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1 JOINT MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT;

MEMORANDUM OF POINTS AND AUTHORITIES

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Daniel S. Robinson, SBN 244245 Wesley K. Polischuk, SBN 254121 Patrick R. Gutierrez, SBN 302512 ROBINSON CALCAGNIE ROBINSON SHAPIRO DAVIS, INC. 19 Corporate Plaza Drive Newport Beach, California 92660 Telephone: (949) 720-1288 Facsimile: (949) 720-1292 [email protected] [email protected] Co-Lead Counsel for the Class Jeffrey H. Reeves, SBN 156648 GIBSON, DUNN & CRUTCHER LLP 3161 Michelson Drive Irvine, CA 92612-4412 Telephone: (949) 451-3800 Facsimile: (949) 451-4220 [email protected] Defendants’ Lead Counsel

SUPERIOR COURT OF THE STATE OF CALIFORNIA

COUNTY OF ORANGE – CIVIL COMPLEX

Coordination Proceeding Special Title [Rule 3.550] ST. JOSEPH HEALTH SYSTEM MEDICAL INFORMATION CASES ________________________________________ DEANNA DEBAEKE, DANNA GRAEWINGHOLT, JEANNIE HAMBRIC, LINDA KERKOW, and DESIREE ORTIZ, individually and on behalf of all others similarly situated, Plaintiffs, vs. ST. JOSEPH HEALTH SYSTEM, et al., Defendants.

Judicial Council Coordinated Proceeding No. 4716

Coordination Trial Judge: Honorable Kim G. Dunning Department CX 104 JOINT MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT; MEMORANDUM OF POINTS AND AUTHORITIES [Filed Concurrently With Declarations of Daniel S. Robinson, Hon. Peter D. Lichtman (Ret.), and [Proposed] Order]

Hearing Date: September 24, 2015 Time: 9:00 a.m. Dept.: CX104



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TO THE COURT, TO ALL PARTIES AND TO THEIR COUNSEL OF RECORD:

PLEASE TAKE NOTICE THAT on September 24, 2015 at 09:00 a.m., in Department CX104 of

the Orange County Superior Court, Civil Complex Center, located at 751 W. Santa Ana Blvd., Santa

Ana, CA 92701, Plaintiffs Deanna DeBaeke, Danna Graewingholt, Jeannie Hambric, Linda Kerkow,

and Desiree Ortiz (collectively, “Plaintiffs”), and Defendants St. Joseph Health System, Mission

Hospital Regional Medical Center, St. Jude Hospital, Queen of the Valley Medical Center, Santa Rosa

Memorial Hospital, Petaluma Valley Hospital Auxiliary, The Auxiliary of Mission Hospital Laguna

Beach, The Auxiliary of Mission Hospital Mission Viejo, Saint Joseph Hospital of Orange, Saint Joseph

Hospital of Eureka, and Redwood Memorial Hospital of Fortuna (collectively, “SJHS” or

“Defendants”), will and hereby do jointly move the Court for an order granting preliminary approval of

the proposed class action settlement between Plaintiffs and Defendants (together the “Parties”) pursuant

to Code of Civil Procedure (“CCP”) section 382 and California Rule of Court (CRC) 3.769.

Specifically, the Parties jointly seek an order:

1. Preliminarily approving the Settlement Agreement, dated September 10, 2015, and finding that it is fair, reasonable, adequate and the product of investigation, litigation and arm’s-length negotiation;

2. Appointing Kurtzman Carson Consultants LLC (“KCC”) as the Settlement Administrator and directing KCC to give the notice, manage the settlement payment procedure and manage the claims procedure as set forth more particularly in the Settlement Agreement;

3. Approving the claims, opt out and objection procedures provided in the Settlement Agreement;

4. Setting the following schedule:

a. Mailing of Notice to Settlement Class Members1: 20 days after entry of the Court’s Order preliminarily approving the settlement;

b. Deadline to submit opt-out forms: 60 days after the date on which the Notice is first mailed to Settlement Class Members;

1 The term “Settlement Class [Member]” is defined in § IV ¶ 1.6 of the Settlement Agreement as “any individual who (1) falls within definition of the Class or Class Member (as defined in the Court’s December 5, 2014 Order Granting Plaintiffs’ Motion for Class Certification), and (2) who did not previously timely and validly exclude himself or herself from the certified Class.”

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JOINT MOTION FOR PRELIMINARY APPROVAL OF CLASS ACTION SETTLEMENT; MEMORANDUM OF POINTS AND AUTHORITIES

TABLE OF CONTENTS

I. INTRODUCTION.....................................................................................................................1

II. BACKGROUND…………………………………………………………...............................2 A. Summary Of The Case………………………………………………………………….....2 1. The Alleged SJHS Data Security Breach ………………………………………………....2

2. Discovery Of The Alleged Breach and Plaintiffs’ Notification to SJHS......……………...2 3. The Litigation……………………………………………………………………………...3 B. Summary Of The Settlement……………………………………………………………...4

III. PRELIMINARY APPROVAL OF THE SETTLEMENT IS APPROPRIATE…………..…..6

A. Class Action Settlements Are Subject to Preliminary Review And Approval By

The Court And Final Approval After Notice Has Been Given To The Class………….....6

B. The Settlement Is Fair, Reasonable, Adequate, and the Product of Investigation, Litigation, and Arm’s-Length Negotiation…………………………………………….….7

