Chieftain Royalty Co. v. Enervest Energy Institutional Fund XIII-A, L.P

• Decision Date: 22 June 2022
• Docket Number: CIV-11-177-D
• Parties: CHIEFTAIN ROYALTY COMPANY, on its behalf and as representative of a class of similarly situated royalty owners, Plaintiff, v. ENERVEST ENERGY INSTITUTIONAL FUND XIII-A, L.P, et al., Defendants, and CHARLES DAVID NUTLEY, et al., Objectors.
• Court: U.S. District Court — Western District of Oklahoma

CHIEFTAIN ROYALTY COMPANY, on its behalf and as representative of a class of similarly situated royalty owners, Plaintiff,
v.
ENERVEST ENERGY INSTITUTIONAL FUND XIII-A, L.P, et al., Defendants,

and CHARLES DAVID NUTLEY, et al., Objectors.

No. CIV-11-177-D

United States District Court, W.D. Oklahoma

June 22, 2022

ORDER

TIMOTHY D. DEGIUSTI CHIEF UNITED STATES DISTRICT JUDGE

This matter comes before the Court on Class Counsel's Renewed Motion for Approval of Attorneys' Fees from Common Fund [Doc. No. 302]. The Motion is supported by a Memorandum of Law [Doc. No. 303] and a voluminous record consisting of the following evidentiary materials: Declaration of Bradley E. Beckworth and Robert N. Barnes on Behalf of Class Counsel [Doc. No. 302-1]; separate declarations by each attorney on behalf of their respective law firms, Nix, Patterson & Roach, LLP [Doc. No. 302-2] and Barnes & Lewis, LLP [Doc. No. 302-5]; declarations of other attorneys at these law firms who worked on the case [Doc. Nos. 302-3 and 302-5];^[1] the declaration of

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appellate counsel, Daniel Volchok of Wilmer Cutler Pickering Hale & Dorr, LLP [Doc. No. 302-7]; the attorneys' time records [Doc. Nos. 320-1 through 320-5]; the declarations of numerous legal experts and class members who provide opinions in support of the Motion [Doc. Nos. 293 through 300, 302-11 through 302-15];^[2] a declaration of Plaintiff's president, Robert Abernathy [Doc. No. 304-1]; and the previously approved Settlement Agreement [Doc. No. 111-1 through 111-4].^[3]

Objectors Charles David Nutley and Danny George oppose the Motion. See George's Resp. Br. [Doc. No. 321]; Nutley's Resp. Br. [Doc. No. 325].^[4] Their only submission is a one-page summary [Doc. No. 325-1] of an Oklahoma Bar Association membership survey conducted in 2013. Class counsel have replied to George's brief [Doc. No. 326] and Nutley's brief [Doc. No. 327]. Also, the parties filed supplemental briefs

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regarding the Oklahoma Supreme Court's decision in Strack v. Continental Resources, Inc., 2021 OK 21, 507 P.3d 609 (Okla. 2021). See George's Suppl. Br. [Doc. No. 354]; Nutley's Suppl. Br. [Doc. No. 355]; Pl.'s Suppl. Br. [Doc. No. 356]. Thus, the Motion is fully briefed.

Factual and Procedural History

The relevant factual allegations and procedural background are summarized in the Order of February 24, 2022 [Doc. No. 358] and Order of March 31, 2022 [Doc. No. 359]. Briefly, Plaintiff Chieftain Royalty Company represents a certified class of oil and gas royalty owners who settled underpayment claims in 2015 with five defendants, EnerVest Energy Institutional Fund XIII-A, L.P., EnerVest Energy Institutional Fund XIII-WIB, L.P., EnerVest Energy Institutional Fund XIII-WIC, L.P., EnerVest Operating, LLC, and FourPoint Energy, LLC. Objectors appealed both the Order and Judgment Granting Final Approval of Class Action Settlement [Doc. No. 154] and the Order Awarding Attorneys' Fees, Reimbursement of Litigation Expenses and Case Contribution Award [Doc. No. 156]. The Tenth Circuit affirmed the class action settlement but reversed the awards of attorney fees and compensation to the class representative. See Chieftain Royalty Co. v. EnerVest Energy Inst. Fund XIII-A, L.P., 888 F.3d 455, 470 (10th Cir. 2017) (amended Apr. 11, 2018); cert. denied, 139 S.Ct. 482 (2018). As to attorney fees, the court of appeals remanded for this Court to compute the award under Oklahoma law and, under its view of Oklahoma law, to use the lodestar method based on “detailed time records and evidence as to the reasonable value for the services performed.” Id. at 464 (quoting State ex rel. Burk v. City of Okla. City, 1979 OK 115, ¶ 8, 598 P.2d 659, 663).

