Brown v. Phillips Petroleum Co.

• Decision Date: 03 February 1988
• Docket Number: Nos. 85-1788,85-1892 and 85-1912,85-1789,s. 85-1788
• Citation: 838 F.2d 451
• Parties: Oliver S. BROWN, et al., Plaintiffs, v. PHILLIPS PETROLEUM COMPANY, etc., et al., Defendants-Appellants, Mobil Oil Corporation, et al., Defendants, Ashland Oil, Inc., et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 451

838 F.2d 451

Oliver S. BROWN, et al., Plaintiffs, v. PHILLIPS PETROLEUM COMPANY, etc., et al., Defendants-Appellants Mobil Oil Corporation, et al., Defendants Ashland Oil, Inc., et al., Defendants-Appellees.

Nos. 85-1788, 85-1789, 85-1892 and 85-1912.

United States Court of Appeals Tenth Circuit.

Feb. 3, 1988.

Rehearing Denied March 2, 1988.

Richard C. Hite and Steven D. Gough, (W.A. Kahrs of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, Kan., and Charles T. Krol and Mary S. Haskins, Denver, Col., with them on the briefs), of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, Kan., for defendant-appellant and cross-appellee, Amoco Production Co.

John A. Rayll, Jr. and Craig A. Coulter, of Coulter & Rayll, Tulsa, Okl., Stanford J. Smith, Jr. and Alan G. Metzger, of Robbins, Tinker, Smith & Metzger, Wichita, Kan., and Graydon D. Luthey, of Cities Service Oil and Gas Corp., Tulsa, Okl., on briefs, for defendant-appellant and cross-appellee, Cities Service Oil and Gas Corp.

Joseph W. Kennedy and Robert W. Coykendall, of Morris, Laing, Evans, Brock & Kennedy, Chartered, Wichita, Kan., and John L. Williford and Don L. Jemison, of Phillips Petroleum Co., Bartlesville, Okl., on the briefs, for defendant-appellant and cross-appellee, Phillips Petroleum Co.

Gerald Sawatzky (Robert C. Foulston and Jim H. Goering, of Foulston, Siefkin, Powers & Eberhardt, and Richard Jones, Jerome E. Jones, and Robert J. O'Connor, of Hershberger, Patterson, Jones & Roth, Wichita, Kan., with him on the briefs), of Foulston, Siefkin, Powers & Eberhardt, Wichita, Kan., for defendants-appellees, Ashland Oil, Inc., Atlantic Richfield Co., Cabot Petroleum Corp., Damson Oil Corp. (formerly Dorchester Gas Producing Co.), Helmerich & Payne, Inc., Texaco, Inc., Diamond Shamrock Corp., Mapo Production Co., Mobil Oil Corp., Superior Oil Co., Gulf Oil Co., Lessee Producer Class, and cross-appellant, Ashland Oil, Inc.

Before McKAY, TACHA, and BALDOCK, Circuit Judges.

TACHA, Circuit Judge.

This case arises out of a complex series of cases that has been in litigation since the early 1960s. The underlying cases involve generally the ownership and valuation of helium extracted by National Helium Corporation and sold to the federal government from 1963 to 1973. The only issues on appeal and cross-appeal in this case are (1) whether the trial court abused its discretion in awarding attorneys' fees on the basis of a percentage of a common fund, and (2) whether Ashland Oil is precluded from recovering a share of the common fund because of a prior holding of this court. We affirm the court's award of attorneys' fees and hold that Ashland Oil is not precluded from recovering from the common fund. We remand for a determination of appropriate attorneys' fees in the cross-appeal.

The issues litigated in this series of cases related to right to payment for and valuation of helium extracted from natural gas from the Hugoton and Panhandle areas of Kansas, Oklahoma, and Texas. The parties in this appeal are members of the class of lessee producers who obtained judgment in 1983 establishing that they were entitled to a specified amount for the helium extracted by National Helium Corporation. National Helium Corp. v. Panhandle Eastern, No. KC-1980 (D.Kan. Nov. 3, 1983). After appeals were taken from that judgment, the parties settled the protracted controversy by agreeing to payment for the helium at a rate of $3.60 per thousand cubic feet plus interest. That settlement agreement requiring National Helium to pay approximately ninety-one million dollars was submitted to the court on October 16, 1984. The landowners' share of the settlement was approximately sixteen million dollars and the lessee producers' share was approximately seventy-five million dollars. Several law firms that represented various lessee producers and had represented the class of lessee producers through most or all of the class action litigation filed applications for attorneys' fees and expenses to be paid from the lessee producers' common fund recovery of seventy-five million dollars. These law firms (class counsel) represented appellees and cross-appellants in this case. The fee applications were accompanied by reconstructed time records and other documentation of time spent and work performed. The applications sought attorneys' fees in addition to payments the attorneys had received throughout the course of the litigation.

