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Filed: Patrick Fisher
Filed: Patrick Fisher
PUBLISH
DEC 24 2002
Plaintiffs - Appellees,
No. 02-1220
PATRICK FISHER
Clerk
Plaintiffs - Appellees,
No. 02-1221
This appeal arises from the district courts approval of a $70 million class
action settlement of four related cases involving the production of carbon dioxide
(CO 2) contained within the McElmo Dome Unit in Colorado. Appellants are
eleven objectors (Objectors) who assert interests in several small royalty and
overriding royalty interests in the McElmo Dome Unit, and who object to the
settlement. 1
Objectors are members of only two of the three class actions involved in
this case and purport to appeal the settlement only as it relates to those two
classes. Plaintiffs have filed a Motion to Partially Dismiss this appeal on the
ground that Objectors are not class representatives, have made no effort to
achieve that status, and therefore do not represent the class members in those two
cases and can only object to the settlement as it affects their own individual
interests. Plaintiffs seek dismissal of the appeals as to all class members other
than Objectors because, inasmuch as the settlement agreement provides that there
shall be no distributions as long as there are appeals pending, the pendency of
Objectors appeals prevents any distribution.
While we are sympathetic to Plaintiffs plight, we can see no practical way
to separate Objectors individual interests from those of the other class members
without upsetting the entire settlement fund. Moreover, in Devlin v. Scardelletti,
122 S. Ct. 2005 (2002), in which the Supreme Court held that nonnamed nonintervening class members objecting to the approval of a settlement may appeal
that approval even though they were not permitted to intervene, the Court noted
that such an objector will only be allowed to appeal that aspect of the District
(continued...)
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For the reasons that follow, we affirm the district courts approval of the
settlement.
BACKGROUND
The first of the four related actions was filed in October 1996 as a
purported class action on behalf of a coalition (Coalition) of more than seventy
McElmo Dome interest owners against various Shell Oil Company and Mobil Oil
Company entities and the Cortez Pipeline Company (collectively Defendants).
CO 2 Claims Coalition v. Shell Oil Co., No. 96-Z-2451 (D. Colo. filed Oct. 22,
1996). The Coalitions claims generally were for damages and for future relief
caused by the wrongful pricing by Defendants of CO 2 that was transferred through
the Cortez Pipeline to oilfields in West Texas where Defendants used it to
enhance oil production from older oilfields. After class certification was denied
on two separate occasions because the court determined that the alleged class
members interests were too divergent to warrant class certification, the Coalition
case proceeded as an individual (non-class) action.
(...continued)
Courts order that affects him. Id. at 2013, 2010. The Court described that
aspect, however, as the District Courts decision to disregard his objections.
Id. at 2010. Objectors objections were directed at the entire settlement. We
therefore deny Plaintiffs motion to partially dismiss the appeals.
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By the summer of 2001, the CO 2 Claims case was nearing trial, after
extensive discovery and other pretrial proceedings. After sporadic mediation
efforts, at the encouragement of the district court, in August 2001, the Colorado
parties pursued mediation under the guidance of former Colorado Supreme Court
Justice Howard Kirshbaum. After more than seven weeks of negotiation, the
parties agreed to and signed a settlement of all four actions (The CO 2 Claims
Coalition action and the three class actions) on September 24, 2001. They also
filed a joint motion for preliminary approval of the settlement.
The basic terms of the settlement were as follows: defendants agreed to
pay almost $52.9 million in cash, with 8% interest from August 21, 2001, until
the final payment, the actual sum to be adjusted up or down based upon the
number of actual subscribers to the settlement; defendants agreed to pay future
relief of various sorts, which future relief the district court determined had a
present value of $22.5 million; and the actual allocation of the settlement funds
was to be determined by the district court. As finally adjusted, the settlement
fund was $50,430,308.00. The settlement essentially required a minimum of 90%
participation. After opt-outs, the final subscription rate to the settlement was as
follows: 99.7869% of the RIOs; 87.5882% of the ORIOs; and 99.9996% of the
SSWIOs. In total, the subscription percentage was 96.0081%. Objectors have not
opted out of the Colorado settlement.
