In re Lease Oil Antitrust Litigation, 08-40230.

Citation570 F.3d 244
Decision Date28 May 2009
Docket NumberNo. 08-40230.,08-40230.
PartiesIn the Matter of: LEASE OIL ANTITRUST LITIGATION. J. Tom Poynor, Movant-Appellee, v. Chesapeake Exploration Limited Partnership, as Successor to DLB Oil & Gas, Inc., Hugoton Energy Corporation, and Anson Corporation, Movant-Appellant. The McMahon Foundation and J. Tom Poynor, Plaintiffs-Appellees, v. Chesapeake Exploration Limited Partnership, as Successor to DLB Oil & Gas, Inc., Hugoton Energy Corporation, and Anson Corporation, Movant-Appellant. The McMahon Foundation; J. Tom Poyner; and Mary Alma Powell, Plaintiffs-Appellees, v. Chesapeake Exploration Limited Partnership, as Successor to DLB Oil & Gas, Inc., Hugoton Energy Corporation, and Anson Corporation, Movant-Appellant.
CourtUnited States Courts of Appeals. United States Court of Appeals (5th Circuit)

Mary Kathryn Sammons (argued), Karon A. Oshman, Susman Godfrey, Houston, TX, for Appellee, Settling Plaintiffs.

James C. Ho, Office of the Solicitor General, for the State of Texas, Austin, TX; Linda Ibach Shaunessy, David Calvin Mattax, Asst. Atty. Gens., Lesli Gwen Ginn, Jennifer Settle Jackson, Office of the Attorney Gen., Financial Litigation Div., Austin, TX; Kent C. Sullivan, Joseph David Hughes, Office of the Attorney Gen. for the State of Texas, Austin, TX, for Appellant, State of Texas.

Thomas Butler Alleman (argued), Winstead, P.C., Dallas, TX, for Movant-Appellee.

Appeal from the United States District Court for the Southern District of Texas.

Before SMITH, DENNIS and PRADO, Circuit Judges.

JERRY E. SMITH, Circuit Judge:

The State of Texas ("Texas") appeals the denial of its motion to intervene. We reverse and remand.

I. Facts and Procedural History

This appeal arises from a class action that has been ongoing for over a decade. The plaintiff class claimed that oil companies were not paying the fair market value of oil at the well.1 A settlement was reached, and settlement checks were distributed between October 1999 and September 2002. Because the case had been pending for so long before the funds were distributed, some members of the plaintiff class could not be located. Among the unclaimed funds was $4,638,283 owed to members whose last known addresses were in Texas.

The district court decided to use a cy pres distribution of the unclaimed funds to a third party.2 The recipient it chose was an air quality monitoring project. Because all class members were involved in the oil industry, that environmental project was deemed to benefit them. The cy pres plan was discussed during telephonic hearings in March and December 2006 and March 2007.

Texas was not a party and therefore did not participate in the hearings. Class counsel, however, understood that Texas was interested in the proceedings and kept the Texas Attorney General's office informed of the discussions. Class counsel also told the district court about its communications with that office and of Texas's position on the cy pres plan.

Texas opposed any cy pres distribution from the beginning and indicated to class counsel that it might intervene to prevent it. At the March 2006 hearing, class counsel informed the court that she "did call the [Texas] Attorney General's Office, and they made it clear that if there ends up being a significant amount of [unclaimed] money, they might be willing to challenge a court order that sends money anywhere other than to the States." Nevertheless, the district court approved the cy pres distribution in an order on December 12, 2007. In anticipation of an appeal by Texas, the court set aside the Texas unclaimed funds in a separate account and sent a copy of the order to the state.

On January 11, 2008, Texas filed a motion to intervene and a motion to reconsider. The district court denied both. Texas then brought this appeal.

In attempting to intervene, Texas relies on state law that requires that persons in possession of unclaimed property belonging to someone else must deliver it to the state comptroller. See TEX. PROP.CODE § 74.301 (Vernon 2007). Property is considered unclaimed or abandoned if its owner cannot be located for three years and the last-known address of the owner is in Texas. See id. §§ 72.001, 72.101.

II. Issues on Appeal.

Texas argues that it should have been granted leave to intervene as of right in the district court. The test on appeal for intervention as of right is a four-part test, the first of which has four sub-parts. Federal Rule of Civil Procedure 24(a) states,

On timely motion, the court must permit anyone to intervene who ... claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.

