Case: 1:16-cv-08637 Document #: 4259 Filed: 02/02/21 Page 1 of 30 PageID #:289783
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`
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`IN THE UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
`
`
`
`Case No.: 1:16-cv-08637
`
`The Honorable Thomas M. Durkin
`
`
`IN RE BROILER CHICKEN ANTITRUST
`LITIGATION,
`
`
`This Document Relates To:
`
`THE DIRECT PURCHASER PLAINTIFF
`ACTION
`
`
`
`
`
`
`
`DIRECT PURCHASER PLAINTIFFS’ MEMORANDUM IN SUPPORT OF MOTION
`FOR PRELIMINARY APPROVAL OF THE SETTLEMENTS WITH DEFENDANTS
`PILGRIM’S PRIDE CORP., TYSON FOODS, INC., TYSON CHICKEN, INC., TYSON
`BREEDERS, INC., AND TYSON POULTRY, INC.
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`
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`
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`I.
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`II.
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`TABLE OF CONTENTS
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`Page
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`INTRODUCTION ...............................................................................................................1
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`LITIGATION BACKGROUND .........................................................................................3
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`III.
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`SUMMARY OF THE SETTLEMENT NEGOTIATIONS AND TERMS .........................5
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`A.
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`B.
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`The Pilgrim’s Settlement .........................................................................................8
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`The Tyson Settlement ..............................................................................................8
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`IV.
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`THE SETTLEMENTS SATISFY THE STANDARD FOR PRELIMINARY
`APPROVAL ........................................................................................................................9
`
`A.
`
`B.
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`The Settlements Resulted from Arm’s Length Negotiations .................................11
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`The Settlements Provide Substantial Relief to the Settlement Class .....................12
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`V.
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`THE COURT SHOULD CERTIFY THE PROPOSED SETTLEMENT CLASS ............13
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`A.
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`The Requirements of 23(a) Are Satisfied ..............................................................14
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`1.
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`2.
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`3.
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`4.
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`Numerosity .................................................................................................14
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`Common Questions of Law and Fact.........................................................15
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`Typicality ...................................................................................................15
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`Adequacy ...................................................................................................16
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`B.
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`The Settlement Class Satisfies Rule 23(b)(3) ........................................................17
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`VI.
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`THE COURT SHOULD APPROVE THE PROPOSED NOTICE PLAN .......................19
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`VII. THE COURT SHOULD SCHEDULE A FINAL APPROVAL HEARING ....................23
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`VIII. CONCLUSION ..................................................................................................................24
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`
`
`Cases
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Amchem Prods., Inc. v. Windsor,
`521 U.S. 591 (1997) .....................................................................................................13, 18, 19
`
`Armstrong v. Bd. of Sch. Dirs.,
`616 F.2d 305 (7th Cir. 1980) .....................................................................................................9
`
`In re AT&T Mobility Wireless Data Servs. Sales Litig.,
`270 F.R.D. 330 (N.D. Ill. 2010) ...............................................................................................11
`
`In re Catfish Antitrust Litig.,
`826 F. Supp. 1019 (N.D. Miss. 1993) ......................................................................................18
`
`City of Greenville v. Syngenta Crop Prot.,
`No. 3:10-CV-188, 2012 WL 1948153 (S.D. Ill. May 30, 2012) .................................19, 20, 23
`
`In re Cmty. Bank of N. Va.,
`418 F.3d 277 (3d Cir. 2005).....................................................................................................13
`
`In re Corrugated Container Antitrust Litig.,
`643 F.2d 195 (5th Cir. 1981) ...................................................................................................17
`
`E.E.O.C. v. Hiram Walker & Sons, Inc.,
`768 F.2d 884 (7th Cir. 1985) .....................................................................................................9
`
`In re Foundry Resins Antitrust Litig.,
`242 F.R.D. 393 (S.D. Ohio 2007) ............................................................................................18
