Smith et al v. Hess Corporation

Filing 258

MEMORANDUM OPINION AND ORDER by District Judge Frederic Block re 257 Joint MOTION to Approve Settlement of Class Claims, for Issuance of Notice to the Class and to Set a Date for Final Approval Hearing. Therefore, the Court will approve the proposed settlement and class notice provided that both are amended to state good-faith estimates of the amount of each category of deduction from the Settlement Fund. Counsel shall submit the amended documents (or inform the Court that they are not willing to do so) by 5 p.m. on Monday, May 8, 2017. (gr)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW MEXICO
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ARMAND L. SMITH, BRAZOS
BRAVO ROYALTY TRUST, and RIO
PETRO, LTD., individually and on behalf
of all others similarly situated private
royalty and overriding royalty owners,

MEMORANDUM AND ORDER
Case No. 13-CV-468-FB-CG

Plaintiffs,
- against HESS CORPORATION,
Defendant.
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BLOCK, Senior District Judge:
The parties have settled their dispute. Because this is a class action, they seek
preliminary approval of the settlement agreement and permission to notify the class of
the settlement and its terms in advance of a fairness hearing. See Fed. R. Civ. P.
23(e).
A court should grant preliminary approval of a proposed settlement agreement
“[w]here 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.” In re Initial Pub. Offering Secs. Litig., 243 F.R.D.
79, 87 (S.D.N.Y. 2007) (citation and internal quotation marks omitted). It should
approve a proposed class notice if the notice “fairly apprise[s] the prospective members
of the class of the terms of the proposed settlement and of the options that are open to
them in connection with the proceedings.” Id. (citation and internal quotation marks
omitted).
Having reviewed the parties’ settlement agreement and class notice, the Court
has identified an “obvious deficiency” that deprives class members of the meaningful
notice to which they are entitled.

Section 2(b) of the agreement recites that

“[p]laintiffs’ attorney fees, New Mexico gross receipts tax thereon, litigation costs,
notice expense, awards to class representatives and costs of notice, administration and
distribution . . . shall be deducted from the Settlement Fund.” Similarly, the class
notice advises that “[a]ttorneys for the Class will ask the Court for an award of
attorneys’ fees, New Mexico gross receipts tax, for reimbursement of costs and
expenses advanced in the prosecution of the lawsuit and for costs of settlement
distribution and administration. They will also request an award for services of the
Plaintiffs as class representatives.” Yet neither the proposed settlement nor the class

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notice gives even a rough estimate of how much those deductions will reduce the
Settlement Fund—and, therefore, class members’ ultimate recovery. Class counsel
has represented that he may seek up to $1 million dollars in attorneys’ fees and
$175,000 in costs.
Rule 23(h) requires that class members be notified of any request for attorney
fees and nontaxable costs “in a reasonable manner.” The advisory notes to the rule
sensibly explain that “[f]or motions by class counsel in cases subject to court review of
a proposed settlement under Rule 23(e), it would be important to require the filing of at
least the initial motion in time for inclusion of information about the motion in the
notice to the class about the proposed settlement that is required by Rule 23(e),” and
that “[i]n cases in which settlement approval is contemplated under Rule 23(e), notice
of class counsel’s fee motion should be combined with notice of the proposed
settlement, and the provision regarding notice to the class is parallel to the requirements
for notice under Rule 23(e).” The obvious purpose of this practice is to give class
members sufficient information—with sufficient advance notice—to allow them to
make an informed decision whether to object to the proposed settlement at the fairness
hearing. See Fed. R. Civ. P. 23(h)(2) (“A class member, or a party from whom

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payment is sought, may object to the motion.”).
Therefore, the Court will approve the proposed settlement and class notice

provided that both are amended to state good-faith estimates of the amount of each
category of deduction from the Settlement Fund. Counsel shall submit the amended
documents (or inform the Court that they are not willing to do so) by 5 p.m. on
Monday, May 8, 2017.
SO ORDERED.

/s/ Frederic Block______________
FREDERIC BLOCK
Senior United States District Judge
Brooklyn, New York
May 4, 2017

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