Schell v. OXY USA ( 2016 )

FILED
United States Court of Appeals
Tenth Circuit
PUBLISH
February 9, 2016
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
DAVID SCHELL; DONNA SCHELL;
RON OLIVER, individually, and as
representative parties on behalf of surface
owners,
Plaintiffs - Appellees/Cross-
Appellants,
v. Nos. 13-3297 & 13-3304
OXY USA INC.,
Defendant - Appellant/Cross-
Appellee.
_________________________________
ORDER
_________________________________
Before BRISCOE, HARTZ, and HOLMES, Circuit Judges.
_________________________________
These matters are before the court on the Petition for Rehearing or Rehearing En
Banc filed in Case No. 13-3297 by Defendant - Appellant/Cross-Appellee, OXY USA,
Inc. We also have a response from the Appellees in that appeal.
The petition for panel rehearing is granted in part to the extent of the modifications
set forth in the attached revised opinion. The remainder of the relief requested is denied.
The petition for rehearing en banc and the attached revised opinion were
transmitted to all of the judges of the court who are in regular active service. As no
member of the panel and no judge in regular active service requested that the court be
polled, the suggestion for en banc rehearing is denied.
The mandate in Case No. 13-3304 is sua sponte recalled. The Clerk of Court is
directed to issue the attached revised opinion in Case Nos. 13-3297 and 13-3304 as of the
date of this order. Pursuant to Fed. R. App. P. 2 and 10th Cir. R. 2.1, the prohibition on
successive petitions for rehearing found in 10th Cir. R. 40.3 is hereby suspended, such
that any party to these appeals may file a petition for rehearing as to the attached revised
opinion. Any such petition must be filed within 14 days of the date of this order and shall
otherwise comply with all applicable federal and local rules.
Entered for the Court,
ELISABETH A. SHUMAKER, Clerk
by: Chris Wolpert
Chief Deputy Clerk
2
FILED
United States Court of Appeals
Tenth Circuit
February 9, 2016
PUBLISH Elisabeth A. Shumaker
Clerk of Court
UNITED STATES COURT OF APPEALS
TENTH CIRCUIT
DAVID SCHELL; DONNA SCHELL;
RON OLIVER, individually, and as
representative parties on behalf of
surface owners,
Plaintiffs-Appellees/Cross-
Appellants, Nos. 13-3297 & 13-3304
v.
OXY USA INC.,
Defendant-Appellant/Cross-
Appellee.
APPEALS FROM THE UNITED STATES DISTRICT
COURT FOR THE DISTRICT OF KANSAS
(D.C. No. 6:07-CV-01258-JTM-KMH)
Marie R. Yeates, Vinson & Elkins LLP, Houston, Texas (Michael A. Heidler and
Conor P. McEvily, Vinson & Elkins LLP, Houston, Texas; Lisa T. Silvestri,
GableGotwals, Tulsa, Oklahoma; and Stanford J. Smith, Jr. and Marcia A. Wood,
Martin, Pringle, Oliver, Wallace & Bauer, Wichita, Kansas, with her on the
briefs), for Defendant-Appellant/Cross-Appellee.
Rex A. Sharp, Gunderson Sharp, LLP, Prairie Village, Kansas (Barbara C.
Frankland, Gunderson Sharp, LLP, Prairie Village, Kansas; and Lee Thompson,
Thompson Law Firm, Wichita, Kansas, with him on the briefs), for Plaintiffs-
Appellees/Cross-Appellants.
Before BRISCOE, HARTZ, and HOLMES, Circuit Judges.
HOLMES, Circuit Judge.
Appellant and Cross-Appellee OXY USA Inc. (“OXY”), the defendant in
the district court, appeals from the grant of summary judgment to Appellees and
Cross-Appellants—a class of plaintiffs represented by David Schell, Donna
Schell, and Ron Oliver—on the question of whether their oil and gas leases
required OXY to make “free gas” useable for domestic purposes. OXY also
appeals from the district court’s certification of plaintiffs’ class and the denial of
a motion to decertify, and the district court’s order to quash the deposition of an
absent class member.
Plaintiffs cross-appeal from the district court’s denial of their motion for
attorneys’ fees, litigation expenses, and an incentive award. Importantly,
plaintiffs also move to dismiss the appeal as moot. OXY opposes dismissal for
mootness, but argues that if we find mootness, we should vacate the district
court’s decision.
We hold that OXY’s sale of the oil and gas leases at issue here mooted its
appeal; therefore, we grant the plaintiffs’ motion to dismiss. Nevertheless, we
conclude that the cross-appeal has not been mooted by this sale, and exercising
our jurisdiction under 28 U.S.C. § 1291, we affirm the district court’s judgment as
2
to the denial of attorneys’ fees, litigation expenses, and an incentive award.
I
This case is before us after seven years of litigation culminated in a
summary judgment granting declaratory relief to the plaintiff class. Because we
do not ultimately reach the merits of this dispute, we are brief in our recounting
of the factual and legal background.
The plaintiff class, appellees and cross-appellants here, consists of
approximately 2200 surface owners of Kansas land burdened by oil and gas leases
held or operated by OXY, the appellant and cross-appellee. The leases were
executed separately over a century, from 1906 to 2007, but approximately
seventy-five percent of the leases were executed in the 1930s and 1940s. The
leases contained a “free gas” clause. They did not necessarily contain identical
free gas clauses but the clauses all, in substance, purported to grant the lessor
access to free gas for domestic use. All of the plaintiffs who have used free gas
obtain their gas from a tap connected directly to a wellhead line. In addition,
some members of the plaintiff class—including about half of the current users of
free gas—have received royalty payments from OXY based on the production of
gas on their land.
As gas wells reach the end of their productive life, they often experience
decreases in pressure and increases in hydrogen sulfide (“H 2S”), a dangerous
chemical compound. In August 2007, OXY sent letters warning free gas users
3
that their gas may become unsafe to use, either because of high hydrogen sulfide
content or low pressure at the wellhead. These letters urged the lessors to convert
their houses to an alternative energy source.
On August 31, 2007, leaseholders David Schell, Donna Schell, Howard
Pickens, 1 and Ron Oliver filed this action on behalf of themselves and others
similarly situated, seeking a permanent injunction, a declaratory judgment, and
actual damages based on alleged breaches of mineral leases entered into with
OXY for failure to supply free usable gas. The declaratory relief sought was:
Pursuant to [28] U.S.C. [] § 2201, the plaintiff class is entitled to
a declaration of the rights under the Free Gas Covenant: namely
that OXY is required to provide useable gas pursuant to the terms
of the Free Gas Covenant without interruption by virtue of
conduct designed to interrupt, interfere with, or disconnect Class
members’ residences from the use of free gas.
Aplt. App. at 795 (Am. Compl.). The district court certified a class of “all
surface owners of Kansas land burdened by oil and gas leases held or operated by
OXY USA, Inc. which contain a free gas clause.” Id. at 546 (Mem. & Order).
Plaintiffs subsequently amended their complaint to eliminate their claim for actual
damages. Plaintiffs and OXY then filed cross-motions for summary judgment.
The district court denied OXY’s motion for summary judgment and granted
the plaintiffs’ motion for summary judgment. The district court granted the
1
During the pendency of this case in the district court, Howard
Pickens died. He has since been removed as a named plaintiff.
4
plaintiffs declaratory relief requiring OXY to provide free useable gas under the
contract; however, the district court denied the plaintiffs’ motion for a permanent
injunction because it found that OXY had continued to provide useable house gas
under the contract at all times.
