Jones v. Singing River Health Services Foundation, et al,

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF MISSISSIPPI Case No. 1:14-cv-00447-LG-RHW

  1. What is this lawsuit about?

    1. In October 2014, Singing River Health System (“SRHS”) announced that it had not made a contribution to the Singing River Health System Employees’ Retirement Plan and Trust (“Plan” or “Trust”) since 2009.  On January 15, 2015, the United States District Court for the Southern District of Mississippi (“Court”) entered an order temporarily prohibiting any action that would affect the operation or status of the Plan.  The Plaintiffs filed suit seeking recovery of the missed contributions that they alleged SRHS should have been making to the Plan on an annual basis between 2009 and 2014. 

      The Plaintiffs asserted contracts clause claims filed pursuant to the United States Constitution and Mississippi Constitution; takings clause claims filed pursuant to the United States Constitution and Mississippi Constitution; Section 1983 claims; a breach of contract claim; an accounting claim; a declaratory judgment claim; a claim for injunctive relief; claims of fraud, intentional fraudulent misrepresentation, and deceit; claims filed pursuant to ERISA; breach of fiduciary duty; equitable and promissory estoppel claims; claims for constructive trust; and claims for Mississippi Uniform Trust Code violations.

  2. What is a class action and who is involved?

    1. In a class action lawsuit, one or more people called “Class Representatives” (in this case Thomas Jones, Joseph Charles Lohfink, Sue Beavers, Rodolfoa Rel, and Hazel Reed Thomas) sue on behalf of other people who have similar claims.  The people together are a “Class” or “Class Members.”  The people who sued -- and all the Class Members like them -- are called the Plaintiffs.  The companies they sued (in this case SRHS and other entities) are called the Defendants.  One court resolves the issues for everyone in the Class.

  3. What is the proposed settlement?

    1. You can find the full text of the proposed settlement and all the exhibits that it references here.

      The parties to the lawsuit have agreed to settle after extensive investigation and negotiation.  Under the proposed settlement, SRHS has agreed to pay $149,950,000 to the Singing River Health System Employees’ Retirement Trust over 35 years (“Settlement Payment”).  This amount is equivalent to the Plaintiffs’ calculation of the present value of the missed contributions that SRHS failed to make to the Trust between 2009 and 2014. As part of the settlement, Jackson County will pay $13,600,000 to SRHS between 2016 and 2024 to support indigent care and principally to prevent default on a bond issue by supporting the operations of SRHS.  Settlement Class Counsel will also ask the Court to approve fees not to exceed $6,450,000 and out-of-pocket expenses not to exceed $125,000.  If the Court grants Settlement Class Counsel’s request, the fees and expenses will be paid by SRHS in addition to the Settlement Payments to Class Members and will not be deducted from the Settlement Payments. 

      Should SRHS default on its obligation to make a payment to the Trust at any time over the next 35 years pursuant to the schedule outlined in the Settlement, there shall be a summary proceeding in the Jackson County Chancery Court (“Chancery Court”) through which the Chancery Court may enter judgment on 10 days’ notice in favor of the Trust and against SRHS for the unpaid balance of the Settlement Payment.

      The Chancery Court has appointed a Special Fiduciary for the Trust (“Special Fiduciary”), whose sole fiduciary responsibility is, and shall be, to the Trust. The settlement provides that the Special Fiduciary will report to the Chancery Court on a quarterly basis regarding the financial condition of SRHS, the pension plan and the status of the repayment schedule.

      The Settlement Payment may require modification of the Plan to equitably distribute the benefits paid. The settlement provides that any adjustment to the Plan can only be done with Special Fiduciary recommendation and Chancery Court approval after sixty (60) days’ notice to the Class Members and opportunity for hearing. If the Chancery Court orders any modification and/or termination of the Plan, then the Class Members will be bound by the Court’s/Special Fiduciary’s findings, subject to their rights to appeal any order of said court. 

      This Settlement does not change the terms of the Plan distributions that are unrelated to this Settlement, which may be modified or terminated only with the approval of the Special Fiduciary and the Chancery Court.  Except as provided in the Settlement, the current status of the Plan shall remain unchanged until the Chancery Court orders otherwise. 

      SRHS will also pay Settlement Class Counsel’s fees and expenses, subject to approval of the Court.  SRHS also agreed to pay incentive rewards totaling $12,500, to be split between the Representative Plaintiffs in each of the federal court actions and some of the plaintiffs in the Jackson County Chancery Court actions.

