Settlement Agreement

SETTLEMENT AGREEMENT This Settlement Agreement is made and entered into as of the ____ day of _______, 2014 by and among each Plaintiff listed on Exhibit A annexed hereto and made a part hereof (individually, a “Plaintiff” and collectively the “Plaintiffs”); Lincoln D. Chafee in his capacity as Governor of the State of Rhode Island and not individually (the “Governor”); Gina Raimondo in her capacities as General Treasurer of the State of Rhode Island and Chairperson of the Rhode Island Retirement Board and not individually (the “Treasurer”); Frank J. Karpinski in his capacity as Secretary to the Retirement Board and not individually (the “Secretary”); Employees’ Retirement System of the State of Rhode Island (“ERSRI”); and the Rhode Island Retirement Board (the “Board”) (the Governor, the Treasurer, the Secretary, ERSRI and the Board are sometimes hereinafter referred to collectively as the “Defendants”). W I T N E S S E T H: WHEREAS, Plaintiffs listed as numbers 1 through 11 inclusive on Exhibit A commenced a civil action in the Rhode Island Superior Court (the “Court”) against Defendants (C.A. No. PC12-3166) requesting injunctive, declaratory and other relief to prohibit the implementation of Public Law 2011 Chapters 408 and 409, otherwise known as the Rhode Island Retirement Security Act of 2011 (“RIRSA”) as it relates to suspending and reducing, on a retroactive basis, the vested retirement benefits of already retired Rhode Island public employees; and WHEREAS, Plaintiffs listed as numbers 12 through 78 inclusive on Exhibit A commenced a civil action in the Court against Defendants (C.A. No. PC12-3167) requesting injunctive, declaratory and other relief to prohibit the implementation of RIRSA as it relates to 667810.1 suspending and reducing the vested retirement benefits of active Rhode Island municipal general employees; and WHEREAS, Plaintiffs listed as numbers 79 through 159b inclusive on Exhibit A commenced a civil action in the Court against Defendants (C.A. No. PC12-3168) requesting injunctive and other equitable relief and for declaratory judgment to prohibit the implementation of RIRSA as it relates to employees of the State of Rhode Island and public school teachers; and WHEREAS, Plaintiffs listed as numbers 160 through 176 inclusive on Exhibit A (as well as City of Cranston, Police Officers, International Brotherhood of Police Officers Local 301, which is not a party to this Agreement), commenced a civil action in the Court against Defendants (C.A. No. PC12-3169) requesting injunctive, declaratory and other relief to prohibit the implementation of RIRSA as it relates to suspending and reducing the vested retirement benefits of active Rhode Island municipal police officers; WHEREAS, Plaintiffs listed as numbers 177 through 197 inclusive on Exhibit A(as well as Cranston Fire Fighters IAFF Local 1363, which is not a party to this Agreement), commenced a civil action in the Court against Defendants (C.A. No. PC12-3579) requesting injunctive, declaratory and other relief to prohibit the implementation of RIRSA as it relates to suspending and reducing the vested retirement benefits of active Rhode Island municipal fire fighters; and WHEREAS, Plaintiffs listed as numbers 198 through 205 inclusive on Exhibit A commenced a civil action in the Court against Defendants (C.A. No. PC10-2859) requesting injunctive and other equitable relief and for declaratory judgment with respect to Rhode Island Public Law 2009 Chapter 68 and Rhode Island Public Law 2010 Chapter 23, Article 16; and 2 667810.1 WHEREAS, the above civil actions are hereinafter referred to collectively as the “Lawsuits” and the complaints referenced above initiating the Lawsuits are hereinafter referred to collectively as the “Complaints”; and WHEREAS, the Court ordered Plaintiffs and Defendants to enter into a mediation process with respect to the subject matter of the Lawsuits (the “Mediation”); and WHEREAS, through the Mediation, Plaintiffs and Defendants have agreed upon a methodology by which settlement of the Lawsuits can be achieved and desire to commit their agreement to writing. NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth, the Plaintiffs and Defendants agree as follows: 1. Class Action Complaints. Immediately following the satisfaction of conditions in paragraph 3 herein, Plaintiffs will move to file amended Complaints as Class Actions, such classes to be for settlement purposes only. (a) Simultaneously with the filing of the Amended Complaints, Plaintiffs will file a motion for certification of the following classes: (i) Active participants in ERSRI who had ten (10) years or more of service as of June 30, 2012 