Because the district court found that the free gas clauses were ambiguous
and interpreted them according to principles of Kansas law, OXY moved to
vacate the judgment to permit it to discover extrinsic evidence of the clauses’
meaning. The district court agreed and vacated its judgment. However, after
extending the time for discovery, the district court quashed OXY’s only
deposition request and found that OXY was unable to produce any relevant
evidence of the parties’ intent. The court further found that it was unlikely any
relevant evidence existed. The district court subsequently granted plaintiffs’
resubmitted motion for summary judgment. 2 It also denied plaintiffs’ motion for
attorneys’ fees, expenses, and incentive awards. OXY filed this appeal, and the
plaintiffs cross-appealed.
After the appeal and cross-appeal were filed, but before the parties’ briefs
were due, OXY sold all of its interests in the Kansas leases to Merit Hugoton,
L.P. (“Merit”). The plaintiff class filed a motion to dismiss the appeal as moot
2
The district court additionally ruled on the remaining motions
submitted by the parties. It denied OXY’s motion to decertify the class, affirming
its earlier findings that the demands of Rule 23 of the Federal Rules of Civil
Procedure were met.
5
based on this sale. We permitted the appeal to proceed to briefing and oral
argument. One week after oral argument, Merit filed a motion to intervene as an
appellant and cross-appellee. After considering the parties’ responses, we denied
the motion.
II
A
We conclude that this appeal is moot. OXY has sold all of its interests in
the leases; therefore, its conduct cannot be affected by a declaratory judgment
concerning these same oil and gas leases. Accordingly, we grant the motion of
the plaintiff class to dismiss this appeal.
“Mootness is a threshold issue because the existence of a live case or
controversy is a constitutional prerequisite to federal court jurisdiction.” Rio
Grande Silvery Minnow v. Bureau of Reclamation, 601 F.3d 1096, 1109 (10th Cir.
2010) (quoting Disability Law Ctr. v. Millcreek Health Ctr., 428 F.3d 992, 996
(10th Cir. 2005)); accord Ind v. Colo. Dep’t of Corr., 801 F.3d 1209, 1213 (10th
Cir. 2015). If a case is moot, we have no subject-matter jurisdiction. See, e.g.,
Unified Sch. Dist. No. 259 v. Disability Rights Ctr. of Kan., 491 F.3d 1143,
1146–47 (10th Cir. 2007).
More specifically, “[c]onstitutional mootness doctrine is grounded in the
Article III requirement that federal courts may only decide actual ongoing cases
or controversies.” Id. at 1147 (quoting Seneca-Cayuga Tribe of Okla. v. Nat’l
6
Indian Gaming Comm’n, 327 F.3d 1019, 1028 (10th Cir. 2003)). “Th[e] case-or-
controversy requirement subsists through all stages of federal judicial
proceedings, trial and appellate.” Lewis v. Cont’l Bank Corp., 494 U.S. 472, 477
(1990); see Ind, 801 F.3d at 1213 (“Because mootness is an issue of subject
matter jurisdiction, it can be raised at any stage of the proceedings.”). Thus,
“[e]ven where litigation poses a live controversy when filed, the doctrine requires
a federal court to refrain from deciding it if ‘events have so transpired that the
decision will neither presently affect the parties’ rights nor have a more-than-
speculative chance of affecting them in the future.’” Clarke v. United States, 915
F.2d 699, 701 (D.C. Cir. 1990) (en banc) (quoting Transwestern Pipeline Co. v.
Fed. Energy Regulatory Comm’n, 897 F.2d 570, 575 (D.C. Cir. 1990)). We
review de novo the question of whether a case is moot. See, e.g., Prier v. Steed,
456 F.3d 1209, 1212 (10th Cir. 2006).
“Declaratory judgment actions must be sustainable under the same
mootness criteria that apply to any other lawsuit”—viz., an actual case or
controversy between the parties must exist. Rio Grande Silvery Minnow, 601
F.3d at 1109–10. In the declaratory-judgment context, the mootness inquiry looks
to whether the requested relief will actually alter the future conduct of the named
parties. See Hewitt v. Helms, 482 U.S. 755, 761 (1987) (“The real value of the
judicial pronouncement—what makes it a proper judicial resolution of a ‘case or
controversy’ rather than an advisory opinion—is in the settling of some dispute
7
which affects the behavior of the defendant towards the plaintiff.”); Jordan v.
Sosa, 654 F.3d 1012, 1025 (10th Cir. 2011) (“When we apply the mootness
doctrine in the declaratory judgment context, ‘[i]t is well established that what
makes a declaratory judgment action a proper judicial resolution of a case or
controversy rather than an advisory opinion is the settling of some dispute which
affects the behavior of the defendant toward the plaintiff.’” (alteration in
original) (quoting Rio Grande Silvery Minnow, 601 F.3d at 1109–10)). “The
crucial question is whether granting a present determination of the issues offered
will have some effect in the real world.” Rio Grande Silvery Minnow, 601 F.3d at
1110 (quoting Wyoming v. U.S. Dep’t of Agric., 414 F.3d 1207, 1212 (10th Cir.
2005)).
In this case, it is not possible to afford relief between the parties that will
influence the defendant’s behavior toward the plaintiff class. Though OXY
operated the gas wells at issue in this litigation, it no longer has any purported
obligation to provide free gas under the contracts. Thus, the declaratory judgment
at issue in this litigation—“that OXY is required to provide useable gas pursuant
to the terms of the Free Gas Covenant without interruption,” Aplt. App. at
795—cannot affect OXY’s behavior because it is no longer bound by the leases
and no longer operates the wells in question. OXY is completely unaffected by
our interpretation of contractual provisions (i.e., the free gas clauses) in contracts
that no longer bind OXY. Because OXY is no longer bound by these contracts,
8
our interpretation of the provisions will have no effect on OXY’s behavior in the
real world.
OXY’s only argument against mootness is that it retains an interest in the
litigation due to the potential preclusive effects of the declaratory judgment.
OXY claims that the leaseholders could sue OXY over its prior conduct during
the time when it was operating the wells. It claims that it has an interest in the
declaratory judgment because a finding that OXY had a duty to make the gas
useable could have an adverse preclusive effect in damages suits over the
provision of free gas. 3 We deem that concern—viz., the effects of this judgment
in hypothetical unfiled future litigation—to be not a legally cognizable interest
that will defeat mootness.
3
OXY conceded that “there may be only a small risk that a surface
owner might file a lawsuit against OXY,” Aplt. Resp. & Reply Br. at 37, but even
that may overstate the risk. The district court specifically denied injunctive relief
because it found that OXY had provided free useable gas at all times during the
litigation. Aplt. App. at 1331 (Mem. & Order) (“Plaintiffs admit defendant has
not presently terminated their use of free useable house gas but has only indicated
it might to [sic] do so.”). Moreover, it found that OXY’s “argument about a spate
of damages actions is misplaced because at the present time [OXY] has not
discontinued the plaintiffs’ supply of free, useable gas, thus, plaintiffs have no
damages.” Id. at 1327 (emphasis added); see also Aplt. Opening Br. at 5 (“OXY
has not interrupted or directly interfered with Plaintiffs’ use of the free gas.”);
Aplee. Principal & Resp. Br. at 5 (“For many years, as long as OXY has produced
gas under the leases, OXY provided the surface owners free gas for use in their
homes.”). OXY could only be sued for damages for its past behavior, because it
no longer operates the wells in question. But its past behavior is very unlikely to
give rise to a lawsuit for damages. In other words, because the district court
found, and the parties agree, that OXY never failed to deliver free useable gas,
the prospect of a damages claim appears remote at best.
