was in the SBA account one
09:39:00 09:38:32
year and ten months, rounded off to say approximately ten years drawing interest. So the original SBA document should be got from the United States District Court
09:39:28
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 20 of 35
21 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 numbers. Department of Labor in New York City and, therefore, it would tell you exactly how many people have been in the SBA account. THE COURT: Do either counsel have a response to
09:39:31
Mr. Gilmore concerning this account with the SBA and whether or not there's any discrepancy between that account and the accounts that were reviewed at Honeywell and Garrett? MR. SHAPIRO: Your Honor, there has been vigorous
09:39:51
discovery conducted by the plaintiffs to ascertain the status of class member accounts at the time when the transfer occurred from the Garrett plan into the Signal plan. as an issue whatsoever, Your Honor. I don't see this
09:40:13
The class period reflects
the work done by both actuaries who, unique to this case, Your Honor, spent about four hours one afternoon in Mr. Banks' office in Philadelphia working through many of these data-driven types of questions. MS. MARTIN: I would also add, Your Honor, that
09:40:40
there's no claim in this lawsuit regarding a discrepancy between the persons who should be or should not be in the SBA account. And what are the claims in this lawsuit and what are not the claims in this lawsuit have been the subject of several conversations. MR. GILMORE: Your Honor, we're talking about
09:40:59
We're talking about individuals who have the So if we're talking numbers, we
09:41:11
SBA account and everything.
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 21 of 35
22 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 should talk the correct numbers. document. THE COURT: MR. BANKS: And Mr. Banks? Yes, Your Honor. Thank you.
09:41:24
We should get the original
09:41:15
The primary claims in this case, the anticutback claims address not the SBA account specifically but the pension plan, the separate defined benefit pension plan, and the interaction between those two plans. In many arrangements such as this where there are two separate plans, there are participants who are in one plan such as the SBA, a defined contribution savings plan, who would not be participants at the relevant time in the defined benefit pension plan. For example, employees who began to accumulate benefits in the SBA but who left active service before they vested on the defined benefit pension plan would still be account holders in the SBA but not participants in the pension plan. Not knowing Mr. Gilmore's objection in advance, of course we haven't had an opportunity to check those numbers; but that is a very likely explanation that there are SBA account holders who are not involved in the pension plan at the relevant time and, therefore, are not part of this case. THE COURT: MR. GILMORE: Mr. Gilmore, have you understood? Your Honor, he's talking about the
09:41:40
09:41:58
09:42:19
09:42:35
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 22 of 35
23 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 pension plan. Well, the SBA offset comes out of my pension so,
09:42:36
therefore, I should be able to talk about the SBA offset because that's my pension plan. The pension plan and the SBA, now, according to my research, the SBA is a separate account. December 31, 1983. Let's go back to
09:42:56
The old severance account was terminated,
and then the money was put into Garrett, not Allied's, not Honeywell's, new Garrett Secured Benefit Account. into an annuity. An annuity was State Street Bank. That was put And the
09:43:34
annuity was with State Street Bank. it in Prudential Insurance Company.
State Street Bank invested That annuity was locked in
for 25 years at 12.3 percent interest and it was at no cost to the participants for them to manage the funds. Now, when Allied come aboard in 1985 they made everything retroactive back to January 1, 1984. When that was locked in, guaranteed interest in an annuity for 25 years and nobody drawing interest for a year and 10 months and that money was put into the stock purchase plan. It was not put into the retirement plan. purchase plan. It was in a stock
09:44:32 09:44:02
Then in 1989 Allied took it out of the stock
purchase plan and put it into a separate plan by itself. How can you change an annuity? You can't. They had
no business changing it, taking it out of the stock purchase plan and putting it into a separate annuity. And then after
09:44:57
that they mingled it again around and played games with it and United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 23 of 35
24 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 me. then eventually ended up into the retirement plan. Therefore,
09:45:01
they could put an offset against it and be legal by the law and take it out of our pension. Now, he talks about pension, then I have to tell you exactly how and what went on and how it was taken out of our pension. THE COURT: Mr. Gilmore, I am wondering why,
09:45:16
particularly since you had numerous conversations with counsel, that you never told them precisely what your objection is. MR. GILMORE: Ma'am, I did, and they won't listen to I tried to -09:45:37
I tried to talk to them two or three times.
the counsel, Miss Susan Martin, is -- let me back up and let me tell you the whole situation. I was a founder of this lawsuit. I am the one that I am the
09:45:55
gathered up all of the information for this lawsuit. one that appointed the committee.