1. The Settlement Provides Substantial Benefits To The Class With Multiple

Components Of Relief And Protection…………………………………………………....7

a. Cash Payment…………………………………………………………………......8 b. Time to File a Claim for Identity Theft Losses…………………………………....9

c. Cash Reimbursement of Identity Theft Losses………………………………..…10

d. Cash Reimbursement of Out-of-Pocket Expenses…………………………….....10

e. Enhanced Security Measures………………………………………………….....11

f. Prior Year of Credit Monitoring………………………………………………....11

g. Protection of Minor Class Members’ Interests…………………………………..11

h. Attorneys’ Fees, Reimbursement of Attorneys’ Expenses, Class Representative

Awards and Costs of Settlement Administration to Be Paid Separately by SJHS………………………………………………………….……………..……12

2. The Settlement Agreement Is the Product of Informed, and Non Collusive Arm’s-

Length Negotiations in Which Both Parties Were Represented by Experienced Counsel With The Assistance Of A Neutral Mediator………………………………..…13

3. The Proposed Stipulation of Settlement is Fair and Reasonable in Light of The Parties Respective Legal Positions……………………………………………………....14

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IV. REASONABLE NOTICE TO THE CLASS IN ACCORDANCE WITH A

CONSTITUTIONALLY PERMISSIBLE NOTICE PLAN WILL BE PROVIDED……......15

V. THE COURT SHOULD SET A BRIEFING SCHEDULE AND HEARING FOR FINAL APPROVAL…………………………………………………………………………………16

VI. CONCLUSION…………………………………………...…………………………………16

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iii


TABLE OF AUTHORITIES

Federal Cases

Class Plaintiffs v. City of Seattle, 955 F.2d 1268 (9th Cir. 1992) .........................................................6

Cotton v. Hinton, 559 F.2d 1326 (5th Cir. 1977) ...................................................................................7

Nat’l Rural Tel. Coop. v. DIRECTV, Inc., 221 F.R.D. 523 (C.D. Cal. 2004) .......................................7

Stamburgh v. Superior Court, 62 Cal. App. 3d 231 (1976) .................................................................13

State Cases

Cartt v. Superior Court, 50 Cal. App. 3d 960 (1975) ..........................................................................15

Clark v. American Residential Servs. LLC, 175 Cal. App. 4th 785 (2009) ...........................................6

Dunk v. Ford Motor Co. 48 Cal. App. 4th 1794 (1996) ..................................................................6, 13

Kullar v. Foot Locker Retail, Inc., 168 Cal. App. 4th 116 (2008) ...................................................7, 13

Mallick v. Superior Court, 89 Cal. App. 3d 434 (1979) ........................................................................6

Munoz v. BCI Coca-Cola Bottling Co. of Los Angeles, 186 Cal. App. 4th 399 (2010).........................7

Stamburgh v. Superior Court, 62 Cal. App. 3d 231 (1976) .................................................................13

Wershba v. Apple Computers, Inc., 91 Cal. App. 4th 224 (2001) ...................................................5, 14

State Rules

California Rules of Court, Rule 3.766 .................................................................................................15

California Rules of Court, Rule 3.769(a) ...............................................................................................6

Other Authorities

3 Alba Conte & Newberg, Newberg on Class Actions§§ 11.24 – 11.26 (4th Ed. 2002) ......................6

3 Alba Conte & Newberg, Newberg on Class Actions§§ 11.51 (4th Ed. 2002) .................................13

Manual for Complex Litigation, § 30.44 (3d ed. 2009) .........................................................................7

Manual for Complex Litigation, Fourth § 13.12 (2004) ......................................................................13



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I. INTRODUCTION

On February 17, 2012, the first of several class action lawsuits against SJHS was filed alleging,

among other causes of action, that SJHS violated the Confidentiality of Medical Information Act

(“CMIA”) by releasing the confidential medical information of approximately 31,802 patients (the

“Alleged Breach”). Now, after over three years of litigation regarding the merits of the claims,

discovery regarding the cause(s) of the Alleged Breach, class certification, preparation for trial, and

several rounds of settlement negotiations, the Parties have reached a Settlement Agreement. The

Settlement Agreement accomplishes the objectives of addressing and remediating the cause(s) of the

Alleged Breach, while providing substantial relief to the Class.

As described in more detail below, preliminary approval of the Settlement Agreement is

warranted. The Settlement Agreement, which provides substantial benefits, relief and protections to

Settlement Class Members2, has a total value exceeding $28,000,000, including:

• Cash payment of $7,500,000 to Participating Settlement Class Members3—based on the approximate Settlement Class size of 31,074 individuals,4 the cash payment to each Participating Settlement Class Member will not be less than $241.36 ($7,500,000/31,074);

• A period to make a claim for identity theft reimbursement of almost six (6) years, from the date the Alleged Breach began (February 2011) to January 1, 2017;

• A $3,000,000 fund to reimburse Participating Settlement Class Members for actual identity theft losses that are more likely than not a result of the Alleged Breach (up to $25,000 per person) and to reimburse Participating Settlement Class Members for certain out-of-pocket expenses incurred as a result of the Alleged Breach;

2 “Settlement Class [Member],” as defined in § IV ¶ 1.6 of the Settlement Agreement, means as any individual who (1) falls within definition of the Class or Class Member (as defined in the Court’s December 5, 2014 Order Granting Plaintiffs’ Motion for Class Certification), and (2) who did not previously timely and validly exclude himself or herself from the certified Class. 3 “Participating Settlement Class Member,” as defined in § IV ¶ 1.7 of the Master Settlement Agreement, means any Settlement Class Member who does not timely and validly exclude himself or herself from the Settlement Class after receiving notice of this Settlement. 4 The approximate size of the Settlement Class was determined by first removing any duplicate entries from the spreadsheet produced by Defendants in this litigation with a Bates Number of SJHS00254195, and then removing any individual listed on the spreadsheet who previously submitted a valid opt-out form. See Dec. of Daniel S. Robinson in Support of Joint Motion for Prelim. Approval (“Robinson Dec.”) ¶ 9.