including state employees and teachers as well as other ERSRI participants; (ii) Active members in the Municipal Employees’ Retirement System of Rhode Island (“MERS”) who had ten (10) years or more of service as of June 30, 2012 and union municipal employees who allege they were provided cost of living adjustments pursuant to R.I. Gen. Laws § 45-21-52 prior to June 30, 2012 under a collective bargaining agreement without regard to years of service; 3 667810.1 (iii) All active members of the fire fighters bargaining units participating in fire MERS units, except Cranston Fire Fighters, IAFF Local 1363, whether or not their unions are Plaintiffs and without regard to years of service, as well as active nonbargaining unit employees participating in fire MERS units who had ten (10) years or more of service as of June 30, 2012; (iv) All active members of the police bargaining units participating in police MERS units, except City of Cranston, Police Officers, International Brotherhood of Police Officers Local 301, whether or not their unions are Plaintiffs and without regard to years of service, as well as active non-bargaining unit employees participating in police MERS units with ten (10) years or more of service as of June 30, 2012; and (v) Retired members and beneficiaries of retired members as of the date of filing of motion to amend complaints as class action who are eligible to receive a retirement benefit under ERSRI or MERS which includes a cost of living adjustment. (b) The order certifying the five (5) classes shall provide that any settlement of the Lawsuits will be binding on all class members and no class member will be entitled to elect not to participate. (c) If the class action is not certified by the Court or if the settlement described herein is rejected by the voting mechanism described in Paragraph 4 below, or is rejected by the Court after a fairness hearing, or if the Legislation as defined in Paragraph 2 is not enacted by the General Assembly, the Plaintiffs and Defendants will file a joint motion with the Court to decertify the classes and return to non-class litigation, without prejudice as to their respective rights again to seek class certification or not to do so in connection with the respective litigations. 4 667810.1 2. The Legislation. Attached hereto and made a part hereof as Exhibit B is a term sheet setting forth the economic terms of the settlement and attached hereto and made a part hereof as Exhibit C is an Act Relating to Public Officers and Employees which, if enacted, would amend RIRSA (the “Legislation”) to effectuate the terms of the Settlement set forth in Exhibit B (the “Settlement”). The parties acknowledge that enactment of the Legislation can only be effected by action of the Rhode Island General Assembly. The parties further acknowledge that the provisions of this Settlement Agreement are subject to the Court’s review and approval. Plaintiffs and Defendants agree that all Court filings and other documents to effectuate the Settlement shall be jointly prepared and approved. 3. Condition Precedent – Plaintiff Approval. Prior to submission of this Settlement Agreement to the Court for approval, it shall be submitted to Plaintiffs’ members in accordance with the provisions of this Paragraph 3. (a) The Organizational Plaintiffs (i.e., those Plaintiffs who are not individuals) may designate authorized representatives (the “Authorized Representatives”) to provide information to their members regarding the Settlement and the provisions of the Legislation which information shall not be inconsistent with the terms of this Agreement. The Organizational Plaintiffs shall use their best efforts to accomplish the actions set forth in this paragraph 3 within 60 days following the execution of this Agreement and shall retain ProMail to tally the votes contemplated herein. Any costs, expenses and fees of Promail to undertake the actions contemplated by this paragraph 3 shall be borne by the Organizational Plaintiffs. With respect to the identification of persons eligible to participate in the votes described in this paragraph, the Retirement Board shall work cooperatively with the Organizational Plaintiffs to 5 667810.1 identify eligible participants and to provide accurate mailing addresses, without expense to the Organizational Plaintiffs. (b) It is contemplated that Plaintiffs, through their Authorized Representatives, will conduct informational meetings prior to the voting mechanism described below. The parties recognize that some informational meetings may take place during scheduled work hours and at employer-provided locations. To the extent that such meetings involve active employees of