`
`Gautreaux v. Pierce,
`690 F.2d 616 (7th Cir. 1982) .....................................................................................................9
`
`Goldsmith v. Tech. Solutions Co.,
`No. 92-CV-4374, 1995 WL 17009594 (N.D. Ill. Oct. 10, 1995) ............................................11
`
`Hughes v. Baird & Warner, Inc.,
`No. 76-CV-3929, 1980 WL 1894 (N.D. Ill. Aug. 20, 1980) ...................................................18
`
`Isby v. Bayh,
`75 F.3d 1191 (7th Cir. 1996) ...............................................................................................9, 10
`
`Kohen v. Pacific Inv. Mgmt.,
`571 F.3d 672 (7th Cir. 2009) ...................................................................................................17
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`
`
`In re Linerboard Antitrust Litig.,
`292 F. Supp. 2d 631 (E.D. Pa. 2003) .................................................................................11, 12
`
`In re Mercedes-Benz Antitrust Litig.,
`213 F.R.D. 180 (D.N.J. 2003) ..................................................................................................16
`
`In re Mid-Atlantic Toyota Antitrust Litig.,
`564 F. Supp. 1379 (D. Md. 1983) ............................................................................................10
`
`In re NASDAQ Market-Makers Antitrust Litig.,
`176 F.R.D. 99 (S.D.N.Y 1997) ................................................................................................10
`
`Owner-Operator Indep. Drivers’ Ass’n v. Allied Van Lines, Inc.,
`231 F.R.D. 280 (N.D. Ill. 2005) ...............................................................................................16
`
`Saltzman v. Pella Corp.,
`257 F.R.D. 471 (N.D. Ill. 2009) .........................................................................................15, 18
`
`Schmidt v. Smith & Wollensky LLC,
`268 F.R.D. 323 (N.D. Ill. 2010) ...............................................................................................14
`
`Thillens, Inc. v. Cmty. Currency Exch. Ass’n,
`97 F.R.D. 668 (N.D. Ill. 1983) .................................................................................................15
`
`Uhl v. Thoroughbred Tech. & Telecomms, Inc.,
`309 F.3d 978 (7th Cir. 2002) ...................................................................................................10
`
`Wal-Mart Stores, Inc. v. Dukes,
`564 U.S. 338 (2011) .................................................................................................................15
`
`In re Warfarin Sodium Antitrust Litig.,
`212 F.R.D. 231 (D. Del. 2002) ..................................................................................................9
`
`Statutes and Rules
`
`28 U.S.C. § 1715 ............................................................................................................................24
`
`Fed. R. Civ. P. 23(a) ..........................................................................................................14, 15, 16
`
`Fed. R. Civ. P. 23(b) ................................................................................................................17, 18
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`Fed. R. Civ. P. 23(c) ................................................................................................................19, 21
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`Fed. R. Civ. P. 23(e) ............................................................................................................9, 10, 19
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`Other Authorities
`
`Manual For Complex Litigation (Fourth) § 21.632 (2004) ...........................................................10
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`2 NEWBERG ON CLASS ACTIONS, § 11.24 (3d ed. 1992)............................................................9, 10
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`2 NEWBERG ON CLASS ACTIONS, § 11.40 (2d ed. 1985)................................................................11
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`4 NEWBERG ON CLASS ACTIONS, § 11.53 (4th ed. 2002) ..............................................................19
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`I.
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`INTRODUCTION
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`The Direct Purchaser Plaintiffs (“DPPs”) in this class action, alleging that Defendants
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`conspired to fix, raise, maintain, and stabilize the prices of Broiler chicken sold in the United
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`States, hereby seek preliminary approval of settlements with two additional groups of defendants:
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`Pilgrim’s Pride Corp. (“Pilgrim’s”), and Tyson Foods, Inc., Tyson Chicken, Inc., Tyson Breeders,
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`Inc., and Tyson Poultry, Inc. (collectively “Tyson”) (Pilgrim’s and Tyson collectively are referred
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`to as the “Settling Defendants”). Under the settlements (collectively, “Settlements” or “Settlement
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`Agreements”), Pilgrim’s will pay $75 million and Tyson will pay $80 million. Collectively, the
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`Settlements provide up to $155 million to the Settlement Class (as defined in Section V infra) from
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`Settling Defendants, bringing the total recovery to date to over $170 million. (See Declaration of
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`W. Joseph Bruckner in Support of Motion (“Bruckner Decl.”) at ¶ 8.) In addition to this monetary
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`relief, both Pilgrim’s and Tyson have agreed to provide meaningful cooperation, which may assist
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`DPPs in the prosecution of their claims against the remaining defendants in the case.