9
Seeking to litigate this ostensible controversy now over unfiled, potential
future damages claims is “the very sort of speculative, ‘hypothetical’ factual
scenario that would render such a [declaratory] judgment a prohibited advisory
opinion.” Jordan, 654 F.3d at 1026. Concerns over the preclusive effect of an
adverse judgment or other matters relating to a hypothetical unfiled suit are not
cognizable reasons for continuing litigation that is otherwise moot. See United
States v. Juvenile Male, --- U.S. ----, 131 S. Ct. 2860, 2864 (2011) (per curiam)
(“True, a favorable decision in this case might serve as a useful precedent for
respondent in a hypothetical lawsuit . . . . But this possible, indirect benefit in a
future lawsuit cannot save this case from mootness.”); see also In re Burrell, 415
F.3d 994, 999 (9th Cir. 2005) (“[The appellant] may not invoke as an exception to
the mootness doctrine the specter of continuing legal harm from res judicata or
collateral estoppel arising from his mooted claims when such harm is merely
hypothetical and speculative.”); Commodity Futures Trading Comm’n v. Bd. of
Trade of Chi., 701 F.2d 653, 656 (7th Cir. 1983) (“[O]ne can never be certain that
findings made in a decision concluding one lawsuit will not some day . . . control
the outcome of another suit. But if that were enough to avoid mootness, no case
would ever be moot.”). We are specifically prohibited from “advising what the
law would be upon a hypothetical state of facts.” Olin Corp. v. Consol.
Aluminum Corp., 5 F.3d 10, 17 (2d Cir. 1993) (quoting Aetna Life Ins. Co. v.
Haworth, 300 U.S. 227, 241 (1937)); see also Front Range Equine Rescue v.
10
Vilsack, 782 F.3d 565, 569 (10th Cir. 2015) (“[W]e are persuaded the contingent
possibility that Responsible Transportation might apply for a new grant of equine
inspection does not give rise to a current case or controversy, regardless of
whether the former grant could have some future influence on the agency’s
consideration of a hypothetical new request for equine inspection.”). As such,
OXY’s claimed interest in the adverse preclusive effects of this judgment in
hypothetical future suits cannot save this appeal from mootness.
At bottom, the fundamental point is that the declaratory judgment under
review in this action has no real-world impact on OXY’s conduct; consequently,
our decision would not “affect[] the behavior of the defendant toward the
plaintiff.” Jordan, 654 F.3d at 1025 (quoting Rio Grande Silvery Minnow, 601
F.3d at 1110); see also Rio Grande Silvery Minnow, 601 F.3d at 1110 (“The
crucial question is whether granting a present determination of the issues offered
will have some effect in the real world.” (quoting Wyoming, 414 F.3d at 1212)).
It is pellucid that OXY’s behavior cannot be altered by a ruling interpreting the
meaning of clauses in contracts that no longer bind OXY—that is, contracts to
which it is no longer a party. Even if OXY had breached the contracts in the past,
our ruling today on the meaning of the free gas clauses cannot change its present
behavior (because it no longer operates the wells) and cannot change its past
behavior. Accordingly, the declaratory judgment action is moot, and we have no
11
jurisdiction to enter a ruling. 4
B
Having determined that the case is moot, we now conclude after study of
the relevant authorities that it is appropriate to dismiss this appeal without
vacating the district court’s judgment regarding the plaintiff class’s declaratory-
judgment action. The question of whether to vacate a judgment after a finding of
mootness “is an equitable question” that must be determined “on the basis of the
particular circumstances.” Rio Grande Silvery Minnow, 601 F.3d at 1129
(citations omitted); see also U.S. Bancorp Mortg. Co. v. Bonner Mall P’ship, 513
U.S. 18, 24 (1994) (“From the beginning we have disposed of moot cases in the
manner ‘“most consonant to justice” . . . in view of the nature and character of the
conditions which have caused the case to become moot.’” (quoting United States
4
We have no basis in the record to support the view that Merit’s late-
blooming request to intervene would have changed this conclusion. The parties
have declined to enter into the record any documents related to the sale of the oil
and gas leases, so we have no knowledge of how a judgment against OXY might
or might not bind Merit. Merit claimed in its motion to intervene that it is the
successor in interest to OXY, but nothing in the record supports that claim.
Notably, neither Merit nor OXY petitioned for Merit to be substituted for OXY,
which would have guaranteed that our ruling was binding on Merit, but only for
Merit to intervene, which says nothing about the effects on Merit of a declaratory
judgment against OXY. The judgment presented for our review is a declaratory
judgment against OXY. In the absence of any evidence in the record that a
judgment against OXY would bind Merit, we cannot conclude that the judgment
will have any effect whatsoever on Merit’s behavior toward the plaintiff class.
Given the absence of record evidence on the question, we cannot conclude that
Merit’s intervention in this litigation would have changed the mootness inquiry.
12
v. Hamburg–Amerikanische Packetfahrt–Actien Gesellschaft, 239 U.S. 466, 478
(1916))). We conclude that OXY’s intentional conduct caused this case to be
moot—and viewing this fact in the context of broader balancing of the
equities—we determine that the equitable resolution of the question is to leave in
place the district court’s judgment regarding the declaratory-judgment action.
1
“In general, ‘[w]hen a case becomes moot on appeal, the ordinary course is
to vacate the judgment below and remand with directions to dismiss.’” Rio
Grande Silvery Minnow, 601 F.3d at 1129 (alteration in original) (quoting Kan.
Judicial Review v. Stout, 562 F.3d 1240, 1248 (10th Cir. 2009)); see also
Wyoming, 414 F.3d at 1213 (“When a case becomes moot pending appeal, the
general practice is to vacate the judgment below and remand with directions to
dismiss.”). Vacatur must be ordered when review of a judgment is “‘prevented
through happenstance’—that is to say, where a controversy presented for review
has ‘become moot due to circumstances unattributable to any of the parties.’”
Bancorp, 513 U.S. at 23 (quoting Karcher v. May, 484 U.S. 72, 82, 83 (1987)).
We have justified this course by stating that “[t]his is because ‘[a] party who
seeks review of the merits of an adverse ruling, but is frustrated by the vagaries
of circumstance, ought not in fairness be forced to acquiesce in the judgment.’”
Wyoming, 414 F.3d at 1213 (second alteration in original) (quoting Bancorp, 513
U.S. at 25).
13
However, when mootness results from a voluntary act of one of the parties,
we generally act to prevent a party from taking advantage of mootness that the
party caused. In particular, as relevant here, when a party—who has lost before
the district court—causes mootness and then seeks vacatur, we generally refuse to
vacate the district court’s opinion. See Rio Grande Silvery Minnow, 601 F.3d at
1129 (“On the other hand, if the party seeking vacatur has caused mootness,
generally we do not order vacatur.”); Amoco Oil Co. v. U.S. Envtl. Prot. Agency,
231 F.3d 694, 699 (10th Cir. 2000) (“[G]ranting vacatur to a party who both
causes mootness and pursues dismissal based on mootness serves only the
interests of that party.”); see also Burrell, 415 F.3d at 999 (“[E]quity counsels
against vacatur[] ‘when the appellant has by his own act caused the dismissal of
the appeal.’” (quoting Ringsby Truck Lines, Inc. v. W. Conference of Teamsters,
686 F.2d 720, 722 (9th Cir. 1982))); Nat’l Football League Players Ass’n v. Pro-
Football, Inc., 79 F.3d 1215, 1216–17 (D.C. Cir. 1996) (“As vacatur is an
equitable doctrine, we are not to apply it where ‘the party seeking relief from the
judgment below caused the mootness by voluntary action.’” (quoting Bancorp,
513 U.S. at 24)). 5
5
We note that in the converse situation, applying this same equitable
principle, “vacatur must be granted where mootness results from the unilateral
action of the party who prevailed in the lower court,” in order to prevent that
party from making its win unreviewable. Bancorp, 513 U.S. at 23; cf. Arizonans
for Official English v. Ariz., 520 U.S. 43, 71–74 (1997) (vacating a district court’s
(continued...)
14
Equitable principles keep us from applying this standard in a rigid fashion.