the Defendants, Defendants agree to provide reasonable access to state facilities and release time. Authorized paid leave for this purpose is subject to prior supervisory approval and shall not be disruptive to normal operations, that is, staffing levels must be maintained to provide necessary services. Approval for such leave shall not be unreasonably withheld. Said active employees who are relieved of duty during their scheduled work hours shall only be paid for those scheduled work hours and shall not receive any additional compensation for said attendance. To that end, the Authorized Representatives shall provide appropriate prior notice to the Director of Administration’s designee as to the place, date, time and anticipated duration. (c) Each of the following six (6) groups (individually, a “Group” and collectively, the “Groups”) of Plaintiffs’ members shall participate in the voting process: (i) Bargaining unit members in state employee unions in C.A. No. PC12-3168 who had ten (10) or more years of service as of June 30, 2012; (ii) Bargaining unit members in teacher unions in C.A. No. PC12-3168 who had ten (10) or more years of service as of June 30, 2012; (iii) Bargaining unit members in Plaintiff unions in C.A. No. PC12- 3167 who had ten (10) or more years of service as of June 30, 2012 and bargaining unit members 6 667810.1 in Plaintiff unions in C.A. No. PC12-3167 whose collective bargaining agreements contain cost of living adjustment provisions without regard to years of service; (iv) Bargaining unit members participating in MERS units represented by Plaintiff unions in C.A. No. PC12-3579 except Cranston Firefighters, IAFF Local 1363; (v) Bargaining unit members participating in police MERS units represented by Plaintiff unions in C.A. No. PC12-3169 except City of Cranston Police Officers, International Brotherhood of Police Officers Local 301; and (vi) Individual Plaintiffs and Members of the Plaintiff Associations in C.A. No. PC12-3166 who are retired participants and/or their beneficiaries in ERSRI or MERS who are or will be entitled to a cost of living adjustment and have paid the legal defense fund assessment to a Plaintiff Association and are otherwise members in good standing. (d) Ballots shall be distributed to each Group member on which a Group member may vote to reject the Settlement. Ballots opting for rejection of the Settlement shall be returned by mail in accordance with the deadline and instruction contained thereon. (e) Ballots shall be tabulated on a Group by Group basis and the votes to reject the Settlement tallied against each Group’s members eligible to vote. If fifty (50%) percent or fewer of each Group’s members eligible to vote timely return ballots voting to reject the Settlement, the Settlement shall proceed and the Plaintiffs and Defendants will file a joint motion with the Court seeking approval of the Settlement. If more than fifty (50%) percent of any Group’s members eligible to vote timely return ballots voting to reject the Settlement, the Settlement shall not proceed. (f) Determination of eligibility to vote shall be made by the respective Organizational Plaintiffs in their sole discretion and, with respect to current employees, shall be 7 667810.1 limited to active (that is, not retired) employees as of the date that the within Settlement Agreement is signed by all parties. 4. (a) Condition Precedent – Class Vote. If the Court preliminarily approves the classes for settlement purposes, the Settlement will be submitted to the Classes listed in Paragraph 1 above for action. Voting shall be conducted on a class by class basis as defined herein. Ballots shall be distributed to each class member on which a class member may vote to reject the Settlement. If more than fifty (50%) percent of any class’s members eligible to vote timely return ballots voting to reject the Settlement, the Settlement shall not proceed as to any class, and the settlement terms of the Settlement Agreement shall not become operative. If fifty (50%) percent or fewer of each class’s eligible voting members vote to reject the Settlement, the Settlement shall proceed as to all classes. The Organizational Plaintiffs shall retain ProMail to provide appropriate and necessary notice and tally the votes contemplated herein. The costs and expenses of ProMail shall be borne by the Defendants. With respect to the identification of persons eligible to participate in the votes described in this paragraph, the Retirement Board shall work cooperatively with the Organizational Plaintiffs to identify eligible participants and to provide accurate mailing addresses, without expense to the Organizational Plaintiffs. The Organizational Plaintiffs shall use their best efforts to comply with the provisions of this paragraph 4(a) within 45 days of the Court’s preliminary approval of classes for settlement purposes. (b) Failure to include all persons described in ¶¶ 3 and/or 4(a) in the voting process shall not be a ground to invalidate or delay the results of any Group’s vote. Any individual who believes that he or she met the definitions of eligibility to vote but was not provided a ballot may be heard by the Court at the fairness hearing. 