After appropriate notice to the producer class members and landowners, the trial court held hearings on a motion to approve the settlement agreement and on the applications for attorneys' fees and litigation expenses. Appellants in this case, three lessee producers, opposed the fee applications. The district court approved the settlement agreement and awarded class counsel an amount equal to 16.5% of the lessee producers' seventy-five million dollar share of the common fund. Appellants challenge the court's decision to award attorneys' fees based on a percentage of the common fund. They claim that the award should have been based upon an analysis of the hours reasonably spent multiplied by a reasonable hourly rate.

I.

An award of attorneys' fees is a matter uniquely within the discretion of the trial judge who "has intimate knowledge of the efforts expended and the value of the services rendered." United States v. Anglin & Stevenson, 145 F.2d 622, 630 (10th Cir.1944), cert. denied, 324 U.S. 844, 65 S.Ct. 678, 89 L.Ed. 1405 (1945). We view the award here in the context of approximately twenty-five years of litigation including several state and federal district court cases, at least six appeals to this circuit, massive discovery and evidentiary development, and several thousand docket entries. The total record of related cases in this matter is among the largest ever amassed in this circuit. Perhaps most significantly for the questions before us, the district court judge who determined the attorneys' fee award was involved in substantially all of this litigation. His experience with and knowledge about the course of the litigation compels appellate court deference to his determination in the absence of an abuse of discretion. Lucero v. City of Trinidad, 815 F.2d 1384, 1386 (10th Cir.1987).

The fee the trial court establishes must be reasonable. In statutory fee cases "the most useful starting point for determining the amount of a reasonable fee is the number of hours reasonably expended on the litigation multiplied by a reasonable hourly rate." Hensley v. Eckerhart, 461 U.S. 424, 434, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983). This formulation, generally known as the lodestar method, provides the starting point for appellate court review of statutory fee awards to determine whether a trial court has abused its discretion. The trial court in this case expressly did not rely on a lodestar analysis of class counsel's fee application. Failure to rely, to some extent, on a reasonable lodestar analysis would in most statutory fee cases constitute an abuse of discretion. Ramos v. Lamm, 713 F.2d 546, 552-57 (10th Cir.1983). Here we must first decide whether a fee award based on a percentage of a common fund, in a case not involving statutory fees, is per se unreasonable. If it is not, we must then determine whether the trial court in this case abused its discretion nonetheless.

The Supreme Court has, in our judgment, answered the first question presented here. In Blum v. Stenson, a statutory fee case, the Court stated: "Unlike the calculation of attorney's fees under the 'common fund doctrine' where a reasonable fee is based on a percentage of the fund bestowed on the class, a reasonable fee under Sec. 1988 reflects the amount of attorney time reasonably expended on the litigation." 465 U.S. 886, 900, n. 16, 104 S.Ct. 1541, 1550, n. 16, 79 L.Ed.2d 891 (1984) (emphasis added). Not only does this language implicitly recognize basic differences in the rationale for calculating attorneys' fees in common fund cases, but the Court also explicitly described a percentage calculation as a "reasonable fee" in those cases. We hold, therefore, that the award of attorneys' fees on a percentage basis in a common fund case is not per se an abuse of discretion.

The award of attorneys' fees is based on substantially different underlying purposes in a common fund case than in a statutory fees case. The common fund doctrine "rests on the perception that persons who obtain the benefit of a lawsuit without contributing to its costs are unjustly enriched at the successful litigant's expense." Boeing Co. v. Van Gemert, 444 U.S. 472, 478, 100 S.Ct. 745, 749, 62 L.Ed.2d 676 (1980). Common fund fees derive in part from the common law premise that a trustee is entitled to reimbursement from the fund administered. Trustees v. Greenough, 105 U.S. (15 Otto) 527, 532, 26 L.Ed. 1157 (1881). Fees in common fund cases are extracted from the predetermined damage recovery rather than obtained from the losing party. Thus, common fund fees are neither intrinsically punitive nor designed to further any statutory public policy. Conversely, statutory fees are intended to further a legislative purpose by punishing the nonprevailing party and encouraging private parties to enforce substantive statutory rights. See H. Newberg, Attorney Fee Awards, Sec. 2.06 (2d ed. 1986); see generally, Report of the Third Circuit Task Force, Court Awarded Attorney Fees, 108 FRD 237 (1985). Thus, unlike statutory fees, which result in a shifting of the fee burden to the losing party, common fund fees result in a sharing of the fees among those benefited by the litigation. As the footnote in Blum recognizes, another important difference is that normally a large number of people or entities benefit from a common fund case while the number benefited is not "a consideration of significance in calculating in the award of statutory attorneys' fees." Blum, 465 U.S. at 900 n. 16, 104 S.Ct. at 1550 n. 160.

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