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• The prior year of identity theft/credit monitoring SJHS offered to all Participating Settlement Class Members in 2012 as a result of actions taken by Plaintiffs in notifying SJHS and the Class about the Alleged Breach—this benefit is valued at over $4.5 million; and

• Healthcare information and security-related remedial actions taken by SJHS as a

result of Plaintiffs’ notification of the Alleged Breach and the ensuing litigation—this benefit is valued at over $13 million.

The Settlement Agreement is the culmination of several sessions of informed and arm’s-length

negotiations between the Parties, some of which were with the assistance of mediators, the Hon. Peter D.

Lichtman (Ret.) and Hon. Edward A. Infante (Ret.) at JAMS. Attorneys’ fees, reimbursement of

attorneys’ expenses, Class Representative incentive awards and costs of settlement administration are to

be paid separately from the aforementioned benefits by SJHS. The proposed settlement is fair,

reasonable and should be approved as it is an appropriate result given the complexities of this case.

Thus, preliminary approval should be granted and a final fairness hearing should be set.

II. BACKGROUND

A. Summary Of The Case

1. The Alleged SJHS Data Security Breach

On or around February 13, 2012, St. Joseph Health System (“SJHS”) sent letters to

approximately 31,802 patients, notifying them that it had inadvertently made some of their personal

health information publicly accessible on the Internet, thus allowing outside search engines to have

access to the information. The letter stated that the type of information accessible included the

following: diagnoses lists, active medication lists, lab results, medication allergies, body mass index

(BMI), blood pressure, smoking status, advance directive status, and demographic information,

including spoken language, ethnicity, race, gender and birth date. The information was allegedly

accessible from approximately February 2011 through February 2012. See Robinson Dec. ¶ 2.

2. Discovery Of The Alleged Breach and Plaintiffs’ Notification to SJHS

In late January 2012, an SJHS patient (Class Representative Danna Graewingholt) discovered

that her medical information was publicly accessible online following a search using the Google search

engine. On approximately January 30, 2012, Plaintiff Graewingholt, through counsel, notified SJHS’s

legal department that her medical information, as well as the medical information of what appeared to be

several thousand other patients, was publicly accessible on the Internet. After verifying the allegations,



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SJHS sent the aforementioned notification letters to the approximately 31,802 affected patients. See id. ¶

3.

3. The Litigation

On February 17, 2012, two of the affected patients (Class Representatives Jeannie Hambric and

Desiree Ortiz) filed separate class action complaints against SJHS and several of its hospitals in Orange

County Superior Court, alleging (among other causes of action) that SJHS had violated the CMIA by

releasing its patients’ medical information. After several other patients filed class action complaints in

various counties, a Petition for Coordination was filed on May 9, 2012. On July 18, 2012, the

Honorable Thomas J. Borris, Presiding Judge of Orange County, assigned Judge Dunning as the

Coordination Trial Judge for Judicial Council Coordinated Proceeding (JCCP) 4775. The Court

designated Daniel S. Robinson, Robinson Calcagnie Robinson Shapiro Davis, Inc. and Jeremiah Frei-

Pearson, Meiselman, Denlea, Packman, Carton & Eberz P.C.5 as Plaintiffs’ Co-Lead Counsel, and

Jeffrey H. Reeves, Gibson Dunn & Crutcher, as Defendants’ Lead and Liaison Counsel on September

12, 2012. See id. ¶ 4.

On December 12, 2012, Plaintiffs filed a consolidated master class action complaint in the

Litigation, alleging four causes of action:

• (1) violation of the CMIA;

• (2) negligence;

• (3) money had and received; and

• (4) violation of the California Unfair Competition Law (UCL), California Business and

Professionals Code, Section 17200, et. seq.

See id. ¶ 5. Defendants filed a demurrer to the complaint on January 23, 2013. After the parties

submitted briefing and presented oral argument, the Court sustained in part and denied in part the

demurrer on April 22, 2013, denying with respect to Plaintiffs’ CMIA, negligence, and UCL based

claims, but granting with respect to Plaintiffs’ claim for money had and received. Defendants filed a

peremptory writ petition with the Court of Appeal on June 14, 2013, challenging the trial court’s

5 Mr. Frei-Pearson’s firm is now Finkelstein, Blankinship, Frei-Pearson & Garber, LLP.



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demurrer decisions in favor of Plaintiffs. After the parties submitted briefing, the Court of Appeal

summarily denied Defendants’ petition on September 12, 2013. See id. ¶ 7.

Prior to Plaintiffs’ motion for class certification, filed on August 13, 2014, the parties engaged in

extensive discovery. To date, this has included the following: the Parties’ exchange of multiple sets of

requests for the production of documents; the Parties’ exchange of multiple sets of interrogatories;

multiple requests for admission served by Plaintiffs on Defendants; the Parties’ responses to all

discovery requests; the depositions of approximately fourteen (14) SJHS corporate witnesses and five

(5) Class Representatives; and the production of several thousand pages of documents—many of which

reveal the possible cause(s) of the Alleged Breach. See id. ¶ 6. On December 5, 2014, after the parties

submitted extensive briefing and presented oral argument, the Court granted class certification as to

Plaintiffs’ CMIA claim. The Court defined the class as follows:

All SJHS patients whose confidential medical information was made

publicly accessible on the Internet by Defendants at any point from

February 1, 2011 through February 28, 2012.

