Gigot v. Cities Service Oil Co.

• Decision Date: 01 May 1987
• Docket Number: No. 59527,59527
• Citation: 737 P.2d 18,241 Kan. 304
• Parties: Clarence GIGOT, et al., Plaintiffs/Appellees, v. CITIES SERVICE OIL COMPANY, et al., Defendants/Appellees, and Amoco Production Company, Appellant.
• Court: Kansas Supreme Court

Page 18

737 P.2d 18

241 Kan. 304

Clarence GIGOT, et al., Plaintiffs/Appellees, v. CITIES SERVICE OIL COMPANY, et al., Defendants/Appellees and Amoco Production Company, Appellant.

No. 59527.

Supreme Court of Kansas.

May 1, 1987.

Syllabus by the Court

1. A party has standing to appeal if he has sufficient interest in the judgment and is injured, aggrieved, or prejudiced thereby.

2. In determining the amount of attorney fees to be awarded in a class action, the trial court must hold an evidentiary hearing so that it has before it sufficient information to make a fair and adequate fee award. Factors which should be considered by the trial court in determining the size of attorney fees in a class action include: (1) the number of hours spent on the case by the various attorneys and the manner in which they were spent; (2) the reasonable hourly rate for each attorney; (3) the contingent nature of success; (4) the extent, if any, to which the quality of an attorney's work mandates increasing or decreasing the amount to which the court has found the attorney reasonably entitled; (5) the amount involved in the class action; and (6) the benefit produced by the lawsuit. Following Shutts v. Phillips Petroleum Co., 235 Kan. 195, Syl. p 14, 679 P.2d 1159 (1984).

3. Where established guidelines are followed by the district court in determining the size of the attorney fee to be awarded in a class action, appellate review is limited to abuse of discretion. Following Shutts v. Phillips Petroleum Co., 235 Kan. 195, Syl. p 15, 679 P.2d 1159 (1984).

4. In a class action in which an appeal is taken from the determination and award of attorney fees, the record is examined and it is held that: (1) The appellant has standing to appeal; (2) appellant's counsel is not estopped from claiming attorney fees from the common fund; (3) the district court did not err in assessing appellant's share of the common fund its proportionate share of the attorney fees awarded to other class counsel; (4) the district court followed the established guidelines set forth in Syllabus p 2; and (5) the district court, after considering the factors set out in Syllabus p 2, did not abuse its discretion by awarding attorney fees equal to 18% of the common fund.

Richard C. Hite, of Kahrs, Nelson, Fanning, Hite & Kellogg, Wichita, argued the cause, and Steven D. Gough, of the same firm, and Charles T. Krol, Regional Counsel, and Mary S. Haskins, of Amoco Production Co., Denver, Colo., were with him on the brief, for appellant.

Gerald Sawatzky, of Foulston, Siefkin, Powers & Eberhardt, Wichita, argued the cause, and Robert C. Foulston and Jim H. Goering, of the same firm, and Jerome E. Jones, Richard Jones, and Robert J. O'Connor, of Hershberger, Patterson, Jones & Roth, of Wichita, and Glenn D. Young, Jr., of Gott, Young & Bogle, P.A., Wichita, were with him on the brief for defendants/appellees.

ALLEGRUCCI, Justice.

This is a class action suit brought to recover the reasonable value of helium extracted from natural gas. The case was settled and Amoco Production Company (defendant/cross-claimant) appeals from the district court's award of attorney fees.

In May 1971, plaintiff landowners brought this suit in Finney County District Court to recover the reasonable value of helium contained in helium-bearing natural gas extracted from their land. Plaintiffs owned land in or near Finney County from which natural gas was severed under oil and gas leases held by defendant lessee-producers. The producers originally named in the suit were: Amoco Production Company, represented by Gott, Young & Bogle; Champlin Petroleum Company, represented by Adams, Jones, Robinson and Malone until September 1974, and by Gott, Young & Bogle after that date; Skelly Oil Company (which became Getty Oil Company as the result of a merger and later became Texaco Producing, Inc.) represented by Foulston, Siefkin, Powers & Eberhardt (Foulston); Mobil Oil Corporation, Continental Oil Company, Northern Pump Company, D.R. Lauck Oil Company, Kansas Natural Gas, Inc., and Petroleum, Inc. represented by Hershberger, Patterson, Jones and Roth (Hershberger). Unnamed members of the class were 186 producers who delivered gas into the system serving the Sunflower plant near Scott City, Kansas. The Foulston firm was considered lead counsel in the case with Hershberger and Gott, Young & Bogle acting as co-lead counsel.

