Elliot Ex Rel. Ira R/O v. Ward (In Re Sandridge Energy, Inc. Shareholder Derivative Litigation), 875 F.3d 1297

Two shareholder derivative suits against SandRidge directors: a federal action (filed Jan 2013) and a separate state action filed by objector-appellant Dale Hefner (Jan 2013).
Federal plaintiffs negotiated a partial settlement providing up to $38 million from insurers (subject to deductions) plus corporate governance reforms; plaintiffs sought about $13 million in attorneys’ fees.
Hefner objected to the federal settlement, sought additional settlement-related discovery, and sought attorneys’ fees for his counsel, arguing his state-court efforts materially contributed to obtaining the settlement.
The district court denied Hefner’s discovery request, approved the partial settlement, and denied Hefner’s fee request; Hefner appealed.
While the appeal was pending SandRidge filed Chapter 11, its reorganization cancelled prepetition shares and released derivative claims; the bankruptcy plan’s effect rendered most of Hefner’s appeal moot except his fee claim.
The Tenth Circuit affirmed the denial of Hefner’s fee request and dismissed the remainder of the appeal as moot.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Subject-matter jurisdiction (diversity)	Federal court lacked adequate proof of diverse citizenship among entity members	Plaintiffs provided supplemental citizenship info showing diversity	Diversity jurisdiction was proper; court rejected Hefner’s challenge
Mootness / standing to object	Lack of continuous ownership does not defeat objector status; he can still challenge settlement	Bankruptcy cancelled prepetition shares and released claims, leaving no derivative plaintiffs or relief to grant	Appeal mostly moot because reorganization eliminated derivative standing and effective relief; only fee claim survives
Request for settlement-related discovery	Needed discovery to show flaws in settlement approval and insurers’ role	District court had already provided extensive discovery; additional discovery was unnecessary	Denial of additional settlement-related discovery affirmed as moot with respect to the settlement objections
Attorneys’ fees for Hefner’s counsel	Hefner’s state-court work and objections conferred a substantial benefit to SandRidge and justify fees from the common fund	District court found Hefner conferred no substantial benefit; plaintiffs’ counsel, not Hefner, produced the settlement	Fee denial affirmed: factual findings that Hefner did not confer a substantial benefit were not clearly erroneous; denial was not an abuse of discretion

S. Utah Wilderness All. v. Smith, 110 F.3d 724 (10th Cir. 1997) (standing/mootness assessed over time)
Murphy v. Hunt, 455 U.S. 478 (1982) (case must remain live to be justiciable)
Cooter & Gell v. Hartmarx Corp., 496 U.S. 384 (1990) (collateral issues like fees can survive underlying action)
Rosenbaum v. MacAllister, 64 F.3d 1439 (10th Cir. 1995) (objector ownership requirement differs from derivative plaintiff’s continuous ownership)
Ocelot Oil Corp. v. Sparrow Indus., 847 F.2d 1458 (10th Cir. 1988) (clearly erroneous standard for factual findings)
Gottlieb v. Barry, 43 F.3d 474 (10th Cir. 1994) (compensating non-plaintiff contributors from common fund)