In re New Mexico Natural Gas Antitrust Litigation

• Decision Date: 01 August 1984
• Docket Number: Civ. A. No. 83-F-1173 (MDL-403).
• Citation: 607 F. Supp. 1491
• Parties: In re NEW MEXICO NATURAL GAS ANTITRUST LITIGATION. Sheila BREWER, Mark Fleisher, Ramon Huerta, Marie Loague, Jay Miller, Vodene Patterson, and Eliu E. Romero, on behalf of themselves and others similarly situated, Plaintiffs, v. SOUTHERN UNION COMPANY and Southern Union Gathering Company, Defendants.
• Court: U.S. District Court — District of Colorado

607 F. Supp. 1491

In re NEW MEXICO NATURAL GAS ANTITRUST LITIGATION Sheila BREWER, Mark Fleisher, Ramon Huerta, Marie Loague, Jay Miller, Vodene Patterson, and Eliu E. Romero, on behalf of themselves and others similarly situated, Plaintiffs, v. SOUTHERN UNION COMPANY and Southern Union Gathering Company, Defendants.

Civ. A. No. 83-F-1173 (MDL-403).

United States District Court, D. Colorado.

August 1, 1984.

J.E. Gallegos, Arturo L. Jaramillo, Steven Tucker, Jones, Gallegos, Snead & Wertheim, Santa Fe, N.M., for plaintiff in the Brewer and State Cases.

Russell Moore, Keleher & McLeod, Albuquerque, N.M., for plaintiff Public Service Co. of New Mexico.

Robert F. Hill, Hill & Robbins, Denver, Colo., for all plaintiffs.

Robert F. Hanley, Kenneth Fimberg, Melanie Vogl, Morrison & Foerster, Denver, Colo., James Brosnahan, Thomas Lee, Cedric Chao, Morrison & Foerster, San Francisco, Cal., Victor R. Ortega, Montgomery & Andrews, Santa Fe, N.M., Hal Sanders, Strasburger & Price, Dallas, Tex., Walter A. Steele, White & Steele, Denver, Colo., for Southern Union defendants.

ORDER NO. 1984-32

APPROVING STIPULATION AND AGREEMENT OF SETTLEMENT OF CLAIMS BETWEEN PLAINTIFF CLASS MEMBERS AND DEFENDANTS SOUTHERN UNION COMPANY AND SOUTHERN UNION GATHERING COMPANY

AND

DISMISSING PLAINTIFF CLASS MEMBERS' CLAIMS WITH PREJUDICE AGAINST DEFENDANTS SOUTHERN UNION COMPANY AND SOUTHERN UNION GATHERING COMPANY AND ENTRY OF FINAL JUDGMENT

SHERMAN G. FINESILVER, Chief Judge.

In this class action the matter is before the court on a Joint Motion for Court Approval of Final Settlement by Class Action Plaintiffs (the "Brewer class") and defendants Southern Union Company and Southern Union Gathering Company (collectively "Southern Union").

The Stipulation and Agreement between the Brewer class and Southern Union dated April 12, 1984 is a comprehensive agreement contemplating the final resolution and dismissal of all cases which have been consolidated in this single action.¹ The cases involved are: Sheila Brewer, et al. v. Southern Union, et al., (Colo.Civ. No. 83-F-1173); State of New Mexico, ex rel. Department of Finance and Administration, et al. v. Southern Union, et al., (Colo.Civ. No. 83-F-1174); and Public Service Company of New Mexico v. Southern Union, et al., (Colo.Civ. No. 83-F-1175). Because of the nature of the proposed settlement, representatives of the Public Service Company of New Mexico ("PNM") and the State of New Mexico plaintiffs ("State plaintiffs") have also been signatories to the stipulation and agreement on behalf of those additional plaintiffs.

SUMMARY OF ORDER

The litigation involves claims of price fixing in regard to the wellhead price for natural gas produced in the San Juan Basin region of New Mexico. The complaints assert violations of section one of the Sherman Act, 15 U.S.C. § 1. The plaintiffs include a group of some 350,000 past and present residential consumers of natural gas residing in the State of New Mexico. This group has been certified as a class under the provisions of Rule 23 of the Fed.R.Civ.Proc. (F.R.C.P.).

The plaintiffs, including the plaintiff class, and the remaining defendants have reached a proposed settlement which would resolve all claims and terminate the litigation. Because of the involvement of a certified class, the court must approve any settlement as to the class under Rule 23(e) of the F.R.C.P. On April 20, 1984, the court gave preliminary approval to the settlement proposal. On June 29, 1984 the court held a hearing to consider final approval of the proposed settlement.

In this order we review the history of the litigation, the terms of the proposed settlement, the adequacy of the notice procedure, and the evidence presented in favor of and in opposition to the settlement. Thereafter, having concluded that the settlement is fair, adequate and reasonable to the class as a whole, the order GRANTS final approval pursuant to Rule 23(e) of the F.R.C.P.

