Lazy Oil Co. v. Witco Corp.

• Decision Date: 02 February 1999
• Docket Number: No. 98-3067,98-3067
• Citation: 166 F.3d 581
• Parties: 1999-1 Trade Cases P 72,420 LAZY OIL CO.; John B. Andreassi; Thomas A. Miller Oil Company, on behalf of themselves and all others similarly situated; Carl B. Brown, Proprietor; Carl B. Brown Oil; Waco Oil & Gas Company; Gassearch Corporation; Interstate Drilling, Inc.; Alamco, Inc.; R.H. Adkins Companies; Wynnewood Drilling Associates, v. WITCO CORPORATION; Quaker State Corporation; Quaker State Oil Refining Corporation; Pennzoil Company; Pennzoil Products Company. Lazy Oil Co.; John B. Andreassi; Thomas A. Miller Oil Co., Appellants.
• Court: U.S. Court of Appeals — Third Circuit

Page 581

166 F.3d 581

1999-1 Trade Cases P 72,420

LAZY OIL CO.; John B. Andreassi; Thomas A. Miller Oil Company, on behalf of themselves and all others similarly situated; Carl B. Brown, Proprietor; Carl B. Brown Oil Waco Oil & Gas Company; Gassearch Corporation; Interstate Drilling, Inc.; Alamco, Inc.; R.H. Adkins Companies Wynnewood Drilling Associates, v. WITCO CORPORATION; Quaker State Corporation; Quaker State Oil Refining Corporation; Pennzoil Company Pennzoil Products Company Lazy Oil Co.; John B. Andreassi; Thomas A. Miller Oil Co., Appellants.

No. 98-3067.

United States Court of Appeals, Third Circuit.

Argued Dec. 11, 1998.

Decided Feb. 2, 1999.

Joseph E. Altomare (Argued), Titusville, PA, for Appellants.

George A. Patterson, III, Brian A. Glasser, Bowles, Rice, McDavid, Graff & Love, PLLC, Charleston, WV, for Appellees Waco Oil & Gas Co., Interstate Drilling, Inc., Alamco, Inc., R.H. Adkins Companies, Gassearch Corporation.

Arthur M. Kaplan, Fine, Kaplan & Black, Philadelphia, PA, Howard J. Sedran (Argued), Levin, Fishbein, Sedran & Berman, Philadelphia, PA, Samuel D. Heins, Daniel E. Gustafson, Heins, Mills & Olson, P.L.C., Minneapolis, MN, Roberta D. Liebenberg, Liebenberg & White, Jenkintown, PA, for Appellee Wynnewood Drilling, Plaintiff Class.

Ronald S. Rolfe (Argued), Cravath, Swaine & Moore, New York, N.Y., David L. McClenahan, Kirkpatrick & Lockhart, LLP, Pittsburgh, PA, for Appellee Witco Corp.

Rufus W. Oliver, III, G. Irvin Terrell (Argued), Baker & Botts, L.L.P., Houston, TX, William M. Wycoff, Thorp, Reed & Armstrong, Pittsburgh, PA, for Appellees Pennzoil Company and Pennzoil Products Company.

Before: BECKER, Chief Judge, STAPLETON, Circuit Judge and HARRIS, District Judge. ^*

OPINION OF THE COURT

BECKER, Chief Judge.

This is an appeal from an order of the District Court approving a class action settlement of an antitrust case. Ironically, the lead objector, Lazy Oil Co., is also the lead plaintiff, whose principal, Bennie G. Landers, conceived the suit but later became disaffected with its management and direction and ultimately with its fruits--the settlement. All the objectors are producers of Penn Grade Crude Oil, i.e., crude oil drawn from the western side of the Appalachian Basin within the states of New York, Pennsylvania, Ohio, and West Virginia. ¹ The objectors contend that the settlement is not fair, at least to the producer plaintiffs in contrast to the investor plaintiffs. The objectors distinguish between these two types of class members in making their objections to the settlement, alleging that producer plaintiffs, as full-time oil-producing enterprises, have distinct interests and, particularly, unique losses, as compared to investor plaintiffs, who simply invest funds in oil-producing businesses.

The objectors maintain that producer plaintiffs lost not only revenues from the lower prices paid for their oil (a loss they share with investor plaintiffs), but also suffered the compounded losses from their inability to invest these lost funds in drilling new oil wells or upgrading their existing ones--losses allegedly not applicable to investor plaintiffs. This alleged distinction is also at the heart of the other two issues raised by objectors in this appeal. They contend that the District Court erred in not certifying a subclass of producer plaintiffs to ensure that their unique interests were adequately represented. Finally, they contend that the Class Counsel--originally hired to bring this suit by the lead plaintiffs, who are now objectors--should have been disqualified from representing the remaining class representatives and the entire class once the objectors chose to attack the settlement.