8 667810.1 (c) Condition Precedent – Court Approval. This Settlement Agreement is also subject to approval by the Court following notice to class members and a “fairness hearing” after which the Court will decide whether to approve this Settlement Agreement. (d) Condition Precedent – Legislative Approval. The Settlement is expressly conditioned on enactment of the Legislation by the Rhode Island General Assembly, provided that a change to the Legislation that solely addresses funding by the state or municipal employers and has no impact on levels of employee contributions or levels of employee benefits as set forth in the Legislation attached as Exhibit C shall not be a violation of this provision. 5. Covenants. Through this Settlement Agreement, the parties intend to fully and finally resolve any and all matters with respect to the Lawsuits. Accordingly, Plaintiffs and Defendants, and each of them, covenant and agree that from and after the date hereof through and including final approval of the settlement and enactment of the Legislation and entry of judgment in the form contemplated by and set forth in Exhibit D (except as to 5(h) which is unlimited as to time): (a) They will cause their respective members and employees who actively participated in the Mediation, and/or who are identified as their authorized spokespersons and/or their respective lobbyists or otherwise identified in Exhibit E in this Settlement Agreement (“Authorized Representative”) to abide by and keep the covenants set forth in this Paragraph 5. (b) They will vigorously support the Legislation and vigorously advocate for its passage; and in all statements that are intended or can be disseminated to the public and/or to Plaintiffs’ respective employees and/or membership and/or affiliates and/or the General Assembly (and with respect to the General Assembly this covenant applies whether the statement is intended to be disseminated to the public or, alternatively, is a private communication to the 9 667810.1 General Assembly), they will be entirely and plainly supportive of the Settlement, the Mediation process leading to the Settlement and the involvement of all parties in the Mediation and Settlement process. If any of Plaintiffs’ respective members, employees and/or affiliates and/or entities funded by such affiliates take public positions contrary to this Settlement Agreement, the Authorized Signatories to this Settlement Agreement shall make clear publicly that such position and/or view is not the official position of the respective Organizational Plaintiff and that the Organizational Plaintiff does not agree with such position and fully supports the Settlement. (c) They will agree to language that will be jointly approved by the parties and that will be communicated by a jointly approved letter to all members and employees who are affected by the Settlement and they agree that no information presented at any informational meetings or other communications concerning the Settlement will be inconsistent with language that has been jointly approved by the parties. (d) They will not, directly or indirectly, propose, support, encourage or advocate for any legislative action concerning or relating to retirement benefits other than the adoption of the Legislation. (e) They will not, directly or indirectly, propose, support, encourage and/or advocate that any other person, firm or entity do anything or refrain from doing something that a party to this Settlement Agreement would be prohibited from doing or refraining from doing hereunder. (f) They will ensure that all communications from Authorized Representatives to union membership will be entirely and plainly supportive of the Settlement and the Mediation process leading up to the Settlement and the involvement of all parties in the Mediation and Settlement process. 