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`The Settlement Agreements with the Settling Defendants constitute the third set of DPP
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`settlements in this case, and also a third “step up” by market share point. This Court has granted
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`final approval to DPP settlements twice before in this matter; on November 16, 2018 with Fieldale
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`Farms Corporation (“Fieldale”), which provided a total financial settlement of $2.25 million; and
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`on October 27, 2020 with Peco Foods, Inc. (“Peco”), George’s, Inc., George’s Farms, Inc.
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`(collectively, “George’s”), and Amick Farms, LLC (“Amick”), which provided a total financial
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`settlement of $13,011,600.1 Each of the prior settlements were by very small market participants,
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`yet the respective Settlement Classes received substantial monetary relief reaching up to $2 million
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`per market share point for the Peco, George’s and Amick settlements. The Settlements with the
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`1 $4,964,600 from Peco, $4,097,000 from George’s, and $3,950,000 from Amick.
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`Settling Defendants bring the total amount recovered by DPPs from settling defendants to date to
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`$170,261,600. Accounting for currently anticipated opt-outs from prior settlements, Tyson and
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`Pilgrim’s collectively constitute 37.5% (Settlement Class definition, see Section V infra) of
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`commerce sold to DPPs. Therefore, these third round Settlements constitute a step-up in damages
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`to a range of approximately $4 million per market share point.
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`The ratcheted increases in the Settlement amounts—both on a gross and proportionate
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`basis—support approval of the Settlements. As a result of the substantial recovery obtained to date,
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`DPPs are now in a position, with the Court’s approval, to distribute the combined net settlement
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`proceeds to Settlement Class members.2 As detailed in this Motion for Preliminary Approval of
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`the Settlements (“Motion”) and the supporting documents, each Settlement was the product of the
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`DPPs’ efforts in litigating this case and extensive arm’s length negotiations among the parties and
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`with the assistance of experienced and nationally-renowned mediators. The Settling Defendants
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`have not admitted any liability concerning and continue to deny the legal claims alleged in DPPs’
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`Complaint, and have agreed to the Settlements to avoid the cost and burden of litigation and
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`eliminate the risk of an adverse judgment, but have done so without admission and while fully
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`reserving all rights. By contrast, the DPPs believe they would have prevailed at trial, but have
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`agreed to the Settlements to obtain the cooperation from the Settling Defendants and avoid the risk
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`of an adverse outcome during litigation or trial. Accordingly, these Settlements are the product of
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`compromise and reflect the independent decisions of the DPPs, on the one hand, and the Settling
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`Defendants, on the other hand, to resolve this matter.
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`2 As described in Section III, infra, of this Motion, DPP Class Counsel will move the Court
`separately to approve a plan to distribute net settlement proceeds to qualified members of the DPP
`Class.
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`Moreover, as described below, each of the Settlements is fair, reasonable, and adequate,
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`and satisfies all of the factors for preliminary approval. The DPPs respectfully request that the
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`Court grant their Motion, approve the proposed notice plan, and set a schedule for final approval
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`of the Settlements.
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`II.
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`LITIGATION BACKGROUND
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`This is an antitrust class action against certain producers of Broilers.3 DPPs allege that
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`Defendants combined and conspired to fix, raise, maintain, or stabilize prices of Broilers sold in
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`the United States. DPPs allege that Defendants implemented their conspiracy in various ways,
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`including via coordinated supply restrictions, sharing competitively sensitive price and production
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`information, and otherwise manipulating Broiler prices.
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`DPPs commenced this litigation on September 2, 2016, when they filed a class action
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`lawsuit on behalf of all direct purchasers of Broilers in the United States. (ECF No. 1.) Other class
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`plaintiffs and direct action plaintiffs subsequently filed similar actions. On October 14, 2016, the
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`Court appointed the undersigned law firms as Direct Purchaser Plaintiffs’ Interim Co-Lead and
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`Liaison Counsel. (ECF No. 144.) After extensive briefing by the parties, on November 20, 2017
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`the Court denied Defendants’ Motions to Dismiss the DPPs’ First Consolidated Amended
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`Complaint (“FCAC”). (ECF No. 541.) DPPs filed their operative Fifth Consolidated Amended
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`Complaint on October 23, 2020. (ECF No. Nos. 3919 (Redacted) and 3935 (Unredacted).)
