Pro Rata Adjustments will be used to ensure all of the Settlement Amount (less Administrative Expenses) goes to Settlement Class Members.
After all Tier 2 and Tier 3 Claims have been received and reviewed by the Panel and Claim Award amounts allocated by the Panel, the Pro Rata Adjustment amount will be calculated by the Settlement Administrator by comparing the total sum of all Claim Awards with the total amount remaining in the Settlement Fund. (There will be less than $215 million in the Fund because Administrative Expenses will have been paid out of the Fund prior to the pro rata calculation).
If the sum of the Claim Awards is less than the amount remaining in the Settlement Fund, there will be a Pro Rata Increase applied to all Tier 1, Tier 2, and Tier 3 Claim Award amounts, which means those Claim Awards will all be increased by the same percentage. The percentage increase will be enough to make the sum of the Claim Awards equal the amount of money in the Settlement Fund, or to increase all Claim Award amounts by 50%, whichever comes first. Therefore, the maximum amount claimants could receive would be $3,750 for Tier 1, $30,000 for Tier 2, and $375,000 for Tier 3.
If the sum of the Claim Awards is more than the amount remaining in the Settlement Fund, there will be a Pro Rata Reduction applied to all Tier 2 and Tier 3 Claim Award amounts, which means those Claim Awards will all be decreased by the same percentage. (There will be no decrease of the Tier 1 Claim Awards.) The percentage decrease will be enough to make the sum of the Claim Awards equal the amount of money in the Settlement Fund, or to decrease the Claim Award amounts by 25%, whichever comes first. Therefore, the lowest possible amount a claimant could receive under the Settlement would be $2,500 for Tier 1 (i.e., no reduction) and $5,625 for Tier 2 and Tier 3 (i.e., 25% reduction of lowest possible Tier 2 or 3 Claim Award).
The illustration below is provided to demonstrate the calculation of the Pro Rata Adjustment. For the purposes of the illustration, it is assumed that 15,000 Class Members will be eligible to receive the $2,500 Tier 1 payment. Of those 15,000, the example assumes that 4,000 Class Members or approximately 25% will file either a Tier 2 or a Tier 3 claim; 3,000 of those will file Tier 2 claims and receive an average award of $15,000 and 1,000 will file Tier 3 claims and receive an average award of $125,000. These assumptions result in the following calculations:
Calculation to Determine Pro Rata Adjustment Amount:
|Aggregate Award Amount
*This represents the Settlement Fund as of the date of the pro rata calculation, by which point the Settlement Fund will have been reduced to pay for Administrative Expenses incurred up to that date per Sections 2.2, 2.34, and 2.35 of the Amended Settlement Agreement. Solely for the purposes of this example, we have reduced the Settlement Fund by $5 million for Administrative Expenses.
Calculation to Apply Pro Rata Adjustment:
|15,000 Tier 1 x ($2,500 + 6% = $2,650)
|3,000 Tier 2 x ($15,000 + 6% = $ 15,900)
|1,000 Tier 3 x ($125,000 + 6% = $ 132,500)
|Less Tier 1 Offset for 4,000 Tier 2 and 3 claimants who already received a $2,500 Tier 1 payment
|Total Aggregate Award Amount Plus 6% Pro Rata Increase:
If fewer Class Members are eligible to receive the automatic Tier 1 payment, fewer Class Members file Tier 2 or 3 claims, and/or the average Tier 2 and 3 Claim Award amounts are smaller than what is assumed and estimated in the above example, the Pro Rata Increase to the Tier 1, 2 and 3 Claim Award amounts would be larger. Conversely, if more Class Members are eligible to receive the automatic Tier 1 payment, more Class Members file Tier 2 or 3 claims, and/or the average Tier 2 and 3 Claim Award amounts are larger than what is assumed and estimated in the above example, then the Tier 2 and 3 Claim Award amounts may receive a Pro Rata Reduction.
Tier 2 and Tier 3 claims have been reviewed and Claim Award amounts have been allocated by the Panel. Per the terms of the Settlement, the Pro Rata Adjustment was calculated and applied by the Settlement Administrator. As a result, a Pro Rata Increase of approximately 17% was applied to Tier 1 Settlement payments and Tier 2 and Tier 3 Claim Awards.