In re Lease Oil Antitrust Litigation

Decision Date05 June 1998
Docket NumberNo. MDL 1206.,MDL 1206.
CourtU.S. District Court — Southern District of Texas

J.A. Tony Canales, Canales & Simonson, Corpus Christi, TX, for Plaintiff.

Darrell Lee Barger, Barger & Moss, Corpus Christi, TX, for Defendant.

JACK, District Judge.

On this day came on to be considered Defendant Mobil Oil Corporation's ("Mobil") motion to dismiss various claims on full faith and credit grounds and for lack of subject matter jurisdiction in the above-styled action. After consideration of the briefs filed by several parties and the oral arguments presented on May 15, 1998, the Court DENIES said motion.


The Court has jurisdiction over the consolidated cases in this multidistrict litigation pursuant to the Judicial Panel on Multidistrict Litigation's transfer order of January 14, 1998, and 28 U.S.C. §§ 1331, 1332, 1367 and 1407.


In April 1996, plaintiff royalty payees filed a class action suit in the Southern District of Texas, The McMahon Foundation et al. v. Amerada Hess Corp., et al., against 39 oil companies, alleging that the companies, in violation of § 1 of the Sherman Act, conspired for over a decade to artificially depress oil production royalty payments owed to the putative class members. In that same month, a separate group of plaintiffs brought a class action suit in state court, Cameron Parish School Board v. Texaco, Inc., against fifteen oil companies alleging violations of Louisiana law due to the underpayment of royalties owed for production of oil on properties in Louisiana. Cameron Parish was timely removed to federal court. In 1997, at least three other groups of plaintiffs brought separate suits in federal court based on similar royalty underpayment allegations and based on federal and/or state law violations (viz., Randolph Energy, Inc. et. al. v. Amerada Hess Corp. et. al., Stanley v. Gulf Oil Corp. et. al., Nicholson et. al. v. Marathon Oil).

In September 1996, a separate group of plaintiffs filed a putative class action in Alabama state court, E.M. Lovelace et al. v. Amerada Hess Corporation et al., based on similar royalty underpayment allegations, asserting that 24 oil company defendants violated the separate antitrust statutes of each of the fifty states. Lovelace was removed to federal court, and the plaintiffs sought a remand, arguing that federal antitrust claims were not at issue in their case since their claims were based strictly on state statutes. Notably, federal antitrust claims may only be brought in federal court. Marrese v. American Academy of Orthopaedic Surgeons, 470 U.S. 373, 105 S.Ct. 1327, 1331, 84 L.Ed.2d 274 (1985); Freeman v. Bee Mach. Co., 319 U.S. 448, 451, 63 S.Ct. 1146, 87 L.Ed. 1509 (1943); General Investment Co. v. Lake Shore Ry., 260 U.S. 261, 43 S.Ct. 106, 116-17, 67 L.Ed. 244 (1922).

In April 1997, the federal court remanded Lovelace since it appeared that neither diversity nor federal question jurisdiction existed. Shortly after the remand, the Lovelace plaintiffs agreed to a global settlement agreement with Mobil which released all claims against Mobil — both state and federal — of a nationwide class of royalty payees. In May 1997, Mobil and counsel for Lovelace plaintiffs announced the terms of the settlement: in exchange for the nationwide class' release of all federal and state claims based on royalty underpayments, Mobil would pay $15 million to the class (with over 40% guaranteed to the attorneys), would change its method of determining royalty payments in the future, and would allow counsel for plaintiffs access to certain documents and Mobil employees.

The Alabama court ordered that the parties notify the potential settlement class members of the proposal and of a fairness hearing set for December 1997. The parties mailed actual notice to Mobil's royalty payees and published notice in national newspapers to alert all affected parties who were not Mobil payees. In December, the Alabama court held a hearing to certify a settlement class and to consider the fairness of the settlement. The named plaintiffs in McMahon did not appear to contest the certification or settlement, although they did exercise their right to opt out of the settlement. The named plaintiffs in Stanley neither appeared at the hearing nor opted out of the settlement. Represented by Lee Godfrey, intervenors from Texas state court litigation, State of Texas et al. v. Amoco Production Co. et al., No. 95-8680 (345th Jud.Dist., Travis Cty, Tex.), concerning similar royalty underpayment allegations did appear and objected to both certification and settlement. After this hearing, the Alabama state court approved both a settlement class and Mobil's proposed global settlement.