The District Court conducted three days of hearings regarding, inter alia, the objectors' claims that the settlement was not fair, that a subclass of producer plaintiffs should be certified, and that Class Counsel should be disqualified from representing the class. On December 31, 1997, the District Court filed an omnibus order overruling objections to the settlement, approving the terms of the settlement, denying objectors' motion to remove or disqualify Class Counsel, denying objectors' motion for certification of a subclass, and denying approval of the plan for allocating the settlement proceeds.

From the objectors' point of view, our opinion should be devoted largely to a merits analysis of their objections to the settlement, measured by the standards outlined in Girsh v. Jepson, 521 F.2d 153 (3d Cir.1975). However, we dispose of that aspect of the case summarily, concluding that the Girsh factors are easily met and that the District Court did not abuse its discretion in approving the settlement. Neither do we have difficulty with the District Court's order refusing to remove or disqualify Class Counsel, which we also affirm. We do, however, expound on this point to clarify the standard for adjudicating such claims in the class action context. More specifically, drawing on the concurring opinion in In re Corn Derivatives Antitrust Litigation, 748 F.2d 157, 162 (3d Cir.1984) (Adams, J., concurring), we adopt a balancing approach to motions to remove or disqualify class counsel on conflict-of-interest grounds once former class representatives, i.e., former clients of class counsel, become objectors and therefore adversaries to class counsel's remaining clients.

One other point requires discussion--our appellate jurisdiction. The District Court, in its December 31, 1997, order from which this appeal was taken, did not dispose of all outstanding issues related to the settlement (i.e., it denied a motion to approve the allocation plan that was part of the settlement). Therefore, we must determine whether the rule of Cape May Greene, Inc. v. Warren, 698 F.2d 179 (3d Cir.1983), that in certain circumstances a premature appeal may ripen once collateral issues are disposed of by the district court, confers on us appellate jurisdiction because an allocation plan has since been approved by the District Court. We decide that Cape May Greene is both intact and applicable, and that we therefore have jurisdiction to hear this appeal from the order of the District Court, which we, in all respects, affirm.

I. Background

The subject of this appeal began as two separate class actions, each brought in the District Court for the Western District of Pennsylvania, by sellers of Penn Grade crude against three purchasers and refiners of this crude, Quaker State, Pennzoil, and Witco. The plaintiffs in both actions alleged that the defendants conspired to depress the price of Penn Grade Crude, in violation of the Sherman Antitrust Act. The cases were consolidated and, in June 1995, the District Court certified the consolidated case as a class action under Rule 23(b)(3), with the class comprising all "direct sellers of Penn Grade Crude" who sold oil to the defendants between January 1, 1981, and June 30, 1995. Shortly thereafter, the plaintiffs settled with Quaker State for $4.4 million. This settlement was approved by the District Court, and no issues relating to it are before us.

In early 1997, after several months of negotiations, plaintiffs reached a settlement with the remaining defendants, under which Pennzoil would pay approximately $9.7 million and Witco would pay approximately $4.8 million, with neither defendant admitting any liability or wrongdoing. Upon presentation of the settlement to the class representatives, two of them, Lazy Oil Co. and Thomas A. Miller Oil Co., objected to the settlement. ² At least 384 class members joined Lazy Oil et al. in objecting to the terms of the settlement after receiving notice of its terms. ³ Class Counsel thereafter moved to withdraw from representing the objectors.

In February 1997, the District Court directed that notice of the proposed settlement be sent to all class members and published in local and national newspapers. The objectors filed motions, inter alia, requesting that the Court disapprove the settlement, for establishment of a producer subclass, and for disqualification of Class Counsel. As noted above, the District Court conducted three days of evidentiary hearings in April and May 1997. On December 31, 1997, the Court approved the settlement and denied the objectors' motions. With extensive findings of fact, the Court found that plaintiffs faced substantial obstacles to proving that defendants had violated the antitrust laws, as well as serious problems with their theory of damages. The Court also found that the notice to class members had been adequate, and that relatively few class members objected to the settlement. After evaluating these and the other Girsh factors, it concluded that the settlement was fair and reasonable, and that the objectors' primary concern, i.e., that producer plaintiffs were not adequately represented or compensated by the settlement, was based on a speculative and unsupported argument (that had been raised very late in the litigation). Therefore, it overruled all of the relevant objections and approved the settlement. This appeal followed.

II. Appellate Jurisdiction

As noted above, we must first address the matter of our appellate jurisdiction, which is, of course, limited to those cases for which Congress has provided. In general, we may only hear appeals from final judgments and from certain prescribed interlocutory orders of the district courts. See 28 U.S.C. §§ 1291-1292; Behrens v. Pelletier, 516 U.S. 299, 305, 116 S.Ct. 834, 133 L.Ed.2d 773 (1996) ("The requirement of finality precludes consideration of decisions that are subject to revision, and even of fully consummated decisions that are but steps towards final judgment in which they will merge." (internal quotations and brackets omitted)). In this case, the District Court filed its order approving the settlement and denying the objectors' motions, on December 31, 1997, but in that same order, denied a motion to approve an...