Shortly after Plaintiffs filed their Motion for Class Certification, Defendants filed a motion for

summary judgment on August 22, 2014. On January 14, 2015, again after the parties submitted

extensive briefing and presented oral argument, the Court denied Defendants’ motion for summary

judgment. Defendants filed another peremptory writ petition on January 29, 2015, alleging that the

Court had erred in both granting Plaintiffs’ motion for class certification and denying Defendants’

motion for summary judgment. After the parties submitted briefing, the Court of Appeal summarily

denied Defendants’ writ petition on June 18, 2015. See id. ¶ 7.

Pursuant to the Court’s order, all Class Members were sent, by mail, notice of the Court’s Order

granting Plaintiffs’ motion for class certification, and informing them of their right to opt out of the

Class. Approximately 556 Class Members (1.7%) ultimately elected to opt out of the Class. See id. ¶ 8.

B. Summary Of The Settlement

Following extensive arm’s-length negotiations and several mediation sessions before the Hon.

Peter D. Lichtman and the Hon. Edward A. Infante, Plaintiffs and SJHS reached the settlement

memorialized in the Settlement Agreement. See id. ¶ 10. It provides valuable and important benefits for



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the members of the Settlement Class. As set forth in Section III, infra, the Settlement Agreement readily

meets the standard for preliminary approval—that is, it is fair and reasonable in light of the parties’

respective legal positions. See Wershba v. Apple Computers, Inc., 91 Cal. App. 4th 224, 246, 250

(2001). A copy of the Settlement Agreement is attached as Exhibit 1 to the Declaration of Daniel S.

Robinson (hereinafter “Settlement Agreement”). In short, the Settlement Agreement provides multiple

aspects of relief and protection to the Settlement Class, including:

• Cash payment of $7,500,000 to Participating Settlement Class Members—based on the approximate Settlement Class size of 31,074 individuals, the cash payment to each Participating Settlement Class Member will not be less than $241.36;

• A period during which to make a claim for identity theft reimbursement of almost six (6) years, from the date the Alleged Breach began (February 2011) to January 1, 2017;

• A $3,000,000 fund to reimburse Participating Settlement Class Members for actual identity theft losses that are more likely than not as a result of the Alleged Breach (up to $25,000 per person) and to reimburse Participating Settlement Class Members for certain out-of-pocket expenses incurred as a result of the Alleged Breach. For each Participating Settlement Class Member, reimbursement of the following expenses: (i) up to $200.00 cash reimbursement for credit monitoring services costs; (ii) up to $90.00 cash reimbursement for check replacement costs; (iii) the cost of replacing their driver’s license, except in the normal course of renewing one’s license; and (iv) up to $60.00 for the cost of telephone calls, postage related to inquiries on a person’s financial accounts and/or credit reports, lost time (calculated at $10.00 per hour), the cost of placing a freeze on a person’s credit report, and/or the cost of changing a person’s phone number;

• The prior year of identity theft/credit monitoring SJHS offered to all Class Members in 2012 as a result of actions taken by Plaintiffs in notifying SJHS and the Class about the Alleged Breach—this benefit is valued at over $4.5 million; and

• Healthcare information and security-related remedial actions taken by SJHS as a result of Plaintiffs’ notification of the Alleged Breach and the ensuing litigation—this benefit is valued at over $13 million.

See Settlement Agreement § IV ¶ 2.1-2.5. All attorneys’ fees, reimbursement of attorneys’ expenses,

Class Representative incentive awards and costs of settlement administration are to be paid separately by

SJHS. Id. § IV ¶ 7.1-7.5.

The settlement is supported by Plaintiffs, Co-Lead Class Counsel, and the Plaintiffs’ Executive

Committee (“Executive Committee”). The overwhelming support by Plaintiffs and Class Counsel

highlights the strength and fairness of the proposed settlement.



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III. PRELIMINARY APPROVAL OF THE SETTLEMENT IS APPROPRIATE

A. Class Action Settlements Are Subject to Preliminary Review And Approval By The

Court And Final Approval After Notice Has Been Given To The Class

Courts strongly favor and encourage settlements, particularly in class action and other complex

matters where the inherent costs, delays, and risks of continued litigation might otherwise overwhelm

any potential benefit the class could hope to obtain. See Class Plaintiffs v. City of Seattle, 955 F.2d

1268, 1276 (9th Cir. 1992) (noting that “strong judicial policy . . . favors settlements, particularly where

complex class action litigation is concerned.”). A settlement of a class action lawsuit must be reviewed

and approved by the trial court. See Cal. R. Ct. 3.769 (a); see also Dunk v. Ford Motor Co., 48 Cal.

App. 4th 1794, 1800-01 (1996). Approval occurs in two steps: (1) an early (preliminary) review by the

trial court; and (2) a subsequent (final) review after notice has been provided to the Class Members.

The present motion seeks preliminary approval and the setting of a final approval briefing

schedule and hearing. As part of the final approval process, “[t]he trial court must determine whether a

class action settlement is fair and reasonable, and has a broad discretion to do so.” Clark v. American

Residential Servs. LLC, 175 Cal. App. 4th 785, 799 (2009). The preliminary approval process is similar,

but less stringent. See Alba Conte & Herbert B. Newberg, 3 Newberg on Class Actions §§ 11.24 – 26

(4th ed. 2002).

Courts have wide discretion to determine whether the proposed settlement is fair. Mallick v.