INTRODUCTION

On April 17, 1984 the court conducted a hearing to determine whether the proposed settlement should be given preliminary approval under Rule 23(e) of the F.R.C.P. On April 20, 1984 the court entered Order No. 1984-21 which granted preliminary approval and directed that the class members be notified of the nature and terms of the proposed settlement.²

On June 29, 1984 a hearing was held at the United States Courthouse, Santa Fe, New Mexico, to determine whether the proposed Stipulation and Agreement should be given final court approval.

Appearing at the Final Approval Hearing on behalf of the Brewer class were the attorneys of record, Messrs. J.E. Gallegos, Arturo L. Jaramillo, Robert F. Hill and Stephen L. Tucker. Five of the named class representatives were also present at the hearing, those being Ms. Sheila Brewer, Mrs. Marie Loague and Messrs. Ramon Huerta, Mark Fleisher and Eliu Romero.

Appearing on behalf of the state plaintiffs were their attorneys of record, the same counsel as set forth above for the Brewer class. In addition, representing the interests of the state plaintiffs and present at the hearing was Mr. John Perovich, President of the University of New Mexico.

Appearing on behalf of the Public Service Company of New Mexico was its counsel of record, Mr. Russell Moore. In addition, Mr. A.J. Robison, Senior Vice-President of PNM and Mr. John Ackerman, also a Senior Vice-President of PNM, were present at the June 29, 1984 hearing.

The Southern Union defendants were represented by their counsel of record, Messrs. James J. Brosnahan, Robert F. Hanley, Cedric C. Chao, Kenneth R. Fimberg and Ms. Melanie Vogl. In addition, Thomas B. Morton, Senior Vice-President and General Counsel for the Southern Union defendants was also present at the Final Approval Hearing.

The court has reviewed the procedures used to notify class members of the terms of the proposed settlement, the final petition for attorneys fees and the time and place scheduled for the Final Approval Hearing.³ The notification procedures appear to be adequate under the law and are discussed below.

Statements by counsel were presented concerning the merits of the proposed settlement and the nature of the negotiations that preceded the signing of the Stipulation and Agreement. J.E. Gallegos, Esq. testified as to the objectives of the plaintiffs in this litigation, the terms of the settlement as they relate to those objectives, and the nature of the negotiations that led up to the settlement. Mr. George L. Donkin, plaintiffs' principal damage expert and the five class representatives also testified. In addition, Mr. Joseph Ventura testified concerning the benefits of the proposed settlement to senior citizens residing in the Santa Fe area as well as in the State of New Mexico as a whole.

Messrs. Robison and Ackerman testified on behalf of PNM concerning PNM's affirmative position regarding the proposed settlement and negotiations leading up to the settlement. Each described the financial aspects of the settlement as well as the nature of the corporate structure of PNM that will be effectuated if court approval of the settlement is granted.

The only witness presented on behalf of the defendants was Mr. Morton. He discussed the benefits of the settlement to all parties as well as the hard fought nature of the negotiations that took place in the months preceding the settlement.

Lastly, four (4) individuals presented statements in opposition to the terms of the proposed settlement. They were Messrs. Frank Chavez, Don Hancock, Frank Benavidez and Jeffrey Smedberg. Generally speaking, the objections were all based on the portion of the settlement whereby PNM would acquire the natural gas production, distribution assets and facilities of Southern Union located in New Mexico.

Being thoroughly advised on this matter, we enter our findings of fact and conclusions of law under Rule 52(a) of the F.R. C.P. and pursuant to Rule 23(e) of the F.R.C.P. Accordingly, we GRANT final approval to the settlement as proposed in the Stipulation and Agreement entered into between the Brewer class and Southern Union defendants as well as the Agreement between Plaintiffs concerning Final Settlement signed on April 12, 1984.

I. HISTORY OF LITIGATION

This litigation has one of the more unique legal and factual histories encountered by the court in class action litigation. The cases have their genesis in substantial rate increases encountered by residential natural gas consumers in New Mexico. Sometime between 1976 and 1978 public school teachers in various locations within New Mexico noticed that, while school budgets increased yearly, little of the increases was applied towards higher teacher salaries. Instead a large portion of each increase was expended to pay increasing natural gas bills incurred to heat and cool the schools. At the same time, the same educators realized that their own residential natural gas bills had begun to increase substantially.

Alarmed by the apparent suddenness of these increases both at school and at home, the teachers, through an organizational body, the National Education Association — New Mexico ("NEA-NM"), contacted the Association's legal counsel and asked that an investigation be commenced into the cause and legitimacy of the sudden and sharp increase in natural gas prices.

It appears that counsel for NEA-NM spent much of 1978 investigating the reasons behind the natural gas price increase imposed by Southern Union's gas supply subsidiary, Gas Company of New Mexico. Based on the results of the investigation, counsel for the teachers' organization determined that the evidence revealed potential violations of section one of the Sherman Act, 15 U.S.C. § 1. Specifically, counsel believed that a scheme existed to fix wellhead natural gas prices at an artificially high level. This involved gas produced from the San Juan Basin located in New Mexico. The resulting higher prices were passed on to residential gas consumers...