`
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`3 Consistent with the Complaint, the term Broilers is defined in the Settlement Agreements as
`“chickens raised for meat consumption to be slaughtered before the age of 13 weeks, and which
`may be sold in a variety of forms, including fresh or frozen, raw or cooked, whole or in parts, or
`as a meat ingredient in a value added product, but excluding chicken that is grown, processed, and
`sold according to halal, kosher, free range, or organic standards.” (See Settlement Agreements
`§ 1.d.) The Settling Defendants agree to this definition only for purposes of approving the
`Settlements and certifying the proposed Settlement Class and otherwise reserve all rights,
`arguments and defenses with respect to this definition. (Id.)
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`DPPs performed a thorough investigation and engaged in extensive discovery prior to
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`reaching the Settlements. These efforts commenced prior to the filing of DPPs’ initial complaint
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`and included pre-litigation investigation into Defendants’ conduct that formed the basis of the
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`DPPs’ complaints. (See Bruckner Decl. ¶ 4.) In denying Defendants’ motions to dismiss, the Court
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`held that these “alleged factual circumstances plausibly demonstrate that [Defendants’] parallel
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`conduct was a product of a conspiracy.” (See ECF No. 541, p. 18.) During the litigation, DPPs
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`obtained responses to multiple sets of interrogatories, and received over 8 million documents in
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`response to their requests for production and third party subpoenas. (See Bruckner Decl. ¶ 5.)
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`DPPs, along with other plaintiffs, have taken over 100 depositions of the Defendants and third
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`parties. (Id. ¶ 6.) DPPs have also provided responses to written discovery, produced documents,
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`and appeared for depositions noticed by the Defendants. (Id. ¶ 7.)
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`On June 21, 2019, the United States Department of Justice (“DOJ”) moved to intervene in
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`the civil case and stay the depositions of Defendants, pending the DOJ’s criminal investigation
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`into the Broiler industry. (ECF No. 2268.) On June 27, 2019, the Court granted an initial stay on
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`the depositions of Defendants until September 27, 2019. (ECF No. 2302.) On October 16, 2019,
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`the Court extended the stay on the depositions of Defendants (with certain exceptions) until June
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`27, 2020. (ECF No. 3153.) Among the criminal defendants are three Pilgrim’s executives,
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`including Pilgrim’s former CEOs Jayson Penn and William Lovette. Furthermore, Pilgrim’s itself
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`pled guilty to criminal price-fixing charges and agreed to pay $110.5 million in criminal penalties.4
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`Tyson has announced that “it took appropriate actions to address the internal issues and has been
`
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`4 Pilgrim’s Announces Agreement with DOJ Antitrust Division, PILGRIM’S PRIDE CORP.
`(2020),
`https://ir.pilgrims.com/news-releases/news-release-details/pilgrims-announces-
`agreement-doj-antitrust-division (last visited Feb. 1, 2021).
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`fully cooperating with the DOJ as part of its application for leniency under the DOJ’s Corporate
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`Leniency Program.”5
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`Prior to the Court’s ruling on Defendants’ motions to dismiss, Plaintiffs reached an “ice-
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`breaker” settlement with Defendant Fieldale. Fieldale, a small producer, agreed to pay $2.25
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`million, provide cooperation including attorney and witness proffers, and produce certain
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`documents to DPPs. (See Bruckner Decl. ¶ 8.) The Court granted final approval to the Fieldale
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`settlement on November 18, 2018. (See ECF No. 1414.) Plaintiffs later reached settlements with
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`Defendants Amick, Peco, and George’s. Like Fieldale, these three Defendant groups are small
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`producers. (See Bruckner Decl. ¶ 8.) In addition to providing cooperation to DPPs, Peco paid
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`$4,964,600, George’s paid $4,097,000, and Amick paid $3,950,000. (See Id.) The Court granted
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`final approval of the Amick, Peco, and George’s settlements on October 27, 2020. (See ECF Nos.
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`3944 (Peco and George’s), 3945 (Amick).)
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`III.
`
`SUMMARY OF THE SETTLEMENT NEGOTIATIONS AND TERMS
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`The Settlement Agreements with Pilgrim’s and Tyson were each reached through
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`confidential, protracted, arm’s length settlement negotiations. (See Bruckner Decl. ¶¶ 9-18.) The
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`Pilgrim’s settlement was the product of a negotiation process that commenced in December 2020.
