Hershey v. ExxonMobil Oil Corporation

Filing 355

MEMORANDUM AND ORDER denying 323 Objector Keith Farrar's Motion for Discovery. Signed by District Judge J. Thomas Marten on 10/5/2012. (mss)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS

JIMMIE HERSHEY,
individually and on behalf of all
others similarly situated,
Plaintiff,

vs.

Case No. 07-1300-JTM

EXXONMOBIL OIL CORPORATION,
Defendant.

MEMORANDUM AND ORDER

The matter is before the court on Objector Keith Farrar’s Motion for Discovery (Dkt.
323) which seeks extensive discovery into both the information previously exchanged
between ExxonMobil and the plaintiff class, as well as information as to the parties’
settlement negotiations.
Farrar correctly observes that a party objecting to a proposed class action settlement
has a due process right to present his challenge in a meaningful way. Kowalczyk v. INS, 245
F.3d 1143, 1147 (10th Cir. 2001) (quoting Mathews v. Eldridge, 424 U.S. 319, 333 (1976)). At
the same time, however, there is no vested right for objectors to conduct discovery.
International Union v. General Motors, 497 F.3d 615, 6(6th Cir. 2007). In exercising its
discretion to ensure a fair class action settlement, the court in appropriate cases may “limit

the discovery or presentation of evidence to that which may assist it in determining the
fairness and adequacy of the settlement.” Epstein v. Witting, No. 03-4081-JAR, 2005 WL
3276390, *7 (D. Kan. 2005) (noting that objectors “do not have an absolute right to
discovery”). While the court must extend all objectors fair opportunity to challenge a
proposed settlement, this does not translate in all cases into unfettered access to an existing
and voluminous discovery record. See Rutter v. Wilbanks Corp. v. Shell Oil, 314 F.3d 1180,
1187 (10th Cir. 2002). “‘Although the right to be heard is an integral part of due process, an
individual entitled to such process is not entitled to dictate to the court the precise manner
in which he is to be heard.” Id. (quoting Jones v. Nuclear Pharm., 741 F.2d 322, 325 (10h Cir.
1984)).
As noted earlier, the first class of information requested by Farrar targets discovery
materials previously exchanged between Hershey and ExxonMobil. (Dkt. 324, at 2).1
However, other than a recitation of the rule that objectors are generally allowed access to
discovery in an action, Farrar presents no extended argument relating this argument to the
present action. (Id., citing MANUAL FOR COMPLEX LITIGATION, § 21.643, pp 327-28).
In addition, Farrar contends that ExxonMobil should provide the requested
information given its agreement to provide an accounting in the Farrar action. A review of
the cited document, however, fails to show any such agreement by ExxonMobil to provide
such an accounting. (Dkt. 324-3).
Both ExxonMobil and the plaintiff class oppose the discovery as unnecessary and
1

The full list of information sought by Farrar was first presented to the parties by
a e-mail sent August 31, 2012. That list is attached as an Exhibit to Farrar’s motion, and
appears as an Appendix to the present Order.

burdensome.2 ExxonMobil stresses the extent of discovery previously accorded Farrar in
the state action, including 200,000 pages of documents and 5.5 gigabytes of electronic data
relating to royalty payment records. The company also made available for review its lease
and accounting files, and ExxonMobil corporate represenatives were deposed for six days.
Further, the same authority cited by Farrar also provides:
Discovery should be minimal and conditioned on a showing of need, because
it will delay settlement, introduce uncertainty, and might be undertaken
primarily to justify an award of attorney fees to the objector’s counsel. A
court should monitor post-settlement discovery by objectors and limit it to
providing objectors with information central to the fairness of the proposed
settlement. A court should not allow discovery into the
settlement-negotiation process unless the objector makes a preliminary
showing of collusion or other improper behavior.
MANUAL FOR COMPLEX LITIGATION, § 21.643, pp. 327-28.
Farrar requests information relating to the settlement negotiations between the
plaintiff class and ExxonMobil. He contends that, in light of recent decisions by the Kansas
Supreme Court (Seaboard Corp. v. Marsh, Inc.,

Kan.