I wrote the books and
everything else and sent books to the ERISA, Department of Labor. I sent them to the Pension Guaranty Corporation. I
even sent them to -- the books to Security Criminal Investigation Department. books. I wrote all kinds of people and I even wrote a letter to the
09:46:21
I wrote my congressman.
president of the United States asking everybody to help because I didn't want to go through a private attorney because a private attorney, they want one-third of the money. I wanted The
09:46:41
the federal government involved to see what was going on. United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 24 of 35
25 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 federal government wouldn't do anything and this all happened before 9-11 because I was corresponding with Robin Paradoski (phonetic) at ERISA Department of Labor. The Trade Center got destroyed and the books got destroyed and I had to send her new ones. So this all started with me. And then right at the time when I was starting this, I had an age discrimination lawsuit against Honeywell. One of
09:47:00 09:46:45
those members that was against me represented Honeywell is sitting here in the courtroom today and that law firm and my attorney told me at that time if I ever brung up another lawsuit against Honeywell, they would take away back my settlement out of my age discrimination lawsuit. I told this
09:47:27
attorney, Ms. Susan Martin, that you cannot mix two lawsuits together. I wanted to be a part of this lawsuit. She says I
09:47:50
could not be a part of it because I would lose my age discrimination money. Therefore, I had to back out and I give -- and I appointed this committee. together. committee. This committee is the one that I put
09:48:10
I went to Susan Martin with all of my books and this She said I had to back out so I backed out. THE COURT: All right. Let me stop you.
Ms. Martin, can you respond to any of the allegations made by Mr. Gilmore? MS. MARTIN: Yes. I can tell you, quite frankly,
09:48:30
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 25 of 35
26 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Your Honor, that we've had no communication with Mr. Gilmore after the receipt of the notice and the communications and complaints he has referred to all predated the partial settlement in this case. From the time the partial settlement
09:48:51 09:48:32
notice went out to two days ago we have not heard one word from Mr. Gilmore, and he came to my office two days ago to pick up some documents. During the course of this litigation, we have met with Mr. Gilmore on several occasions to attempt to explain to him repeatedly and through correspondence what are the allegations in this case and what are not the allegations in this case, not necessarily to Mr. Gilmore's satisfaction, however, but we have determined what we thought were the viable claims. The claims that Mr. Gilmore is referring to, and I'm
09:49:03
not exactly sure what they are, have to do with the way the SBA offset was managed back in 1984 perhaps. We've endeavored to
09:49:25
explain that there is no claim in this lawsuit regarding that and that he was free to seek legal counsel on those issues that were not going to be litigated in this matter. I hope that answers the court's questions. THE COURT: And Mr. Rosenbaum? Thank you, Your Honor. Let me
09:49:50
MR. ROSENBAUM: address one point.
I think I'm the lawyer who Mr. Gilmore was
referring to back with his age discrimination lawsuit. Mr. Gilmore was one of 150 or more plaintiffs in an age United States District Court
09:50:06
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 26 of 35
27 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 discrimination litigation arising out of reductions in force that Honeywell conducted back in the early 1990s. I spent a day with Magistrate Vercamp and Mr. Gilmore up in Flagstaff at a court-ordered settlement conference and that ultimately led, as I recall, to a settlement agreement which has a release term. I haven't pulled it out to see
09:50:29 09:50:12
whether it impacts his entitlement to any moneys in this case or not. But it seems to me that's an individual issue with
respect to Mr. Gilmore that doesn't impact the validity of this class settlement. MS. MARTIN: Your Honor, if I may, I also would like Mr. Gilmore had nothing
09:50:49
to correct for the record a statement.
to do with the appointment of the named plaintiffs in this case. He had no role in appointment of named plaintiffs and to
09:51:02
the degree that he gave that impression, that would not be correct. THE COURT: MR. GILMORE: THE COURT: MR. GILMORE: Mr. Gilmore? Yes, ma'am. Anything else? Just that I might have more objections
09:51:13
or I might like to say something else as -- because you originally said, that this is a partial settlement at this time on the ERISA. THE COURT: The case is an ERISA case. It's a
09:51:37
partial settlement of the ERISA lawsuit.