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`(Id. ¶ 9.) The Tyson settlement was negotiated separately in a process that started in December
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`2019. (Id. ¶ 12.) The core settlement terms are substantially similar in each of the Agreements, and
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`the settlement amounts reflect the size and other factors affecting these Settling Defendants. Each
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`of the Settlements represents an increase—on a proportionate and gross basis—from the prior
`
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`5 Tyson Foods’ Statement on Department of Justice Indictment in Broiler Chicken
`Investigation, TYSON FOODS,
`INC.
`(2020),
`https://www.tysonfoods.com/news/news-
`releases/2020/6/tyson-foods-statement-department-justice-indictment-broiler-chicken (last visited
`Feb. 1, 2021).
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`settlements. Collectively the Settlements provide up to $155 million in recovery to the Settlement
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`Class,6 and bring the total amount recovered by DPPs to $170,261,600.
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`In addition to monetary relief, the Settling Defendants will: (1) cooperate with DPPs in a
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`manner that is consistent with the provisions of the Antitrust Criminal Penalty Enhancement and
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`Reform Act of 2004 (“ACPERA”), if applicable; (2) provide an attorney proffer regarding the
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`principal facts known to Settling Defendants relevant to the alleged conduct at issue in this Action;
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`(3) use reasonable efforts to authenticate documents and assist DPPs to understand previously-
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`produced structured data, (4) producing live witnesses at trial; and (5) not oppose the DPPs’
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`depositions of specifically-named current and former executives. (See Pilgrim’s Settlement,
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`attached as Exhibit “A” to Bruckner Decl., § 10; Tyson Settlement, attached as Exhibit “B” to
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`Bruckner Decl., § 10.)
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`In exchange, the DPPs and the proposed Settlement Class will separately release certain
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`Released Claims (as defined in the Settlement Agreements) against the Released Parties (as
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`defined in the Settlement Agreements). (See Id. §§ 14, 15.) The releases do not extend to other
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`Defendants or to unrelated claims that are not the subject matter of the lawsuit. (Id.) Each of the
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`Settlement Agreements contains a reduction mechanism that could result in a reduction of the
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`settlement amount if the opt-outs exceed agreed-upon thresholds based on sales attributed to opt-
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`outs of previous settlements with DPPs and entities who have filed direct action lawsuits. (See
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`Pilgrim’s Settlement § 19; Tyson Settlement § 21.) Neither the Pilgrim’s nor Tyson Settlement
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`contains a termination provision based on opt-outs. DPPs will report on the number of opt-outs
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`and the final amount recovered by the Settlement Class prior to final approval. Finally, each
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`Settlement refers to a judgment-sharing agreement among certain Defendants and, consistent with
`
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`6 The “Settlement Class” definition is set forth in Section V infra herein.
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`that agreement (per the Settling Defendants), each Settlement removes from the calculation of a
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`damages award resulting from any verdict and Final Judgment DPPs may obtain against any other
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`Defendant who is a signatory to Defendants’ judgment-sharing agreement certain amounts
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`intended to reflect the Settling Defendants’ approximately proportionate sales of Broilers
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`(Pilgrim’s Settlement § 38; Tyson Settlement § 40). Thus, any other such Defendant against whom
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`DPPs obtain a verdict and judgment would not be jointly and severally liable for Tyson or Pilgrim’s
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`share of damages removed pursuant to the judgment-sharing agreement resulting from sales to the
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`DPP Class.
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`Subject to the approval and direction of the Court, the settlement amounts (with accrued
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`interest) will be used to: (1) pay for notice costs and costs incurred in the administration and
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`distribution of the Settlements; (2) pay taxes and tax-related costs associated with the escrow
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`account7 for proceeds from the Settlements; (3) make a distribution to Settlement Class Members
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`in accordance with a to-be-filed proposed plan of distribution; (4) pay attorneys’ fees to Counsel
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`for the Settlement Class, as well as costs and expenses, that may be awarded by the Court; and (5)
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`pay incentive awards to the named Plaintiffs. DPPs will move the Court to approve a plan to
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`distribute net settlement proceeds to qualified class members, and to award attorneys’ fees (not to
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`exceed 33⅓%), reimbursement of litigation expenses (not to exceed $4.5 million), and service
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`awards to the named Class Representatives (not to exceed $25,000 per Class Representative) at an
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`appropriate date in the future, but at least two weeks before the last date to opt out or object to the
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`Settlements.8
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`7 Plaintiffs respectfully request that the Court appoint US Bank as the Escrow Agent.