  4. Who are the individuals and/or entities being released?

    1. As part of this Settlement, all claims, rights and causes of action, damages, losses, liabilities and demands of any nature whatsoever, whether known or unknown, that are, could have been or might in the future be asserted by the Trust, any Plaintiffs or any member of the Settlement Class (whether directly, representatively, or in any other capacity), against “Released Persons,” in connection with or that arise out of any acts, conduct, facts, transactions or occurrences, alleged or otherwise asserted or that could have been asserted related to the failure to fund the Trust and/or management or administration of the Plan shall be compromised, settled, released and discharged with prejudice.  The “Released Persons” are:

      1. Jackson County, Mississippi and the Jackson County Board of Supervisors;
       
      2. Singing River Health System, its current and former Board of Trustees (individually and in their official capacities), agents, servants and/or employees;
       
      3. Singing River Health Services Foundation, Singing River Health System Foundation f/k/a Coastal Mississippi Healthcare Fund, Inc., Singing River Hospital System Foundation, Inc., Singing River Hospital System Benefit Fund, Inc., and Singing River Hospital System and all of their current and former employees, agents, and inside and outside counsel and their firms; and
       
      4. Current and former Trustees of the Trust (in their individual and official capacities).
  5. Am I part of this class?

    1. The Lawsuit is being settled on behalf of a class that is defined as follows:

      All current and former employees of Singing River Health System who participated in the Singing River Health System Employees’ Retirement Plan and Trust, including their spouses, alternate payees, death beneficiaries, or any other person to whom a plan benefit may be owed.

  6. What happens if I do nothing at all?

    1. You don’t have to do anything now.  If you are in the Class, you will be entitled to the settlement benefits described above.  You will also be legally bound by all of the orders the Court issues and judgments the Court makes in this class action.

  7. Do I have a lawyer in this case?

    1. The Court decided that the law firms of Reeves & Mestayer, PLLC and Cunningham Bounds, LLC are qualified to represent the Class.  The law firms are called “Settlement Class Counsel.”  More information about these law firms, their practices, and their lawyers’ experience is available at www.rmlawcall.com and www.cunninghambounds.com.

  8. How will the lawyers for the class get paid?

    1. Settlement Class Counsel will ask the Court to approve fees not to exceed $6,450,000 and out-of-pocket expenses not to exceed $125,000.  If the Court grants Settlement Class Counsel’s request, the fees and expenses will be paid by SRHS in addition to the Settlement Payments to Class Members and will not be deducted from the Settlement Payments.  The fee petition, a copy of which can be obtained by contacting Settlement Class Counsel, will be available for review by April 1, 2016.

  9. Who will determine if the settlement is fair?

    1. The Court has ordered that a hearing be held on May 16, 2016, at 10:00 a.m. in the Courthouse for the United States District Court for the Southern District of Mississippi, 2012 15th Street, Suite 814, Gulfport, MS 39501, to determine whether the proposed settlement is fair, reasonable and adequate; whether it should be approved by the Court; whether judgment should be entered dismissing the Lawsuit with prejudice; and the amount of attorneys’ fees and costs to be awarded to Settlement Class Counsel.  The settlement hearing may be continued from time to time by the Court.

  10. What do I do if I want to object to the settlement?

    1. The Four Questions below are the only questions that the Court will consider and about which it will receive additional testimony and evidence at the supplemental Final Fairness Hearing.  No other questions will be considered.  All other factual or legal issues decided by the Fifth Circuit establish the “law of the case” and must be followed in all later proceedings in the same case in the lower court.  Therefore, the Court cannot and will not consider any objections to the proposed settlement that fall outside of the Four Questions. 

       

      A Settlement Class Member wishing to be heard on the subjects addressed by the Four Questions must file a written response. Your written response must be postmarked on or before January 5, 2018.  Be sure to follow the instructions in the Supplemental Class Notice with respect to what must be included in your response.

       

      The Fifth Circuit Court of Appeals has asked the United States District Court for the Southern District of Mississippi to give additional consideration to these four questions (“Four Questions”) in deciding if it should approve the proposed settlement:

       

      1.   How, and how much, the future stream of SRHS’s payments into the Plan, together with existing Plan assets and prospective earnings, will intersect with future claims of Plan participants, including, but not limited to, what effect the Settlement has on current retirees;

       

      2.   What are SRHS’s future revenue projections, showing dollar amounts, assumptions and contingencies, from which a reasonable conclusion is drawn that SRHS has the financial ability to complete performance under the settlement;

       

      3.   Why any payments from litigation involving KPMG, Transamerica or related entities are permitted to defray SRHS’s payment obligation rather than supplement the settlement for the benefit of class members; and

       

      4.   Why class counsel’s fees should not be tailored to align with the uncertainty and risk that class members will bear?

