Slamon v. Carrizo (Marcellus) LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE MIDDLE DISTRICT OF PENNSYLVANIA

JAMES SLAMON,

Plaintiff, :

V. 3:16-CV-02187

(JUDGE MARIANI)

CARRIZO (MARCELLUS) LLC, etal, :

Defendants.

MEMORANDUM OPINION

|. INTRODUCTION

Presently before the Court is the Motion of Plaintiff James Slamon and Plaintiff's

counsel LeVan Law Group and Berger Montague PC (collectively “Class Counsel’) seeking

an Order from this Court establishing a Common Benefit Fund (Doc. 75). Specifically,

Plaintiff and Plaintiffs counsel assert that:

[b]ased on Class Counsel's efforts in pursuing this Action, and in an attempt to

release the claims brought in this case, Defendants BKV Chelsea LLC and BKV

Operating LLC (collectively, “BKV”) have made individual settlement offers to

hundreds of putative Class Members which, in the aggregate, constitute many

millions of dollars. Unless the Court orders the creation of a common benefit

fund, putative Class Members who accept the BKV offer will have reaped the

benefits of Class Counsel's years of effort without paying their fair share of the

costs and fees associated with the litigation.

(Id. at 1-2). Accordingly, Plaintiff and Class Counsel request that the Court enter an Order:

(i) establishing a common benefit fund to compensate Class Counsel for

services rendered and to reimburse them for expenses incurred in conjunction

with services benefitting putative Class Members who received and accepted

a settlement offer from BKV in exchange for releasing claims brought in this

class action; (ii) directing Defendants, including in particular BKV, to hold back

and set aside (a) 33 1/3% of any settlement payment (whether or not

characterized as a “signing bonus”) to any putative Class Member, for common

benefit attorneys’ fees; and (b) an additional 1 2/3% of any settlement payment

(whether or not characterized as a “signing bonus’) to any putative Class

Member for common benefit costs and expenses incurred by Class Counsel

herein; and (iii) directing Defendants to place the held-back and set-aside

amounts into a “common benefit trust fund” established and maintained by

Class Counsel, or by another escrow agent as directed by the Court.

(Id. at 2).

For the following reasons, Plaintiff's Motion will be denied.

Il. PROCEDURAL HISTORY

In this action, Plaintiff James Slamon claims that he and other similarly situated

individuals were paid royalties on their oil and gas leases that were improperly calculated by

Defendants, Reliance Marcellus Il LLC, Reliance Holdings USA, Inc., (collectively

“Reliance”), and Carrizo (Marcellus) LLC (“Carrizo’).

On October 3, 2016, Slamon filed a five-count Complaint in the Court of Common

Pleas of Susquehanna County, Pennsylvania seeking declaratory relief for breach of the

terms of the Lease (Count I) and alleging breach of contract (Count II), breach of contract

through a breach of the implied duty of good faith and fair dealing (Count III), and breach of

fiduciary duty (Count IV), and requesting an accounting (Count V). (Doc. 1, “Tab A’; see

also, Doc. 1-1). Defendants removed the case to this Court on October 31, 2016. (Doc. 1,

at 1-6). Thereafter, Carrizo and Reliance filed separate motions to dismiss (Docs. 15, 17)

which this Court by Opinion and Order (Docs. 30, 31) filed September 5, 2017 granted in

part and denied in part. The Court granted Defendants’ motions to dismiss Count IV of

Plaintiff's Complaint and Plaintiff's breach of fiduciary duty claim found in Count IV of his

Complaint was therefore dismissed with prejudice. In all other respects, the Court denied

Defendants’ Motions to Dismiss. (See Doc. 31).

By Order dated June 15, 2018 (Doc. 46), the Court granted Plaintiffs unopposed

Motion for Leave to File and Amend Complaint (Doc. 45). In that same Order, the Court

ordered that it would schedule an evidentiary hearing to address Plaintiff's Motion for

Expedited Emergency Relief Pursuant to Federal Rule of Civil Procedure (Doc. 43) upon

receiving notice that all parties had been served with the Plaintiffs Amended Complaint

which added BKV Operating LLC and BKV Chelsea LLC (collectively “BKV”) as defendants

in this case as successors-in-interest to the original defendants’ rights under the putative

Class Members’ Paid Up Oil and Gas Leases. (See PI.’s First Am. Compl. (Doc. 47)).

Service of Plaintiffs Amended Complaint upon all Defendants was effected as confirmed in

Plaintiff's counsel's letter to the Court dated June 16, 2018. (Doc. 48). Thus, by Order

dated June 21, 2018, (Doc. 49), the Court scheduled an evidentiary hearing to be held on

Plaintiff's Motion for Expedited Emergency Relief Pursuant to Federal Rule of Civil

Procedure 23(d). The evidentiary hearing was held on June 27, 2018, and on that date, this

Court ordered Defendants to file a brief in response to Plaintiff's Rule 23(d) Motion, required

Plaintiff to file a brief in reply thereto and further ordered the following:

3. The parties shall make every good faith effort to agree upon the text of a

proposed curative notice to putative class members, without reference to which

party may send the proposed notice, which is an issue reserved for the Court.

The parties shall inform the Court of whether they have reached an agreement

as to the text of a proposed notice, and if so, include the text of the proposed

notice, in a letter to the Court by Thursday, July 5, 2018.

4. Defendants shall not effectuate any Release of Claims and/or Lease

Amendment and Ratification materials executed by putative class members

that Defendants have received, or any such materials that Defendants may

receive, prior to the Court’s ruling on Plaintiff's Rule 23(d) Motion (Doc. 43).

(Doc. 51, at Jf] 3, 4).

On July 10, 2018, Class Counsel informed the Court via letter that Plaintiff and BKV

had agreed upon the text of a proposed curative notice to putative class members (Doc. 58)

and attached the agreed-upon language thereto (Doc. 58-1).

After briefing by the parties, this Court, by Order dated July 27, 2018, granted as

modified Plaintiff's Motion for Expedited Emergency Relief Pursuant to Federal Rule of Civil

Procedure 23(d) and ordered the Defendants BKV Operating LLC and BKV Chelsea LLC to

provide Plaintiff's counsel with the identity of all putative class members to whom BKV sent

the disputed communication at issue in Plaintiffs Motion and a copy of such communications.

(Doc. 65; see also, Doc. 64). In addition, the Court ordered BKV to send the proposed

curative notice as set forth in Doc. 58-1 in full to all putative class members to whom BKV

had sent the disputed communication at issue in Plaintiffs Motion, except that the deadline

for responding to BKV’s settlement offers was extended to August 31, 2018. The Court

further ordered that “{ajll other aspects of the proposed curative text (Doc. 58-1) shall remain

the same.” (Doc. 65, J 1(b)). The Court’s Order also provided:

c. Any previously executed cover letter, Full and Final Release, and/or

Lease Amendment and Ratification (the “Materials”) that any putative

class member executed and returned to BKV is hereby declared not

enforceable unless and until the class member re-signs and returns the

Materials after receipt of the proposed curative notice.

d. All parties are hereby enjoined from sending any misleading or

materially incomplete communications to putative class members in the

future.

2. For the reasons set forth in the accompanying memorandum opinion [Doc.

64], parties may continue to engage in communications with putative class

members that occur in the ordinary course of business, such an annually

scheduled “Landowner Town Hall Meetings.” Docs. 62, 63. However, parties

shall be prohibited from engaging in any misleading or confusing

communications regarding the pending action, including, but not limited to,

discussing any potential settlement offers without referencing putative class

members to the curative notice to be sent by BKV.