The four parts of the intervention test are therefore (1) timeliness, (2) an interest relating to the action, (3) that the interest would be impaired or impeded by the case, and (4) that the interest is not adequately represented by existing parties. See Sierra Club v. Espy, 18 F.3d 1202, 1204-05 (5th Cir.1994); 6 JAMES W. MOORE ET AL., MOORE'S FEDERAL PRACTICE § 24.03[1][a], at 24-21 through 24-22 (3d ed.2008). The first part, timeliness, is governed by the four-part test in Stallworth v. Monsanto Co., 558 F.2d 257 (5th Cir. 1977):(1) the length of time between the would-be intervenor's learning of his interest and his petition to intervene, (2) the extent of prejudice to existing parties from allowing late intervention, (3) the extent of prejudice to the would-be intervenor if the petition is denied, and (4) any unusual circumstances. See id. at 263-66; accord Ruiz v. Estelle, 161 F.3d 814, 827-28 (5th Cir.1998).

Although the right to intervene is in general an issue of law that we review de novo, Sierra Club, 18 F.3d at 1205, the determination of timeliness is "largely committed to the discretion of the district court," Stallworth, 558 F.2d at 263, so we review that decision for abuse of discretion, id.; Sierra Club, 18 F.3d at 1205 n. 2. The criteria are mandatory, but "[r]ule 24 is to be construed liberally, ... and doubts resolved in favor of the proposed intervenor." 6 MOORE ET AL., supra, § 24.03[1][a], at 24-22 (citations omitted).

A. Timeliness.
1. Length of Time Since Learning of Interest in the Action.

The first timeliness factor is "[t]he length of time during which the would-be intervenor actually knew or reasonably should have known of his interest in the case before he petitioned for leave to intervene." Stallworth, 558 F.2d at 264. The timeliness clock does not start running until the putative intervenor also knows that class counsel will not represent his interest. Sierra Club, 18 F.3d at 1206. The district court found that Texas had actual knowledge of its interest in the case by March 2006 at the latest.

Texas argues that it was not aware of its interest until it received notice of the December 12, 2007, order, which declared the existence of unclaimed checks and created the cy pres distribution. Texas received formal notice of the order on January 2, 2008, and filed its motion to intervene just nine days later.

There is ample evidence, however, that Texas was aware of its interest quite some time earlier. Class counsel reported to the district court that it had kept Texas informed of the possibility of a cy pres distribution. In several hearings, the court noted Texas's opposition to the idea and its possible intent to intervene. The hearing transcripts show that Texas knew the case was pending. Class counsel represented to the district court on at least three occasions that it had been in touch with the Texas Attorney General's office regarding the progress of the case.

The transcripts also indicate that Texas knew its interests were not being represented by class counsel. At the March 2006 hearing, class counsel reported contacting the Texas Attorney General's office about the unclaimed settlement funds. Texas's opinion was that the money should go to the state, not a cy pres distribution. From the posture of class counsel, working toward the cy pres settlement, Texas should have been aware that its interests were not being represented by any of the parties. The timeliness of the motion to intervene should thus be measured from March 2006, almost two years before it was filed.

2. Prejudice to Existing Parties if Motion To Intervene Is Granted.

The second timeliness factor weighs the prejudice to other parties caused by the delay in seeking intervention. Any potential prejudice caused by the intervention itself is irrelevant, because it would have occurred regardless of whether the intervention was timely. Stallworth, 558 F.2d at 265. The only proper concern is how much more prejudice would come from Texas's intervening in January 2008 compared to its intervening in March 2006.

The impact on other parties is minimized by the nature of Texas's interest and by actions the district court took to segregate the funds in question. Texas is not asking to reopen the underlying settlement agreement. No new negotiations need to take place. Texas has no quarrel with the amount of the settlement or the distribution of funds among class members.

It would have been more convenient for the district court to hear Texas's arguments about the unclaimed funds at the time the cy pres plan was being developed, but the other parties are not disadvantaged by the delay. Inconvenience for the district court is not the same as prejudice to parties. "[I]nterfere[nce] with orderly judicial processes ... has nothing to do with timeliness" and is not a relevant factor when analyzing intervention as of right. Stallworth, 558 F.2d at 266.

The actions of the district court prevented prejudice to one party that might otherwise have been disadvantaged by a late intervention. In a companion to this case, Chesapeake Energy Limited Partnership ("CELP") is appealing another aspect of the same...

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