       

      Any member of the settlement class who wants to be heard on the subjects addressed by the Four Questions may appear in person or through counsel, at his or her own expense, at the Supplemental Fairness Hearing to present any evidence or argument that may be proper and relevant. However, no member of the settlement class shall be heard and no papers, briefs, pleadings, or other documents submitted by any member of the settlement class shall be received and considered by the Court unless such member of the settlement class shall both file with the Court and mail to Settlement Class Counsel and counsel for the defendant Singing River Health System, at the addresses designated in the class notice, a written response that includes (a) your name and address, and, if applicable, the name, address, and telephone number of your attorney; (b) a notice of whether you intend to appear; (c) a statement of membership in the settlement class; (d) the specific grounds for the objection and any reasons that such member of the settlement class desires the Court to consider.  Your objection must be accompanied by copies of any supporting papers or briefs you intend to submit in support of your objection. Your objection must also include, if applicable: (1) the names of any attorney(s) that will appear on behalf of the objector; (2) the names of any lay witnesses that will present testimony on behalf of the objector at the Supplemental Fairness Hearing; (3) a list of any evidence that the objector wishes to present at the Supplemental Fairness Hearing; (4) and copies of reports and curricula vitae of any expert witnesses that will appear on behalf of the objector at the Supplemental Fairness Hearing. Objections must be filed with the Court and mailed to Settlement Class Counsel and Defendants’ Counsel at the addresses listed in the Supplemental Class Notice. 

       

      ANY CLASS MEMBER WHO DOES NOT OBJECT IN THE WAY DESCRIBED ABOVE SHALL BE DEEMED TO HAVE WAIVED SUCH OBJECTION AND SHALL NOT HAVE ANY RIGHT TO OBJECT TO THE FAIRNESS OR ADEQUACY OF THE SETTLEMENT.

  11. Where do I mail my written objection and any supporting documents?

    1. You must mail your objection (as described in FAQ No. 10) and all supporting documentation to all of the following:

      Court: Clerk of the Court, U.S. District Court, 2012 15th Street, Suite 814, Gulfport, MS 39501

      Settlement Class Counsel: Jim Reeves, Reeves & Mestayer, 160 Main Street, Biloxi, MS 39530

      Defense Counsel: A. Kelly Sessoms, Dogan & Wilkinson, 734 Delmas Avenue, Pascagoula, MS 39568-1618

  12. How did SRHS get into this financial difficulty in the first place?

    1. There were a number of factors in the last several years that contributed to SRHS’s financial difficulties.  First, there has been a lot of pressure on the healthcare industry.  The recession began in 2008, which put a financial strain on all companies, SRHS included.  This financial strain was worsened by the fact that SRHS expends significant sums for indigent care while receiving no public tax dollars to offset those losses; simultaneously, Mississippi refused to expand Medicaid, leaving SRHS to absorb the cost of that care.  For example, SRHS paid nearly $156 million in unreimbursed care in 2014 without the help of any taxpayer funds.  Second, both private and government health insurers reduced the amounts they were willing to reimburse hospitals like SRHS for specific services.  Third, SRHS made some large capital expenditures for improvements such as the neurology building, the health complex, and federally-mandated improvements to SRHS's medical record information system.  SRHS took out bonds that were accompanied by covenants that put additional financial pressure on the hospital.  These covenants required: (1) a debt service coverage ratio of 1.20 (i.e., net income available for debt service is equal to 120% of the maximum annual debt service requirement); and (2) cash on hand equal to 65 days of operating expenses.  Fourth, SRHS’s accounts receivable were overstated by approximately $88 million.  While previous estimates stated SRHS that it could collect $88 million owed to it by patients who had received healthcare services but had not yet paid their bills, those estimates failed to factor in the effect that deaths, bankruptcies and certain government-restricted reimbursements would have on the potential for collectability of those outstanding amounts.  When SRHS discovered the error, it realized that it was in much worse financial condition than it had previously projected. 

  13. Why does the proposed settlement only refund missed contributions to the Plan starting in 2009? What about missed contributions to the Plan before 2009?

    1. The SRHS audited financial statements show that the Plan had a net pension asset as of September 30, 2003, and had a 100% funded ratio as of the October 1, 2004 actuarial valuation date.  Actuaries for the Plan estimated that the Annual Required Contributions (“ARC”) for years ending September 30, 2005 through September 30, 2008 were $9,557,594 in total.  SRHS contributed $10,500,000 to the Plan in total during this same period.  Thus, SRHS shorted the Plan in some years but made up for it in others during this time period.  There was no sustained underfunding until 2009.

      Source: SRHS Audited Financial Statements September 30, 2005 and 2004, Note 8(d) “Schedule of Funding Progress – Unaudited Required Supplementary Information” (SRHS-JONES 1584).

      Source: SRHS Audited Financial Statements September 30, 2006 and 2005, Note 8(b) “Annual Pension Cost and Net Pension Liability” (SRHS-JONES 1629).

      Source: SRHS Audited Financial Statements September 30, 2008 and 2007, Note 8(b) “Annual Pension Cost and Net Pension Liability” (SRHS-JONES 1719). 

  14. How did you calculate the amount of Annual Required Contributions (“ARC”) that SRHS should have contributed to the Plan between 2009 and 2014?