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Meanwhile, on August 30, 2001, two of the Objectors (two of the Texas
class representatives) acting on behalf of a named plaintiff in each of the two
competing Texas actions, filed motions to intervene in the Colorado proceedings
in order to object to the upcoming settlement. After the Plaintiffs in the Colorado
proceedings had filed various motions, including the motion for preliminary
approval of the class action settlement on behalf of the three class actions (Rutter,
Ainsworth, and Watson) and a motion to appoint a fairness expert to review the
fairness of the overall settlement, including any allocation as determined by the
court, the district court held a status conference on October 1, 2001. After
hearing from the two Objectors counsel at the October 1 status conference, the
district court established a briefing schedule on Objectors motion to intervene.
Accordingly, Objectors appeared and argued at an October 26 hearing on
their motion to intervene, at the conclusion of which the district court denied the
motions to intervene, primarily . . . on timeliness. App. Vol. XV, tab 134 at
5010. Then, a hearing on preliminary settlement approval took place on
November 14. The court noted that although it was not permitting the Objectors
to formally intervene, it would permit them to file amicus briefs. On December 6,
the court signed the order conditionally certifying the class, preliminarily
approving the settlement, and formally appointing James Lyons as the fairness
expert. Mr. Lyons was specifically directed to address the following matters:
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objected on numerous grounds, including the total amount of the settlement, its
resolution of the no transportation claim, 3 the allocation of the settlement,
alleged conflicts of interest by Plaintiffs counsel, and alleged collusion in the
settlement negotiations. In his Affidavit concerning the proposed class action
settlement, Mr. Lyons stated that he had various and extensive discussions with
counsel for all parties, including counsel for Objectors. Lyons Aff. 1, App.
Vol. XII, tab 35 at 4125.
In February 2002, Objectors moved to take expedited discovery and sought
to depose everyone involved in the settlement, which was denied. They also
requested a status conference to discuss whether they would be allowed to present
live testimony at the final fairness hearing scheduled for April 8, 2002. There
(...continued)
implicate the jurisdiction of the courts under Article III of the constitution, nor
does it raise the sorts of concerns that are ordinarily addressed as a matter of
prudential standing. Devlin, 122 S. Ct. at 2009. We therefore elect to leave the
scope of Devlin to another day, and proceed to the merits of this case, particularly
in view of the fact that the parties do not discuss that argument and because the
result of our decision is the same (unfavorable to Objectors).
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was apparently a status conference held on February 11, 2002, which was not
transcribed, and in which Objectors again requested permission to present live
testimony at the final fairness hearing. The court invited briefs on the issue.
Objectors then filed a motion to present live testimony, which the district court
denied, stating:
The Court, having presided over this entire matter for almost six
years, is familiar with the case, and all elements thereof. The
objectors have been afforded procedural protections. They have
received notice, despite initial inefficiencies, and have alerted the
Court to their concerns over this settlement via voluminous written
material, exhibits, and affidavits. They have participated in this case
since their intervention motions were filed, and have had access to
significant discovery in this matter and the Texas cases. Under these
circumstances . . . objectors motion for live testimony will be
denied.
Order at 3, App. Vol. XI, tab 104 at 3772.
However, the court did state that Objectors may file additional written
proffers and/or affidavits not to exceed five pages each, on or before April 3,
2002, and it stated that they may file with the Court suggested questions to be
posed to Mr. Lyons at the Fairness Hearing, which the Court may or may not ask,
on or before April 4, 2002. Id. at 3772-3773. At Objectors request, those
deadlines were extended to April 5, 2002, with written submissions not to exceed
ten pages, although Objectors were directed they may not file affidavits and/or
proffers by persons who previously have filed similar papers with the Court.
Minute Order, App. Vol. XII, tab 108, 109. The court also denied Objectors
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DISCUSSION
Due process issues, which call for legal conclusions, are subject to de
novo review. United States v. Clark, 84 F.3d 378, 381 (10th Cir. 1996). By
contrast, [w]e review the courts approval of the settlement agreement for an
abuse of discretion. United States v. Hardage, 982 F.2d 1491, 1495 (10th Cir.