(Id. at § 1(c-d); 2)(emphasis in original). The Court thereafter approved (Doc. 67) an

unopposed request for two non-substantive changes to the curative notices as set forth ina

letter of August 2, 2018 to the Court from counsel for the BKV Defendants (Doc. 66).

On August 30, 2018, Plaintiff and Plaintiff's counsel filed the Motion at issue here for

establishment of a common benefit fund. (Doc. 75).

On March 4, 2019, the Court granted a concurred-in motion by Plaintiff's counsel

(Doc. 90) for an amendment to the scheduling order which provided, inter alia, that Plaintiff's

Motion for Class Certification shall be due on July 15, 2019, with Defendants’ responses to

be due on September 3, 2019, and Plaintiff's reply to be submitted by October 21, 2019.

(Doc. 91). On July 15, 2019, Plaintiff filed his first “Motion for Class Certification”, moving

for class certification pursuant to Federal Rule of Civil Procedure 23(a), 23(b)(2) and 23

(b)(3). (Doc. 96).

Ill. CONTENTIONS OF THE PARTIES

A. Plaintiffs Assertions in Support of his Motion for an Order

Establishing a Common Benefit Fund

Plaintiff and Class Counsel found this Motion on what they describe as a federal

court’s “equitable powers” to grant an attorney's fee award in the circumstance where a

successful litigant has, through its efforts, conferred a common benefit upon other

individuals who are not participants in the litigation. Thus, Plaintiff, in the brief in support of

the motion states: “[i]ndeed, under the exercise of its equitable powers, a federal court may

fashion an attorney's fees award to successful litigants who confer a common benefit upon

a class of individuals not participating in the litigation.” (Doc. 75-2, at 2). In support of this

assertion, Plaintiff cites Polonski v. Trump Taj Mahal Associates, 137 F.3d 139, 145 (3d Cir.

1998) and Mills v. Electric Auto-Lite Company, 396 U.S. 375, 391-392, 90 S.Ct. 616, 24

L.Ed.2d 593 (1970). (Id).

Plaintiff argues that ‘[ijt is beyond dispute that Class Counsel have been actively

engaged with Defendants Carrizo (Marcellus) LLC (“Carrizo”), Reliance Marcellus I! LLC

and Reliance Holdings USA (collectively, “Reliance”) for a substantial amount of time,

having litigated this Action since October 2016. Class Counsel have spent considerable

resources examining every potential facet of this case — investigating the claims,

successfully opposing motions to dismiss, conducting fact discovery, retaining experts, and

researching potential damages for putative Class Members.” (/d. at 2-3). Thus, Plaintiff

argues that “[clourts have routinely implemented common benefit funds because of the

potential for non-parties to the litigation to ride the coat-tails of the attorneys who have

expended significant efforts litigating this case.” (/d. at 3). Plaintiff asserts that Defendant

BKV has made “substantial individual settlement offers to hundreds of putative Class

Members’ thus creating what Plaintiff terms an “actual risk” that these settlement offers

create “a free rider” who settles his or her own claims to avoid paying for the work done by

Plaintiffs counsel. (/d.).

Plaintiff notes that after conducting investigation and research, Class Counsel, on

October 3, 2016, filed a Complaint on behalf of Plaintiff Slamon and further states that the

Complaint was on behalf of “a proposed Class consisting of ‘[a]ll persons or entities who

own property within the Commonwealth of Pennsylvania and who are, or have been, a

royalty owner under a Paid Up Oil and Gas Lease with Defendants in which natural gas has

been produced under the lease (the ‘Class’).” (/d. at 4). Plaintiff then states that he opposed

motions to dismiss filed by Carrizo and Reliance, has served written discovery, including

interrogatories and document requests on both Carrizo and Reliance and has engaged in

additional discovery with respect to non-party DTE Energy Holdings, Inc., the broker

through which Carrizo and Reliance purportedly sold gas produced on Plaintiff's property as

well as the properties of the putative Class Members. (/d. at 5). Plaintiff also notes that on

September 5, 2017, this Court issued a Memorandum Opinion denying Carrizo’s and

Reliance’s motions to dismiss with the exception of Plaintiff's breach of fiduciary duty claim

set forth in Count IV which was dismissed. (Id.).

Plaintiff asserts that following his “successful opposition” to the motions to dismiss,

“Class Counsel continued to vigorously pursue discovery from Defendants Carrizo and

Reliance.” (Id. at 6). Plaintiff further states that when Class Counsel learned of the

acquisition by BKV of Carrizo’s and Reliance’s rights under the leases at issue, and that

Carrizo had communicated with putative Class Members requesting consent to an

assignment of their respective leases to BKV with a ratification of any prior assignments,

including the Carrizo assignment to Reliance, that Class Counsel was successful in:

obtaining a copy of the BKV Assignment Agreement; obtaining concessions from both

Carrizo and Reliance that they would not interpret the ratification provision in the BKV

assignment to impair any rights of Plaintiff or any putative Class Member; and obtained a

redacted copy of the Purchase and Sale Agreement between BKV and Carrizo and

Reliance. (Id. at 7).

Thus, Plaintiff argues:

In short, up until the time when BKV made individual settlement offers to

hundreds of putative Class Members, Class Counsel had, on behalf of Mr.

Slamon and the proposed Class, vigorously pursued the claims at issue in this

case, survived a motion to dismiss, and spent hundreds of thousands of dollars

in time and out-of-pocket expenses positioning the case for success.

(Id. at 8).

Next, Plaintiff asserts that when BKV “sent letters to hundreds of putative Class

Members offering a ‘signing bonus” and requested that the putative Class Member either

sign a Lease Amendment and Ratification and a Full and Final Release of all claims,

including those in the action before this Court, or only a Release without a Lease

Amendment, that the efforts by Defendants to obtain either the Lease Amendment and

Ratification with a Full and Final Release of all claims or a Release without a Lease

Amendment from the putative Class Members were the direct result of Plaintiff counsel's

efforts in this case.

Plaintiff and Plaintiff's counsel summarize their theory in support of their Motion for

the Establishment of a Common Fund as follows:

In essence, the putative Class Member is releasing the exact claims at issue in

this case that have been vigorously pursued by Plaintiff and Class Counsel for

nearly two years. The consideration for giving up these claims against BKV,

Carrizo, and Reliance is, according to the terms of the Release, “TEN

DOLLARS ($10.00),” but, in reality, is the “signing bonus” monies, which range

from $100 to more than $260,000. There can be little doubt that the “signing

bonus’ is exactly what it appears to be - a settlement offer to settle the claims

in the instant case.

(Id. at 10)(emphasis in original).

Plaintiff makes a similar argument for those putative Class Members who received

an offer that included an Amendment in addition to the Release, arguing that “while the

Release addresses all claims brought in this action but in particular the royalty

underpayment contentions, the Amendment also addresses the valuation contentions that

have been vigorously pursued by Plaintiff and Class Counsel.” (/d. at 11). Plaintiff notes

that the settlement offers to putative Class Members who were sent the Amendment in

addition to the Release “range from several hundred dollars to more than $460,000." (Id.).

Based on the above-stated assertions, Plaintiff's motion requests that the Court

establish a common benefit fund for the payment of attorney's fees and expenses from

individual settlements. Plaintiff, citing the decisions in Trustees v. Greenough, 105 U.S. 527,

26 L.Ed. 1157 (1881); Central Railroad & Banking Co. v. Pettus, 113 U.S. 116, 5 S.Ct. 387,

28 L.Ed. 915 (1885); Sprague v. Ticonic National Bank, 307 U.S. 161, 59 S.Ct. 777, 83 L.Ed.

1184 (1939); Mills v. Electric Auto-Lite Co., 396 U.S. 375, 90 S.Ct. 616, 24 L.Ed.2d 593

(1970); and Hall v. Cole, 412 U.S. 1, 93 S.Ct. 1943, 36 L.Ed.2d 702 (1973), then argues:

The common benefit doctrine recognizes the federal courts’ inherent authority to

prevent unjust enrichment by those who benefit from the efforts of counsel in

class proceedings and similar litigation, whose risk, investment, and effort

generates, enhances, or protects a fund or benefit enjoyed by such beneficiaries.