, 284 P.3d 314 (Aug. 31, 2012) and

Judge Vratil (Freebird v. Merit Energy, No. 10-1154-KHV, 2012 U.S. Dist. LEXIS 106866 (D.
Kan. Aug. 1, 2012)), the proposed settlement should be seen as potentially collusive.
The court finds that the request to discover the existing discovery record, along with
the designated settlement communications, should be denied. Again, as Judge Robinson

2

The plaintiff class opposes the discovery motion for the additional rationale that
Farrar’s counsel sent the informal e-mail request well before his formal Objection was
filed. The plaintiff therefore contends that the present discovery motion violates District
of Kansas Rule 37.2, given the absence of any certification of an attempt to confer prior
to the filing of the motion. The court does not disagree, but proceeds to the merits of
Farrar’s request in order to expeditiously resolve all issues preliminary to the scheduled
fairness hearing.

summarized the factors relevant to objector discovery in Epstein:
The fundamental question is whether the district judge has sufficient facts
before him to intelligently approve or disapprove the settlement. The criteria
relevant to the court's decision of whether or not to permit discovery are the
nature and amount of previous discovery, reasonable basis for the
evidentiary requests, and number and interests of the objectors. Discovery
should be minimal and conditioned on a showing of need, because it will
delay settlement, introduce uncertainty, and might be undertaken primarily
to justify an award of attorney fees to the objector's counsel. The burden is
higher when a party seeks discovery of settlement negotiations. It is only
proper where the party seeking it lays a foundation by adducing from other
sources evidence indicating that the settlement may be collusive.
2005 WL. 3276390, *7 (citations and internal quotations omitted).
Applying these standards here, the court finds that the requested discovery is
unwarranted. First, as noted earlier, the existing, voluminous evidentiary record already
available to Farrar provides a sufficient basis for him to present his arguments, and for the
court to assess the fairness of the proposed settlement. Given the years in which all parties,
including the objector, have been studying ExxonMobil’s royalty payment system, granting
the requested discovery would only serve to needlessly delay implementation of the
proposed settlement.
Second, the “number and interests” of the objectors weighs against discovery, given
that the vast majority of the plaintiff class has not opted out of the proposed settlement,
and that of the two objectors Farrar and Lahey, only one has chosen to assert the need for
additional discovery.
Third, Farrar has presented no credible evidence suggesting collusion on the part
of the plaintiff and ExxonMobil. The only grounds cited by Farrar for such a conclusion,
as noted earlier, are two recent decisions which Farrar suggests compromised the ability

of the plaintiff class to present its claims free from a statute of limitations defense by
ExxonMobil. An examination of those cases, however, demonstrates that Farrar’s claims
of collusion are unjustified and purely speculative.
Freebird, the first of the cases cited by Farrar, reflects an interlocutory ruling by
another judge of this District, involving different claims and different parties. Freebird, Inc.
v. Merit Energy, No. 10-1154-KHV, 2012 WL 3143870 (D. Kan. Aug. 1, 2012). The decision
is not controlling here, and the court finds no grounds for inferring that this decision
caused the parties, and their counsel, to commence a fraudulent or collusive settlement of
the claims in this action.
Seaboard, the second of the cases cited by Farrar provides even less reason to suspect
collusion. First, the Kansas Supreme Court in that case did not, as Farrar suggests, reject
the federal doctrine of class action tolling. Rather, the court resolved the case on the basis
of state statutory law (K.S.A. 60-518), and explicitly disavowed any resolution of the class
action tolling doctrine first articulated in American Pipe & Constr. v. Utah, 414 U.S. 538
(1974). See 284 P.3d at 324 (“the issue before us is not how we will apply the court-created
American Pipe tolling principle”). Second, and more fundamentally, Seaboard was unlikely
to have thrust the parties into collusion for the simple fact that it was decided after the
parties reached their proposed Settlement Agreement.
In the end, the present action contains a broader basis for class-wide recovery than
that presented in Farrar, and provides a logical forum for ExxonMobil to attempt to fairly
resolve what it has termed the “tornado” of royalty litigation asserted against it. Because
Farrar has failed to present any colorable indicia of fraud or collusion, the wide-ranging

discovery request presented in his motion is denied.3
In considering Farrar’s requested discovery order, as in its consideration of the
provisional settlement, the court has considered and reviewed all of the circumstances of
the case. These circumstances include the extensive discovery actually provided the
Objector in the Farrar action, or which has been otherwise made available to him. CoObjector Lahey has thus assembled expert calculations as to the value of the litigation
“[u]sing reasonable assumptions based on data provided by ExxonMobil in the Farrar
case.” (Dkt. 328, at 9-10). The existing record is equally available to Farrar himself.
IT IS ACCORDINGLY ORDERED this 5th day of October, 2012, that the Objector’s
Motion for Discovery (Dkt. 323) is hereby denied.

s/ J. Thomas Marten
J. THOMAS MARTEN, JUDGE

3

Because the court finds that the discovery request is generally unjustified, it
need not reach the additional issue presented by the ExxonMobil that much of the
information sought (such as items 4, 5, 20, and 21) are not discoverable as protected by
attorney-client privilege.