Several examples define the operation of this rule. In Bancorp, the Supreme
Court stated that “[t]he principal condition to which we have looked is whether
the party seeking relief from the judgment below caused the mootness by
voluntary action.” Bancorp, 513 U.S. at 24 (emphasis added). Although Bancorp
dealt specifically with mootness by reason of settlement, the Supreme Court and
our court have recognized that Bancorp’s principal condition—that is, whether
the party seeking relief from the judgment below caused mootness by voluntary
action—extends beyond the settlement context. See, e.g., Alvarez v. Smith, 558
U.S. 87, 94–95 (2009) (recognizing the operation of Bancorp’s principal
condition outside of the settlement context); 19 Solid Waste Dep’t Mechs. v. City
of Albuquerque, 76 F.3d 1142 (10th Cir. 1996) (relying on Bancorp to refuse to
vacate a district court’s judgment when an appellant had caused the case to
become moot through voluntary actions other than settlement).
In 19 Solid Waste Department Mechanics, plaintiff mechanics challenged
the city’s drug testing policy, and the district court entered judgment for the
plaintiffs. 76 F.3d at 1143. While the city’s appeal was pending, the city
5
(...continued)
judgment won by a plaintiff who then mooted the case while appeal was pending
by resigning her public-sector job but who did not request that the court dismiss
the case for mootness). The unifying principle is that generally, a party cannot
preserve a win—or wipe away a loss—when its voluntary actions cause an appeal
to become moot.
15
withdrew the proposed policy. Id. at 1144. The city initially pursued its appeal
and did not request dismissal for mootness, but after it was revealed at oral
argument that the policy had been withdrawn, the city submitted a motion to
dismiss the claim as moot and vacate the district court’s judgment on that issue.
Id. Although we granted the dismissal, we refused to vacate the district court’s
judgment. Id. We applied Bancorp’s statement that “[t]he principal condition to
which we have looked is whether the party seeking relief from the judgment
below caused the mootness by voluntary action.” Id. (alteration in original)
(quoting Bancorp, 513 U.S. at 24). We observed that there is a “presumption . . .
in favor of retaining the judgment,” unless the public interest would be served by
vacatur. Id. We noted our particular concern in that case that the city had both
caused the mootness and urged dismissal on mootness grounds. Id. at 1145. For
that reason, we refused to grant vacatur, because vacatur would condone “[t]his
one-sided use of the mootness doctrine [that] does not appear to serve any interest
other than the City’s own.” Id.
Similarly, in Tandy v. City of Wichita, 380 F.3d 1277 (10th Cir. 2004), we
declined to vacate portions of a judgment for injunctive relief when they became
moot on appeal because of the voluntary compliance by the cross-appellant. 6 Id.
at 1291–92. In that case, disabled transit passengers sued over a “driver-
6
Other claims became moot because of the death of an appellant and
cross-appellee. Tandy, 380 F.3d at 1290.
16
discretion policy” that permitted bus drivers “discretion to refuse to deploy lifts
for disabled persons who attempted to board an accessible bus on an inaccessible
route.” Id. at 1283. The cross-appellant city, which lost on the issue in the
district court, mooted the issue when it equipped all routes with lift-accessible
busses and instructed its drivers to deploy lifts at all bus stops. Id. at 1291. We
concluded that “it is far from clear that vacatur . . . would be the appropriate
response to a finding of mootness on appeal brought about by the voluntary
conduct of the party that lost in the District Court.” Id. at 1292 (omission in
original) (quoting Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528
U.S. 167, 194 n.6 (2000)); see also In re W. Pac. Airlines, Inc., 181 F.3d 1191,
1198 (10th Cir. 1999) (“[W]e decline to grant vacatur of the decisions
underpinning this appeal as well. By retrieving the three planes as to which
repossession rights were at issue in this action, Boullioun has voluntarily mooted
this appeal.”).
In contrast, in two cases, Wyoming and Rio Grande Silvery Minnow, we
vacated the judgment of the district court when an entity that was not a party to
the litigation was more responsible for the mootness than any party. In Wyoming,
the State of Wyoming brought suit against the U.S. Forest Service, which was
joined by defendant-intervenor environmental groups, in which the State
challenged the Service’s adoption of a rule regarding road construction, and the
district court entered a judgment against the Forest Service. See Wyoming, 414
17
F.3d at 1210–11. We held that the case was mooted while the intervenor
environmental groups’ appeal was pending because the Forest Service had
replaced the rule at issue with a new rule. Id. at 1211–12. Although we noted
that our usual course is not to vacate the judgment of the district court when the
nonprevailing party causes mootness, we found equitable reasons for vacatur. Id.
at 1213. First, while the Forest Service had mooted the case, it was only the
environmental groups, and not the Forest Service, that had appealed the adverse
judgment; therefore, no party in the appellate case had mooted the case. Id.
Thus, it was clear that no party to the appellate litigation was “attempting to
manipulate the courts to obtain the relief it was not able to win in the judicial
system.” Id. We concluded that the case was “more akin to one in which a
controversy is mooted through ‘circumstances unattributable to any of the
parties.’” Id. (quoting Bancorp, 513 U.S. at 23). 7
7
The circumstances of Wyoming are roughly analogous to those found
in a recent case from our circuit, Front Range Equine Rescue; not surprisingly,
we reached a consistent result there. In Front Range, we described the basic
procedural history as follows: “This appeal involves environmental challenges to
a federal agency’s decisions to grant inspection services for the slaughter and
processing of horses and other equines at three slaughterhouses. In the
proceedings below, the district court affirmed the agency’s grants of inspection.”
782 F.3d at 567. We determined that “recent developments have significantly
changed the status of th[e] litigation,” and ultimately concluded that those
developments had rendered the litigation moot. Id. at 568. Though the events
that had caused the appeal’s mootness were voluntary actions (rather than
happenstance), they were not within the control of the appellants who advocated
for vacatur, nor were they actions of the prevailing federal agency. See id. at 571.
(continued...)
18
Similar concerns animated the court in Rio Grande Silvery Minnow. In that
case, as relevant here, actions by Congress and federal agencies caused ongoing
litigation to become moot. See Rio Grande Silvery Minnow, 601 F.3d at 1108,
1115. Plaintiff environmental groups asked the district court to dismiss the case,
but asked it not to vacate prior orders in which the groups had prevailed. Id. at
1108–09. The defendant federal agencies urged vacatur. Id. at 1109. On the
vacatur question, we concluded that the federal agencies, which had lost in the
district court, were not attempting to “‘manipulate[] the judicial process’ by
depriving the district court of jurisdiction,” id. at 1130 (alteration in original)
(quoting McClendon v. City of Albuquerque, 100 F.3d 863, 868 (10th Cir. 1996));
therefore, we concluded that their voluntary actions should not weigh against
them in seeking vacatur, id. at 1130–31. In addition, we concluded that “the
district court essentially imputed congressional action to the appellants.” Id. at
1131. Because Congress was not a party in the case, we determined that the
mootness was primarily attributable to the actions of a third party, and thus the
equities favored vacatur. Id. at 1132.
7
(...continued)
Instead, mootness was caused by “unilateral decisions made by the slaughterhouse
Intervenors-Appellees and by various [non-party] government officials, not by
any action of Appellants.” Id. Accordingly, under these circumstances, we
concluded that “vacatur of the district court’s judgment is appropriate,” id.,
seemingly doing so with confidence that the appellants were not “attempting to
manipulate the courts to obtain the relief [they were] not able to win in the
judicial system,” Wyoming, 414 F.3d at 1213.