(Doc. 75-2, at 12), Plaintiff, citing Hall v. Cole, supra, states that the “origins of this doctrine

can be traced to the common fund rule whereby those who share in a fund must participate

in paying attorney's fees when a prevailing plaintiffs litigation redounds to the benefit of the

common fund.” (Id. at 12-13). Plaintiff also cites to Polonski v. Trump Taj Mahal

Associates, arguing that “[a]s the Third Circuit held in Polonski, under the exercise of its

equitable powers, a federal court may fashion an attorney's fees award to successful

litigants who confer a common benefit upon a class of individuals not participating in the

litigation.” (Id. at 13-14).

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After setting forth the criteria established by the Third Circuit in Polonski for

determining whether a fee award is appropriate under the common benefit doctrine, Plaintiff

notes that “[w]hether a plaintiff is entitled to an award of attorney's fees and expenses under

the common benefit doctrine is left to the discretion of the district court.” (Id. at 14)(citing

Hall, 412 U.S. at 15).

Plaintiff argues that the work performed by Class Counsel satisfies the “three-part

test” set forth in Polonski for an award of attorney's fees under the common benefit/common

fund analysis.

First, Plaintiff argues that “Class Counsel's efforts spanning nearly four years in

investigating, researching, and litigating the facts and legal claims at issue have resulted in

the substantial settlement offers made by BKV to putative Class Members.” (Doc. 75-2, at

15). Plaintiff argues that “[nJow, after successfully opposing multiple motions to dismiss and

with the evidence developed and collected as the result of Class Counsel's efforts in this

Action over multiple years, BKV has presented all (or nearly all) putative Class Members

with de facto settlement offers, despite almost none of them having initiated their own

litigation against Carrizo, Reliance, or BKV.” (/d. at 15-16). Plaintiff argues that in the

absence of the current litigation before this Court “there is simply no reason to believe BKV

would have offered multiple millions of dollars to settle these claims, regardless of BKV's

characterization of the offers as a ‘signing bonus’. (/d. at 16).

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Second, Plaintiff argues that the members of the class to whom Class Counsel has

provided this benefit “is easily identifiable and ascertainable”, reasoning that BKV had sent

individual settlement offers to hundreds of putative Class Members and has produced

copies of each of the original communications. (/d. at 16-17).

Third, Plaintiff argues that because BKV has a “discrete list of individual putative

Class Members that have accepted the BKV offer and the exact amounts of those

settlements, the Court has a reasonable basis to spread the costs of the litigation to those

settling putative Class Members and to do so in a proportionate manner by ordering BKV (or

any other Defendant who directly or indirectly funds the settlement payments) to hold back a

set percentage of each individual settlement for a determination of an appropriate attorneys’

fee and allocation of expenses.” (/d. at 17).

Finally, Plaintiff in his brief in support of the motion stresses that “Class Counsel

requests only that these funds be withheld at this point, not awarded and paid to Class

Counsel.” (Doc. 75-2, at 19). Plaintiff adds that the common benefit fund whose

establishment Plaintiff and Class Counsel request is “not a guarantee that Class Counsel be

paid any set amount” adding that no amounts will be disbursed without a review and

approval by the Court. (/d.).

B. Defendants’ Responses to Plaintiff's Motion

In response, each Defendant has filed a brief in opposition to Plaintiffs motion. The

brief of Defendants BKV Operating LLC and BKV Chelsea LLC (Doc. 77) begins with the

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assertion that “BKV purchased a number of the leases at issue in this case from Defendants

Carrizo and Reliance after this lawsuit had already been filed. When BKV first contacted

lessors, it was not a party to this action.” (Id. at 1). BKV acknowledges that it sought to

renegotiate that section of the lease agreement to which various lessors are or were a party

which addresses how the price paid to lessors for oil and gas extracted from the wells

established under the leases is calculated. Likewise it acknowledges that it offered to pay

lessors money in exchange for a lease amendment and release of past claims. (/d.).

Then, characterizing Plaintiff and Class Counsel as engaging in a “blatant money

grab”, BKV argues that Plaintiff and Class Counsel are attempting to deprive those

Pennsylvania lessors with whom BKV has entered into settlements of the benefit of the

bargain they reached. Specifically, BKV argues that Class Counsel is attempting to force

the lessors and BKV to place 35% of all funds BKV agreed to pay the lessors into a

“Common Benefit Fund.” (/d.).

BKV then sets forth its reasons why the motion of Plaintiff and Plaintiffs counsel

should be denied. First, BKV argues that if it

completes its settlement with potential class members before class certification,

then the Court is without jurisdiction to order the recipients to contribute a portion

of their payments to compensate Class Counsel. In other words, because there

has been no class certification and the potential class members do not have

individual lawsuits pending before the Court, the Court does not have authority

to order that the potential class members contribute a portion of their settlements

for payment of Class Counsel’s fees.

(Doc. 77, at 6).

13

BKV argues that there has been no class certification in this case and instead that

‘alll that currently exists is a collection of individual claims that might be pursued as a class

action under Rule 23.” (/d. at 7) (emphasis in original). The BKV Defendants assert that

“once individual lessors settle with BKV, their claims become moot and necessarily are no

longer a part of any case or controversy before the Court.” (/d.). Accordingly, BKV argues

that the Court has no subject matter jurisdiction over those claims or any settlement related

to those claims.

Second, BKV argues that because there has been no certification of a class, no

“oroper notice” of the action and no opportunity to “opt out”, there is no basis upon which to

conclude that any absentee plaintiff has consented to being subject to the Court’s jurisdiction.

(Id. at 8). Further, BKV asserts that to the extent that the curative communication from BKV

to the lessors was “proper notice” of this action, the “settling lessors are expressly choosing

not to be a party to this litigation, which they have a right to do.” (Id.)(emphasis in original).

From this BKV argues that the Court has no personal jurisdiction over the settling lessors. In

support of this assertion, BKV cites numerous cases both from within the Third Circuit and

from other jurisdictions. (See id. at 8-11).

BKV additionally argues that there was no causal connection between its decision to

seek lease amendments, ratifications and releases, and the litigation before this Court.

Instead, it argues that its decision to do so was a “business decision made by BKV because

it wished to pay royalties going forward in a manner that would be mutually agreeable to

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BKV and the lessors - and BKV was willing to pay substantial consideration to the lessors

to do so.” (Doc. 77, at 12). BKV further argues that it sought to clarify how royalties were to

be calculated and paid so as to avoid future liability by obtaining amendments to the oil and

gas leases which spell out how royalty calculations are paid. It also offers that a substantial

portion of the consideration offered by BKV to the settling lessors was for the lease

amendments and not for the releases. Thus, it argues that the payments are not

“settlement payments” for any claim and therefore should be excluded from any “Common

Benefit Fund” if the Court were to determine that a fund is appropriate. (/d.).

Next, BKV argues that the “common benefit doctrine does not apply to payments

received by any settling lessor.” (Id. at 15). It again asserts that its decision to seek lease

amendments and releases was not the result of the litigation before this Court but rather “an

independent business decision made by BKV — before it was a party to this action -

because it wished to pay royalties going forward in a manner that would be mutually

agreeable to BKV and the lessors.” (/d.).