    1. The last contribution SRHS made to the Plan was in FY 2009 in the amount of $2,000,000.  The ARC for FY 2009 was $4,522,625, which made FY 2009 the first year that SRHS fell significantly short of meeting its annually required contribution after being nearly 100% funded.

      Source: SRHS Audited Financial Statements September 30, 2009 and 2008, Note 8(b) “Annual Pension Cost and Net Pension Liability” (SRHS-JONES 1766).

       

      We began the calculation of unfunded contributions with the September 30, 2009 fiscal year, and determined from the audited financial statements that from September 30, 2009 – September 30, 2014, SRHS had $55,003,058 in annual required contributions to the Plan.  SRHS contributed $2,000,000 to the Plan during this same period, leaving a deficit of $53,003,058. 

       

      The actuarially determined Annual Required Contribution includes an element of amortization of prior year funding shortfalls.  Therefore, the increase in the ARCs due to this amortization had to be removed from the calculation of missed contributions to prevent erroneously duplicating prior year funding shortages.  A total of $6,185,760 was identified as amortization of prior year funding shortfalls, which was subtracted from the $53,003,058 deficit.

       

      Also included in the development of the actuarially determined ARC is an element of interest that is added to the employer contribution calculated as of the beginning of the year.  Because interest is calculated annually on the amortization of prior year funding shortfalls and included in each year’s ARC, an adjustment to remove that interest must be made to prevent erroneously overstating the calculation of missed contributions.  The interest was removed on an annual basis at the same rate that was used in the actuarial reports when calculating the ARC and amounted to $477,567 for the years ending September 30, 2009 through September 30, 2014. 

       

      The ARC, net of employer contributions, amortization of prior year funding shortfalls, and interest on the amortization of prior year funding shortfalls is $46,339,731 for the years September 30, 2009 through September 30, 2014.

       

      The unfunded annual contribution balance for the years ending September 30, 2009 through September 30, 2014 was increased to take into consideration the earnings the Plan would have made each year had the employer contributions actually been invested using the Plan’s actual rates of return.  The Plan’s actual rates of return were calculated on an annual basis by taking the total investment income for the year as a percentage of beginning Plan assets.  Total earnings of $9,375,054 were calculated for years 2009 through 2014 on the unfunded contributions and cumulative missed earnings. 

       

      100% of the missed contributions plus estimated earnings on those contributions amounts to $55,714,784.  Plaintiffs’ Counsels’ calculation of the present value of the $156,400,000, less attorneys fees, that the Settlement Agreement requires that SRHS deposit into the Trust for the benefit of the Class members over time is $55,950,875.  Attorneys’ fees will be paid by SRHS in addition to the amount that is required to fully refund the missed annual required contributions to the Trust. .  

  15. How did you calculate that the present value of the amount to be deposited into the Trust pursuant to the settlement is equal to or greater than the amount that SRHS failed to contribute between 2009 and 2014?

    1. Plaintiffs’ Counsels’ calculation of the present value of the missed contributions between 2009 and 2014 is $55,714,784, as described in FAQ No. 14.  Plaintiffs’ counsel retained financial and accounting experts who confirmed these calculations. 

      The scheduled payments are in the future.  Therefore, they must be discounted to determine the value of those dollars today.  One dollar received in the future is not worth one dollar today.  Present value dollars are worth less than dollars received in the future.  If someone says they will give you $1,000,000 a year from now, that is the same thing as giving you $943,396 today (if interest rates are 6%).

      Assuming a 6% interest rate, the future deposits into the Trust (noted as deposits totaling $156,400,000 on the amortization schedule below), less the payments to the attorneys, have been discounted to reflect the current value of those payments ($55,950,876).  The present value of those future payments ($55,950,876) is greater than the value of the missed contributions between 2009 and 2014 ($55,714,784).  Thus, although SRHS is paying over time, 100% of the missed contributions is being refunded to the Trust.  The following chart details this conclusion:

  16. Why doesn’t the proposed settlement guarantee future pension payouts?

    1. You cannot recover as damages in a lawsuit something to which you were never entitled.  There was never any guarantee that benefits would have been paid in accordance with the Plan.  The Plan terms make clear that SRHS always reserved the right to terminate the Plan, in whole or in part, at any time.  See ¶ 11.01 (“RIGHT TO TERMINATE RESERVED: The Plan has been established in confidence that it will continue in effect indefinitely.  However, due to uncertainties under which all business activity operates, the Employer must and herewith does reserve the right to terminate the Plan on its own behalf, in whole or in part, at any time.”). 

      Click here to see a copy of the entire Plan with amendments.

      The Plaintiffs have alleged that the wrongdoing in this case was SRHS’s attempt to terminate the Plan after failing to make its Annual Required Contributions each year and, as part of that process, to absolve itself of the responsibility of making those missed contributions once the termination became effective.  Thus, the purpose of the lawsuit was to recover the value of the Annual Required Contributions that SRHS failed to make between 2009 and 2014 – a goal which has been accomplished. 