APPENDIX

Discovery Sought by Objector
1. Copies of any and all communications and other documents exchanged
between Hershey class counsel and ExxonMobil regarding settlement and
any mediation preceding that settlement, including but not limited to all
previous drafts of the Settlement Agreement and Release;
2. Copies of any and all communications and other documents exchanged
between Hershey class counsel and any mediator regarding preceding
the settlement, including but not limited to any settlement brochure(s),
mediation submission letter(s), and offers to settle.
3. Copies of any and all communications and other documents exchanged
between ExxonMobil and any mediator regarding mediation and/or
settlement, including but not limited to any settlement brochure(s) or
mediation submission letter(s) , and offers to settle.
4. Electronic and written copies of any and all worksheets, spreadsheets,
and any other studies performed to determine the value of claims
purported to be settled in th is lawsuit.
5. Copies of any and all studies, analyses, and/or calculations of the present
value or the fair market value of Exxon Mobil's agreement to share or
deduct Gathering Fees and Expenses in the future.
6. Copies of any and all studies, analyses, and/or calculations of the total
value, in dollars, of the "Total Settlement Amount" as defined in Section
2.51 of the Settlement Agreement and Release, and of each component
thereof.
7. Copies of any and all studies, analyses, and or calculations of the amount
of conservation fees reimbursed by Exxon Mobil as a result of this
lawsuit.
8. Copies of any and all studies, analyses, and/or calculations of the amount
or value of conservation fees that will not be deducted as a result of this
lawsuit.
9. The electronic spreadsheet(s) reflecting Class Member information and

payment history provided to Hershey by Exxon Mobil pursuant to
Section 6.3 of the Settlement Agreement and Release.
10. Any additional royalty payment information provided to Hershey by
Exxon Mobil, including but not limited to information provided pursuant
to Section 9.7 and/or Section 6.3 of the Settlement Agreement and
Release.
11. An Excel spreadsheet containing a list of class members to whom the
Notice of Settlement of Class Action was mailed, including name,
address, and ExxonMobil royalty owner number.
12. An Excel spreadsheet containing the list of class members to whom the
prior Notice of Class Action was mailed.
13. An Excel spreadsheet identifying by name, address, and ExxonMobil
royalty owner number, all current royalty owners who have interest in
wells not gathered on the Bushton or Hickok gathering lines and will
receive a present value additional payment in lieu of Exxon ceasing to
take certain future gathering fee deductions.
14. All information and documents produced by Hershey regarding
damages claimed in th is lawsuit, including but not limited to any
expert reports regarding damages.
15. All information and documents produced by ExxonMobil regarding
damages claimed by Hershey in this lawsuit, including but not limited
to any expert reports regarding damages.
16. All written discovery responses provided by Hershey in th is lawsuit that,
in any way, pertain to (1) the description of the cla ims asserted herein or
(2) the amount of claimed damages.
17. All written discovery responses provided by ExxonMobil in th is lawsuit
that, in any way, pertain to (1) the description of the claims asserted
herein or (2) the amount of claimed damages.
18. All information and documents produced by ExxonMobil in th is
litigation regarding the amounts of its royalty payments to members of
the plaintiff class herein during the period covered by this lawsuit.
19. Any and all communications and other documents exchanged between
ExxonMobil and Hershey regarding any claim (by anyone) for breach of
the 1984 Settlement Agreement, including but not limited to any

documents regarding the amount(s) of deductions taken under leases
subject to the 1984 Settlement Agreement.
20. Any and all documents evidencing or reflecting Exxon Mobil's efforts,
prior to the entry of the order staying execution in Farrar, to determine
the amount(s) of the deductions taken under leases subject to the 1984
Settlement Agreement.
21. Any and all documents evidencing or reflecting ExxonMobil's efforts,
subsequent to the entry of the order staying execution in Farrar, to
determine the amount(s) of the deductions taken under leases subject to
the 1984 Settlement Agreement, as agreed to in the e-mail from Richard
Hite to Tom Kitch on March 22, 2012.