In a footnote BKV points out that historically the “common benefit doctrine applied in

cases such as shareholder derivative suits and labor disputes, where the plaintiff vindicates

rights on behalf of an entire class.” It further acknowledges that courts now “also rely on the

common benefit doctrine to create funds and award fees to lead counsel or committees in

MDL or consolidated proceedings out of fees that would be paid to individual plaintiffs

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lawyers.” It concludes, however, that this case “does not fall into either of these typical

scenarios where the common benefit doctrine applies.” (/d. at 15 n.7) (collecting cases).

The other Defendants have, as noted, also submitted responses in opposition to

Plaintiff's Motion for an Order Establishing a Common Benefit Fund. Defendants Reliance

Marcellus Il, LLC and Reliance Holdings USA Inc. (“Reliance”) state simply that “[t]here are

no allegations that Reliance has extended any offers related to the lease amendments and

ratifications. .. . There are no allegations that Reliance has participated in the lease

amendments and ratifications extended by Defendants BKV Operating LLC and BKV

Chelsea, LLC.” (Doc. 76, at 2). Reliance accordingly argues that there is no legal or factual

basis in the record for the relief sought as against Reliance.

Defendant Carrizo (Marcellus) LLC, in its brief in opposition to Plaintiffs Motion

begins with the statement that:

As a threshold matter, Carrizo notes that Mr. Slamon has pointed to no case in

which a court has done what he asks this Court to do. Mr. Slamon filed a

lawsuit, opposed motions to dismiss and engaged in written discovery. But

there has been no judicial determination that Mr. Slamon’s legal contentions

are correct or that the pendency of the lawsuit caused BKV to make the offers

it did, Nonetheless, Mr. Slamon asks this Court to order sequestration of

significant amounts of money belonging to third parties who are not before the

Court and who have been given no notice or opportunity to be heard about Mr.

Slamon’s request - all because Mr. Slamon believes that, if he ultimately

prevailed in the litigation, he would have a right to those funds.

(Doc. 78, at 1-2).

Carrizo argues that the Supreme Court's decision in Hall v. Cole only allows an

award of attorney's fees under the common benefit doctrine in the circumstance where “the

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plaintiffs successful litigation confers a substantial benefit on the members of an

ascertainable class, and where the court’s jurisdiction over the subject matter of the suit

makes possible an award that will operate to spread the cost proportionately among them.”

(Id. at 2) (quoting Hall, 412 U.S. at 5). Carrizo further cites the Supreme Court’s decision in

Mills v. Electric Auto-Lite Company, stating that “the proponent of a common-benefit fund

[must] satisfy three requirements: (1) the plaintiff must confer a substantial benefit, (2) to

members of an ascertainable class and (3) the court must ensure that the costs are

proportionally spread among that class.” (/d.)(citing Mills 396 U.S. at 393-394). Carrizo

asserts that Plaintiff and Plaintiff's counsel cannot satisfy these criteria nor those set forth by

the Third Circuit in Polonski v. Trump Taj Mahal Associates. (Id. at 3).

In addition, Carrizo asserts that there is no indication that Plaintiff Slamon has given

notice to those non-party landowners from whom one-third of the payment due from BKV to

them would be placed in an account for ultimate payment to Plaintiffs counsel. (/d.).

Carrizo rejects Slamon’s contention that Plaintiffs counsel is entitled to the

establishment of a fund under the common benefit doctrine as set forth by the Supreme

Court in Sprague v. Ticonic National Bank, arguing that “[t]here is nothing equitable about a

proceeding affecting the funds of third parties who have been given no opportunity to be

heard. “ (Doc. 78, at 4).

Carrizo further denies that Slamon has conferred a “substantial benefit” on the

landowners from whom one-third of the monies paid to them would be placed in this sought

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after common benefit fund. As to Slamon, Carrizo asserts that “[hle filed and has

maintained a lawsuit. But he has not at present established any rights that will flow to those

landowners. He alleged that Carrizo, Reliance and now BKV have miscalculated his

natural-gas royalty, but the Court has made no such finding.” (/d. at 5). Carrizo argues that

the reasoning and result in Polonski and in Mills do not support the Plaintiffs Motion

requesting the establishment of a common benefit fund since, in Polonski, the Third Circuit

declined to require members of the union to pay Plaintiff's counsel fees since the union itself

was a party to the litigation and liable for its breach of a duty of fair representation owing to

those members, whereas in Mills, the Supreme Court ruled that the minority shareholders of

Auto-Lite were entitled to fees from Auto-Lite and derivatively, from all of its shareholders.

The Mills Court arrived at this conclusion on the premise that the plaintiff shareholders had

proven a violation of federal law and had thereby conferred a benefit on all shareholders in

doing so. (Id. at 5-6),

Carrizo also asserts that in this case Slamon and Plaintiff's counsel have obtained

no determination as to the correctness of their position with respect to their asserted

interpretation of the royalty payments provisions of the lease between Slamon and BKV and

its predecessors. Carrizo argues “there is no record evidence that the mere pendency of

the lawsuit was the basis for BKV’s offers and, so, it is not a situation like Mills in which an

asserted benefit is traceable to the plaintiff's action.” (Id. at 7).

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C. Plaintiff's Reply to Defendants’ Opposition

In Plaintiffs Reply Memorandum (Doc. 79), counsel reiterates the essential premise

underlying the motion: “[t]he court’s inherent equitable jurisdiction plainly extends to a class

of individuals not participating in the litigation.” (/d. at 3). Plaintiff then quotes from Sprague

v. Ticonic National Bank, as follows:

Plainly the foundation for the historic practice of granting reimbursement

for the costs of litigation other than the conventional taxable costs is part

of the original authority of the chancellor to do equity in a particular

Situation. Whether one professes to sue representatively or formally makes a

fund available for others may, of course, be a relevant circumstance in making

the fund liable for his costs in producing it. But when such a fund is for all

practical purposes created for the benefit of others, . . . the absence of an

avowed class suit or the creation of a fund, as it were, through stare decisis

rather than through a decree — hardly touch[es] the power of equity in doing

justice as between a party and the beneficiaries of his litigation.

(/d.)(quoting Sprague, 307 U.S. at 166-167)(emphasis in brief).

Slamon also addresses the "money grab” accusation directed at Plaintiff and Class

Counsel, stating that they:

have not asked the Court to order recipients of BKV’s settlement offer to do

anything; instead, they seek an order that BKV (and, if ever appropriate, the

other Defendants) place monies into a common benefit fund. Any such award

would not be a “windfall” or “money grab” by “depriving” settling putative Class

Members of the “benefit of their bargain” with BKV. Indeed, BKV has it

completely backwards: The point of the common benefit doctrine is to prevent

unjust enrichment and free-riding by those who have benefitted from Plaintiff

and Class Counsel's efforts — namely, settling putative Class Members.

(/d. at 5-6)(emphasis in original).

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In support of their request for the establishment of a common benefit fund, Plaintiff

and Plaintiffs counsel assert that “Class Counsel have spent years investigating and

litigating the very claims that settling putative Class Members are getting paid for, but Class

Counsel (unlike counsel for Defendants) have received absolutely no compensation for their

efforts during that time, and have Spent tens of thousands of dollars out-of-pocket in

addition to their uncompensated time.” (Doc. 79, at 6).

Plaintiff cites to Turner v. Murphy Oil USA, Inc., 422 F.Supp.2d 676 (E.D. La. 2006)

as instructive. (Doc. 79, at 6). There, after Hurricane Katrina had caused extensive

flooding, suit was brought in 27 consolidated class actions filed on behalf of several

thousand persons Claiming damage in connection with the escape of 25,110 barrels of

crude oil from a 250,000 barrel above-ground storage tank at Murphy Oil's refinery in St.