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Standard of Decision

During the pendency of the Renewed Motion, the Oklahoma Supreme Court decided Strack and provided controlling guidance on how to determine class counsel's fee award under the Tenth Circuit's mandate to apply Oklahoma law. First, the supreme court reaffirmed an interpretation of the attorney-fee provision of Oklahoma's class-action statute, Okla. Stat. tit. 12, § 2023(G), applied by lower courts: a percentage-of-the-fund method is authorized and “valuable” to determine a reasonable fee in a common fund case. Strack, 2021 OK 21, ¶¶ 16, 19, 507 P.3d 615, 617. Second, the supreme court directed that “courts should ensure the reasonableness of the fee award involving a common fund by comparing the fee based on a percentage calculation to what the lodestar approach would produce.” Id. at ¶ 18, 507 P.3d at 616. This comparison acts as a cross-check on a reasonable fee award. Id. Strack teaches that “[a] court's goal in deciding attorney fee awards is to award a reasonable fee, and a court should compare the results of both methods to ensure it is awarding a reasonable fee in a common fund class action.” Id. at ¶ 19, 507 P.3d at 617.

As applied to the facts presented in Strack, the supreme court concluded that a $19,920,000 fee award computed as 40 percent of the $49,800,000 common fund based on a contingency fee agreement between the class representatives and their attorneys yielded an unreasonable amount. The court found that “an award of 40% of the common fund [was] excessive when compared to (1) the average percentage used in reported cases [of 20% to 30%], and (2) the amount owed to class counsel for the actual time spent under the lodestar calculation.” Id., 2021 OK 21, ¶¶ 21-22, 507 P.3d at 617. The supreme court

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further found the lodestar method used to cross-check the percentage fee was flawed because the district court enhanced the lodestar by a multiplier of 3.17 without sufficient explanation and “based on nothing more than an attempt to equate it to 40% of the common fund.” Id., 2021 OK 21, ¶ 31, 507 P.3d at 620. By so doing, the district court abused its discretion to determine a reasonable fee in that case.

Class Counsel's Motion

Class counsel seek an attorney fee award of $17,333,333.00, which is the same amount previously determined to be reasonable using a percentage-based method and the federal-law factors of Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974). See Order Awarding Atty's Fees, Reimb. Litig. Expenses & Case Contrib. Award (hereafter, “Fee Order”) at 7-8. After applying the Johnson factors to the facts and evidence presented, the Court found that thirty-three and one-third percent (33 %%) of the cash settlement amount of $52,000,000.00 produced a reasonable fee for class counsel's services. The Court made no lodestar comparison; class counsel did not present evidence that permitted the use of a lodestar method. The Tenth Circuit found this to be a fatal flaw and remanded the case to develop a factual record and perform a lodestar analysis.^[5]Accordingly, in support of the Renewed Motion, class counsel have compiled an extensive evidentiary record, described supra, that includes time records for each attorney, paralegal, and legal assistant whose work is included in the lodestar computation, and declarations

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from the individual attorneys. As to some attorneys, class counsel have submitted reconstructed time records that the attorneys created from other records; their methods of reconstruction are described in the declarations. Class counsel provide legal support for this approach from caselaw and several expert opinions. See, e.g., Young v. Spencer, 2017 OK Civ. App. 58, ¶ 25, 405 P.3d 701, 708; Ryan Decl. [Doc. No. 297], ¶¶ 8-9; Siegel Decl. [Doc. No. 300], ¶¶ 8-9. Class counsel assert that the original fee award is justified by a lodestar product of $8,236.561.50 enhanced by a 2.1 multiplier that is supported by applying Oklahoma's statutory factors in § 2023(G)(4)(e) to the facts of this case. See Mem. Law at 1, 33, 35.^[6] Following Strack, class counsel argue that the Court's prior percentage award “was right on the mark” and “a lodestar cross-check fully demonstrates the reasonableness” of the prior award. See Pl.'s Suppl. Br. at 8, 9.

Objectors assert that class counsel's request for the same award is unreasonable because the hours claimed by the attorneys and their hourly rates are excessive and because their legal work is not properly documented. Specifically, Objectors challenge the Renewed Motion for the following reasons: 1) class counsel should not be compensated

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for “reconstructed” time, that is, services for which they did not keep contemporaneous time records (Nutley's Resp. Br. at 3-5); 2) alternatively, class counsel's hours should be drastically reduced due to inadequate documentation (Nutley's Resp. Br. at 5-6, 13-14); 3) some of the attorneys' time is not compensable because it was devoted to litigation against the non-settling defendant, SM Energy Company, the fee litigation, the appeal, and appeal-related work (Nutley's Resp. Br. at 7-12; George's Resp. Br. at 14-23); 4) the claimed hourly rates exceed the customary rates for legal services in Oklahoma and should be cut in half (Nutley's Resp. Br. at 15-17); and 5) no multiplier is warranted or, at most, a 1.5 multiplier would satisfy the applicable factors (Nutley's Resp. Br. at 18-20; George's Resp. Br. at 23-25).

Nutley initially urged the Court to deny class counsel any award or to make an unspecified reduction (Nutley's Resp. Br. at 21-23), but after Strack, Nutley contends the award “should not exceed 25% of the fund” or a “reasonable lodestar with, at most, a very modest multiplier.” See Nutley's Suppl. Br. at 1. George suggests “a fee of no more than $7.5 million,” which represents the product of a “lodestar somewhere less than $5 million” and a 1.5 multiplier (George's Resp. Br. at 5, 22-23, 28), “or 14.4% of the $52 million settlement amount.” See George's Suppl. Br. at 2 (footnote omitted). The Court will address these objections in the context of its analysis.

As a procedural matter, George also asserts that Fed.R.Civ.P. 23(h)(1) requires new classwide notice of...