Hershey v. ExxonMobil Oil Corporation

FILED
United States Court of Appeals
UNITED STATES COURT OF APPEALS Tenth Circuit
TENTH CIRCUIT December 16, 2013
Elisabeth A. Shumaker
Clerk of Court
JIMMIE HERSHEY, individually and on
behalf of all others similarly situated,
Plaintiff - Appellee,
v. No. 12-3309
(D.C. No. 6:07-CV-01300-JTM-KMH)
EXXONMOBIL OIL CORPORATION, (D. Kan.)
Defendant - Appellee.
---------------------------------
WILLIE JEAN FARRAR and KEITH
FARRAR, as Co-Trustees of the Keith
Farrar Revocable Trust, dated October
22,1999; THOMAS L. LAHEY; JOHN
ELDON GREGG and KEITH THOMAS
GREGG, as Co-Trustees of the Marie
Gregg Trust u/a dated April 26, 1979, as
amended; FLEESON GOOING
COULSON & KITCH, LLC; KRAMER
NORDLING & NORDLING, LLC,
Movants - Appellants,
and
PATRICIA A. LAHEY,
Movant.
________________________________
JIMMIE HERSHEY, individually and on
behalf of all others similarly situated,
Plaintiff - Appellee,
v. No. 13-3029
(D.C. No. 6:07-CV-01300-JTM-KMH)
EXXONMOBIL OIL CORPORATION, (D. Kan.)
Defendant - Appellee.
---------------------------------
WILLIE JEAN FARRAR and KEITH
FARRAR, as Co-Trustees of the Keith
Farrar Revocable Trust, dated
October 22,1999; THOMAS L. LAHEY,
Movants - Appellants,
and
PATRICIA A. LAHEY; JOHN ELDON
GREGG and KEITH THOMAS GREGG,
as Co-Trustees of the Marie Gregg Trust
u/a dated April 26, 1979, as amended;
FLEESON GOOING COULSON &
KITCH; KRAMER NORDLING &
NORDLING,
Movants.
ORDER & JUDGMENT AFFIRMING IN PART APPEAL NO. 12-3309
ORDER DISMISSING IN PART
APPEAL NO. 12-3309
ORDER & JUDGMENT AFFIRMING APPEAL NO. 13-3029
Before TYMKOVICH, O'BRIEN, and HOLMES, Circuit Judges.
2
This is an appeal from the approval of a class-action settlement between Jimmie
Hershey, the appointed class representative and named plaintiff, and ExxonMobil, the
defendant.1 Appellants are primarily parties who objected to this settlement. For
convenience, we refer to these objecting parties as Appellants and refer to the three other
appellants—the Gregg Trust and the law firms of Fleeson, Gooing, Coulson & Kitch,
LLC, and Kramer, Nordling & Nordling, LLC—by name and address their issues
separately.
I. MOTION TO DISMISS
A threshold question in this appeal is whether Appellants are bound by an appeal-
bond requirement in a class action settlement. The district judge overruled Appellants’
objections, approved the settlement agreement, and, as specifically provided in the
agreement,2 imposed an appeal-bond requirement to secure the costs of appeal, including
attorney fees and the interest likely to be lost on the judgment while the appeal is
pending. Despite the terms of the agreement and the district court’s order, Appellants did
1
Appellants filed separate notices of appeal dealing with the approval of the class-
action settlement and the district court’s imposition of a substantial appeal bond. We
docketed the two appeals under docket numbers 12-3309 and 13-3029, respectively, but
dispose of both appeals with this Order.
2
Although the time to file objections expired on September 21, 2012, Appellants
first raised their present challenge to the appeal-bond provision on December 14, 2012.
3
not post the bond. Understandably, Hershey moved this court to dismiss the appeal in
light of their failure to do so.
In their response to the motion to dismiss the appeal, Appellants contend we
should not dismiss because the appeal-bond requirement contravenes the Federal Rules of
Civil and Appellate Procedure. They make two related arguments.