Bernard Parish, Louisiana. There, the Plaintiffs’ Steering Committee (“PSC”) moved for an

order to set-aside 15% of the gross of any settlements of represented persons within the

class boundary for class counsel attorney's fees as well as 7% of the gross for class

counsel's costs. The Court, on January 30, 2006, certified these 27 cases as a Class action

and granted the PSC’s motion for class certification for all persons living within the area

described in the class definition. Thereafter, on March 15, 2006, the PSC filed the set-aside

motion. The PSC asserted that its motion was directed toward two sets of claimants — one,

individuals who had opted out, retained lawyers, and filed lawsuits, and two, individuals who

had opted out and retained counsel for purposes of settlement. Thus, the Court noted that

20

‘[t]he motion is not aimed at individuals who accept a settlement offer ‘that would have been

made regardless of class certification [,]' according to the PSC. Thus, the PSC's motion

does not cover settlements made or to be made by individuals directly with Murphy without

the assistance of counsel.” Turner, 422 F.Supp.2d at 678-679,

Plaintiff and Plaintiff's counsel also address Defendants’ argument that this Court

lacks personal jurisdiction over putative Class Members. (Doc. 79, at 7). To this

contention, Plaintiff responds that “Class Counsel are not asking settling putative Class

Members to pay money into a common benefit fund; they are asking BKV (or the other

Defendants) to do so.” (/d.). Plaintiff and Plaintiffs counsel argue that Plaintiff's counsel, as

putative Class Counsel, has provided a substantial benefit to settling lessors. It rejects

BKV’s argument that the offers of settlement it made to the settling lessors were made when

BKV was not a Defendant, calling this contention “specious”. (id. at 9). Plaintiff points out

that BKV did not make two offers but instead, BKV was ordered by this Court to issue a

curative communication “effectively rescinding the original offers, as any offer that had been

previously accepted was no longer valid.” (/d.). In addition, Plaintiff and Plaintiff's counsel

argue that contrary to Carrizo’s contentions, “Class Counsel need not have achieved a final

ruling or judgment in order to show that a substantial benefit was provided. Numerous

courts have held that the key inquiry is whether there is a causal link or nexus between the

litigation and the benefit provided.” (/d. at 10)(citing In re Maniaci-Canni, 2013 WL 5314348

at “4 (E.D.N.Y. 2013); New Leadership Committee v. Davidson, 23 F Supp.2d 301, 303,

21

308-309 (E.D.N.Y. 1998); Koppel v. Wien, 743 F.2d 129, 135 (2d Cir. 1984); Goldberg v.

Hall, 1988 WL 215393 at *4 (S.D.N.Y. 1988).

On this basis, Plaintiff and putative Class Counsel assert that they filed and

maintained a lawsuit “which directly resulted in 126 settlement offers made solely in

exchange for a release of the claims brought in this lawsuit.” (Doc. 79, at 11). Likewise,

they claim that with respect to the other 196 settlement offers, which included both a release

and a material amendment to the lease provision at issue in this case, BKV has conceded

that it values the lease amendment at only $500/acre which, in the view of Plaintiff and

Plaintiff's counsel, indicates that any remaining portion of the offer was based solely and

exclusively on a release of the claims brought in this lawsuit. (/d. at 11-12).

With these summaries of the parties’ contentions having been set forth, the Court will

address their legal and factual merit.

IV. ANALYSIS

A review of the governing case law and the current posture of this action demonstrate

that Plaintiff's “Motion for an Order Establishing a Common Benefit Fund” (Doc. 75) must be

denied.

First, there has been no class certification under Fed.R. Civ. P. 23 in this case.

Plaintiff filed his Motion for an Order Establishing a Common Benefit Fund on August 30,

2018, and 11 months later, moved for the first time for class certification (Doc. 96). That

22

motion is not yet ripe as Defendants’ responses are due on September 3, 2019, and

Plaintiffs reply thereafter on October 21, 2019 (see Doc. 91).

Second, Plaintiff has not achieved the status of a successful litigant, either by

judgment or settlement of his claim.

Third, there is no clear nexus between Plaintiff's filing of his Complaint and this Court’s

denial of Defendants’ motions to dismiss Plaintiff's Complaint (with the exception of Count IV

for breach of fiduciary duty) and the settlement offers which BKV made in accordance with

this Court's Memorandum Opinion (Doc. 64) and Order (Doc. 65) filed July 27, 2018, which

granted as modified Plaintiff's Motion for Expedited Emergency Relief Pursuant to Federal

Rule of Civil Procedure 23(d) (Doc. 43), ordered the BKV Defendants to provide Plaintiff's

counsel with the identity of all putative Class Members and which further ordered that BKV

send a curative notice, the text of which is set forth in Doc. 98-1, to all putative Class

Members to whom BKV had sent the communication which Plaintiff's Motion deemed to be

false or misleading and which extended the deadline to such putative Class Members for

responding to BKV’s settlement offers until August 31, 2018. The Court’s Order of July 27,

2018, also declared ‘not enforceable” any previously executed cover letter, Full and Final

Release, and/or Lease Amendment and Ratification that any putative Class Member had

executed and returned to BKV “unless and until the Class Member re-signs and returns the

Materials after receipt of the proposed curative notice.”

23

Plaintiff has not submitted sufficient evidence that any settlement offers accepted by

members of the putative class were so accepted as a result of Plaintiff's lawsuit. BKV asserts

that it commenced negotiation for amendments to the oil and gas leases to which the putative

Class Members, as lessors, were party with it or its predecessors, Defendants Carrizo and

Reliance, before Plaintiffs suit was filed. Moreover, as this Court has previously ruled,

Defendants may negotiate settlement with potential members of a class prior to class

certification. See Christensen v. Kiewit-Murdock Inv. Corp., 815 F.2d 206, 213 (2d Cir.

1987)("{A]t least prior to class certification, defendants do not violate Rule 23(e) by

negotiating settlements with potential members of a class.”); Cox Nuclear Med. v. Gold Cup

Coffee Servs., Inc., 214 F.R.D. 696, 699 (S.D. Ala. 2003)(“A defendant . . . has the right to

communicate settlement offers directly to putative class member{s].”)(quoting Bublitz v.

duPont de Nemours & Co., 196 F.R.D. 545, 548 (S.D. lowa 2000)); In re Southeastern Milk

Antitrust Litig., 2009 WL 3747130, at *3 (E.D. Tenn. Nov. 3, 2009)(“Against this general

backdrop, it is clear then that the defendants may discuss settlement offers with putative

class members prior to class certification, as a general rule.”).

The development of the common benefit fund as an instrument by which the court

may do equity begins, in the modern era, with Sprague v. Ticonic National Bank. In Ticonic,

petitioner Sprague delivered money to the Ticonic National Bank in trust for her and others’

beneficial interest. Part of the money was to be deposited by the Bank in its Savings

Department with the rest of the funds to be deposited by the Bank in its Commercial

24

Checking Department awaiting investment or distribution, to be secured by an appropriate

amount of bonds set aside in its Trust Department as required by law. The People’s National

Bank subsequently took over Ticonic’s assets including the bonds in question and assumed

the indebtedness of the Ticonic Bank. People’s Bank then closed and both banks were

placed in receivership. Thereafter, Sprague and her beneficiary filed suit in District Court

against the banks and the banks’ receiver to place a lien upon the proceeds of the bonds for

their trust deposit. The District Court sustained the claim and entered a decree for the

payment of plaintiffs claim with interest. 307 U.S. at 162-163. Sprague sought reasonable

counsel fees and litigation expenses to be paid out of the proceeds of the bonds, reasoning

that “by vindicating her claim to a lien on the proceeds of the earmarked bonds to the amount

of her trust funds, she had established as a matter of law the right to recovery in relation to

fourteen trusts in situations like her own; that she had prosecuted the litigation solely at her

own expense; that although the total assets of the bank were not sufficient to satisfy the

unsecured creditors, the proceeds of the bonds were more than sufficient to discharge all

trust obligations”. /d. at 163. The District Court held that it had no authority to grant the

petition, and the First Circuit affirmed. The Supreme Court reversed the decision so that the

District Court could entertain the petition for reimbursement “in the light of the appropriate

equitable considerations” in accordance with the Court’s Opinion. /d. at 169.