19
Furthermore, the Supreme Court has recognized that, even where a party
has voluntarily mooted the appeal, it is possible for compelling equitable
circumstances to militate strongly in favor of vacatur. In Alvarez, the Supreme
Court ordered vacatur even though the defendant-appellant State had mooted the
appeal; the State had done so by voluntarily returning cars and cash that it had
seized from the plaintiffs-appellees, such that the underlying property dispute was
resolved. 558 U.S. at 96–97. Although the State had voluntarily returned the
seized property, it had done so in the ordinary course of state court proceedings
that had no procedural link to the federal case and involved only issues of state
substantive law. See id. Specifically, the State voluntarily dismissed the state
court proceedings and returned the property between eleven and forty months
after the seizures; this was “a long enough time for the State to have investigated
the matters and to have determined . . . for evidentiary reasons that it did not wish
to claim” the property. Id. at 96. The Court observed that “[t]he disparate dates
at which plaintiffs’ forfeiture proceedings terminated” over the forty-month
period “indicate[d] that the State’s Attorney did not coordinate the resolution of
plaintiffs’ state-court cases, either with each other or with plaintiffs’ federal civil
rights case.” Id. It accordingly concluded that “the presence of th[e] federal case
played no significant role in the termination of the separate state-court
proceedings.” Id. at 96–97. And, because these circumstances—which the Court
was called upon to weigh in the equitable balancing—“more closely resemble[d]
20
mootness through ‘happenstance’ than through ‘settlement,’” id. at 94, it
concluded that “there [wa]s not present here the kind of ‘voluntary forfeit[ure]’ of
a legal remedy [i.e., appellate review of an adverse judgment] that led the Court
in Bancorp to find that considerations of ‘fairness’ and ‘equity’ tilted against
vacatur,” id. at 97. Thus, the Alvarez Court held that vacatur was appropriate.
We have previously taken a similar stance in recognizing that certain
compelling equitable circumstances militated in favor of vacatur, even where a
party was responsible for mooting the appeal. Specifically, McClendon provided
a rare instance in which we concluded that the “defendants [we]re, in effect,
responsible for mooting this appeal,” but we still agreed to vacate the district
court’s judgment against the defendants. McClendon, 100 F.3d at 868. The
circumstances in McClendon were unusual: defendants were city and county
prison officials who lost in the district court and then, during the pendency of the
appeal, voluntarily complied with the district court’s mandate to reduce prison
overcrowding. Id. at 866–67. We based our decision to vacate on the fact that
this was “clearly not a case in which a defendant has manipulated the judicial
process by deliberately aborting appellate review to avoid a decision on the
issues.” Id. at 868. Rather, because defendants had mooted the appeal by
complying with the district court’s order, they should not be burdened by leaving
the adverse opinion in place. Id. We reached this conclusion because we
determined that the defendants’ actions “constitute[d] responsible governmental
21
conduct to be commended” and we did not want to discourage their voluntary act
to reduce prison overcrowding. Id.
In sum, our usual disposition is not to grant vacatur when the act mooting
the appeal was caused by the non-prevailing party, but we will grant vacatur when
the act causing mootness was more attributable to some person or entity outside
of the litigation, or where other compelling equitable reasons demonstrate that
vacatur is appropriate.
2
Though resisting our determination of mootness, OXY has argued
alternatively that, if we conclude that the appeal is moot, we should vacate the
district court’s judgment (and accompanying memorandum order). After
weighing the equities of this case, however, we determine that vacating the
district court’s judgment would not be appropriate. To begin, the prior decisions
of our court emphasize that “our resolution of the mootness issue necessarily
impacts our examination of ‘where the equities . . . lie.’” Rio Grande Silvery
Minnow, 601 F.3d at 1130 (omission in original) (quoting Rio Grande Silvery
Minnow v. Keys, 355 F.3d 1215, 1221 (10th Cir. 2004)). Indeed, we have
repeatedly warned that “the appropriateness of vacatur must be determined ‘on
the basis of the particular circumstances.’” Id. at 1129 (quoting McClendon, 100
F.3d at 868); see also Nat’l Black Police Ass’n v. District of Columbia, 108 F.3d
346, 353 (D.C. Cir. 1997) (stating that the court’s prior decisions on mootness
22
reflect the weighing of particular circumstances in the public interest).
There is no ground for dispute that OXY’s voluntary action caused the
mootness in this case. OXY caused the controversy over the free gas clauses to
become moot when it sold the oil and gas rights in question to Merit. And unlike
Rio Grand Silvery Minnow or Wyoming, there is no other entity absent from this
appeal that was more responsible for mooting the controversy. Thus, our
precedent counsels against vacating the district court’s judgment. To act
otherwise would permit OXY to benefit from its voluntary act by wiping away a
loss. See Mfrs. Hanover Tr. Co. v. Yanakas, 11 F.3d 381, 383 (2d Cir. 1993) (“If
we were to vacate where the party that lost in the district court has taken action to
moot the controversy, the result would be to allow that party to eliminate its loss
without an appeal and to deprive the winning party of the judicial protection it
has fairly won.”).
Furthermore, we have repeatedly rejected the argument that we should
vacate the judgment of the district court because leaving it in place might
adversely affect a future action against an appellant that caused mootness. See W.
Pac. Airlines, 181 F.3d at 1198 (rejecting the claimed equity “that vacatur would
free [the appellant causing mootness] from the preclusive effect of the lower court
decisions”); 19 Solid Waste Dep’t Mechs., 76 F.3d at 1145 (“[T]he assertion that
some unquantified number of other employees disciplined under the withdrawn
policy may use the district court judgment offensively against the City is far too
23
speculative to support a departure from the normal practice of letting a judgment
lie against the party that has caused mootness.”); see also Ford v. Wilder, 469
F.3d 500, 506 (6th Cir. 2006) (“The defendants’ only argument in favor of
vacatur is the ‘possibility that the judgment of the court below could influence the
litigation of this issue in the future.’ However, this argument could apply to
every case that becomes moot pending appeal, and the defendants have not shown
that the public interest would be furthered by vacatur.” (citation omitted)).
Moreover, our view of the equities in this case is reinforced by OXY’s
apparent litigation strategy before our court, which is objectively consistent with
an effort to secure an impermissible advisory opinion regarding the meaning of
the frequently-used free gas clauses at issue here. In this regard, OXY did not
take the fundamental steps necessary to enable our review of this case to be
binding on anyone. Despite repeated questions at oral argument, OXY never
voluntarily offered for inclusion in the record the sales contract, or a part thereof,
to show whether our interpretation of the free gas clauses would be binding on
Merit. See generally Clark v. K–Mart Corp., 979 F.2d 965, 967 (3d Cir. 1992)
(en banc) (“[B]ecause mootness is a jurisdictional issue, we may receive facts
relevant to that issue; otherwise there would be no way to find out if an appeal
has become moot.”); Cedar Coal Co. v. United Mine Workers of Am., 560 F.2d
1153, 1166 (4th Cir. 1977) (permitting a party to file affidavits relevant to the
24
question of whether the cases were moot). 8 Nor did OXY file a motion to
substitute parties. See generally Fed. R. App. P. 43 (providing for substitution of
parties after notice of appeal is filed); United States v. Miller Bros. Constr. Co.,
505 F.2d 1031, 1036 (10th Cir. 1974) (“Since a substituted party steps into the
same position as the original party there is a continuance of the original action
and a separate proceeding against the substituted party is not necessary.”).
OXY protests that it did not “enter[] into this $1.4 billion sale of regional
assets for the purpose of mooting one appeal,” Aplt. Resp. & Reply Br. at 38, and
that it never asked us to dismiss the case as moot. However, we have no adequate
means on this record to reach a firm conclusion regarding OXY’s subjective
purpose. In any event, under a holistic vacatur analysis, the fact that OXY’s
purpose was unrelated to mooting this appeal would be only one factor—albeit a
significant one—in the calculus. See Alvarez, 558 U.S. at 94, 96–97 (noting
“[t]he statute that enables us to vacate a lower court judgment when a case
becomes moot is flexible,” yet ordering vacatur in significant part because the
Court had come to “believe that the presence of this federal case played no
significant role in the termination of the separate state-court proceedings”); see
also Rio Grande Silvery Minnow, 601 F.3d at 1129; McClendon, 100 F.3d at 868.