First, they contend the judge improperly “circumvent[ed] the limitations and
requirements of” Fed. R. App. P. 7 (permitting the district court to require a bond “to
ensure payment of costs on appeal”) and Fed. R. App. P. 39 (governing calculation and
determination of costs on appeal). (Appellants’ Response to Motion to Dismiss Appeal,
at 8.) But they fail to appreciate the non-exclusive nature of the bond provisions in these
rules. True, Rule 7 allows a district court to require an appellant to provide security to
cover the costs associated with the appeal. 3 If Rule 7 set forth the district court’s
exclusive authority to order a bond to cover appellate costs, they would be right to
3
Generally, an award of costs covers only the expenses for “(1) the preparation
and transmission of the record; (2) the reporter’s transcript, if needed to determine the
appeal; (3) premiums paid for a supersedeas bond or other bond to preserve rights
pending appeal; and (4) the fee for filing the notice of appeal.” Fed. R. App. P. 39.
Some courts have also concluded that, when provided for by statute, expenses like
attorney fees may also be included in the calculation of costs. See In Re Cardizem CD
Antitrust Litig., 391 F.3d 812, 817 (6th Cir. 2004); accord Azizian v. Federated Dep’t
Stores, Inc., 499 F.3d 950, 958 (9th Cir. 2007). Appellants did not seek a stay from the
district court or this court. Accordingly, there was no need for a supersedeas or similar
bond. See Fed. R. Civ. P. 62(d); Fed. R. App. P. 8.
4
complain; Hershey has not pointed to any rule or statute explicitly authorizing the court
to impose a bond to cover attorney fees and interest. However, nothing in Rule 7
forecloses the parties from reaching their own agreement to provide broader security for
appeals. Here, the judge imposed the bond under paragraph 5.3 of the class action
settlement agreement, which explicitly provides for security for all of the expenses
secured by the court-ordered bond:
Because any appeal by an objecting Class Member would
delay the payment under the Settlement, each Class Member
that appeals agrees to put up a cash bond to be set by the
district court sufficient to reimburse Class Counsel’s appellate
fees, Class Counsel’s expenses, and the lost interest to the
Class caused by the delay.
(Appellants’ App’x Vol. XI at 3817-18.) As the judge observed, Appellants failed to
timely object to the provision’s requirement of security for appellate fees, class counsel’s
expenses, and lost interest. They are therefore bound by it.4
4
Although Appellants did not timely raise to the district court the objection they
make here, the timely Objection of Thomas Lahey, filed on September 18, 2012, took
exception to the “additional 5% fee” for class counsel “in the event of an appeal by any
objector.” Lahey’s objection argued the appeal-bond provision in paragraph 5.3
amounted to an attempt by class counsel “to obtain a multiple recovery of attorney fees
on appeal.” (Appellants’ App’x Vol. III at 667 n.2.) As the focal point of this argument
was the attorney fee award to class counsel, it cannot be fairly read as a refusal to agree
with the settlement agreement’s requirement of security for lost interest, counsel’s
expenses, and costs. Nor does it even suggest the provision itself was impermissible
because, as Appellants now argue, it contravenes the Federal Rules of Appellate and
Civil Procedure.
5
In their opposition to Hershey’s district court motion to require the bond as a
condition of permitting this appeal, Appellants made the same arguments they raise here.
In response, the district judge criticized them for failing to “present any authority
demonstrating that, pursuant to such an explicit fee-shifting agreement, the court may not
enforce that agreement to the extent the appeal causes additional expenses and delays to
the settlement class.” (Id. at 3819.)
In their briefing here, they repeat the arguments made to the district judge without
meaningfully addressing his criticism. Rather, they turn this criticism on its head by
arguing Hershey failed to provide any authority “supporting enforcement of [the appeal-
bond provision].” (Appellants’ Response to Motion to Dismiss Appeal, Jan. 18, 2013, at
16.) This was not Hershey’s burden. Ordinarily, a party contending an agreement
contains unenforceable terms bears the burden of demonstrating unenforceability. See,
e.g., Milk ‘N’ More, Inc. v. Beavert, 963 F.2d 1342, 1346 (10th Cir. 1992) (concluding
the burden of resisting a venue selection clause lies with the resisting party); Carrothers
Constr. Co. v. City of S. Hutchinson, 207 P.3d 231, 241 (Kan. 2009) (“By placing the
burden of proof on the party challenging [the enforceability of a clause in an agreement],
we promote a public policy favoring settlement and avoidance of litigation, and allowing
parties to make, and live by, their own contracts.”). In any event, the court’s authority to
enforce the terms of a settlement agreement would seem so obvious as to be beyond
challenge. See United States v. Hardage, 982 F.2d 1491, 1496 (10th Cir. 1993) (“A trial
court has the power to summarily enforce a settlement agreement entered into by the
6
litigants while the litigation is pending before it.”); see also Advantage Props., Inc. v.