In the course of reaching this ruling, the Supreme Court laid out the elements for the

creation of a common benefit fund and payment therefrom of counsel fees to the successful

25

party who, in succeeding on its claim, has conferred a benefit on other persons as well. The

Court explained that the stare decisis effect of the ruling in Sprague’s favor necessarily

established the claims of the other 14 trusts making claims on the same bonds so that

Sprague was entitled to petition the District Court for allowance of attorney’s fees and

expenses from those other persons similarly situated who would benefit from her successful

litigation:

To be sure, the usual case is one where through the complainant's efforts a

fund is recovered in which others share. Sometimes the complainant avowedly

sues for the common interest while in others his litigation results in a fund for a

group though he did not profess to be their representative. The present case

presents a variant of the latter situation. In her main suit the petitioner neither

avowed herself to be the representative of a class nor did she automatically

establish a fund in which others could participate. But in view of the

consequences of stare decisis, the petitioner by establishing her claim

necessarily established the claims of fourteen other trusts pertaining to the

same bonds.

307 U.S. at 165-166.

Similarly, in Mills v. Electric Auto-Lite Company, the Supreme Court, following

Ticonic, held that the successful suit brought by the minority shareholders of the company,

establishing that a corporate merger was accomplished through the use of a proxy

statement that was materially false or misleading and established a violation of the

applicable security laws by their corporation and its officials, conferred a benefit upon all

other shareholders such that the minority shareholders were entitled to reimbursement by

the corporation for the cost of establishing the violation. 396 U.S. at 389-390. The Court

26

departed from the “general American rule” that “attorneys’ fees are not ordinarily

recoverable as costs,” stating that:

A primary judge-created exception has been to award expenses where a

plaintiff has successfully maintained a suit, usually on behalf of a class, that

benefits a group of others in the same manner as himself. See Fleischmann

Corp. v. Maier Brewing Co., 386 U.S., at 718-719, 87 S.Ct. at 1407. To allow

the others to obtain full benefit from the plaintiffs efforts without contributing

equally to the litigation expenses would be to enrich the others unjustly at the

plaintiffs expense. This suit presents such a situation. The dissemination of

misleading proxy solicitations was a ‘deceit practiced on the stockholders as a

group,’ J. |. Case Co. v. Borak, 377 U.S., at 432, 84 S.Ct. at 1560, and the

expenses of petitioners’ lawsuit have been incurred for the benefit of the

corporation and the other shareholders.

Id. at 391-392.

The Court in Mills also made clear that the authority of the chancellor to do equity

arose not only in the circumstance where the litigation produced or preserved a “common

fund” for the benefit of a group but also applied where the litigation has produced a decision

entitled to “stare decisis.” Id. at 393.

Finally, the Court concluded:

To award attorneys’ fees in such a suit to a plaintiff who has succeeded in

establishing a cause of action is not to saddie the unsuccessful party with the

expenses but to impose them on the class that has benefited from them and

that would have had to pay them had it brought the suit.

Id. at 396-397.

The requirement of a successful suit as a basis for the establishment of a common

fund by which to compensate counsel for fees incurred in that action was reiterated in Hall

v. Cole. There, the Supreme Court held that an award of counsel fees to a successful union

27

member in a suit brought under § 102 of the Labor Management Reporting and Disclosure

Act ("LMRDA’), 29 U.S.C. § 412, fell “squarely within the traditional equitable power of

federal courts to award such fees whenever ‘overriding considerations indicate the need for

such a recovery.” 412 U.S. at 9 (quoting Mills, 396 U.S. at 391-392). The Court

determined that the union member's successful suit, which vindicated his own right to free

speech guaranteed by § 101(a)(2) of Title | of the LMRDA “necessarily rendered a

substantial service to his union as an institution and to all of its members.” /d. at 8. The

Court placed its decision within what it termed an “established exception” to the traditional

American rule which does not provide for the allowance of attorney’s fees in the absence of

Statutory or contractual authorization. Thus, it stated:

Another established exception [to the American rule] involves cases in which

the plaintiff's successful litigation confers ‘a substantial benefit on the members

of an ascertainable class, and where the court’s jurisdiction over the subject

matter of the suit makes possible an award that will operate to spread the costs

proportionately among them.’

Id. at 5 (quoting Mills, 396 U.S. at 393-394).

With respect to Mills, the Court noted that “we approved an award of attorneys’ fees

to successful shareholder plaintiffs in a suit brought to set aside a corporate merger

accomplished through the use of a misleading proxy statement in violation of § 14(a) of the

Securities Exchange Act of 1934.. ..” Id. at 6-7.

In Polonski v. Trump Taj Mahal Associates, the Court made clear that the

requirements for the application of the common benefit doctrine begin with the exercise of a

28

federal court’s equitable powers to fashion an award for attorney's fees to successful

litigants who confer a common benefit upon a class of individuals not participating in the

litigation. The Court’s analysis is worth setting forth at length here.

We now turn to the merits of this appeal. By way of background, it is well

established that the traditional American rule disfavors the award of attorney's

fees in the absence of statutory or contractual authorization. Summit Valley

Indus., Inc. v. Local 112, United Bhd. of Carpenters and Joiners, 456 U.S. 717,

721, 102 S.Ct. 2112, 2114-15, 72 L.Ed.2d 511 (1982). Under the exercise of

its equitable powers, however, a federal court may fashion an attorney's fees

award to successful litigants who confer a common benefit upon a class of

individuals not participating in the litigation. Mills v. Electric Auto-Lite Co., 396

U.S. 375, 391-92, 90 S.Ct. 616, 625-26, 24 L.Ed.2d 593 (1970). At the heart of

this exception is a concern for fairness and unjust enrichment; the law will not

reward those who reap the substantial benefits of litigation without participating

in its costs. As explained by the Supreme Court, “[t]o allow the others to obtain

full benefit from the plaintiff's efforts without contributing equally to the litigation

expenses would be to enrich the others unjustly at the plaintiffs expense.” /d.

at 392, 90 S.Ct. at 625. The origins of this doctrine can be traced to the common

fund rule whereby those who share in a fund must participate in paying

attorney's fees when a prevailing plaintiffs litigation redounds to the benefit of

the common fund. See Hail v. Cole, 412 U.S. 1, 5 n. 7, 93 S.Ct. 1943, 1947 n.

7, 36 L.Ed.2d 702 (1973); 1 Dan B. Dobbs, Law of Remedies § 3.10(2) (2d ed.

1993).

Under the common benefit doctrine, an award of attorney's fees is appropriate

where “the plaintiff's successful litigation confers ‘a substantial benefit on the

members of an ascertainable class, and where the court's jurisdiction over the

subject matter of the suit makes possible an award that will operate to spread

the costs proportionately among them.” Hall, 412 U.S. at 5, 93 S.Ct. at 1946

(quoting Mills, 396 U.S. at 393-94, 90 S.Ct. at 626-27). This test entails

satisfying three distinct elements: (1) the plaintiff must confer a substantial

benefit; (2) to members of an ascertainable class; and (3) the court must ensure

that the costs are proportionally spread among that class. Because this test

may be read literally to include every lawsuit against any institutional defendant,

we have refined this language further. In Marshall v. United Steelworkers, 666

F.2d 845, 848 (3d Cir. 1981), this court inquired: (1) whether the benefits may

be traced with some accuracy; (2) whether the class of beneficiaries are readily

29

identifiable; and, (3) whether there is a reasonable basis for confidence that the

costs may be shifted with some precision to those benefitting.