Superior Court, 89 Cal. App. 3d 434, 438 (1979). Moreover, fairness is presumed where, as here: (1)

the settlement is reached through arm’s-length bargaining; (2) investigation is sufficient to allow counsel

and the court to intelligently evaluate the settlement agreement; and (3) counsel is experienced in similar

litigation. Dunk, 48 Cal. App. 4th at 1800. In the preliminary evaluation, the court’s task is to

determine whether the proposed settlement is within the “range of reasonableness,” and whether it is

appropriate to notify the class of the terms of the settlement and to schedule a formal fairness hearing.

Conte & Newberg, supra, at § 11.25. The Manual for Complex Litigation provides:

If the proposed settlement appears to be the product of serious, informed, non-collusive negotiations, has no obvious deficiencies, does not improperly grant preferential treatment to class representatives or segments of the class, and falls within the range of possible approval, then the court should direct that notice be given to the Class Members



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of a Formal Fairness Hearing, at which evidence may be presented in support of and in opposition to the settlement.

Manual for Complex Litigation, § 30.44 (3d ed. 2009).

In the preliminary fairness evaluation, courts should be mindful of the “strong presumption” that

an agreed-upon settlement is fair. Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977). “In most

situations, unless the settlement is clearly inadequate, its acceptance and approval are preferable to

lengthy and expensive litigation with uncertain results.” Nat’l Rural Tel. Coop. v. DIRECTV, Inc., 221

F.R.D. 523, 526 (C.D. Cal. 2004).

To evaluate a settlement, the trial court must receive “basic information about the nature and

magnitude of the claims in question and the basis for concluding that the consideration being paid for

the release of those claims represents a reasonable compromise.” Kullar v. Foot Locker Retail, Inc., 168

Cal. App. 4th 116, 133 (2008). However, the record need not contain an explicit statement of the

maximum theoretical amount that the class could recover. See Munoz v. BCI Coca-Cola Bottling Co. of

Los Angeles, 186 Cal. App. 4th 399, 409 (2010) (holding that the law requires a record which allows “an

understanding of the amount that is in controversy and the realistic range of outcomes of the

litigation.”).

As demonstrated in § IV.B, infra, the Parties have exceeded the threshold required to provide the

Court with an understanding of the amount that is in controversy and the realistic range of outcomes of

the litigation. Having delivered the materials and information necessary for preliminary approval, the

Parties request that the Court preliminarily approve the settlement, authorize notice to the Settlement

Class and set a Final Approval Hearing.

B. The Settlement Is Fair, Reasonable, Adequate, and the Product of Investigation,

Litigation, and Arm’s-Length Negotiation

1. The Settlement Provides Substantial Benefits To The Class With Multiple

Components Of Relief And Protection

As outlined above and discussed in detail below, the Settlement Agreement offers multiple layers

of fair and adequate benefits for the Settlement Class Members.

//



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a. Cash Payment

The Settlement Agreement requires SJHS to make a total of $7,500,000 in cash payments, in the

form of checks, to Settlement Class Members who do not opt out of the settlement (i.e., Participating

Settlement Class Members). See Settlement Agreement § IV ¶ 2.2. The amount of each check sent

during the first round of cash payments will be determined by distributing the $7,500,000 cash payment

pro rata among all Participating Settlement Class Members. Id. § IV ¶ 2.2(a). Participating Settlement

Class Members are not required to submit a claim form to receive this check. In no event will the

amount of the check sent to each Participating Settlement Class Member be less than $ 241.35

($7,500,000 divided by 31,074—the approximate number of Class Members who have not previously

opted out and rounding down to the nearest cent). Id. The payment each Class Member will receive in

this settlement compares favorably to other health care data privacy breach cases. Robinson Dec. ¶ 12.6

Upon final approval of the settlement by the Court, the Settlement Administrator shall issue

checks as described above (“first-round checks”). See Settlement Agreement § IV ¶ 2.2(b). For any

first-round checks returned as undeliverable, the Settlement Administrator will make reasonable efforts

to find a valid address and resend the check within 30 days after the check is returned. See id. § IV ¶

2.2(c). Absent a Participating Settlement Class Member’s reasonable circumstances for excuse, any

first-round checks not cashed within 90 days of issuance will be deemed expired. Id. Those

Participating Settlement Class Members who do not cash their first-round checks within 120 calendar

days of issuance will be considered as having waived any right to a cash payment under the Settlement

Agreement. Id.

6 By way of comparison, in a similar class action brought by patients against a medical facility for its unauthorized disclosure of medical records, Smith v. Regents of the University of California, No. RG08-410004, Super. Ct. of California, Alameda Cty. (2010), the trial court approved a settlement that provided for injunctive relief, payment of a $1.3 million cy pres fund, costs and an incentive award to the named plaintiff, and attorneys’ fees, but no cash payment to class. In Springer v. Stanford Hospital and Clinics, No. BC470522, Super. Ct. of California, Los Angeles Cty. (2014), the court approved a settlement which anticipated payments of approximately $100 going to each of the 19,500 class members. And in Rice v. InSync, et al., No. 30-2014-00701147-CU-NP-CJC, Super. Ct. of California, Orange Cty. (Apr. 15, 2015), this Court approved a settlement which provided a common fund of $4,125,000 for 50,036 class members, with anticipated payments of $51.71 to each class member after accounting for attorneys’ fees and costs.



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A second round of payments will be made on a pro rata basis to those Participating Settlement

Class Members who cashed first-round checks (“second-round checks”) if the total dollar amount of

uncashed first-round checks (numerator) divided by the number of Participating Settlement Class

Members who cashed first-round checks (denominator) is greater than or equal to $10.00, and will be

issued by the Settlement Administrator 90 days following the first-round check-cashing deadline. See

id. § IV ¶ 2.2(d). If second-round checks would be less than $10.00, the total dollar value of uncashed

checks will be paid to a charitable organization to be agreed upon by the Parties (and approved by the

Court) for the provision of services to victims of identity theft and fraud-related crimes. See id. § IV ¶

2.2(e).