Commerce Bank, N.A., 242 F.3d 387 (10th Cir. 2000) (unpublished) (“In the absence of
bad faith or fraud, when parties enter into an agreement settling and adjusting a dispute,
neither party is permitted to repudiate it.”) (quotation omitted).
Appellants’ second argument also lacks merit. They say the settlement
agreement’s appeal-bond provision is unenforceable because Fed. R. Civ. P 23(e)(5)
“gives the members of a class the unequivocal right to file an objection to a settlement”
but “does not authorize or permit the parties to the settlement to attach conditions to the
filing of an objection which violate[s] the Federal Rules of Appellate Procedure.”
(Appellant’s Response to Motion to Dismiss Appeal at 8.) This argument is mystifying.
The appeal-bond provision applies to appeals, not to objections. Thus, enforcing the
appeal-bond provision of the settlement agreement would not prevent or even discourage
class members from asserting their rights to object to a proposed settlement. 5 And, as we
have already concluded, the appeal-bond provision does not violate the Federal Rules of
Appellate Procedure.
5
Appellants tell us the appeal rights of objectors to a settlement agreement can
henceforth be extinguished in every class action by the simple expedient of including in
the settlement agreement an appeal-bond provision such as the one presented here. Not
so! Had Appellants made their present argument to the district court in a timely fashion,
there would be a genuine issue as to whether they had actually agreed to—and were
therefore bound to honor—the appeal-bond provision.
7
Because both of their arguments lack merit, Appellants have failed to demonstrate
why the appeal-bond provision in the settlement agreement is unenforceable. In the end,
a “litigant cannot ignore an order setting an appeal bond without consequences to [his or
her] appeal.” In re Cardizem CD Antitrust Litig., 391 F.3d 812, 818 (6th Cir. 2004).
And, particularly in class-action litigation, we realize some class members “may use an
appeal as a means of leveraging compensation for themselves or their counsel” to the
“detriment to class members [as a whole].” Vaughn v. Am. Honda Motor Co., Inc., 507
F.3d 295, 300 (5th Cir. 2007). Even though the appeal-bond provision addresses this
problem—and Appellants tacitly agreed to this provision by remaining in the class and
failing to timely object to it—they failed to honor it. Under these circumstances, we see
no reason not to give Hershey and ExxonMobil the benefit of their bargain. Except as
noted below, we dismiss the appeal.
II. THE GREGG TRUST APPEAL
The Marie Gregg Trust opted out of the Hershey class, and is therefore not subject
to the appeal-bond order. Consequently, we address the merits of the Trust’s appeal.
Because the Gregg Trust opted out, the district judge concluded it was free to
pursue its own claims against ExxonMobil. But the judge also found its co-trustees, John
Eldon Gregg and Keith Thomas Gregg, had not opted out and were, therefore, bound by
the settlement agreement. He found the same to be true of the Trust’s attorneys, who
evidently were also members of the class. Thus, he concluded the Trust would not be
able to pursue its claims against ExxonMobil using its current trustees and counsel.
8
The Gregg Trust appeals this part of the district court’s order. It argues the judge
erred by “ignor[ing] the fundamental distinction between a principal and its agent.”
(Appellants’ Br. at 50.)
Before we address the Trust’s argument, it is important to note what it is not
arguing. It is not arguing the district court lacked authority to permanently enjoin all
class members from pursuing the claims released in the settlement agreement. In any
event, such an argument is unlikely to succeed. See Fed. Judicial Ctr., Manual for
Complex Litigation, ' 20.32, at 340 (4th ed. 2004) (“[W]here a class has been certified
under [Fed. R. Civ. P.] 23(b)(3), and where class members have failed to avail
themselves of their right to opt out and litigate their claims independently in state or
federal court, a district court may enjoin those members from initiating or proceeding
with civil actions in other state or federal courts”); see also 7B Charles Alan Wright et
al., Fed. Prac. & Proc. Civ. § 1798.1 (3d ed., April 2013 update) (“[A]n injunction . . .
may be particularly appropriate once a [class action] settlement has been reached and
judgment entered as a part of that settlement”).