137 F.3d at 145.

The cases discussed herein by this Court, while recognizing the ability of the court to

exercise its equitable powers to establish a common benefit fund and/or require that

nonparties to a proceeding be made to share in the costs of litigation, require that the party

seeking an award of counsel fees from the nonparties must have been successful in the suit

either by an award of money or by the establishment of a principle of law that may be cited

by others under the doctrine of stare decisis. Here, Plaintiff Slamon is not a successful

litigant under the case law which has delineated the circumstances under which the court's

equitable powers may be used to establish a common benefit fund or otherwise require

nonparties to participate in the payment of counsel fees on the basis that a benefit has been

conferred upon them through the successful litigation.

In addition, a substantial body of case law exists to establish that where, as here, no

class certification has been obtained by the plaintiff, the common benefit doctrine does not

provide a basis for an award of counsel fees among those who have yet to be certified as

part of the class. For example, in the context of Multi-District Litigation cases, the Fourth

Circuit has held that a District Court did not have the authority to compel contribution to the

Steering Committee of plaintiffs’ lawyers for discovery-generated expense from plaintiffs in

State or federal litigation who were not before the court and by claimants who had chosen

not to litigate but to compromise their claims outside of court. The case, In Re Showa

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Denko K.K. L- Tryptophan Products Liability Litigation - II! v. Showa Denko K.K., 953 F.2d

162 (4th Cir. 1992), reversed a District Court’s order compelling contributions from plaintiffs

in state or federal litigation who were not before the court as well by claimants who had not

chosen to litigate but to compromise their claims outside of the court. The Circuit explained

in its ruling:

Paragraphs 2 and 3 of Order No. 7 require plaintiffs counsel to contribute

$1,000 and 0.5% of the value of settlement or verdict “in all cases presently

filed or later filed in these proceedings.” While these paragraphs apparently

limit their scope to parties to the litigation before the court, paragraph 4 applies

the obligations of paragraphs 2 and 3 “to actions venued in state courts,

untransferred federal cases, and unfiled claims in which any MDL defendant is

a party or payor.” The order thus compels contributions from plaintiffs in state

or federal litigation who are not before the court and by claimants who have

chosen not to litigate but to compromise their claims outside of the court.

Contrary to the suggestion of the plaintiffs’ steering committee, this

impermissible reach of paragraph 4 is not mitigated by the opportunity under

paragraph 5 to obtain a waiver of assessments by petitioning the district court.

To take advantage of this opportunity, the claimant is compelled to file a petition

in the district court, yet the court has no jurisdiction to compel such a procedure

in the first instance. Claimants who have not sued and plaintiffs in state and

untransferred federal cases have not voluntarily entered the litigation before

the district court nor have they been brought in by process. The district court

simply has no power to extend the obligations of its order to them.

Id.at 166.

Similarly, in Hartland v. Alaska Airlines, 544 F.2d 992 (9th Cir. 1976), an Alaska

Airlines plane crashed in Alaska, causing the deaths of all 111 persons aboard. Two of the

persons killed were Mabel Sampson and Harvey Golub. The Sampson Estate was

represented by counsel but filed no lawsuit. The executrix of the Golub Estate brought suit

against Alaska Airlines in Alaska. The Judicial Panel on Multi-District Litigation entered an

31

Order that a specified number of actions were transferred to the Northern District of

California and assigned for coordinated or consolidated pretrial proceedings. The actions

so transferred did not include the Sampson claim or the Golub actions. The Court assigned

to the Multi-District Litigation issued an order requiring all parties plaintiff to reimburse

plaintiff's liaison counsel for expenses and disbursements incurred in discovery proceedings

including depositions, production of documents, exhibits, administration and coordination of

discovery as well as the cost of reproduction and distribution of discovery materials and

documents as may be required. /d. at 993-996. The lawyers representing the Sampson

Estate received a written offer from counsel for Alaska Airlines indicating that the offer of

settlement made to them required approval of the District Court. /d. at 996.

With respect to the Sampson Estate, the personal representative did not file suit and

counsel for Sampson Estate did not sign the stipulation regarding discovery. Nonetheless,

the District Court, in approving the compromised settlement, ordered the law firm for the

Sampson Estate to deposit with the Clerk 5% of the settlement to be retained as a portion of

a common fund for distribution and payment of costs and services, commonly incurred and

expended on the question of liability. Similarly, with respect to the Golub Estate, the District

Court entered an order approving a settlement and again ordering the deposit with the Clerk

in the sum of $28,971.00, “which cash, subject to the order of the court, be retained by the

Clerk as a portion of a common fund for distribution and payment for costs and services

commonly incurred and expended on the question of liability to be hereafter determined as

32

above set forth by the court, jurisdiction for which is to be reserved.” /d. at 999. The Court

of Appeals found that the District Court was without jurisdiction to order the Sampson or

Golub estates to make such deposits on a common benefit basis. With respect to the

Sampson Estate, the Court stated:

In Sampson, the likelihood is more remote than in Golub, since the District

Court had not even a semblance of jurisdiction — original, ancillary or pendent

— to order anything or anybody, and least of all to compel lawyers who are not

parties to the action to pay $3,250 into a fund. There was just “no action”

pending anywhere.

In Golub, the question is closer, although we are unable to find in any of the

District Court's orders a reservation by it for a redetermination of the amounts

due to the Discovery Committee for its efforts and skill when at the same time

we are conscious that Cohen should not be extended or abused, since it is of

paramount importance that the guardians of Federal appellate procedure be

constantly alert in their apprehension of piecemeal review.

Id. at 1001.

The Ninth Circuit therefore granted writs of mandamus and directed the District Court

to “forthwith cause the Clerk of his Court to withdraw the funds deposited as described in

this Opinion, together with the interest accrued thereon, and return the proceeds without

undue delay to the respective appellants.” /d. at 1002.

The decision in Hartland was followed in Vincent v. Hughes Air West, Inc., 557 F.2d

759 (9th Cir. 1977). There, the Circuit held that the District Court had no authority to require

a claimant who had never filed suit, but rather had only engaged in non-judicial activities in

order to reach a settlement, to contribute funds from which the multi-district litigation lead

counsel’s attorneys’ fees would be paid and that claimants who had reached a settlement

33

prior to the appointment of lead counsel in the multi-district litigation could not be required to

contribute to a special class fund. The Court of Appeals observed:

If parties to a suit cannot confer subject-matter jurisdiction on a federal court

by agreement, certainly “nonparties,” people who have never been made

parties to a suit anywhere, cannot confer such jurisdiction by failing to raise

their voices above some unspecified decibel count in protest against the

attempted exercise of jurisdiction.

957 F.2d. at 766. Further, the Court noted:

The only plausible basis for valid District Court jurisdiction over Vincent or her

settlement is the class action. But as is discussed in detail . . ., the class

certification order of October 12, 1972 was erroneous. No valid class action

including Vincent among its unnamed plaintiffs ever existed.

Id. Accordingly, the Court reversed the District Court’s order and directed that Vincent's

contribution to the Special Class Fund plus accrued interest, be returned to her. /d.

