Rulings in Prudential Case Are Questioned

In 1987, Alfred M. Wolin sailed through a brief Senate confirmation hearing on his nomination for a federal judgeship, with only one matter about his past raising any concern.

That was a program Wolin had pioneered as a state judge to clear his court’s calendar by pressuring litigants to settle lawsuits.

“Is it possible,” asked Sen. Howell Heflin (D.-Ala.), himself a former high-ranking state justice, “for a judge to be too aggressive in encouraging pretrial settlements?”

Wolin assured Heflin that he saw his role as only to help resolve disputes, not to “push settlement,” as he put it.

But that very same issue is once again being raised with Wolin, this time over his tactics in presiding over one of the biggest class-action lawsuits in the country.

Wolin last Monday gave his formal approval to a multimillion-dollar settlement in that case, in which Prudential Insurance Co. was accused of having defrauded millions of its life insurance policyholders.

But private plaintiffs’ lawyers and some state insurance regulators contend that Wolin played an improperly aggressive role in helping to fashion a settlement and then trying to impose it by fiat. Several lawyers who oppose the settlement say they are planning to appeal and that Wolin’s conduct will be a central issue in their challenges.

Some have also petitioned a higher court to remove Wolin from the case on grounds that he has become “an advocate of the proposed settlement” to “benefit Prudential,” rather than fulfilling his legal role as guardian of the interests of the plaintiffs.

Wolin refused through his law clerk to respond to written questions from The Times about his conduct of the case. “He does not give interviews or respond to questions about cases that are pending before him,” said the clerk, Sabrina Silver.

But in a court hearing in December in which he rejected requests that he step down from the case, Wolin strongly denied that he was biased or had done anything improper. The judge several times has accused the press, including The Times, of biased coverage of the case.

Among other things, the judge, whose courtroom is only a few blocks away from Prudential’s world headquarters here, has issued a series of rulings in recent months that critics contend were designed to stifle opponents’ attempts to expose the settlement’s shortcomings, along with the alleged irregularities in how it was negotiated.

The company and the lead class-action lawyers called the final pact, which they valued at between $410 million and $1.9 billion, an “extraordinary result” that “can give an unlimited number of people any and all damages they are entitled to,” in the words of Melvyn I. Weiss, the lead plaintiffs’ attorney.

But opponents contend that many aggrieved customers, including the elderly, have little reason to celebrate.

Even with the last-minute improvements, some lawyers say, the settlement requires claimants to read and understand a 58-page legal notice, fill out a complicated 16-page claim form and persist through a four-tiered evaluation process. Perhaps as few as 3% to 4% of the potential claimants would bother to file claims, they say.

The proposed settlement, contend many customer advocates, still places much of the burden of the claim process on the victims--even though Prudential’s pattern of deceptive sales practices is no longer in question.

For one thing, some plaintiffs’ attorneys say, the official notice of settlement issued by Prudential to millions of potential victims will be incomprehensible to most policyholders. They noted that the word “fraud” appears nowhere in the notice, which gives no explanation of many of the illegal practices at issue. The notice also does not make clear that if policyholders fail to file any claim by the June 1 deadline, they will get nothing.

Most customers “won’t know what they should do or why they are suing Prudential,” said San Diego lawyer Lynde Selden II, who objects to the settlement.

Moreover, say those objecting, a large fraction of those who do file may get back only a portion of their losses. These victims include low-income customers who had taken out $5,000 policies to cover the cost of their funerals.

For his part, Weiss argues that the notice is adequate and that the burden to respond belongs on policyholders. “We can only lead them to the water,” he said. “We can’t make them drink it.”

But that still leaves questions about Wolin’s role in the settlement.

A product of the New Jersey Republican Party establishment, Wolin, now 64, was appointed to the federal bench in 1987 by President Ronald Reagan after a career as a private lawyer, local prosecutor and state court judge. Part of his time in private practice was spent representing insurance companies in personal injury and property damage cases, according to a questionnaire he filled out upon his nomination to the federal bench.

There is no evidence of any direct links between Wolin and Prudential. But the giant company is closely aligned with its home state’s bureaucratic and political establishments.

Many lawyers complain that Wolin all but openly favored Prudential during hearings on the settlement. In court documents, Pittsburgh lawyer Michael P. Malakoff charged that the judge never allowed him or other objecting attorneys access to key documents in the case and that he prevented them from cross-examining witnesses at the main hearing on the settlement.

He and other lawyers further charged that Wolin made crucial decisions favoring the settlement in closed, off-the-record court hearings for which they received no advance notice. And they allege that he held improper private meetings with Arthur F. Ryan, Prudential’s chairman and chief executive, and with officials of the New Jersey Insurance Department, a strong advocate of the settlement.

In one of his most controversial rulings in the case, the judge on Dec. 30 refused to allow objecting lawyers to file any new objections to the settlement and refused to allow them to call any witnesses at a Feb. 24 hearing on the pact’s fairness. Among those he specifically barred from testifying was John Cressman, a former senior auditor for Prudential who in testimony given to Florida investigators said that he had uncovered--and warned top management about--massive evidence of illegal behavior beginning in the early 1980s.

The ban on testimony also prevented the objecting lawyers from cross-examining the experts hired by Prudential and the lead class-action lawyers, who submitted affidavits attesting to the value and benefits of the settlement.

The judge said from the bench that allowing Cressman and others to testify at the fairness hearing “would turn it into a three-ring circus” for the benefit of the press.

Wolin’s decision to bar testimony was criticized by a number of independent experts in class-action law.

Although no federal rules require judges to allow testimony, it has become commonplace to do so in big class-action settlements in which significant objections have been filed.

“When you’ve got these mega- class actions involving millions of claimants and either millions or billions of dollars at stake, it’s pretty rare for the judge to just sign off on it,” said Linda S. Mullenix, a professor at the University of Texas Law School. Testimony is important, she said, “to make sure that class plaintiffs aren’t being sold down the river by class counsel.”

Susan P. Koniak, a Boston University Law School professor who is critical of prevailing class-action procedures, said judges should feel an implicit obligation to hear testimony from all sides because the law gives them a special duty in reviewing settlements to act as guardians for the class members, or plaintiffs.

“How would you feel if a guardian is appointed to take care of your finances and is supposed to be watching out for you,” she remarked, “and then says: ‘I don’t want to hear too much about what’s going on’?”

Also drawing fire is Wolin’s handling of another explosive issue in the case: the $90-million fee Prudential has agreed to pay Weiss and other class-action attorneys.

The judge refused to allow the subject of the fee to be raised at the fairness hearing, scheduling instead a separate hearing Monday.

But several plaintiffs’ lawyers contend that the issue goes to the heart of the settlement’s fairness. The huge fee, they say, raises the question of whether there may have been collusion between Weiss, the lead plaintiffs’ lawyer in the suit, and Prudential.

Among the questions they would like answered is exactly when the fee was negotiated. Federal rules bar negotiation of fees in class actions until after the settlement terms have been agreed on.

But objecting lawyers have filed papers indicating that negotiations between the class attorneys and Prudential may have begun as early as last August, before the settlement terms were reached. Weiss and Prudential stated in affidavits that they began a month later, after the basic terms of the pact were negotiated.

Wolin has refused to allow Malakoff and other dissidents to take depositions or obtain documents that would show when the fee talks actually took place. In one ruling among others, he rejected Malakoff’s request for access to the minutes of Prudential board meetings and to drafts of the settlement agreements that would show when the fee negotiations began.

In his order denying the request, the judge insisted that there was no reason to suspect collusion, and he said the request was “unreasonable” because there had already been “plentiful” discovery in the case.