8
We note that the motion to dismiss this appeal on mootness grounds
was pending before this court, and garnered a response from OXY, before OXY’s
principal brief was due, giving OXY ample opportunity to take steps necessary to
shore up jurisdiction in this case if it desired or was able to do so.
25
Similarly, OXY’s resistance to a finding of mootness is admittedly a germane
factor in the vacatur anaylsis. See Alvarez, 558 U.S. at 97 (stating that the fact
that both parties argued against mootness at oral argument “further suggests that a
desire to avoid review in this case played no role at all in producing the state case
terminations”); cf. 19 Solid Waste Dep’t Mechs., 76 F.3d at 1145 (concluding that
the appellant “fail[s] to demonstrate ‘equitable entitlement to the extraordinary
remedy of vacatur’” when the appellant “both caused mootness and sought
dismissal on the basis of mootness” (quoting Bancorp, 513 U.S. at 26)).
However, even if we accept that mooting this appeal was not OXY’s
purpose for the sale, and also factor into the equitable calculus OXY’s resistance
to a mootness finding, it remains undeniable that OXY’s voluntary action mooted
this appeal. And we cannot conclude that, in every instance where such
circumstances are present, we are obliged to “allow [a] party to eliminate its loss
without an appeal and to deprive the winning party of the judicial protection it
has fairly won.” Mfrs. Hanover Tr. Co., 11 F.3d at 383.
Significantly, OXY has not presented a compelling equitable reason here
for vacatur. Notably, in this respect, OXY’s circumstances are not akin to those
found in Alvarez and McClendon. In Alvarez, the State voluntarily caused the
action to become moot, but for reasons that are commendable. There, the State
voluntarily returned the seized items after it “investigated the matters” eleven to
forty months after the seizures and made the kind of evidence-based, voluntary
26
determinations to offer redress that the Supreme Court would commend. Alvarez,
558 U.S. at 96. In similar circumstances, in McClendon, the city prison officials
voluntarily caused the action to become moot, but they did so by reducing prison
overcrowding, which we described as “responsible governmental conduct to be
commended.” McClendon, 100 F.3d at 868. Now, based upon what we know
here, OXY’s sale was certainly not anything to condemn, but we have no reason
to necessarily commend it either; we are entirely phlegmatic regarding the sale.
This case therefore does not present the kind of commendable action that the
Supreme Court addressed in Alvarez and that we faced in McClendon—the kind
of action that would furnish compelling equitable reasons for vacatur.
Furthermore, we are unaware of any other considerations on this record that
would engender the same or a similar magnitude of equitable effect.
For these foregoing reasons, we conclude that the equities do not favor
vacating the district court’s judgment in favor of the plaintiff class. Accordingly,
we dismiss this appeal without disturbing that judgment. 9
C
The only remaining matter is the plaintiffs’ cross-appeal challenging the
9
As we have said in prior cases reaching such a disposition, “[w]hile
we decline to vacate the decisions below, our opinion should not be read as an
affirmance of the underlying decisions on the merits.” W. Pac. Airlines, 181 F.3d
at 1198. Because we lack jurisdiction over the matter due to its mootness, we are
in no position to express an opinion on the merits of the parties’ arguments
regarding the free gas clause.
27
district court’s denial of their motion for attorneys’ fees, expenses, and an
incentive award. We still have jurisdiction to address this matter, despite the
mootness of the merits appeal. We agree with the reasoning of the district court:
the plaintiff class has not shown a legally sound basis for an award of attorneys’
fees and other related relief. 10 Accordingly, we affirm this portion of the district
court’s judgment.
1
A claim for attorneys’ fees may remain viable even after the underlying
cause of action becomes moot. See Dahlem ex rel. Dahlem v. Bd. of Educ., 901
F.2d 1508, 1511 (10th Cir. 1990) (“While a claim of entitlement to attorney’s fees
does not preserve a moot cause of action, the expiration of the underlying cause
of action does not moot a controversy over attorney’s fees already incurred.”
10
In litigating plaintiffs’ motion before the district court, the parties
did not suggest that plaintiffs’ request for attorneys’ fees should be analyzed
discreetly from their request for other litigation expenses and an incentive award
(allegedly based on the superior performance of plaintiffs’ counsel); more
specifically, the parties’ briefing reflected an understanding that, if plaintiffs
could not prevail on their request for attorneys’ fees, they also could not win their
other sought-after relief. See, e.g., Aplt. App. at 2203 (Mem. & Order) (“The
parties agree that an award of nontaxable expenses depends on whether the court
awards attorneys’ fees.”). And on appeal, the parties’ arguments reflect the same
understanding. For reasons explicated infra, the parties’ perception of the
interrelationship between attorneys’ fees and the other monetary relief that
plaintiffs seek has a solid grounding in the law. Given this interrelationship, we
have no occasion here to analyze discretely plaintiffs’ entitlement to the three
components of relief sought in their motion; instead, our analytical focus is on the
propriety of the district court’s ruling regarding attorneys’ fees.
28
(citation omitted)); see also Citizens for Responsible Gov’t State Political Action
Comm. v. Davidson, 236 F.3d 1174, 1183 (10th Cir. 2000) (interpreting Dahlem
to mean that “a plaintiff may still recover (and a defendant may still contest) fees
even when the merits have been rendered moot”). In Dahlem, for example,
plaintiff Scott Dahlem, a high school student, wanted to participate in
interscholastic gymnastics, but his public high school only had a girls’ gymnastics
team and prohibited boys from participating. Id. at 1510. Mr. Dahlem sued and
was granted a preliminary injunction in the district court, and the school appealed.
Id. While its appeal was pending, the gymnastics season ended; because Mr.
Dahlem was a high school senior at that time, we deemed the appeal—addressing
whether Mr. Dahlem had a right to participate on the gymnastics team—moot and
dismissed it. Id. Mr. Dahlem then filed a motion for attorneys’ fees in the
district court, which the court denied. Id. In the appeal from the district court’s
ruling, we held that the dismissal of Mr. Dahlem’s preliminary injunction action
as moot did not moot the claim for attorneys’ fees. Id. Accordingly, we rejected
the school board’s motion to dismiss the appeal for lack of jurisdiction. Id. at
1510–11. Thus, a controversy over attorneys’ fees does not become moot simply
because the underlying dispute becomes moot on appeal. 11
11
We have also stated that a plaintiff may not use a dispute over
attorneys’ fees to revive an otherwise moot controversy on the merits. See
Fleming v. Gutierrez, 785 F.3d 442, 448 (10th Cir. 2015) (“The possibility that
(continued...)
29
Because there is a live controversy between the parties, we may afford
relief by deciding the issue; in other words, the issue is not moot. At bottom, the
outcome of this appeal turns on which party should bear the financial burdens of
the plaintiffs’ representation in the district court, including a sum of $2 million in
attorneys’ fees. See Aplt. App. at 2197 (Mem. & Order). Our resolution of the
cross-appeal will assign these burdens between the two parties present in this
litigation. As such, we address a live controversy with actual stakes for the
parties in this litigation.
2
Nevertheless, the plaintiffs cannot prevail on this issue. “Under the
American Rule, absent a statute or enforceable contract, a prevailing litigant is
11
(...continued)
the preliminary injunction will form the basis for a grant of attorney’s fees does
not transform this appeal into a live controversy.”); see also Lewis, 494 U.S. at
480 (“This interest in attorney’s fees is, of course, insufficient to create an Article
III case or controversy where none exists on the merits of the underlying claim.”