      If SRHS had been current on its Annual Required Contributions at the time it attempted to terminate the Plan in the fall of 2014, such action would have complied with the terms of the Plan and would have been permissible.  If this settlement is approved, the Class Members will be returned to the same position in which they would have been had SRHS made all of the Annual Required Contributions to the Plan between 2009 and 2014.

  17. Why does SRHS get 35 years to repay the annual required contributions that it missed?

    1. SRHS owes $55,714,784 to the Plan.  A thorough examination of its financial documents clearly demonstrates that it does not have that amount of cash on hand to deposit into the Trust.  Therefore, the proposed settlement requires SRHS to make these payments over time.  It would be far worse for the class members for SRHS to file for bankruptcy than for it to make these payments over time.  This benefit is not insured by federal or state governments.  Thus, if SRHS files bankruptcy, there is no certainty there would be assets available to fund Trust obligations.  This means that if SRHS files bankruptcy, and the Plan terminates, benefits would be limited to the amount that could be paid out of the amount available in Trust.  

  18. The proposed Settlement requires that SRHS pay money into the Trust over time. What happens if SRHS misses a payment? What is to stop SRHS from just failing to contribute the money?

    1. Should SRHS default on its obligation to make a payment to the Trust at any time over the next 35 years pursuant to the schedule outlined in the Settlement, there shall be a summary proceeding in the Jackson County Chancery Court (“Chancery Court”) through which the Chancery Court may enter judgment on 10 days’ notice in favor of the Trust and against SRHS for the unpaid balance of the Settlement Payment.

      In other words, if SRHS fails to make a payment, the entire unpaid balance will become due within a very short period of time.  If that occurs, SRHS would be at risk of default on its bond obligations, which would be financially devastating.  Thus, SRHS has very strong monetary incentives never to default on a payment to the Trust.

  19. The proposed settlement states that with the exception of the requirement that SRHS pay (over time) the Annual Required Contributions that it missed, the Plan remains unchanged. What is going to happen to the Plan in the future?

    1. Any future modification or termination of the Plan is for the court-appointed Special Fiduciary to decide and must be approved by the Jackson County Chancery Court.  As a result of this proposed settlement, those decisions are no longer in the hands of SRHS.  The Special Fiduciary’s process of analyzing the future of the Plan is ongoing and is not yet complete.

      The settlement provides that any adjustment to the Plan can only be done with Special Fiduciary recommendation and Chancery Court approval after sixty (60) days’ notice to the Class Members and opportunity for hearing. If the Chancery Court orders any modification and/or termination of the Plan, then the Class Members will be bound by the Court’s/Special Fiduciary’s findings, subject to their rights to appeal any order of said court. 

      Thus, Class members have protections that they never had before.  Before this litigation, SRHS had the right to terminate or modify the Plan at any time.  If the settlement is approved, any changes to the Plan – whether modification or termination – will have to be approved by a court of law.  You will have notice of any proposed changes and a chance to present any arguments to the Chancery Court as to why those changes should or should not be made. 

      The substance of any future modifications and/or termination of the Plan is not a part of the federal court settlement – only the mechanism by which such changes must be proposed and approved is.  Additionally, SRHS no longer has any ability to unilaterally terminate the Plan.

  20. Does the proposed settlement transfer the risks of future market fluctuations to the Plan members?

    1. All pension trusts, like other retirement funds, that invest funds are subject to market fluctuations.  Nothing has changed in that respect.  

      SRHS owes $55,714,784 to the Plan.  A thorough examination of its financial documents clearly demonstrates that it does not have that amount of cash on hand to deposit into the Trust.  Therefore, the proposed settlement requires SRHS to make these payments over time.  To do that, financial experts must make assumptions about the discount rate.  A 6% discount rate is reasonable.

  21. Why has the proposed settlement been filed as a “non-opt out” class? Why am I not getting the chance to pursue my own lawsuit if I don’t like the settlement?

    1. If individual lawsuits were allowed to supplement or augment the class recovery, the Plan fiduciary, who by law is obligated to treat all Plan members fairly in accordance with the terms of the Plan, would be faced with a situation in which one plaintiff may be awarded more in his or her individual case than another.  The Plan fiduciary would then be put in the impossible position of discriminating against members of the Plan (those who were awarded larger sums in their individual trials would get more retirement benefits than those who lost their trials or received smaller sums), which the Plan fiduciary cannot do under the law.  Additionally, the basic claim in this lawsuit is that the Plan was not funded by SRHS.  No class member had an individual, self-directed account with its own investment risks and objectives.  Therefore, the recovery must go to the Plan.  If individual lawsuits are filed, the first plaintiffs to receive awards may deprive other employees or retirees of their benefits.  Thus, a mandatory class is necessary to ensure that all class members are treated fairly and are similarly bound by the benefits and burdens of the settlement.