Nor is the Trust arguing its trustees are free to pursue their own claims against
ExxonMobil. To the contrary, it concedes “the co-trustees of the Gregg Trust are also
class members . . . who chose not to opt out of the class and are, therefore, subject to the
injunction.” (Appellants’ Br. at 50.)
Finally, it does not dispute that at least some of its attorneys are members of the
class. Instead, it argues only that the district court’s order infringes on its “fundamental
9
right” to choose its own lawyer. (Id. at 51 (quoting Richardson-Merrell, Inc. v. Koller,
472 U.S. 424, 442-43 (1985) (Stevens, J., dissenting))).6
The Trust’s appeal actually turns on whether a district court has the authority to
enjoin a class member from pursuing a non-class member’s claim. It says the district
court had no such authority here, but we disagree. The district court had the authority to
enjoin class members from pursuing released claims either as principals or as agents.
To begin, the Trust does not offer any legal authority to the contrary. Its only
authority stands for the uncontested proposition that a court cannot enjoin a party not
before it. But that is not what the district court did here. The court enjoined parties who
are members of the class, some of whom also happen to be the Trust’s agents. The
Trust’s legal authority is not on point.
6
Indeed, the Trust concedes that two of its attorneys are members of the class.
(See Reply Br. 20 n.15.) Admittedly, it also argues there was insufficient evidence to
show its other attorneys were class members. But it makes this claim for the first time in
a footnote in its reply brief. (See id.) And “[a]rguments raised in a perfunctory manner,
such as in a footnote, are waived.” United States v. Berry, 717 F.3d 823, 834 n.7 (10th
Cir.) (emphasis added; internal quotation marks omitted), cert. denied, 134 S. Ct. 495
(2013). What is more, it never explains which of its attorneys are class members and
which are not. Worse, it never actually claims that some of its attorneys are not class
members. “We will not manufacture arguments”—or claims—“for an appellant.”
Craven v. Univ. of Colo. Hosp. Auth., 260 F.3d 1218, 1226 (10th Cir. 2001) (internal
quotation marks omitted). “[A] bare assertion”—let alone no assertion—does not
“preserve a claim, particularly when, as here, a host of other issues are presented for
review.” Id. We decline to consider whether any of the Gregg Trust’s attorneys are not
class members.
10
Moreover, the Trust’s position is inconsistent with the settlement agreement.
According to the agreement, by remaining members of the class, each of the trustees and
counsel “acknowledge[d] and agree[d] that he, she, or it is concluding the Litigation, and
accepting their share of the Settlement Fund and other consideration described herein, as
a full, final, and complete compromise and settlement of claims and controversies.”
(Appellants’ App’x Vol. II at 362 (emphasis added).) In the agreement, the term
“Litigation” included “all facts, contentions, allegations, disputes, and other matters
related to . . . Willie Jean Farrar, et al. vs. Mobil Oil Corporation, Case No. 01-CV-
12”Cthe very case where, prior to the Hershey settlement, the Trust, its trustees, and its
counsel had been litigating their claims. Id. at 347B48. Further, the trustees and counsel
agreed to “not, . . . on [their] own behalf or by or through others, sue, instigate, or assert
against [ExxonMobil] any claims or actions on or concerning the Released Claims,” id.
at 362 (emphasis added), which include “any and all causes of action, . . . that are, were,
or could have been asserted in the Litigation,” id. at 349Ce.g., the Trust’s claims against
ExxonMobil in the parallel state court class action. Thus, by not opting out, the trustees
and counsel agreed to not participate any further in the Trust’s or any other entity’s
related litigation against ExxonMobil.