There are remaining a
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 27 of 35
28 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 number of claims that are also ERISA issues. MR. GILMORE: to do with ERISA. THE COURT: MR. GILMORE: All of them. We don't know what those claims are.
09:51:58 09:51:44
What I mean is those claims that have
We don't know what -- you know, what I'm trying to say is the ERISA claims, are they SBA, to do with the SBA? Do they deal
with the Social Security or do they deal with strictly our benefits like health insurance, retirement, cost of living or something like that? We don't know what those claims are. I'm locked in the closet. We
09:52:21
are strictly in the dark. THE COURT:
Well, I have no doubt that both counsel
will explain to you as simply as possible what those claims are and it concerns your retirement account. I can't tell you and I don't think at this point, because it is a complex issue, what the -- how the account was created. And this SBA account, it seems to me, was melded into
09:52:44
your -- what is now characterized as a retirement plan account. I have no doubt because of this litigation over a long period of time that what has been represented to me that the nature of that count, the characterization of that count and the final determination of what that account is is accurate. MR. GILMORE: If the SBA is tied in to our retirement
09:53:18
account, then I will have to object because the SBA should not be tied in to our retirement. That's a separate account or
09:53:41
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 28 of 35
29 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 it's tied in to the stock -- it's not a separate account. The
09:53:48
SBA, by the books, by the information and by the ERISA document in New York City, the SBA is the stock -- is tied in to the stock purchase account. So, therefore, if it's tied in to my retirement, I would have to object. And I would like to have the opportunity
09:54:09
to listen to this partial settlement but also have the opportunity if I would object to anything. THE COURT: All right. And thank you, Mr. Gilmore.
09:54:28
I have considered everything that you have to say and I am taking that into account in determining whether or not to accept the settlement. MR. GILMORE: THE COURT: Okay. Thank you. All right.
I have no further questions concerning the
09:54:53
settlement and the request in the motion for a settlement and that's partial settlement. And I have found, having considered
everything, including the objection here today, that the partial settlement does meet the standards for approval under Rule 23. In particular, I have considered the strength of the plaintiffs' case, the risk, expense, complexity and likely duration of further litigation, the risk of maintaining class action status throughout the trial, the amount offered in the settlement, the extent of discovery completed and the stage of United States District Court
09:55:33 09:55:15
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 29 of 35
30 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 the proceedings, the experience and views of counsel, the presence of a governmental participant, and the reaction of the class members to the proposed settlement. I have also found, having reviewed it, that the notice is accurate and it is sufficient, was sufficient as much as possible to explain the nature of this settlement, to explain the nature of the lawsuit. And it is -- I have been cognizant of the fact that there is -- very cognizant of the fact that there is remaining a good portion of this lawsuit which will be vigorously litigated by both sides and will be finally resolved, I presume, by this court. Mr. Gilmore, I urge you to meet with counsel and as they have done in the past and to express your questions, additional questions, concerning the nature of the retirement fund and I have no question that they will make every effort to explain it to you and inasmuch as possible -- and they will eventually explain to you what you are entitled to based upon the very features of this settlement and the dates of 1984 and 2002 and what your employment was during that period of time. Is there anything else to bring to my attention on whether or not I accept this partial settlement? Ms. Martin? MS. MARTIN: No. Your Honor. There is the matter of
09:57:51 09:57:31 09:57:00 09:56:21 09:56:00 09:55:38
plaintiffs' application for attorneys' fees and costs and the United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 30 of 35
31 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 incentive awards to the named plaintiffs. MR. SHAPIRO: Other than that, no.
09:57:53
Your Honor, I have nothing further
except to note that because we represent defendants, we cannot speak with Mr. Gilmore. MS. MARTIN: But plaintiffs will endeavor once again
09:58:09
to meet with Mr. Gilmore and answer any questions that he has. THE COURT: All right. Thank you.