A third round of payments will be made on a pro rata basis to those Participating Settlement

Class Members who cashed second-round checks if the total dollar amount of uncashed second-round

checks (numerator) divided by the amount of Participating Settlement Class Members who cashed

second-round checks (denominator) is greater than or equal to $10.00. See id. § IV ¶ 2.2(d). This

process will continue with subsequent rounds until the dollar amount of uncashed checks left from the

prior round divided by the number of Participating Settlement Class Members who cashed a check

during that prior round is less than $10.00 per person. At that point, the total dollar value of uncashed

checks will be paid to the aforementioned charitable organization agreed upon by the Parties (and

approved by the Court). See id. § IV ¶ 2.2(e).

b. Time to File a Claim for Identity Theft Losses

The Settlement Agreement has a built-in mechanism to provide for cash reimbursement for any

identity theft losses that are more likely than not resulting from the Alleged Breach. The date to file

such claims runs for a period of almost six years, from February 1, 2011, the date the Alleged Breach

first occurred, through January 1, 2017 (the “Claims Period”). Claims alleging identity theft must be

made no later than ninety (90) days after the conclusion of the Claims Period. See id. § IV ¶ 2.3(c).

This time to file a claim for identity theft losses protects Participating Settlement Class Members from

future harm due to the Alleged Breach and is an important and valuable benefit to the Settlement Class.

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c. Cash Reimbursement of Identity Theft Losses

The Settlement Agreement provides that SJHS shall reimburse each Participating Settlement

Class Member up to $25,000 per person for any unreimbursed loss that is shown by the Participating

Settlement Class Member to have occurred more likely than not as a result of the Alleged Breach. The

Participating Settlement Class Member seeking reimbursement must demonstrate: (1) an actual,

documented and unreimbursed loss; (2) that resulted from identity theft that more likely than not can be

attributed to the Alleged Breach; and (3) that occurred during the time period from February 1, 2011,

through and including January 1, 2017 (the “Claims Period”). Id. Participating Settlement Class

Members seeking such reimbursement must submit a written claim under penalty of perjury to the

Settlement Administrator using the forms attached as Exhibits A and B to the Settlement Agreement,

together with proof of such losses. See id., Exs. A, B. The Settlement Administrator shall collect the

proof of losses and claims forms from Participating Settlement Class Members and provide a neutral

assessment of the facts and proof to SJHS for acceptance or rejection of the Claim. See id. § IV ¶ 2.3(d).

The Settlement Agreement also provides Participating Settlement Class Members with the right to

appeal determinations made by SJHS to an independent arbitrator from Judicial Arbitration and

Mediation Services (JAMS). See id. ¶ 2.3(e).

d. Cash Reimbursement of Out-of-Pocket Expenses

In addition to reimbursement of identity theft losses, the Settlement Agreement provides for cash

reimbursement of certain out-of-pocket expenses that are more likely than not a result of this incident.7

Class Members seeking out-of-pocket expenses must submit claims within 90 days of the date on which

7 These expenses include: (i) documented paper check printing costs of up to $90.00 per person necessitated by the opening of a new checking account that were incurred prior to the published notice of this settlement; (ii) the cost of obtaining credit monitoring and identity theft insurance incurred prior to the first cancellation opportunity of the credit monitoring and identity theft insurance after the Court grants final approval, but in no event more than $20.00 per month, subject to reasonable documentation, and up to a total maximum of $200.00 per person; (iii) the cost of telephone calls, postage related to inquiries on a person’s financial accounts and/or credit reports, lost time (calculated at $10.00 per hour), the cost of placing a freeze on a person’s credit report, and/or the cost of changing a person’s phone number, up to $60.00 per person, subject to reasonable documentation and a signed statement by the person that his or her claim is true and correct and is being made under penalty of perjury; and (iv) the cost of replacing a person’s driver’s license, except in the normal course of renewing one’s license. See § IV ¶ 2.3(b).



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the Court’s order granting final approval of the settlement becomes final. See id. § IV ¶ 2.3(b). Total

aggregate payments made by SJHS pursuant to claims made for identity-theft losses and out-of-pocket

expenses incurred as a result of the Alleged Breach shall be administered on a first valid claim received

basis, subject to a cap of $3,000,000, with prior claims given priority over subsequent claims. See id. §

IV ¶ 2.3(g).

e. Enhanced Security Measures

SJHS has represented to Plaintiffs’ Counsel and the Court that it has made substantial changes

and improvements to its security policies, procedures and infrastructure as a result of actions taken by

Plaintiffs in notifying SJHS and the Class about the Breach. See id. ¶ 2.4 and Ex. D. According to the

Declaration of Karen Mihelic, Executive Director of RSO Ministry Security at St. Joseph Health

System, some of the actions taken by SJHS as a result of the breach notification by Plaintiffs and the

ensuing litigation include: (1) discovery of the Alleged Breach and its cause, (2) notification of

approximately 31,802 patients and other state and federal regulatory agencies, (3) the offering of one

year of identify-theft and credit monitoring to all potentially affected patients, (4) retaining several

outside data security consultants to review, analyze and overhaul the policies and procedures at SJHS

with respect to data security, and (5) the implementation of numerous data security measures to improve

data security at SJHS, including hiring nine additional full-time data security employees. Id. SJHS

estimates that this component of the Settlement Agreement provides at least $13,000,000 in benefit to

Settlement Class Members. See Id.

f. Prior Year of Credit Monitoring

The Parties agree that the year of identity theft/credit monitoring SJHS offered to all Class

Members in 2012 was as a result of actions taken by Plaintiffs in discovering and notifying SJHS and

the Class about the Alleged Breach, and is a benefit to the Class resulting from this litigation and

Settlement. The Parties estimate the amount of that benefit is over $4,500,000. See Id.

g. Protection of Minor Class Members’ Interests

The Settlement also protects the interests of underage Settlement Class Members by providing

for the appointment of a Guardian Ad Litem for Minor Settlement Class Members. See id. § IV ¶ 2.5.

