When Collusion Is the Allegation, Arm’s-Length Mediation Matters Even More

In class action practice, courts do not just ask whether a settlement amount sounds substantial. They also ask whether the deal was reached in a fair way. That scrutiny becomes even sharper when the underlying case itself includes allegations of conspiracy, self-dealing, and coordinated misconduct.

That is one reason the recent decision in In re AME Church Employee Retirement Fund Litigation is so interesting. The case arises out of alleged losses to a church retirement plan, with plaintiffs claiming that plan assets were misappropriated over time through a scheme involving insiders and outside entities. Among the remaining claims against Symetra were civil conspiracy, aiding and abetting breach of fiduciary duty, negligence, and fraudulent concealment. Plaintiffs alleged that Symetra helped facilitate the scheme and benefited from its role in the plan’s operations.

Against that backdrop, the court was asked to preliminarily approve a $44.4 million class settlement with Symetra. The question was not whether plaintiffs had proven the conspiracy allegations. The question, instead, was whether the proposed settlement itself had been reached through a process that was fair, non-collusive, and worthy of notice to the class. The court answered yes.

What makes the opinion especially useful is its close attention to the settlement process. In many disputes, parties focus heavily on the dollar amount. But in class actions, process matters just as much. Courts must protect absent class members who are not sitting at the negotiating table. Because of that, Rule 23 requires the court to examine whether the proposal was negotiated at arm’s length and whether there is a meaningful risk of fraud or collusion.

Here, the court found several features of the record persuasive.

First, the settlement did not arise from a rushed compromise struck early in the litigation. By the time the parties settled, the case had been heavily litigated for years. Discovery had closed. Motions to dismiss had been briefed and decided. Expert discovery had been completed. Daubert issues had been litigated. Class certification had already occurred on certain issues. Cross-motions for summary judgment were also pending. In other words, the parties were negotiating with a full understanding of the factual record, the legal issues, and the risks of trial.

That matters. A court is much more likely to trust a settlement reached after extensive litigation than one reached before the record is developed. In the former situation, counsel are evaluating real strengths and weaknesses. In the latter, there is a greater concern that the negotiations may reflect guesswork, leverage, or convenience rather than informed judgment.

Second, the court emphasized that the settlement followed two formal mediations with experienced neutrals. One session involved retired Tennessee Supreme Court Justice Janice Holder. A later session involved former federal judge Layn R. Phillips. The court treated the participation of these independent mediators as powerful evidence that the negotiations were conducted at arm’s length and without collusion.

That point deserves attention from any lawyer handling a complex class or aggregate dispute. Mediation is not simply a box to check. In the right case, it becomes part of the proof that the settlement process can withstand judicial scrutiny. The presence of respected neutrals helps demonstrate that the result was not engineered through side deals or insider cooperation, but instead emerged from adversarial bargaining under professional supervision.

Third, the court gave special weight to the fact that the settlement amount came from a mediator’s proposal. That detail is important. When a number is proposed by the neutral, rather than simply traded back and forth by the parties, it tends to undercut the argument that counsel colluded to reach an artificially convenient result. The court specifically noted that this feature further supported the conclusion that the deal was the product of arm’s-length negotiation.

There is an interesting irony here. The plaintiffs’ claims against Symetra included allegations of conspiracy and coordinated wrongdoing. Yet when the time came to evaluate the settlement, the court looked for the opposite: independence, adversity, and procedural integrity. That contrast is a good reminder that in class litigation, parties are often litigating on two tracks at once. They are litigating the merits of alleged misconduct, but they are also building a record that any eventual settlement was reached in a manner that avoids its own taint.

The court also found comfort in the broader settlement context. Plaintiffs had already reached earlier settlements with other defendants, and the opinion notes that no class member formally objected to or opted out of those earlier deals. While that did not decide the issue, it reinforced the court’s view that the process in this MDL had been serious, transparent, and supervised.

The opinion further shows that even when a settlement resolves less than the maximum potential recovery, that does not make it suspect. The court recognized that plaintiffs claimed tens of millions in missing plan assets and even larger potential trial damages. Still, it concluded that the Symetra settlement represented reasonable relief in light of the risks, costs, and delay of continued litigation. Many class members were near or in retirement, making time itself a critical factor. A delayed victory years later is not always better than a substantial, present recovery now.

For attorneys and clients, the larger lesson is straightforward. In a class action, especially one involving allegations of coordinated misconduct, the credibility of the settlement process may be as important as the settlement figure itself. Courts want to see hard-fought litigation, informed counsel, experienced neutrals, and a record showing that the agreement emerged from genuine adversity rather than convenience or compromise for its own sake. 

That is where thoughtful dispute resolution can make a real difference. Strong mediation in a high-stakes case is not about softening the dispute. It is about creating a disciplined process that helps parties test value, confront risk, and, when resolution is possible, produce an outcome that can survive judicial review.  Compare and contrast this case to the Jones v. Los Angeles Department of Water and Power class action case where it was alleged that counsel for the class and counsel for Defendant conspired together to reach a settlement that appeared not to benefit the class members, as opposed to counsel who were (quickly) paid over $11 million.  Litigation over that collusion is still pending. Dennis Bradshaw v. City of Los Angeles (United States District Court, Central District of California (Western Division — Los Angeles) Case No. 2:19-cv-06661-GW-MAR), where Bradshaw is suing more than a dozen attorneys over their conduct in the underlying Jones case.

For businesses, institutions, and counsel facing complex litigation, that is a useful takeaway. The right neutral process does more than help settle a case. It can help legitimize the settlement when legitimacy matters most. That is particularly true in class and aggregate litigation, where absent claimants, courts, and the public all have a stake in whether the result was reached fairly. Nationwide ADR’s work in arbitration and mediation is built around exactly that kind of disciplined, balanced process - especially in demanding disputes where credibility, fairness, and resolution all matter.