  22. Will I get a check as a result of this proposed settlement?

    1. No.  All of the settlement funds will be deposited into the Trust.  No individual class member will get a direct disbursement of those funds.  Benefits will continue to be paid from the Trust upon your retirement and according to the terms of the Plan.

  23. Do I have to pay attorneys’ fees as a result of this federal court litigation?

    1. No.  If the Court grants Settlement Class Counsel’s request, the fees and expenses will be paid by SRHS in addition to the Settlement Payments to Class Members and will not be deducted from the $149,950,000 that is needed to fully refund the annual required contributions that SRHS did not pay.

  24. How many law firms will share some portion of the proposed attorneys’ fee?

    1. All of the law firms that participated in the federal court negotiations, mediations, and settlement will share in the attorneys’ fee approved by the federal district court: (1) Reeves & Mestayer, LLP; (2) Cunningham Bounds, LLC; (3) Mayo Mallette, PLLC; (4) Quinn, Connor, Weaver, Davies & Rouco, LLP; and (5) Branstetter, Stranch & Jennings, PLLC.

  25. Do I have to sign anything in order to be part of the settlement?

    1. No.  You do not have to take any action to be included in the settlement.

  26. What kind of documents and other evidence were examined before the proposed settlement was agreed upon?

    1. Depositions (out-of-court testimony provided under oath)

       

      • Michael Crews, former Chief Financial Officer of SRHS (taken 6/23/2015)
      • Morris Strickland, member of the SRHS Board of Trustees from 2008-2015 (taken 7/22/15)

       

       

      Written Discovery

       

      • 6,397 documents produced by SRHS, totaling 179,093 pages
      • 61 documents produced in response to a subpoena to JCBOS, totaling 15,753 pages
      • 130 documents produced by Transamerica, totaling 10,790 pages

       

      Total written discovery from all parties: over 6,500 documents consisting of over 200,000 pages

       

      Experts

       

      • Allen Carroll, Founding and Managing Partner at Wilkins Miller 
        • Certified Public Accountant
        • Accredited in Business Valuation
        • Certified in Financial Forensics
        • Certified Valuation Analyst

       

      To see a copy of Mr. Carroll’s curriculum vitae, click here.

       

      • Stacy Cummings, Partner at Wilkins Miller
        • Certified Public Accountant
        • Certified in Financial Forensics
        • Certified Valuation Analyst

       

      To see a copy of Ms. Cummings’s curriculum vitae, click here.

       

      • Lyndsey Dixon, Partner at Wilkins Miller 
        • Certified Public Accountant
        • Certified Valuation Analyst
        • Area of special competence includes audit and consulting services

       

      To see a copy of Ms. Dixon’s curriculum vitae, click here.

       

      The experts at Wilkins Miller have billed over 300 hours between June and December 2015 for their work on this case.

                                                                                                                                                                            

      Mediation Sessions

       

      • July 29 and 30, 2015
      • September 23 and 24, 2015
      • December 17, 2015

       

      Each mediation session was conducted under the guidance of a court-appointed mediator, the Honorable David M. Houston, III.  Judge Houston served as the United States Bankruptcy Judge for the Northern District of Mississippi for 30 years.  He retired from that position in 2013.  Prior to assuming the bench, he was a partner for 11 years in the Aberdeen, Mississippi, law firm of Houston, Chamberlain and Houston.  He served as a Special Agent with the Federal Bureau of Investigation (FBI) in Washington, D.C., Tampa, Florida, and New York City.  His practice is focused on commercial transactions, commercial litigation, bankruptcy, and creditors’ rights.  Judge Houston received his Bachelor’s degree in accounting from the University of Mississippi in 1966 and his Juris Doctor from the same institution in 1969.   Judge Houston currently practices with the law firm of Mitchell McNutt & Sams.

       

      Formal and Informal Negotiations

       

      • Ongoing between July 2015 and December 2015

       

  27. Why weren’t the discussions that took place during the mediations made public or shared with attorneys who refused to attend?

    1. Mediation is a process in which a neutral party (the mediator) facilitates a discussion between the parties to a dispute for the purpose of helping them to resolve it.  In order to encourage the parties to be open, honest, and candid with respect to their position on the issues that are being litigated, all mediations are confidential.  The confidential nature of mediations helps facilitate conflict resolution and is a critical part of why they are often successful.  Mediations are commonly used in civil litigation as a method of resolving disputes short of a trial.

      All mediations in cases pending in federal court in Mississippi are made confidential pursuant to Rule 83.7(j) of the Local Uniform Civil Rules of the United States District Courts for the Northern District of Mississippi and the Southern District of Mississippi, which states:

      (j)            Confidentiality of Proceedings.