The Settlement Agreement defines “Minor Settlement Class Members” as Settlement Class Members



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who are less than 18 years of age at the time the Court grants preliminary approval. Id. The Court has

already approved the appointment of the Hon. Peter D. Lichtman (Ret.) as the Guardian Ad Litem. See

Robinson Dec. ¶ 14.

The Guardian Ad Litem is responsible for reviewing and evaluating the settlement and all

pleadings submitted to the Court related to the Settlement. The Guardian Ad Litem shall then make a

determination of whether the Settlement is fair, reasonable and in the best interest of the Minor

Settlement Class Members and, prior to the Court’s consideration of the motion for preliminary

approval, submit a declaration to the Court stating his opinions and any changes or modifications to the

Settlement he believes should be made. See id. ¶ 13. Judge Lichtman (Ret.) has performed the required

review and his declaration in support of the proposed Settlement is filed herewith. See generally

Declaration of Hon. Peter D. Lichtman in Support of Joint Motion for Preliminary Approval of Class-

Action Settlement.

h. Attorneys’ Fees, Reimbursement of Attorneys’ Expenses, Class

Representative Awards and Costs of Settlement Administration to Be

Paid Separately by SJHS

Attorneys’ fees, reimbursement of attorneys’ expenses, Class Representative awards and costs of

settlement administration are to be paid separately by SJHS on top of the substantial benefits outlined

above. SJHS has agreed not to oppose Co-Lead Class Counsel’s application for incentive awards for

Class Representatives in the total of $50,000, as follows: $15,000 to Plaintiff Danna Graewingholt;

$8,750 to Plaintiff Jeannie Hambric; $8,750 to Plaintiff Linda Kerkow; $8,750 to Plaintiff Desiree Ortiz;

and $8,750 to Plaintiff Deanna Debaeke. See Settlement Agreement § IV ¶ 7.3.

In addition to the incentive awards, SJHS has agreed to not oppose an application by Co-Lead

Class Counsel for an award of attorneys’ fees and costs up to $7,450,000, which includes all costs, past

and future, in connection with the litigation, and all costs associated with administering the settlement.

See id. § IV ¶ 7.2. To date, Class Counsel have incurred over $500,000 in costs associated with this

case. Additional expenses will be incurred between now and final approval. See Robinson Dec. ¶ 15.

With the application for final approval, Co-Lead Class Counsel will provide detailed information



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regarding the hours spent and costs expended litigating this case by Co-Lead Class Counsel and the

Executive Committee. See id.

2. The Settlement Agreement Is the Product of Informed, and Non Collusive

Arm’s-Length Negotiations in Which Both Parties Were Represented by

Experienced Counsel With The Assistance Of A Neutral Mediator

There is a presumption that a settlement agreement is fair, reasonable and adequate where it is

negotiated in good faith and at arm’s-length with the assistance of a neutral mediator. See, e.g., Dunk,

48 Cal. App. 4th at 1802; Kullar, 168 Cal. App. 4th at 168 (“The court undoubtedly should give

considerable weight to the competency and integrity of counsel and the involvement of a neutral

mediator in assuring itself that a settlement agreement represents an arm’s-length transaction…”); Conte

& Newberg, supra, at § 11.51. Settlement is favored, and settlement agreements are realistically

assessed. See Stamburgh v. Superior Court, 62 Cal. App. 3d 231, 236 (1976).

The settlement in this matter was reached after over three years of intense litigation and several

years of negotiation with the assistance of a skilled retired judge acting as mediator. At various time

during this litigation, the Parties engaged in settlement discussions, many of which were before the Hon.

Edward A. Infante (Ret.) at the JAMS office in Orange County, California. See Robinson Dec. ¶¶ 7, 10.

Both Class and Defendants’ Counsel have considerable experience in class action litigation and

have demonstrated competence with litigating actions. See Robinson Dec. ¶ 16. Prior to the lengthy

settlement negotiations and in the preparation for trial, Class Counsel conducted extensive discovery and

exchanged information enabling an informed decision as to the merits of the settlement. See id. ¶ 6.

The timing of the settlement and risks of continued litigation further support approval of the Settlement

Agreement. See Manual for Complex Litigation, Fourth § 13.12 (2004) (recognizing that the benefits of

settlement are diminished if it is postponed until discovery is completed and approving of targeting early

discovery at information needed for settlement negotiations). The Parties engaged in extensive, arm’s-

length negotiations for several months, and have fought hard for the interests of their respective clients

for several years. The resolution achieved here includes substantial and valuable recovery for members

of the Settlement Class.



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3. The Proposed Stipulation of Settlement Is Fair and Reasonable in Light of

the Parties’ Respective Legal Positions

Both Parties were confident in their respective legal positions and vigorously litigated numerous

issues. The case also involved the contested legal issue of the availability of certain statutory damages.

