507 P.3d 609
Okla.2021Background
- Class action (33,890 Oklahoma royalty owners) against Continental for alleged underpayment of oil-and-gas royalties; parties settled with a Period‑1 common fund of $49.8 million (plus further Period‑2 and future-production provisions).
- Two named trustees (Strack and Ariola trusts) signed contingency agreements calling for 40% of the common fund as class counsel fees; they moved for fees and a $400,000 incentive award.
- District court held an evidentiary hearing (time records submitted in camera), awarded 40% ($19,920,000) for Period‑1 (and 40% of Period‑2) and $400,000 to the class representatives; it denied objector Daniel McClure access to unredacted billing descriptions.
- McClure appealed; Court of Civil Appeals reversed the fee and incentive awards; the Oklahoma Supreme Court granted certiorari.
- The Supreme Court held § 2023(G) permits either percentage or lodestar approaches but reversed the district court: the 40% award, the 3.17 lodestar multiplier, the $400,000 incentive award, and withholding of detailed time records were abuses of discretion; remanded for further proceedings.
Issues
| Issue | Strack (Plaintiff) Argument | Continental / Objector Argument | Held |
|---|---|---|---|
| Whether Oklahoma's § 2023(G) permits the percentage‑of‑common‑fund method | Contingency agreement and common‑fund context justify awarding fees as agreed (percentage method) | Statute’s traditional lodestar approach (Burk) should control; fee awards must be closely scrutinized | § 2023(G) allows either percentage or lodestar (or hybrid); court must ensure the fee is reasonable and consider statutory factors |
| Whether 40% of the common fund was a reasonable fee | 40% matches the signed contingency fee and is customary in such cases | 40% is excessive compared with typical class awards (20–30%) and with the lodestar value of hours worked | 40% was unreasonable and an abuse of discretion; reversed (25% or lodestar cross‑check preferred) |
| Whether the district court permissibly applied a 3.17 lodestar multiplier | Multiplier justified to equate lodestar to agreed percentage given risk and results | Multiplier is unsupported and excessive compared to precedent (multipliers typically modest; >1.5 rare) | 3.17 multiplier unsupported by evidence and abused discretion; suggested multipliers of 1.5–2.0 would be more defensible |
| Whether the $400,000 incentive award to class representatives was proper | Large incentive compensates substantial work and risk by named reps | Award must be supported by evidence of time/effort; percentage‑based incentive is disfavored | $400,000 award lacked evidentiary support; arbitrary percentage awards disfavored; remand for fact‑finding on a lodestar‑style incentive calculation |
| Whether withholding detailed billing descriptions from objecting class member was proper | In‑camera review protected privileged strategy and mental impressions | Objecting class member (McClure) must be allowed to meaningfully challenge fee request; court has fiduciary duty to class | Denial of access and ex parte in‑camera use deprived objector of adversarial review and was an abuse of discretion; records must be available for meaningful challenge on remand |
Key Cases Cited
- State ex rel. Burk v. City of Oklahoma City, 598 P.2d 659 (Okla. 1979) (establishes lodestar method and factors for fee adjustments)
- Hess v. Volkswagen of Am., Inc., 341 P.3d 662 (Okla. 2014) (presumption that lodestar alone usually yields a reasonable fee; limits on multipliers)
- Brown v. Phillips Petroleum Co., 838 F.2d 451 (10th Cir. 1988) (survey of federal common‑fund percentage awards and reasonableness range)
- Spencer v. Oklahoma Gas & Electric Co., 171 P.3d 890 (Okla. 2007) (lodestar adjustments and appellate review of multipliers)
- Arkoma Gas Co. v. Otis Eng'g Corp., 849 P.2d 392 (Okla. 1993) (reducing excessive fee relative to results)
- Sneed v. Sneed, 681 P.2d 754 (Okla. 1984) (court may refuse to enforce contingent fee agreements when fee is excessive)
- State ex rel. Bd. of Comm'rs of Harmon County v. Oklahoma Tax Comm'n, 151 P.2d 797 (Okla. 1944) (recognizes common‑fund concept and percentage awards)