And the application for attorneys' fees and the award of compensation to the various class members who have participated in this litigation is -- the court also finds it appropriate and let me ask just a couple of questions. I noted that there was some difference in the amounts to be awarded to each of the class members and I was wondering how you made that determination. many hours they have worked. set forth the number of hours. How did you make a determination of what that should be for those who didn't set forth specific numbers? MS. MARTIN: Your Honor, we -- the plaintiffs did The amount to be distributed to the
10:01:07 10:00:13
Some of them set forth how
10:00:46
Some of them set forth -- do not
keep track of their hours.
named plaintiffs was based on the allocation of the actual time spent. I believe Mr. Scates says several thousand hours and we -- because the number continued to change during the class period. For example, in the last 60 days, Mr. Scates has spent United States District Court
10:01:31
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 31 of 35
32 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 an incredibly large amount of time answering inquiries. It was
10:01:36
counsel's decision not to put a specific number in because the number kept fluctuating. But Mr. Scates, who is here today along with Mr. West and Mr. Jones, spent the most amount of time in assisting this litigation. website. They established a website and have maintained the
10:01:50
They have responded to inquiries from class members.
They have collected information and documents and they have -and Mr. Scates in particular has served as the direct liaison between class counsel and the class members who are part of the group that was originally here in Arizona. He now has expanded
10:02:13
to being the liaison with many, many class members all over the country. So the amounts of fees were discussed with the named plaintiffs together. I believe all of the named plaintiffs
10:02:36
feel that the distribution is fair and reflects the actual time and effort expended as named plaintiffs. THE COURT: All right. Based upon the law, and this
is a common fund case, I find that the request and also that it is more than reasonable considering the cases that have been presented to me previously and that is that it is the standard amount for attorneys' fees which is only 25 percent. I find
10:03:01
the amount requested appropriate and reasonable and the amounts for the expenses and participation of the class members also reasonable and the order will be signed. United States District Court
10:03:22
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 32 of 35
33 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Now, finally, I am signing the order. I will sign
10:03:26
the order which has been proposed for approval of the settlement pursuant to Federal Rule of Civil Procedure 54(b). It sets forth, in addition to what I have already found, all of the findings that the court is to make. And in particular, it also makes clear, as has been part of this settlement, that there remains to be litigated a substantial amount of the lawsuit. So if you will -- what I have is a copy of the order. If you will provide the order so that I can make a signature on that order, I will do so. Is there anything else? MS. MARTIN: THE COURT: Not at this time, Your Honor. Counsel? Your Honor, nothing else on the class
10:04:44 10:04:31 10:03:50
MR. ROSENBAUM: settlement.
I did want to hand up the documents that the court
asked us to bring for in-camera inspection, so if I could do that. THE COURT: Okay. You have those and so we will
10:05:00
continue with the litigation. All right. MR. GILMORE: Mr. Gilmore? Your Honor, in this part we're talking
about right here, are we talking about the $35 million? THE COURT: MR. GILMORE: We're only talking about the $35 million. We're going to talk about -- are we
10:05:16
United States District Court
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 33 of 35
34 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court going to talk about the $35 million for this partial settlement? THE COURT: MR. GILMORE: Well, that's what I have approved. Because what I am -- what I am
10:05:30 10:05:18
objecting to, how do we arrive at the figure, how did we and where did we and who arrived at the figure of $35 million? THE COURT: The actuaries did on both sides based And it will be
upon only this portion of the settlement.
explained to you in detail by Ms. Martin and her law firm, and I urge you to contact them at the conclusion of this hearing and she will make time for you. All right. MR. GILMORE: THE COURT: This matter is adjourned. Your Honor -This matter is adjourned.
10:06:31 10:05:56
(Whereupon, these proceedings recessed at 10:06 p.m.) * * * * *
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 34 of 35
35 CV-04-0424-PHX-ROS, February 7, 2008 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 United States District Court s/Elaine M. Cropper _________________________________ Elaine M. Cropper, RDR, CRR, CCP
10:06:31
C E R T I F I C A T E
10:06:31
I, ELAINE M. CROPPER, do hereby certify that I am duly appointed and qualified to act as Official Court Reporter for the United States District Court for the District of Arizona.
10:06:31
I FURTHER CERTIFY that the foregoing pages constitute a full, true, and accurate transcript of all of that portion of the proceedings contained herein, had in the above-entitled cause on the date specified therein, and that said transcript was prepared under my direction and control, and to the best of my ability.
10:06:31
DATED at Phoenix, Arizona, this 20th day of February, 2008.
10:06:31
Case 2:04-cv-00424-ROS
Document 405
Filed 02/21/2008
Page 35 of 35