Balanced against the strengths and potential weaknesses of the case, the Settlement Agreement

represents a fair result for the Settlement Class Members. A settlement is not judged against what might

have been recovered had a plaintiff prevailed at trial, nor does the settlement have to provide one

hundred percent of the damages sought to be fair and reasonable. Wershba v. Apple Computers, Inc., 91

Cal. App. 4th 224, 246, 250 (2001).

Here, the Settlement Agreement provides fair and reasonable compensation to the class in light

of the issues addressed in the litigation. The Settlement Agreement provides for a cash payment to

Participating Settlement Class Members totaling $7,500,000 (at least $241.35 per person);

reimbursement to Participating Settlement Class Members for any losses resulting from identity theft

they have already suffered, or may suffer in the future, and reimbursement of certain out-of-pocket

expenses (up to $3,000,000); heightened security measures implemented by SJHS (valued at over

$13,000,000); and protection of Minor Settlement Class Members. It also stipulates that Class

Representative incentive awards (up to $50,000), and attorneys’ fees and costs will be paid separately by

SJHS (up to $7,450,000).

Additionally, the settlement provides benefits in contrast to the possibility of no relief should the

claims of Representative Plaintiffs and class members be denied. Balanced against the uncertainty of

litigation, the recovery under the settlement provides a fair and reasonable compromise of Settlement

Class Members’ claims. Given the nature of the case, there is a reasonable likelihood that the decision

on the merits would be appealed, which would then cause further delay, as it would require briefing, oral

argument, and a period of time before a decision is issued. In contrast, the settlement provides

significant benefits for Participating Settlement Class Members now without the delays and risks

described herein.

Under the circumstances, each of the relevant factors supports preliminary approval of the

Settlement Agreement. The Settlement Agreement is an appropriate result for the class and provides for



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immediate, tangible benefits for Participating Settlement Class Members, including protection and relief

from the Alleged Breach. Accordingly, the Court should preliminarily approve the Settlement

Agreement.

IV. REASONABLE NOTICE TO THE CLASS IN ACCORDANCE WITH A

CONSTITUTIONALLY PERMISSIBLE NOTICE PLAN WILL BE PROVIDED

Courts have broad discretion in determining an appropriate mechanism for giving class-wide

notice. See California Rule of Court 3.766 (e)-(f). Although there is no statutory or due process

requirement that all Settlement Class Members receive actual notice, the Parties have agreed on a Notice

Plan in which all Settlement Class Members receive direct mailed notice such that notice will have a

“reasonable chance of reaching a substantial percentage of the Class Members…” Cartt v. Superior

Court, 50 Cal. App. 3d 960, 974 (1975).

The proposed Notice and agreed-upon procedure is in accord with California Rules of Court

3.766 (e) and (f). The Notice will be mailed directly to all Settlement Class Members with information

regarding the lawsuit and settlement which directly affects their rights and release of claims against

SJHS. The proposed Notice explains in plain language the nature of the lawsuit, terms of the settlement,

Settlement Class Members’ rights, the steps necessary to request exclusion from or object to the

Settlement, and how Settlement Class Members may obtain additional information regarding the

settlement. It will make clear that the Settlement Agreement does not constitute an admission of

liability by SJHS, and acknowledge that this Court has not ruled on the merits of the action. It will also

state that the final settlement approval decision has yet to be made. See Settlement Agreement, Ex. F.

The Parties agreed upon a personal notice procedure that is intended to ensure the highest

number of Settlement Class Members receive the Notice. Kurtzman Carson Consultants LLC (“KCC”),

the company selected by the parties to handle the notice and settlement administration, subject to the

Court’s approval, will mail the Notice to the Settlement Class Members based on contact information

SJHS previously produced in discovery and based on updated contact information KCC previously

obtained from mailing the notice of class certification. See id. § IV ¶ 4.2. KCC will manage and

maintain the Settlement Class list and contact information as confidential. In the event any Settlement

Notices are returned by the post office as undeliverable, the proposed notice procedure instructs KCC to



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perform reasonable searches to attempt to locate the Settlement Class Members’ correct addresses. See

id. § IV ¶ 4.3.

V. THE COURT SHOULD SET A BRIEFING SCHEDULE AND HEARING FOR FINAL

APPROVAL

The last step in the settlement approval process is the formal hearing where the Court may hear

all evidence and argument necessary to evaluate conclusively the proposed settlement. Proponents of

the Settlement Agreement may explain its terms and conditions, and offer argument in support of final

approval. In addition, Settlement Class Members, or their counsel, may be heard in support of or in

opposition to the Settlement Agreement.

The Court will determine after the final approval hearing whether the Settlement Agreement

should be approved and whether to enter a final order. Class Counsel recommends a hearing

approximately 14 weeks after the hearing of Preliminary Approval, which would be on or about

December 29, 2015.

VI. CONCLUSION

Based on the foregoing, Plaintiffs and Defendants respectfully request that this Court issue an

order: 1. Preliminarily approving the Master Settlement Agreement dated September 10,

2015, and finding that it is fair, reasonable, adequate and the product of investigation, litigation and arm’s-length negotiation;

2. Appointing Kurtzman Carson Consultants LLC (“KCC”) as the Settlement Administrator and directing KCC to give the notice, manage the settlement payment procedure and manage the claims procedure as set forth more particularly in the Settlement Agreement;

3. Approving the claims, opt out and objection procedures provided in the Agreement;

4. Setting the following schedule:

a. Mailing of Notice to Settlement Class Members: 20 days after entry of the Court’s Order preliminarily approving the Settlement;

b. Deadline to submit opt-out forms: 60 days after the date on which the Notice is mailed to Settlement Class Members;

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