10 667810.1 (g) They will work diligently in good faith and with all due speed to accomplish the Settlement in accordance with the provisions of this Agreement. (h) They will not file, maintain and/or support (financially or otherwise) any suit or action pursued by any non-settling party in the Lawsuits. Moreover, each of the Organizational Plaintiffs and the classes shall be bound by the judgment entered by the Court and shall be foreclosed from filing, maintaining and/or supporting (financially or otherwise) any challenge in a court of law or equity to RIRSA (as enacted in 2011) and/or 2009 and 2010 legislative retirement changes for matters that were raised or could have been raised in the Lawsuits and/or challenges with respect to this Settlement and the Legislation, except for any action to enforce the terms of the Settlement set forth herein. 6. Representations and Warranties and Acknowledgments. Each Plaintiff and Defendant represents and warrants that his, her or its respective signatories is of legal age and has the necessary authority to execute this Settlement Agreement. Plaintiffs and Defendants acknowledge that they have read this entire Settlement Agreement including the Legislation, understand the terms and effects thereof and have consulted with independent counsel in relation thereto. Plaintiffs and Defendants acknowledge that they have freely and voluntarily entered into this Settlement Agreement. 7. Violation. The parties agree that the Court’s Confidentiality Order of January 14, 2013 shall remain in full force and effect until such time as the parties and the Court agree that it should be withdrawn and vacated. Moreover, should the provisions of this Settlement Agreement be violated by any party or should any party believe that any Plaintiff or Defendant (or other person making such covenant) has breached its, his or her covenants hereunder, then upon notice by a non-breaching party to the party or person in breach and to all parties to this 11 667810.1 Agreement, the parties consent to the Court’s jurisdiction and authority to hold a hearing to determine whether such breach occurred, and, if so, the appropriate remedy for such breach, which may include, but not be limited to, sanctions, fines, damages, equitable relief and in the event of a knowing, willful and material breach, the parties acknowledge and agree that the Court may enter an order of contempt; and if the Court determines that such breach violates the essence of this Settlement Agreement so as to defeat its purpose, the Court may void this Settlement Agreement and this Settlement Agreement shall then terminate and be of no further force and effect, the Plaintiffs and Defendants shall file a motion to terminate the class action; in such event the Lawsuits shall continue as non-class action suits. Provided, however, notwithstanding the foregoing, any dispute between or among the parties with respect to the terms of the Settlement prior to the entry of the Court’s final approval thereof shall be mediated first by the Federal Mediation and Conciliation Service. 8. Miscellaneous. (a) Plaintiffs and Defendants will cooperate and work with the Mediators to announce the Settlement with details to be agreed among Plaintiffs, Defendants and Mediators. (b) This Settlement Agreement is made and entered into in the State of Rhode Island and shall be governed by and construed in accordance with the laws of that State without reference to its conflict of laws principles. (c) The Settlement has been negotiated among Plaintiffs and Defendants and this Settlement Agreement has been drafted jointly by representatives of Plaintiffs and Defendants and shall not be construed for or against any of them by reason of authorship. (d) This Settlement Agreement sets forth the entire agreement and understanding among the parties with respect to the subject matter hereof and merges any and all 12 667810.1 discussions, negotiations, or agreements in principle among them. No party shall be bound by any conditions, warranties, understandings or representations with respect to such subject matter other than as expressly provided herein, or as duly set forth on or subsequent to the date hereof in writing and signed by a duly authorized signatory of each party. (e) This Settlement Agreement shall be binding upon and shall inure to the exclusive benefit of the parties hereto and their respective heirs, executors, administrators, legal representatives, successors and assigns. 9. Execution by Counterparts. Each of Plaintiffs and Defendants agree that this Settlement Agreement may be executed in counterparts and by each party hereto under separate counterpart, all of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Each of Plaintiffs and Defendants further agree that delivery of an executed counterpart of a signature page to this Settlement Agreement by telecopier, facsimile or email transmission shall be effective as delivery of a manually executed counterpart of this Settlement Agreement. 13 667810.1