      1. General Rule of Confidentiality.  Except as otherwise provided in L.U.Civ.R. 83.7(j)(4) or required by law, all communications made in mediation or settlement conference are confidential. Mediation- and settlement conference-related communications are not subject to disclosure and may not be used as evidence against any party or participant in any judicial or administrative proceeding.
      2. No Compelled Disclosure. Except as provided in L.U.Civ.R. 83.7(j)(4) or required by law, no party,  party’s attorney, party’s representative, mediator or judicial officer is subject to process requiring disclosure of confidential information or data related to a mediation or settlement conference conducted under this Local Rule, nor may such persons be compelled to testify in any proceeding related to matters occurring during a mediation or settlement conference.
      3. Limitations on Communications with Court.  Except as provided in L.U.Civ.R. 83.7(j)(4) or required by law, a person participating in mediation or settlement conference under this Local Rule may not be compelled to disclose to the court any communication made, position taken, or opinion formed by any party or mediator in connection with mediation or settlement conference.
      4. Exceptions to the General Rule of Confidentiality. The only circumstances which may make it appropriate for  a party, a party’s attorney, a party’s representative, a mediator or a judicial officer to disclose a confidential communication arising from proceedings governed by this Local Rule is a finding by the court that such testimony or other disclosure is necessary to:

      (A)   prevent a manifest injustice;

      (B)   enforce a settlement;

      (C)   help establish a violation of criminal law; or

      (D)   prevent harm to the public health or safety.

      Similar rules govern the confidentiality of mediations in Mississippi Chancery Court cases:

      Rule VII.  Confidentiality of Communications in Mediation

      1. Except as provided by subsections C and D below, a communication relating to the subject matter of any civil dispute made by a participant in a mediation is confidential, is not subject to disclosure, and may not be used as evidence against the participant in any judicial or administrative proceeding. 
      2. Mediation is confidential and no record shall be made.  The participants or the mediator may not be required to testify in any proceedings relating to matters occurring during the mediation session, nor shall they be subject to process requiring disclosure of confidential information or data relating to or arising out of the matter in dispute.
      3. Any oral communication or written material used in or made a part of a mediation is admissible or discoverable only if it is admissible or discoverable independent of the mediation.
      4. If this section conflicts with other legal requirements for disclosure of communications or materials, the issue of confidentiality may be presented to the court having jurisdiction of the proceedings to determine, in camera, whether the facts, circumstances and context of the communications or materials sought to be disclosed warrant a protective order of the court or whether the communications or materials are subject to disclosure.

      To the extent that any attorney who refused to participate in the mediation in this case claims that he or she is entitled to the disclosure of confidential information or data related to the mediation, such disclosure is expressly prohibited by Rule 83.7(j)(2) of the local federal rules and Rule VII(B) of the Mississippi Mediation Rules for Civil Litigation. 

      More importantly, all of the raw data that any experts used in formulating their opinions in this case was produced to all plaintiffs’ attorneys, whether they attended the federal mediation or not (see FAQ No. 27).  The raw data was not subject to the mediation confidentiality rules because it was generated long before and independent of the mediation proceedings.  This information consisted of nearly 200,000 pages of documents that included, but was not limited to:

      • SRHS Audited Financial Statements for Years Ending 9/30/2003 through 9/30/2014
      • Actuarial Valuation Reports for SRHS Retirement Plan and Trust for Years Ending 9/30/2006 through 9/30/2014

      As is the case in any litigation, any attorney representing any party may hire any expert to offer opinions about specific issues in the case.  However, the burden is on that attorney to hire those experts and pay for the time that they spend reviewing the raw data and formulating their opinions.  Settlement Class Counsel advanced the costs of this review by their own experts.  Any plaintiffs’ attorney could have done the same.  All plaintiffs’ attorneys in all SRHS litigation received the same raw data, which they could have provided to an expert of their choosing for the purpose of obtaining an analysis of any issue that the attorney felt needed to be evaluated by an expert.

      To the extent that any individual has an objection to the proposed settlement, the United States District Court for the Southern District of Mississippi has provided a method by which that individual or his or her attorney may present testimony by experts they have hired or by other lay witnesses at the Final Fairness Hearing in support of the objection.  Please see the Class Notice for additional information about how to make an objection.       

  28. Did all plaintiffs’ attorneys in both the state and federal cases receive the document production from SRHS referenced in FAQ No. 26?

    1. Yes.  All of the plaintiffs’ attorneys in both the federal and the state court litigation – including Harvey Barton and Earl Denham – received the same documents from SRHS.  These documents totaled 179,093 pages.  Click here to see the correspondence conveying these documents.

  29. How much money is in the Trust right now?

    1. As of December 5, 2017, there was $124,906,000 in the SRHS Employee Benefits Retirement Plan and Trust.  

  30. Why wasn’t any member of the SRHS executive leadership team terminated from his or her position as part of this litigation?

