Chieftain Royalty Co. v. Enervest Energy Institutional Fund XIII-A, L.P.
888 F.3d 455
10th Cir.2017Background
- Class action in W.D. Okla. alleged underpayment of gas royalties; parties settled for $52 million net to class members after fees/expenses.
- Class counsel requested 40% of the fund in fees; lead plaintiff Chieftain sought a 1% incentive award. Two class members (Nutley and George) objected.
- District court awarded class counsel 33 1/3% ($17,333,333.33) and awarded Chieftain 1/2% ($260,000).
- This appeal challenged (1) the fee award method/amount and (2) the incentive award; the Tenth Circuit reviewed choice-of-law and sufficiency of evidentiary support.
- Court held that in a diversity case Oklahoma substantive law governs both the right to fees and the method for calculating them, and remanded because class counsel failed to present the contemporaneous time records required under Oklahoma (Burk) to compute a lodestar.
- Court also reversed the incentive award because the record lacked adequate evidentiary support and percentage-based incentive awards are disfavored; remanded for further fact-finding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether state (Oklahoma) law or federal law governs calculation method for substantive common-fund attorney fees | Chieftain: Rule 23(h) governs fee proceedings; federal common-fund practice (percentage method) is acceptable | Objectors: Erie requires applying Oklahoma law, which mandates lodestar with time records (Burk) | Court: Erie applies; Oklahoma law governs both entitlement and method; lodestar required absent extraordinary circumstances |
| Whether the district court could affirm fee amount without lodestar records | Class counsel: empirical parity between percentage and lodestar makes separate lodestar unnecessary; contingency agreement supports percentage | Objectors: Counsel failed to provide detailed time records as required by Burk; percentage-only award conflicts with Oklahoma substantive rule | Court: Reversed — counsel did not present required contemporaneous time records; remand for lodestar-based determination (or determination whether award permissible given lack of records) |
| Whether the 1/2% ($260,000) incentive award to lead plaintiff is justified | Chieftain: Abernathy (lead) performed 200–300 hours, will monitor future compliance, incurred risks/burdens and provided substantial services | Objectors: Incentive awards improper or unsupported; record lacks contemporaneous time documentation and meaningful proof of risk/burden | Court: Reversed — record insufficient to justify percentage-based incentive; Oklahoma would likely require awards tied to documented reasonable services (not a fund percentage); remand for fact-finding |
Key Cases Cited
- Erie R.R. Co. v. Tompkins, 304 U.S. 64 (U.S. 1938) (federal courts in diversity must apply state substantive law)
- Burk v. Oklahoma City, 598 P.2d 659 (Okla. 1979) (Oklahoma requires detailed time records and lodestar as baseline in common-fund cases)
- Gottlieb v. Barry, 43 F.3d 474 (10th Cir. 1994) (discusses percentage-of-fund and Johnson-factor approaches in this circuit)
- Perdue v. Kenny A. ex rel. Winn, 559 U.S. 542 (U.S. 2010) (limits enhancements to lodestar; supports presumption in favor of lodestar)
- Shady Grove Orthopedic Assocs., P.A. v. Allstate Ins. Co., 559 U.S. 393 (U.S. 2010) (discusses interaction of federal rules and state substantive rights)
- Boeing Co. v. Van Gemert, 444 U.S. 472 (U.S. 1980) (recognition of common-fund doctrine nationally)