1993); see also Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)
(noting that the district courts decision to approve or reject a settlement is
committed to the sound discretion of the trial judge because he is exposed to the
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litigants, and their strategies, positions, and proof). Any factual findings we
review under the clearly erroneous standard. Fed. R. Civ. P. 52(a). In reviewing
a courts determination for abuse of discretion, we will not disturb the
determination absent a distinct showing it was based on a clearly erroneous
finding of fact or an erroneous conclusion of law or manifests a clear error of
judgment. Cartier v. Jackson, 59 F.3d 1046, 1048 (10th Cir. 1995).
As Plaintiffs and Defendants point out, Objectors had ample time to file
rebuttal affidavits. The refusal about which they complain involves the decision
five days before the final fairness hearing to not permit Objectors to file
affidavits from those who had previously filed similar affidavits.
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Plaintiffs point out, Objectors fail to demonstrate why, given the fact that the
court, not the parties, determined the allocation of the settlement between the
various subgroups, any alleged conflict between those subgroups would be
magnified or exacerbated by the fact that Plaintiffs counsel represented all the
groups. Rather, that situation would motivate Plaintiffs counsel to seek the
largest overall award possible.
Further, as Defendants point out, each subgroup had its own class
representative during settlement negotiations, and the fairness expert spent
considerable time reviewing the details of the settlement and the allocation,
including recommending some modifications, which the district court accepted.
See Amchem Prods., Inc., 521 U.S. 591, 627 (1997) (noting that a settlement
needs structural assurance of fair and adequate representation for the diverse
groups and individuals affected). Additionally, Objectors themselves and their
counsel argued strenuously on behalf of the RIOs and ORIOs, the two subgroups
involved in the Texas cases. See Gottlieb v. Wiles, 11 F.3d 1004, 1008 n.4 (10th
Cir. 1993), overruled in part on other grounds, Devlin v. Scardelletti, 122 S. Ct.
2005 (2002) (noting that any claim of inadequacy of representation was cured by
the [objectors] active participation in the Rule 23(e) settlement approval hearing
and by the district courts explicit addressing of the [objectors] objections in its
order approving settlement.). Given the district courts familiarity with the case,
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each of the four factors listed in Gottlieb and Jones and considered all of
Objectors arguments. The court thoroughly considered Objectors allocation
arguments, and their arguments concerning purported collusion, and solicited
extensive input from the fairness expert. We conclude that the district court did
not abuse its discretion in determining that the settlement, from which an
extremely small percentage of class members opted out, was fair, reasonable and
adequate, for substantially the reasons stated in the district courts findings of fact
and conclusions of law.
(...continued)
supported class certification in connection with the settlement of that case plus
the three class actions, an inference of collusion between Plaintiffs and
Defendants is warranted. However, as Defendants assert, it was not inconsistent
to oppose class certification in the CO 2 Claims Coalition case, when all types of
interests were involved with no differentiation between the different subgroups,
but to support it when each subgroup was separated into its own class with its
own class representative.
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Objectors have no response to the argument the settling parties make, and with
which the district court agreed, that Objectors reverse auction argument would
lead to the conclusion that no settlement could ever occur in the circumstances of
parallel or multiple class actionsnone of the competing cases could settle
without being accused by another of participating in a collusive reverse
auction. Findings of Fact and Conclusions of Law at 20, App. Vol. XV, tab 131
at 4801. Absent some more concrete evidence of collusion than Objectors
conclusory allegations and inferences, we decline to disturb the district courts
conclusion that the settlement was not a collusive reverse auction. 6
CONCLUSION
We have carefully reviewed the lengthy record and briefs in this case, and
have fully considered all of Objectors arguments. For the foregoing reasons, we
AFFIRM the district courts judgment.
In a short footnote in their brief, Objectors also assert that the district
court erred in awarding excessive attorneys fees and in failing to follow the
Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974) factors.
They fail to further develop this argument, and we therefor do not address it.
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