Plaintiffs also named as defendants pipeline companies which had constructed the Sunflower plant for the purpose of extracting helium from natural gas for sale to the private market. The Sunflower plant began extracting helium from natural gas in September 1968. These companies which extracted and then sold the helium are referred to as the "helex companies" or "helex group."

The lessee-producers cross-claimed against the helex companies for the reasonable value of the helium extracted. KN Energy, Inc. (K-N) cross-claimed against the lessee-producers, alleging that they had warranted title to all gas purchased by K-N and had agreed to indemnify and hold K-N harmless from all claims relating to the gas.

Shortly after this case was filed, it was removed to federal court. There were long periods of relative inactivity during the thirteen years the case was pending in federal court. The parties were working on and awaiting developments in other related helium cases.

The parties attempted to negotiate a settlement in the summer of 1984, but negotiations proved fruitless. On September 4, 1984, approximately one week before trial was to begin, the case was remanded to state district court because the federal court lacked subject matter jurisdiction. The parties had completely prepared the case for trial prior to remand.

Following remand, the parties continued preparation for trial, briefed issues, and held a pretrial conference. The district court certified the plaintiff landowners and defendant lessee-producers as classes pursuant to K.S.A. 60-223(b)(1). The lessee-producer/cross-claimants and cross-defendants were certified as a K.S.A. 60-223(b)(3) class. The parties again began settlement negotiations which culminated in a settlement agreement on September 11, 1985.

The settlement required K-N and Cities Service Cryogenics, Inc., (Cities Service) to pay the landowner and lessee-producer classes for helium produced and sold at the plant from 1968 through December 31, 1984, at the rate of $3.25 per thousand cubic feet (mcf). From January 1, 1985, until deposit of funds as required in the agreement, Cities Service and K-N were required to pay 19.45% of the amount received for helium sales. Interest was to be calculated at 6% per annum until July 1, 1980, and at 10% per annum until deposit of the funds with the clerk. The payments were to be allocated on the basis of one-eighth to the landowners and seven-eighths to the lessee-producers, or the royalty fraction specified in each lease if different from one-eighth. Based on testimony estimating helium production, the court found that Cities Service and K-N should deposit an initial settlement fund of $8,000,363.93. This amount reflected $75,000 advanced to the Foulston firm for expenses incurred for expert consultants and for an allocation study. The fund was to be invested in treasury bills until final distribution, which was scheduled for October 15, 1986.

The parties also entered into an agreement covering future helium sales in which Cities Service and K-N agreed to pay 19.45% of gross proceeds from the sale of helium. Cities Service and K-N were able to obtain the signatures of 176 of K-N's 186 natural gas suppliers. The 176 suppliers who consented to the agreement represent approximately 99% of the helium supplied to the plant. The district court found both agreements to be fair and reasonable to all parties.

The court appointed Jim Goering of the Foulston firm as special master to send notice to all class members, review filings, compile a listing of persons entitled to receive payment, aid in allocating and distributing the settlement fund, and aid the court in resolving controversies which might arise.

The settlement ordered payment from the settlement fund of the litigation expenses and attorney fees of the landowner and lessee-producer classes. The amounts were to be determined by the district court.

The district court ordered that notice of the settlement agreement be sent to each member of the lessee-producer class. The notice reported the terms of the settlement and required counsel for the lessee-producer class to file and serve on all named members of the lessee-producer class copies of their verified applications for attorney fees and expenses. Any class members objecting were required to file a pleading on or before February 11, 1986. The district court also ordered publication of the notice.

In their fee applications, class counsel requested that the fund reimburse all lessee-producer litigation expenses and attorney fees advancements, with interest. Counsel also requested 20% of the fund balance as attorney fees. The three firms agreed that of the 20%, 60% (equivalent to 12% of the common fund) should be awarded to the Foulston firm; 26.5% (or 5.3% of the fund) should go to the Hershberger firm; and 13.5% (or 2.7% of the fund) should go to Gott, Young & Bogle. (These are the figures agreed to at the attorney fees hearing, not the amounts requested in the applications.)

On February 11, 1986, Amoco filed a notice of objection to the requested attorney fees and a motion for an evidentiary hearing on the matter. Amoco's objection was based on the following contentions: 1) Gott, Young & Bogle should not be permitted to recover from Amoco's portion of the common fund recovery because Amoco had paid them pursuant to their longstanding fee arrangement; 2) the attorney fees awarded Foulston and Hershberger should not be assessed against Amoco's share of the recovery because Amoco's interests were...