`8 The Settlements further provide for the use of up to $500,000 ($250,000 per Settling
`Defendant as authorized by the Settlement Agreements, § 6.c) of Settlement proceeds for the cost
`of notice without seeking further approval from the Court.
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`A.
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`The Pilgrim’s Settlement
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`DPPs’ settlement negotiations with Pilgrim’s commenced in December 2020. (See
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`Bruckner Decl. ¶ 9.) After discussions between counsel throughout December 2020, on January 5,
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`2021, DPPs and Pilgrim’s engaged in a mediation with Professor Eric Green, a nationally
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`renowned mediator. (Id. ¶ 10.) The parties were unable to reach an agreement during the face-to-
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`face videoconference mediation session, but continued discussions and ultimately reached an
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`agreement. (Id.) Thereafter, the parties continued to negotiate (with the assistance of Professor
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`Green) regarding the settlement terms, ultimately executing the Pilgrim’s Settlement Agreement
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`on January 19, 2021. See Bruckner Decl. ¶ 11.)
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`The Pilgrim’s Settlement requires Pilgrim’s to pay up to $75 million. (See Pilgrim’s
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`Settlement § 9.)
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`B.
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`The Tyson Settlement
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`DPPs’ settlement negotiations with Tyson commenced in December 2019. (See Bruckner
`
`Decl. ¶ 12.) After engaging in initial discussions the parties agreed to engage Judge Daniel
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`Weinstein (ret.), another nationally renowned mediator. The settlement negotiations with Tyson
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`were thorough and extensive. With the assistance of Judge Weinstein, DPPs and Tyson exchanged
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`mediation briefs, made presentations addressing the merits of the case, and exchanged settlement
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`offers and demands throughout the course of 2020. This process included numerous conferences
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`with Judge Weinstein and his team, a face-to-face videoconference mediation, as well as other
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`discussions. (Id. ¶ 13) None of these efforts resulted in a settlement, and there were times when it
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`appeared that the parties had reached an impasse. (Id.) On January 6, 2021, DPPs and Tyson
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`attended another face-to-face videoconference mediation with Judge Weinstein. (Id. ¶ 14.) The
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`parties were unable to reach an agreement during the January 6, 2021 session; however, the parties
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`continued to negotiate through the mediator. (Id.) On Saturday, January 9, 2021, the parties
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`reconvened via face-to-face videoconference with Judge Weinstein and, after hours of further
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`negotiating, an agreement was reached. (Id. ¶ 15.) Thereafter, the parties continued to negotiate
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`regarding the settlement terms, ultimately executing the Tyson Settlement Agreement on January
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`23, 2021. (See Tyson Settlement; see also Bruckner Decl. ¶ 16.)
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`The Tyson Settlement Agreement requires Tyson to pay up to $80 million. (See Tyson
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`Settlement § 9.)
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`IV.
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`THE SETTLEMENTS SATISFY THE STANDARD FOR PRELIMINARY
`APPROVAL
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`There is an overriding public interest in settling litigation, and this is particularly true in
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`class actions. See Isby v. Bayh, 75 F.3d 1191, 1196 (7th Cir. 1996) (“Federal courts naturally favor
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`the settlement of class action litigation.”); E.E.O.C. v. Hiram Walker & Sons, Inc., 768 F.2d 884,
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`888-89 (7th Cir. 1985), cert. denied, 478 U.S. 1004 (1986) (noting that there is a general policy
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`favoring voluntary settlements of class action disputes); Armstrong v. Bd. of Sch. Dirs., 616 F.2d
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`305, 312 (7th Cir. 1980) (“It is axiomatic that the federal courts look with great favor upon the
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`voluntary resolution of litigation through settlement.”), overruled on other grounds, Felzen v.
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`Andreas, 134 F.3d 873 (7th Cir. 1998). Class action settlements minimize the litigation expenses
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`of the parties and reduce the strain such litigation imposes upon already scarce judicial resources.
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`Armstrong, 616 F.2d at 313 (citing Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977)).
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`However, a class action may be settled only with court approval. Fed. R. Civ. P. 23(e).