Furthermore, the district court unquestionably had the power to enjoin not only
parties to the litigation before it but also those acting in concert with such parties. See
Fed. R. Civ. P. 65(d)(2)(C); see also Regal Knitwear Co. v. NLRB, 324 U.S. 9, 13-14
(1945) (explaining that the purpose of this rule is to keep parties from “nullify[ing] a
11
decree by carrying out prohibited acts through aiders and abettors”). The district court
did precisely that: it enjoined not only class members (i.e., the individual trustees and the
attorneys) but also those acting in concert with them (i.e., the Trust if it still was being
run by trustees who are class members or still being represented by attorneys who are
class members). Specifically, the judge explained, “Absent any appointment of new
trustees and employment of different counsel, any action by the Trust necessarily reflects
action in concert [with] persons subject to the court’s jurisdiction.” (See Appellants’
App’x Vol. XI at 3681.) Accordingly, even accepting Appellants’ premise that the Trust
is a distinct legal entity from its trustees and counsel, absent a change in its composition
to remove the latter entities, the district court’s injunction would bar the Trust’s litigation
activity as an aider and abettor of its constituent trustees and counsel who are class
members.
The Trust counters that this result infringes on its “fundamental right” to choose
its own lawyer. (Appellants’ Br. at 51.) But the order does not bar the Trust from
choosing its own lawyer. The Trust remains free to hire whatever eligible lawyer it
wants. Present counsel’s own decision makes them ineligible to represent the Trust. In
this case, present counsel chose to remain in the Hershey class, with all the costs and
benefits attending class membership. Their choice renders them unavailable to pursue
this litigation any further, and the Trust may not act in concert with them if it prosecutes
any released claims.
12
For the foregoing reasons, we affirm the district court’s order as to the Gregg
Trust’s trustees and counsel.
III. FEE APPLICATION
Counsel for the Trust and the objectorsCthe law firms of Fleeson, Gooing,
Coulson & Kitch, LLC, and Kramer, Nordling & Nordling, LLCCappeal from the district
judge’s decision to deny them a portion of class counsel’s fees.7 We review fee award
decisions for abuse of discretion. Anchondo v. Anderson, Crenshaw & Assocs., 616 F.3d
1098, 1101 (10th Cir. 2010).
After the settlement’s preliminary approval, the law firms submitted an application
for two-thirds of class counsel’s attorney fee award. The judge denied the application as
untimely, improper, and without merit. On the merits, he concluded the law firms did not
materially benefit the class, even though they filed an earlier class action in state court
and won partial summary judgment in that case. He pointed to their lack of cooperation
with class counsel and repeated efforts to derail the Hershey class, including the firms’
opposition to class certification and support for some of ExxonMobil’s defenses. These
7
The parties appear to be in disagreement over whether the law firms are members
of the class and are thus bound by the settlement agreement’s appeal-bond provision. We
need not resolve this debate. Even if the law firms are subject to that provision, they are
not named in the district court’s appeal-bond order. Besides, their appeal is easily
resolved.
13
actions, he reasoned, offset any benefit conferred by the law firms’ work in the state court
class action.
On appeal, the law firms first claim their fee application was in fact timely and
properly filed under Federal Rules of Civil Procedure 23(h) and 54(d). Rule 23(h) states
an application for attorney’s fees “must be made by motion under Rule 54(d)(2) . . . at a
time the court sets.” Fed. R. Civ. P. 23(h)(1) (emphasis added). The judge set
September 7, 2012, as the deadline for attorney fee applications, but the law firms’
application was not submitted until September 21. Their application was untimely under
Rule 23(h).
The firms counter that the September 7 deadline applied only to class counsel.
But they do not proffer an alternative Rule 23(h) deadline and cannot have it both ways:
They cannot, on the one hand, say their application was timely under Rule 23(h), but, on
the other, say the district court’s only Rule 23(h) deadline did not apply to them.
Granted, the judge treated their fee application as an objection to the settlement,
rather than a Rule 23(h) motion. And as an objection, the fee application was timely; it
was filed on the deadline for submitting objections, September 21. But as an objection,
the fee application was also improperly filed. The class notice required all objections to
include “[a] detailed statement of the specific legal and factual basis for each and every
objection, including a list of any legal authorities, witnesses, and exhibits the objector
may seek to use at the [fairness hearing].” (Appellants’ App’x Vol. II at 560.) The law
firms’ initial fee application appears to contain no such statement and they do not contend
14
otherwise. Indeed, they submitted no evidentiary support until weeks later and some of
their evidence was not submitted until the day before the final fairness hearing. In a
complex class action such as this, where the law firms’ evidence filled thousands of
pages, the judge needed time to evaluate their evidence, certainly more than one day
before the fairness hearing. We do not address the untimely evidence and we agree with
the trial judge: the law firms’ fee application was filed without sufficient evidentiary
support. See Manual for Complex Litigation, supra, ' 21.724, at 338 (“The party seeking
fees has the burden of submitting sufficient information to justify the requested fees and
taxable costs.”).