    1. A court is not in the business of operating and managing a hospital.  The court does not have the expertise or the information necessary to make employment decisions on a hospital’s behalf.  In the context of a lawsuit of this nature, a court would rarely, if ever, dictate to a business who should be a part of its executive leadership team.  This is simply not the role of a court.  As part of the negotiated and agreed upon settlement in this case, a majority of the members of the SRHS Board of Trustees have resigned.  Moreover, as part of an ancillary agreement between Jackson County and SRHS, a turnaround firm will be hired by Jackson County to assess the status of SRHS and to develop mechanisms to make SRHS more economical and efficient. 

  31. Why weren’t there any criminal prosecutions as a result of this litigation?

    1. There are two types of cases – criminal cases and civil cases.  Criminal cases are only prosecuted by the district attorney’s office because they often involve potential incarceration as a consequence of a guilty verdict.  Civil cases can be prosecuted by any plaintiffs’ attorney because the relief sought in those cases typically involves monetary damages. 

      In June 2015, Jackson County District Attorney Tony Lawrence, who is authorized by the state of Mississippi to pursue criminal charges against individuals for crimes committed in the 19th Judicial District (Jackson, George, and Greene counties), reported that he had convened a criminal grand jury (made of community members with no financial interest in the case) and that it declined to indict anyone based on the conduct that led to the pension crisis at SRHS.  The criminal grand jury heard testimony from current and former executives at SRHS, the FBI, and forensic accountants hired by the County.  The grand jury also reviewed SRHS financial statements, audits, emails, meeting minutes, the substance of FBI interviews, and thousands of other documents. 

      After this review of the evidence, the grand jury determined that no violation of criminal law occurred.  The civil litigation in the federal court does not and cannot change that decision.

      Click here to read the June 2015 press release of District Attorney Tony Lawrence regarding his investigation as well as the full report of the grand jury

  32. What steps does the proposed settlement take to ensure that a pension crisis like this does not happen at SRHS again in the future?

    1. The Jackson County Chancery Court has appointed a Special Fiduciary for the Trust, whose sole fiduciary responsibility is and shall be to the Trust.  Before this litigation, all decisions about the Plan were in the hands of SRHS.  The settlement provides that the Special Fiduciary will report to the Chancery Court on a quarterly basis regarding the financial condition of SRHS, the pension plan, and the status of the repayment schedule.  In essence, there is an ombudsman, of sorts, in place who will manage the Trust’s assets and report to the Chancery Court four times a year to ensure that the settlement remains on track.

      In addition, as a result of the negotiations that took place over the last several months, hospital leadership has changed.  A majority of the members of the SRHS Board of Trustees have now resigned.  Moreover, as part of an ancillary agreement between Jackson County and SRHS, a turnaround firm will be hired by Jackson County to assess the status of SRHS and to develop mechanisms to make SRHS more economical and efficient.

  33. What are the Four Questions to which the Fifth Circuit Court of Appeals wanted the trial court to give additional consideration?

    1. The Fifth Circuit Court of Appeals has asked the United States District Court for the Southern District of Mississippi to give additional consideration to these four questions in deciding if it should approve the proposed settlement:

       

      1.   How, and how much, the future stream of SRHS’s payments into the Plan, together with existing Plan assets and prospective earnings, will intersect with future claims of Plan participants, including, but not limited to, what effect the Settlement has on current retirees;

       

      2.   What are SRHS’s future revenue projections, showing dollar amounts, assumptions and contingencies, from which a reasonable conclusion is drawn that SRHS has the financial ability to complete performance under the settlement;

       

      3.   Why any payments from litigation involving KPMG, Transamerica or related entities are permitted to defray SRHS’s payment obligation rather than supplement the settlement for the benefit of class members; and

       

      4.   Why class counsel’s fees should not be tailored to align with the uncertainty and risk that class members will bear?

       

  34. Can the trial court give additional consideration to anything other than the Four Questions or will it receive objections on any other subject?

    1. No.  The Four Questions are the only questions that the Court will consider and about which it will receive additional testimony and evidence at the supplemental Final Fairness Hearing.  No other questions will be considered.  All other factual or legal issues decided by the Fifth Circuit establish the “law of the case” and must be followed in all later proceedings in the same case in the lower court.  Therefore, the Court cannot and will not consider any objections to the proposed settlement that fall outside of the Four Questions. 

  35. What type of evidence and testimony will the parties be presenting at the Supplemental Final Fairness hearing to help answer the Four Questions being considered?

    1. Click here to see Plaintiffs’ Supplemental Memo in Support of Plaintiffs’ Motion for Approval of Final Settlement. 

      • This includes the exhibits that Plaintiffs filed in support of this document.

       

      Click here to see Defendant Singing River Health System’s Supplemental Memo In Support of Final Settlement Approval. 

      • This includes the exhibits that Defendant Singing River Health System filed in support of this document
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