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`“The first step in district court review of a class action settlement is a preliminary, pre-
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`notification hearing to determine whether the proposed settlement is ‘within the range of possible
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`approval.’” 2 NEWBERG ON CLASS ACTIONS, § 11.24 (3d ed. 1992); see also Gautreaux v. Pierce,
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`690 F.2d 616, 621 n.3 (7th Cir. 1982); Armstrong, 616 F.2d at 314; In re Warfarin Sodium Antitrust
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`947717.11
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`Case: 1:16-cv-08637 Document #: 4259 Filed: 02/02/21 Page 15 of 30 PageID #:289797
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`
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`Litig., 212 F.R.D. 231, 254 (D. Del. 2002); In re NASDAQ Market-Makers Antitrust Litig., 176
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`F.R.D. 99, 102 (S.D.N.Y 1997). Generally, before directing notice to the class members, a court
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`makes a preliminary evaluation of the proposed class action settlement pursuant to Rule 23(e). The
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`Manual For Complex Litigation (Fourth) § 21.632 (2004) explains:
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`Review of a proposed class action settlement generally involves two
`hearings. First counsel submit the proposed terms of settlement and
`the judge makes a preliminary fairness evaluation . . . The Judge
`must make a preliminary determination on
`the
`fairness,
`reasonableness and adequacy of the settlement terms and must direct
`the preparation of notice of the . . . proposed settlement, and the date
`of the [formal Rule 23(e)] fairness hearing.
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`A proposed settlement falls within the “range of possible approval” when it is conceivable
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`that the proposed settlement will meet the standards applied for final approval. See Newberg,
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`§ 11.25, at 38-39 (quoting Manual for Complex Litigation, §30.41 (3d ed.)). The standard for final
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`approval of a class action settlement is whether the proposed settlement is fair, reasonable, and
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`adequate. See Fed. R. Civ. P. 23(e); see also Uhl v. Thoroughbred Tech. & Telecomms, Inc., 309
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`F.3d 978, 986 (7th Cir. 2002); Isby, 75 F.3d at 1198-99. When granting preliminary approval, the
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`court does not conduct a “definitive proceeding on the fairness of the proposed settlement,” and
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`the court “must be careful to make clear that the determination permitting notice to members of
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`the class is not a finding that the settlement is fair, reasonable and adequate.” In re Mid-Atlantic
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`Toyota Antitrust Litig., 564 F. Supp. 1379, 1384 (D. Md. 1983) (quoting In re Montgomery Cty.
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`Real Estate Antitrust Litig., 83 F.R.D. 305, 315-16 (D. Md. 1979)). That determination must await
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`the final hearing when the court can assess the fairness, reasonableness, and adequacy of the
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`proposed settlement.
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`The requirement that class action settlements be fair is designed to protect against collusion
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`among the parties. In re Mid-Atlantic Toyota Antitrust Litig., 564 F. Supp. at 1383. There is usually
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`an initial presumption that a proposed settlement is fair and reasonable when it was the result of
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`947717.11
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`arm’s length negotiations. See 2 NEWBERG ON CLASS ACTIONS, § 11.40 at 451 (2d ed. 1985);
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`Goldsmith v. Tech. Solutions Co., No. 92-CV-4374, 1995 WL 17009594, at *3 n.2 (N.D. Ill. Oct.
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`10, 1995) (“[I]t may be presumed that the agreement is fair and adequate where, as here, a proposed
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`settlement is the product of arm’s length negotiations.”). Settlements that are proposed by
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`experienced counsel and result from arm’s length negotiations are entitled to deference from the
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`court. See, e.g., In re Linerboard Antitrust Litig., 292 F. Supp. 2d 631, 640 (E.D. Pa. 2003) (“A
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`presumption of correctness is said to attach to a class settlement reached in arms-length
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`negotiations between experienced, capable counsel after meaningful discovery.”) (quoting
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`Hanrahan v. Britt, 174 F.R.D. 356, 366 (E.D. Pa. 1997)). The initial presumption in favor of such
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`settlements reflects courts’ understanding that vigorous negotiations between seasoned counsel
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`protect against collusion and advance the fairness concerns of Rule 23(e). In making the
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`determination as to whether a proposed settlement is fair, reasonable, and adequate, the Court
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`necessarily will evaluate the judgment of the attorneys for the parties regarding the “strength of
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`plaintiffs’ case compared to the terms of the proposed settlement.” In re AT&T Mobility Wireless
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`Data Servs. Sales Litig., 270 F.R.D. 330, 346 (N.D. Ill. 2010