(citation omitted)); Diamond v. Charles, 476 U.S. 54, 70–71 (1986) (holding that
a party does not have an interest in an underlying claim just because prevailing
would entitle the party to attorneys’ fees); Davidson, 236 F.3d at 1183 (stating
that Dahlem does not stand for the proposition that “an otherwise moot issue is
revived whenever a prevailing party requests or might request fees”). But that is
not the case here. The cross-appeal solely seeks our ruling on the motion for
attorneys’ fees, not on any underlying action that might affect the ability to
collect attorneys’ fees. Our cases have confirmed that a claim for attorneys’ fees
remains viable even after the underlying action becomes moot. See Fleming, 785
F.3d at 448; Davidson, 236 F.3d at 1183. In sum, these opinions hold that a
controversy over attorneys’ fees remains viable on its own, but does not give life
to any other mooted dispute.
30
ordinarily not entitled to collect reasonable attorney fees from the loser.”
Aguinaga v. United Food & Commercial Workers Int’l Union, 993 F.2d 1480,
1481 (10th Cir. 1993); see generally Fleischmann Distilling Corp. v. Maier
Brewing Co., 386 U.S. 714, 718 (1967) (“In support of the American rule, it has
been argued that since litigation is at best uncertain one should not be penalized
for merely defending or prosecuting a lawsuit, and that the poor might be unjustly
discouraged from instituting actions to vindicate their rights if the penalty for
losing included the fees of their opponents’ counsel. Also, the time, expense, and
difficulties of proof inherent in litigating the question of what constitutes
reasonable attorney’s fees would pose substantial burdens for judicial
administration.” (citations omitted)).
This rule applies more generally to ordinarily preclude recovery from one’s
adversary of the multifaceted monetary burdens of civil litigation—including, for
example, the litigation expenses and incentive award at issue here. See, e.g,
United States v. McCall, 235 F.3d 1211, 1216 (10th Cir. 2000) (noting the
applicability of the American Rule to “respective financial burdens of litigating
civil claims”); see also Fox v. Vice, 563 U.S. 826, 131 S. Ct. 2205, 2213 (2011)
(“Our legal system generally requires each party to bear his own litigation
expenses, including attorney’s fees, regardless whether he wins or loses. Indeed,
this principle is so firmly entrenched that it is known as the ‘American Rule.’”);
Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542, 550 (2010) (“The general rule in
31
our legal system is that each party must pay its own attorney’s fees and expenses
. . . .”). Accordingly, though focused on the propriety vel non of the district
court’s ruling regarding attorneys’ fees, our analysis—premised on the American
Rule—also fully speaks to the merits of the court’s decision regarding the other
monetary relief that plaintiffs seek through this cross-appeal. See, e.g., Nepera
Chem., Inc. v. Sea-Land Serv., Inc., 794 F.2d 688, 696 n.56 (D.C. Cir. 1986)
(“The reasons underlying the American Rule lead to the conclusion normally that
litigation expenses other than attorneys’ fees are similarly nonrecoverable. Since
the two seem to go hand-in-hand, what we say in this opinion about attorneys’
fees applies generally to other suit expenses as well.”).
We have recognized a limited number of equitable exceptions to the
American Rule: “the bad faith exception, the common fund exception, the willful
disobedience of a court order exception, and the common benefit exception.”
Aguinaga, 993 F.2d at 1482. But, apart from those exceptions, the prevailing
party must identify a statutory or contractual right to attorneys’ fees. See id. at
1481–82; see also Hardt v. Reliance Standard Life Ins. Co., 560 U.S. 242, 252–53
(2010) (“‘Our basic point of reference’ when considering the award of attorney’s
fees is the bedrock principle known as the ‘American Rule’: Each litigant pays his
own attorney’s fees, win or lose, unless a statute or contract provides otherwise.”
(quoting Ruckelshaus v. Sierra Club, 463 U.S. 680, 683 (1983))); Alyeska
Pipeline Serv. Co. v. Wilderness Soc’y, 421 U.S. 240, 257–59 (1975) (listing the
32
four equitable exceptions to the American Rule).
In denying attorneys’ fees or incentive awards to class representatives, the
district court (apparently sympathetic to the plaintiff class) stated that its decision
was “a seemingly absurd conclusion,” noting that plaintiffs’ attorneys had acted
prudently and had conferred a substantial benefit, valued at over $30 million, on
the class while “having worked for free” without the benefit of an attorneys’ fees
award. Aplt. App. at 2202–03 (Mem. & Order). Nevertheless, the court found
that none of the exceptions to the American Rule that the plaintiff class advocated
for actually applied to this case. Id. at 2202. Additionally, the district court
found “no independent statutory or contractual basis for attorneys’ fees under [28
U.S.C.] § 2202.” Id. As a result, it denied the requested fees and monetary
awards.
On appeal, plaintiffs argue that they qualified for attorneys’ fees under the
common-benefit exception to the American Rule; in the alternative, they argue for
such fees under 28 U.S.C. § 2202. “We review a district court’s attorneys’ fees
award for abuse of discretion. In doing so, we review the district court’s
application of legal principles de novo, and we review the district court’s findings
of fact for clear error.” ClearOne Commc’ns, Inc. v. Biamp Sys., 653 F.3d 1163,
1184 (10th Cir. 2011) (citation omitted). Because we find that neither the
common-benefit exception nor § 2202 is applicable here, we uphold the district
court’s ruling.
33
a
Plaintiffs claim that they are entitled to attorneys’ fees under an equitable
exception available when the litigation confers a substantial common benefit on
the class. See Aguinaga, 993 F.2d at 1482 (recognizing the viability of the
common-benefit exception). The common-benefit exception applies where “the
plaintiff’s successful litigation confers ‘a substantial benefit on the members of an
ascertainable class, and where the court’s jurisdiction over the subject matter of
the suit makes possible an award that will operate to spread the costs
proportionally among them.’” Hall v. Cole, 412 U.S. 1, 5 (1973) (quoting Mills v.
Elec. Auto-Lite Co., 396 U.S. 375, 393–94 (1970)). Plaintiffs assert—and OXY
does not dispute—that if they win, plaintiffs will have secured a substantial
benefit for the plaintiff class. 12
However, a common-benefit exception is only permissible where the costs
will be spread across the plaintiff class and not shifted as an added penalty to the
defendants. See Mills, 396 U.S. at 396–97 (“To award attorneys’ fees . . . to a
plaintiff who has succeeded in establishing a cause of action is not to saddle the
unsuccessful party with the expenses but to impose them on the class that has
12
The fact that relief here is declaratory relief, rather than damages,
does not prevent the finding of a substantial benefit. See, e.g., Mills, 396 U.S. at
392 (concluding that a common-benefit exception award was not barred by “[t]he
fact that this suit has not yet produced, and may never produce, a monetary
recovery”).
34
benefited from them and that would have had to pay them had it brought the
suit.”); Gaffney v. Riverboat Servs. of Ind., Inc., 451 F.3d 424, 467 (7th Cir.
2006) (“The common benefit exception is inapplicable to this case. The plaintiffs
ask this court to shift their fees to the defendants; the common benefit doctrine,
however, serves to shift fees and expenses from the plaintiffs individually to the
benefitting class as a whole.”).
Typically, this exception is employed to deduct attorneys’ fees from a
common fund, or to assess attorneys’ fees from a defendant corporation in a
shareholder derivative suit, to ensure that all fund recipients or shareholders
contribute to the cost of the litigation from which they benefitted. See
Rosenbaum v. MacAllister, 64 F.3d 1439, 1444 (10th Cir. 1995). Such an award
is permissible “where the court’s jurisdiction over the subject matter of the suit
makes possible an award that will operate to spread the costs proportionately
among [plaintiffs].” Id. (quoting Hall, 412 U.S. at 5).
