Hershey v. ExxonMobil Oil Corporation

Filing 420

MEMORANDUM AND ORDER granting 413 plaintiff class's Motion for Appeal Bond. Signed by District Judge J. Thomas Marten on 1/4/2013. (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

Following the court’s approval of the settlement in this natural gas royalty expense
deduction class action, Notices of Appeals were filed on behalf of three class members, two
former members opting out of the class, and counsel for the objecting parties. This matter
is before the court on the motion by the plaintiff class for an appeal bond in the amount of
$9.08 million as to class members Thomas L. Lahey and Willie Jean Farrar and Keith Farrar,
as Co-Trustees of the Keith Farrar Revocable Trust, dated October 22, 1999, for and on
behalf of the trust.
Paragraph 5.3 of the Settlement Agreement approved by the court provides:
Any Class Member wishing to remain a Class Member, but objecting to any
part of the Settlement can do so only as set forth in the Class Notice attached
as Exhibit “C”. Because any appeal by an objecting Class Member would

delay the payment under the Settlement, each Class Member that appeals agrees
to put up a cash bond to be set by the district court sufficient to reimburse Class
Counsel’s appellate fees, Class Counsel’s expenses, and the lost interest to the Class
caused by the delay.
(Emphasis added).
The $60.5 million Settlement, which the court found was “fair, reasonable, and
adequate,” (Dkt. 406, at ¶ 4), includes a $54 million cash payment by ExxonMobil, $800,000
in conservation fee reimbursement to the plaintiff class, $200,000 in administrative
expenses, a prohibition of future conservation fees, and $5.5 million worth of foregone
future gathering fee deductions. The court awarded one third of this total settlement to
counsel for the plaintiff class. The court also approved class counsel’s request for fees,
including, over the objection of Lahey and the Farrars, an award of an additional 5% in the
event of an appeal. (Dkt. 406, at ¶¶ 4, 8, 10, 9.2(a), 10.1, 19).
The plaintiff class represents that the cash bond sought reflects an appropriate
award in light of the Settlement Agreement, counsels’ anticipated fees and expenses of the
appeal, and the interest foregone during the time the appeal may be pending. The class
requests the award pursuant to Paragraph 5.3 of the Settlement Agreement, rather than as
a supersedeas bond under Fed.R.Civ.Pr. 62(d).
The court hereby grants the relief sought. The Farrars and Lahey remain members
of the plaintiff class, and are bound by the terms of the Settlement Agreement. The court
finds that such a bond is appropriate as a means to ensure that the objecting members bear
the full extent of the costs of the appeal. See Eatinger and Chesapeake Operating, Inc. v. BP Am.
Prod. Co, No. 12-3243, at 4, n.1 (10th Cir. Oct. 30, 2012) (Hartz, J., dissenting) (citing John E.
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Lopatka & D. Brooks Smith, “Class Action Professional Objectors: What to Do About
Them?,” 39 FLA.ST.U.L.Rev. 865 (2012). As the plaintiff class concedes (Dkt. 414, at 8), the
amount of the bond is left to the discretion of the court. See Lopatka & Brooks Smith, 39
FLA.ST.U.L.REV. at 872-73.
Objectors Lahey and the Farrars oppose the motion, contending that such a bond
requirement is precluded by Fed.R.App.Pr. 7 and 39. However, the court finds that the
authorities relied upon by the objectors do not involve class actions in which the parties
have, as here, allocated the risks and burden of an appeal by explicit agreement. Further,
the objectors have failed to present any authority demonstrating that, pursuant to such an
explicit fee-shifting agreement, the court may not enforce that agreement to the extent the
appeal causes additional expenses and delays to the settlement class.
While the Farrars and Lahey specifically objected to the in terrorem aspect of Section
5.3 (Dkt. 328, at 19 n. 2), this objection was overruled by the court. Further, the objectors
made no opposition to Section 5.3 on the grounds now advanced — that it is contrary to
Rules 7 and 39. Not only have the objectors waived this argument, the court finds nothing
in the cited Rules which would preclude the court from giving effect to a specific
agreement of the parties to the expenses of an appeal.
The court finds that the objectors are members of the settlement class and are bound
by the Agreement. The court here grants the motion of the plaintiff class to the extent that
the objectors shall file an appeal bond in the amount of $9,080,000. This amount reflects the
documented and probable expenses of the plaintiff class, the additional attorney fees

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generated by the appeal, as well as the likely interest under K.S.A. 16-201 which will be lost
to the class during a year spent presenting and resolving the appeal.
IT IS SO ORDERED this 4th day of January, 2013, that the Plaintiff Class’s Motion for
Appeal Bond (Dkt. 413) is hereby granted.

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

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