In sum, we decline to address the merits of the law firms’ fee application.
Whether as a Rule 23(h) motion or as an objection, it was procedurally defective, and the
law firmsCboth of whom are very experienced in oil and gas class actionsCoffer no
excuse for their delay. On this basis, we affirm the order as to the law firms’ fee
application.
IV. VOLUMES FILED UNDER SEAL
ExxonMobil, in coordination with Hershey, filed two volumes of the Appellees’
Supplemental Appendix under seal. This court issued an order noting the materials in
these two volumes did not appear to meet the privacy and redaction criteria identified
under 10th Cir. R. 25.5 and Fed. R. App. P. 25(a)(5). The order directed the parties to
indicate “whether and why the identified materials need to be filed under seal with this
15
court, and, if so, how long the materials need to remain under seal.” (Order of May 24,
2013, at 2.)
“A party seeking to file court records under seal must overcome a presumption,
long supported by courts, that the public has a common-law right of access to judicial
records.” Eugene S. v. Horizon Blue Cross Blue Shield of N.J., 663 F.3d 1124, 1135
(10th Cir. 2011). “To do so, ‘the parties must articulate a real and substantial interest that
justifies depriving the public of access to the records that inform our decision-making
process.’” Id. at 1135-36 (quoting Helm v. Kansas, 656 F.3d 1277, 1292 (10th Cir.
2011)). We are “not bound by the district court’s decision to seal certain documents
below” and retain our “own authority to decide whether the parties may file documents
under seal in this Court.” Colony Ins. Co. v. Burke, 698 F.3d 1222, 1241 (10th Cir. 2012)
(internal quotation marks omitted).
According to ExxonMobil these volumes “contain specific references to and
formulate opinions based on confidential commercial competitive information of third
parties who are not litigants in this matter.” (ExxonMobil’s Response to the Court’s
May 24, 2013, Order Regarding Documents Submitted Under Seal, at 1.) It requests
these documents be kept under seal until the appeal terminates and requests the return of
these materials thereafter. Hershey took no position with respect to the sealing of these
records. Appellants, including the Gregg Trust and the law firms of Fleeson, Gooing,
Coulson & Kitch, LLC and Kramer, Nordling & Nordling, LLC, did not object to the
sealing of these volumes.
16
As ExxonMobil points out, we have “supervisory power over our own records and
files” and can appropriately deny access to these materials when they might be used “as
sources of business information that might harm a litigant’s competitive standing.”
Nixon v. Warner Comms., Inc., 435 U.S. 589, 598 (1978). Here, the rationale for
protecting these records is even stronger, as the records could harm the competitive
interests of third parties. Moreover, given our disposition of this matter, this is not a
situation where the documents in these volumes were necessary “to determine [the]
litigants’ substantive legal rights.” See Colony Ins. Co., 698 F.3d at 1242. These
circumstances warrant the maintenance of the seal on these volumes.
However, ExxonMobil has cited no authority for its request for the return of these
sealed volumes and has not indicated why the retention of these materials under seal is
insufficient to protect the commercial interests involved. For these reasons, we deny its
request for their return.
V. CONCLUSION
For the reasons stated above, the appeal docketed as 12-3309 (addressing the
district court’s approval of the class-action settlement agreement) is AFFIRMED with
respect to the Gregg Trust issue and the application of the law firms of Fleeson, Gooing,
Coulson & Kitch, and Kramer, Nordling & Nordling for attorney fees. In all other
respects, it is DISMISSED. As to the appeal docketed as 13-3029 (addressing the district
court’s order granting the requested appeal bond), we AFFIRM. We ORDER Volumes X
and XI of the Appellees’ Supplemental Appendix to be retained under seal. We DENY
17
ExxonMobil’s request for the return of these volumes following the termination of these
appeals.
Entered by the Court:
Per Curiam
18