In their initial brief, the plaintiffs suggest that the district court would have
such jurisdiction here, noting that its “declaratory judgment ensures, for decades
into the future, OXY’s provision of free, useable gas to all 2,200 Class members
with free gas clauses in their leases.” Aplee. Principal & Resp. Br. at 45. More
specifically, the plaintiffs contend that there will be an ongoing relationship
between OXY and class members through which the costs of the attorneys’ fees
imposed on OXY could be recouped, such that presumably the fees would not
35
amount to an additional penalty: “OXY and these surface owners have a
continuing relationship which enables OXY to spread an award of Class’s
reasonable attorneys’ fees, non-taxable expenses and incentive award among
those who benefit from the free gas clause in OXY’s leases.” Id. Though they do
not say so, presumably the plaintiffs anticipate that OXY could effect this cost
sharing by reducing royalties or increasing the charges on class members to
recoup the attorneys’ fees award imposed upon it.
However, the salient and determinative problem with this line of argument
is that it no longer bears any connection to current reality, given OXY’s sale of
the leases to Merit. As we have explained, there is no ongoing financial
relationship between class members and OXY. In other words, OXY has no
status that would permit it to spread the costs of an attorneys’ fees award over
these members. Indeed, in their reply brief, the plaintiffs all but concede this,
writing, “in reality, the [common-benefit] doctrine can no longer apply because
OXY sold all of its Kansas leases as of April 30, 2014.” Aplee. Reply Br. at 8.
In the absence of such an ongoing relationship, an award of the requested
attorneys’ fees would be nothing more than a penalty on OXY, which is not
contemplated by the common-benefit exception. Accordingly, we cannot award
the plaintiffs attorneys’ fees under this exception.
b
The plaintiffs also argue that the district court could have awarded
36
attorneys’ fees (and the other relief they requested in their motion) by exercising
its discretion under 28 U.S.C. § 2202, which provides: “Further necessary or
proper relief based on a declaratory judgment or decree may be granted, after
reasonable notice and hearing, against any adverse party whose rights have been
determined by such judgment.” We conclude that the district court did not abuse
its discretion in concluding that § 2202 does not authorize an independent grant of
attorneys’ fees that is not otherwise authorized by statute, contract, or state law.
We have never recognized § 2202 as an independent basis to award
attorneys fees—viz., as an additional ground for such fees beyond the four well-
recognized exceptions to the American Rule. 13 Moreover, when our sister circuits
have considered the question, they have concluded that § 2202 does not give an
independent power to award attorneys’ fees. See Utica Lloyd’s of Tex. v.
Mitchell, 138 F.3d 208, 210 (5th Cir. 1998) (“[Section] 2202 of the Federal
13
This question appears to have been presented to a panel of our court
but we had no occasion to resolve it. Specifically, in Kornfeld v. Kornfeld, 341 F.
App’x 394 (10th Cir. 2009) (unpublished), the district court had based its fee
award on a finding of bad faith, and we remanded the fee award for a more
specific finding of whether the bad faith at issue could meet our narrow test. See
Kornfeld, 341 F. App’x at 400. The district court had also purportedly relied on
§ 2202 to justify the fee award, but we declined to consider whether that statute
could justify the award—beyond the independent finding of bad faith—because
the district court relied on bad faith as its primary rationale and any error in
considering § 2202 would be harmless if the bad faith finding was correct. See
id. at 399 (“Whether [the defendants’] argument is valid depends on whether
§ 2202 constitutes an exception to the American Rule that, absent a contractual or
statutory basis, attorney fees may not be included as damages. We need not
resolve this question[] . . . .” (citations omitted)).
37
[Declaratory Judgment Act] ‘does not by itself provide statutory authority to
award attorney’s fees . . . .’” (quoting Mercantile Nat’l Bank at Dallas v.
Bradford Tr. Co., 850 F.2d 215, 218 (5th Cir. 1988)); Titan Holdings Syndicate,
Inc. v. City of Keene, 898 F.2d 265, 273 (1st Cir. 1990) (“The availability of
attorney’s fees in diversity cases depends upon state law, and this holds true in
declaratory judgment actions.” (citation omitted)); Am. Family Ins. Co. v.
Dewald, 597 F.2d 1148, 1151 (8th Cir. 1979) (“[A]ttorney’s fees may be awarded
under 28 U.S.C. [§] 2202 where such an award is authorized by applicable state
law for comparable actions.”). We are disinclined to follow a different path here,
especially because the plaintiff class offers us no persuasive reason to do so.
The plaintiffs rely on Gant v. Grand Lodge of Tex., 12 F.3d 998 (10th Cir.
1993), to show that § 2202 permits a court to award attorneys’ fees, but that case
involved an award of fees that were independently required by the will at issue.
In Gant, we recognized the authority of the district court to grant attorneys’ fees
in a motion for further relief for payment under a will that guaranteed the plaintiff
“an annual amount sufficient to insure her an adequate living.” Gant, 12 F.3d at
1000. We concluded that § 2202 permitted the attorneys’ fees, in response to a
motion for further relief, because the fees constituted “extraordinary expenses”
whose coverage was mandated by the will’s provision that the plaintiff be
“insure[d] . . . an adequate living.” Id. at 1002 (quoting Gant v. Grand Lodge of
Tex., No. 86-1415 JP, 1992 WL 589728, at *1 (D.N.M. Jan. 9, 1992)). In other
38
words, we concluded that § 2202 permitted the court to award attorneys’ fees in
connection with the necessary enforcement of the will at issue.
Accordingly, we determine that the district court did not abuse its
discretion in rejecting a claim for attorneys’ fees under § 2202. The court
correctly stated that “there is no independent statutory or contractual basis for
attorneys’ fees under § 2202.” Aplt. App. at 2202 (Mem. & Order) (emphasis
added). 14
III
We GRANT Appellees’ motion to dismiss this appeal as moot and
accordingly DISMISS this appeal. We AFFIRM the judgment of the district
court on the cross-appeal.
14
The plaintiffs briefly claimed in their reply brief that OXY litigated
in bad faith. Because the plaintiffs failed to raise this argument in their opening
brief, we do not consider it. See Bronson v. Swensen, 500 F.3d 1099, 1104 (10th
Cir. 2007) (“[W]e routinely have declined to consider arguments that are not
raised, or are inadequately presented, in an appellant’s opening brief.”).
39
13-3297, 13-3304 – Schell v. OXY USA, Inc.
HARTZ, Circuit Judge, concurring in part and dissenting in part:
I would grant panel rehearing and vacate the judgment below. I join all the
revised opinion except footnote 4 and part II B. Although I do not join the footnote, I
agree with our denial of the untimely motion to intervene. I respectfully dissent from
part II B.
On reconsideration, I believe two factors argue strongly in favor of vacating the
district-court judgment. OXY’s voluntary action that mooted the case was obviously not
motivated by the pendency of this litigation, and OXY argued against mootness. See
Alvarez v. Smith, 558 U.S. 87 (2009). I see no equitable reason to blame OXY for
depriving the plaintiffs of their victory in district court. After all, we have ruled (by
dismissing the case as moot) that OXY has no further stake in this litigation. If plaintiffs,
who raised the mootness issue, wanted to preserve their legal victory concerning
interpretation of their contracts, they should have been the ones to seek to substitute
OXY’s successor (now the real party in interest) as the defendant. See Fed. R. App. P. 43
(a)(1), (b) (any party can file motion to substitute); Maier v. Lucent Techs., Inc., 120 F.3d
730, 732 n.1 (7th Cir. 1997) (substitution of parties is appropriate “when a party transfers
its interest in the company or property involved in the suit.”) Then the successor could
determine whether it wished to continue with the appeal. Yet when the successor moved
to intervene, plaintiffs opposed the motion. If there is any inequitable conduct here, it is
the strategy of plaintiffs, who wished to prevent any appeal of the judgment in its favor
by arguing mootness but opposing intervention.