Meanwhile, the Judicial Panel on Multidistrict Litigation ("JPML") was considering whether and where to consolidate the five similar federal actions which were pending and involved royalty underpayment allegations. In November 1997, counsel for plaintiffs and the defendants in McMahon (the first case brought on behalf of a nationwide class) filed a global settlement with the federal district court in Houston. Before the Houston court could consider the settlement, McMahon and the other federal cases were transferred to this Court pursuant to 28 U.S.C. § 1407 for coordinated and consolidated proceedings as In re Lease Oil Antitrust Litigation, MDL-1206.

On May 14 and 15, 1998, this Court held the initial pretrial conference in MDL-1206. The McMahon plaintiffs and 24 oil companies (representing approximately 60-70% of the oil industry) expressed their desire to pursue the settlement agreement that they had proposed prior to consolidation, and those two factions formed, respectively, the "Settling Plaintiffs" and the "Settling Defendants." The remaining plaintiffs and defendants formed the "Non-settling Plaintiffs" and the "Non-settling Defendants" factions. The Court set a hearing to consider the settlement for the settling parties and a separate hearing to consider the class certification for the non-settling parties.

Mobil then presented its motion to dismiss. Plaintiffs in Cameron Parish and Randolph retracted their opposition to Mobil's motion, but Plaintiffs in McMahon and Stanley maintain their opposition to the dismissal of Mobil from MDL-1206. Mobil argues that its settlement in Lovelace ("Lovelace Settlement") has released all claims raised in MDL-1206 and therefore it must be dismissed. It bases its arguments on two legal theories: (1) under the Full Faith and Credit Act, this Court is required to give the Lovelace Settlement the same preclusive effect that an Alabama state court would give it; and, (2) under the Rooker-Feldman doctrine, this Court is divested of jurisdiction over the claims which the Lovelace Settlement released. Plaintiffs opposing Mobil's motion stress that the Alabama court which approved the Lovelace Settlement was unable to exercise jurisdiction over the released federal claims, and they argue that, therefore the Lovelace Settlement does not preclude litigation of those claims of exclusive federal jurisdiction. They also propose that the Rooker-Feldman doctrine is simply inapplicable to these circumstances. Thus, the fundamental issue before this Court is: When an Alabama state court approves a global class action settlement which releases claims of exclusive federal jurisdiction, is a settling defendant protected — by either the Full Faith and Credit Act or the Rooker-Feldman doctrine — from the litigation in federal court of those purportedly released federal claims?


As a preliminary matter, Mobil contends that the Court must grant its motion to dismiss because the two named plaintiffs in McMahon opted out of the Lovelace Settlement and, consequently, lack standing. However, as Mobil has conceded, named plaintiffs in Stanley have not opted out of the Lovelace Settlement (Mobil's Supp. Mem. at 16; Stanley Plaintiff's Mem. at 1), and those plaintiffs oppose the motion to dismiss.

Since there are plaintiffs who did not opt out from the Lovelace Settlement and also oppose dismissal based on that settlement, it is proper for the Court to rule on Mobil's motion to dismiss at this point in the litigation. See e.g., Steinmetz v. Toyota Motor Credit Corp., 963 F.Supp. 1294 (E.D.N.Y. 1997) (district court rules on defendant's motion to dismiss on full faith and credit grounds where putative class action plaintiff had not opted out of defendant's prior settlement). That is, since at the least the Stanley plaintiffs have standing to oppose the motion, the Court — in order to rule on Mobil's present motion — does not need to determine whether the McMahon plaintiffs have standing.

1. Approach Mandated by Matsushita

The Full Faith and Credit Act, 28 U.S.C. § 1738, mandates that the "judicial proceedings" of any state "shall have the same full faith and credit in every court within the United States ... as they have by law or usage in the courts of such State ... from which they are taken."

The Supreme Court has recently emphasized that, "[A]bsent a partial repeal of the Full Faith and Credit Act, 28 U.S.C. § 1738, by another federal statute, a federal court must give the judgment the same effect that it would have in the courts of the State in which it was rendered." Matsushita Elec. Indus. Co., Ltd. v. Epstein, 516 U.S. 367, 116 S.Ct. 873, 876, 134 L.Ed.2d 6 (1996). "Federal courts may not employ their own rules in determining the effect of state judgments, but must accept the rule chosen by the state from which the judgment is taken." Id. 116 S.Ct. at 877 (citations omitted).

Matsushita specified that class actions constituted "judicial proceedings" for § 1738 purposes and that, at least "at the outset," §...

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