| Opinion: | Strack v. Continental Resources, 2021 OK 21 |
| Subject matter: | Class Action |
| Date Decided: | April 20, 2021 |
| Trial Court: | Blaine County (Hladik, J.) |
| Route to this Court: | Cert granted to review Court of Civil Appeals reversal of trial court |
| Facts: | The underlying case is a class action brought on behalf of 33,890 Oklahoma royalty owners for underpayment of oil and gas royalties. After seven years of litigation without a trial, the parties entered into a settlement agreement requiring Continental to pay an estimated $57,500,000 into a common fund and to agree on a going-forward basis to change their deduction practices (changes that would result in an estimated $50,000,000 less in deductions from future royalties). The trial court approved the settlement and also approved attorney’s fees of $19,000,000 (based on a 40% contingency fee agreement entered into with the class representative) and a $400,000 incentive award to the class representatives ($200,000 to each of two class reps). A member of the class (who happens to be a Houston-based class action defense attorney) objected to both the award of attorney’s fees and the incentive award. The Court of Civil Appeals reversed the trial court. The class representatives sought certiorari. |
| Standard of Review: | The reasonableness of attorney’s fee is reviewed for abuse of discretion. The trial court’s interpretation of the class action attorney fee statute is reviewed de novo. |
| Analysis: | Oklahoma’s class action attorney fee statute, 12 O.S.Supp.2017 § 2023(G), does not specify any particular methodology in calculating a fee award. The factors that a court shall consider to assess the reasonableness of attorney’s fees make both the percentage and lodestar methods potentially permissible. Under either methodology, the goal in every case is to arrive at a reasonable fee. Under the right facts, either method can have its shortcomings. In common fund cases such as this one, courts should ensure reasonableness of the fee award by comparing the fee calculated using both methods. The fact that the class representatives and the class counsel entered into a 40% contingency fee agreement does not guarantee such a fee award will be reasonable. Due to the significant economies of scale in class action cases, courts frequently reduce the percentage of the common fund awarded as attorney’s fees below that which would be reasonable if awarded in individual litigation. “…40% of the common fund in this case is excessive in comparison to the average percentage–20% to 30%–used in reported cases involving class action litigation.” Under the lodestar method, class counsel’s fee would have amounted to $790 per hour (without enhancement). The trial court did not abuse its discretion in approving this hourly rate. However, the enhanced rate of $2,500 per hour (based on a 317% enhancement) was an abuse of the trial court’s discretion as it was not supported by evidence other than a conclusory statement of class counsel’s expert witness. The Court has rarely permitted a multiplier above 150%. “We agree that incentive awards are justified as payment for reasonable services rendered by class representatives on behalf of the class that were helpful to the litigation. However, the request for an incentive award must be supported by sufficient evidence in the record.” The record in this case is devoid of any evidence of actual time spent by class representatives on this case. “Oklahoma’s class action statutory scheme gives courts a liberal framework in calculating and awarding fees, mandating that the award be reasonable. The attorney fee awarded here is unreasonable and an abuse of discretion. Similarly, the district court’s incentive award is an abuse of discretion as it is not supported by evidence.” |
| Outcome: | COCA opinion vacated; Trial court reversed and remanded. |
| Vote: | 8-0. Opinion by Winchester, J.; Darby, C.J., Kane, V.C.J., Kauger, Edmondson, Combs (by separate writing), Gurich and Rowe, JJ. concur. |
| Other: | The Court also ruled that the district court erred when it denied the objecting class member access to class counsel’s descriptive time records in their entirety. |