In addition, the Third Circuit's decision in In re Prudential Insurance Company

America Sales Practice Litigation Agent Actions v. Prudential Insurance Company of

America, 148 F.3d. 283 (3d Cir. 1998), makes clear that class certification was a

requirement for the award of attorney's fees in the circumstance where a class settlement

was reached and approved and attorney's fees awarded thereon. The Court of Appeals, in

affirming the certification of the proposed class and the approval of the settlement, held that

the District Court properly found it had personal jurisdiction over the proposed class. The

Court of Appeals explained that personal jurisdiction over the members of the proposed

class followed from class certification and the resultant notices of the impending class action

and the opportunity of class members to exclude themselves from the class:

34

The district court also found it had personal jurisdiction over all members of the

proposed class. We agree. In the class action context, the district court obtains

personal jurisdiction over the absentee class members by providing proper

notice of the impending class action and providing the absentees with the

opportunity to be heard or the opportunity to exclude themselves from the class.

Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 811-12, 105 S.Ct. 2965, 86

L.Ed.2d 628 (1985). The combination of reasonable notice, the opportunity to

be heard and the opportunity to withdraw from the class satisfy the due process

requirements of the Fifth Amendment. Consequently, silence on the part of

those receiving notice is construed as tacit consent to the court's jurisdiction.

Id.; see also Carlough v. Amchem Prods., Inc., 10 F.3d 189, 199 (3d Cir.1993).

The district court here directed that notice of the class action be sent to all

persons who owned one or more Prudential insurance policies between 1982

and the present. Initially, we note the provision of individual notice to each class

member is by no means typical of the notice provided in most class actions,

and certainly qualifies as unprecedented. The notice provided here met the

requirements for personal jurisdiction. It explained that each individual

receiving notice was a member of the proposed class, and clearly set forth the

procedure for opting out of the class. The notice also contained the proposed

release, which explained that all claims would be waived if the individual did

not elect to opt out of the class. Consequently, we find the members of the

proposed class were adequately informed of their potential claims against

Prudential, and the district court had personal jurisdiction over those members

of the putative class who did not timely opt out.

148 F.3d at 306.

The decision in /n re Linerboard Antitrust Litigation, 292 F.Supp.2d 644 (E.D. Pa.

2003) represents a case where the District Court ruled that, in order to compensate class

counsel for work which conferred a common benefit on all claimants, it could require

creation of a fund out of proceeds from opt-out or “tag-along’” suits, but only following

certification of a class and a motion by class counsel for an order sequestering a portion of

35

any recovery obtained by buyers who had opted out of the class action and brought

independent “tag-along” suits.

In In re Diet Drugs (Phentermine/Fenfluramine, Dexfenfluramine) Product Liability

Litigation, 582 F.3d 524 (3d Cir. 2009), the Circuit reiterated the requirements for the

application of the common benefit doctrine:

“Under the common benefit doctrine, an award of attorney's fees is appropriate

where ‘the plaintiffs successful litigation confers a substantial benefit on the

members of an ascertainable class, and where the court's jurisdiction over the

subject matter of the suit makes possible an award that will operate to spread

the costs proportionately among them.” Polonski, 137 F.3d at 145 (quoting

Hall, 412 U.S. at 5, 93 S.Ct. 1943). Thus, in order to obtain common benefit

fees, an attorney must confer a substantial benefit to members of an

ascertainable class, and the court must ensure that the costs are

proportionately spread among that class.

Id. at 546.

Here again, without recounting the intricacies of this multi-district nationwide

products liability class action, it nonetheless may be said that class certification and a

successful conclusion to the litigation which confers a substantial benefit on the members of

an ascertainable class are prerequisites of the application of the common benefit doctrine.

Moreover, even in the circumstance where a class has been certified, in In re OSB

Antitrust Litigation, 2009 WL 579376 (E.D. Pa. 2009), the District Court found that it was

without jurisdiction to award class counsel fees from settlements described as “funded

almost entirely from the monies held in the opt-out escrow accounts” created when an opt-

out entity pursued its own claim against a defendant, in which case 25% of the settlement

36

was made part of the settlement funds to be distributed to the Class and Plaintiffs’ Counsel.

Id. at*1. The District Court, in response to the assertion by the various defendants that it

was without jurisdiction to grant counsel’s request stated:

| agree that | do not have jurisdiction to order the opt-outs to pay from the

settlement monies they have already received the fees sought by Class

Counsel. To the extent that | have jurisdiction over any funds that have not yet

been disbursed to the opt-outs, | conclude that distribution of these monies to

Class Counsel is not warranted.

Id. at *2. In support of this decision the Court wrote:

The settling opt-outs are not bound by [the jurisdictional] provision [in the

Court's Final Approval Orders] because they are not members of the Class.

Indeed, each Final Approval Order listed all the opt-outs and provided that “This

Order shall have no force or effect on these persons or entities.”

ld. Further, the Court noted:

Jurisdiction over a “common fund” is “generally satisfied by jurisdiction over a

party that controls the fund.” Alan Hirsch and Diane Sheehey, Awarding

Attorneys' Fees and Managing Fee Litigation 68 (2d ed. 2005). The money the

opt-outs have already received from settlement funds is obviously no longer

under the control of either Plaintiffs or Defendants. Accordingly, the common

fund doctrine does not afford me jurisdiction to order non-Parties — such as the

opt-outs — to pay Class Counsel's fees. See id. at 94 (“In general, a court cannot

order fees paid by beneficiaries personally if they are not party to the

litigation."); see also In re Brand Name Prescription Drugs Antitrust Litig., 115

F.3d 456, 457 (7th Cir. 1997) (opt-outs are no longer class members and thus

not parties).

My conclusion that | am without jurisdiction over the opt-outs is consistent with

those reached in analogous cases. See In re Showa Denko K.K. L-Tryptophan

Prod. Liab. Litig. Il, 953 F.2d 162, 165-66 (4th Cir. 1992) (“As in any other case,

a transferee court's jurisdiction in multi-district litigation is limited to cases and

controversies between persons who are properly parties to the cases

transferred, and any attempt without service of process to reach others who

are unrelated is beyond the court's power.”): Hartland v. Alaska Airlines, 544

37

F.2d 992 (9th Cir.1976) (granting writ of mandamus and ordering district court

to return funds deposited by nonparties into a discovery fund in a multi-district

case); In re Linerboard Antitrust Litig., 292 F.Supp.2d 644 (E.D. Pa. 2003) (in

MDL case, court lacked jurisdiction to award counsel fees from settlements or

judgments secured by former class members who opted out).

Id. at 3.

Thus, again, while the facts of OSB Antitrust Litigation involve a circumstance where

class certification was obtained and a settlement reached, the case emphasizes the need

for class certification and further points out that “settling opt-outs are not bound by [the

jurisdictional] provision [in the Court's Final Approval Orders] because they are not

members of the Class,” id. at*2. See also, In re Lidoderm Antitrust Litigation, 2017 WL

3478810, at *3 (N.D. Cal. 2017)(“Once a class member opts-out, it is no longer a party to

any case before me and | no longer have jurisdiction over it or over the monies due to it

(absent their filing a new action in federal court which is transferred to this MDL

proceeding).”).

At this juncture, in the case before this Court, the absence of class certification and

the resulting lack of personal jurisdiction over the settling lessors as well as the absence of

any litigation success by Plaintiff Slamon require that his motion for the establishment of a

common benefit fund be denied.

The cases cited by Plaintiff in his Reply brief for the proposition that “Class Counsel

need not have achieved a final ruling or judgment in order to show that a substantial benefit

was provided” (Doc. 79, at 10), are inapposite or entirely unsupportive of Plaintiff's motion.

38

Plaintiff first cites In re Maniaci-Canni, noting the Magistrate Judge’s statement therein that

cases where something short of a judgment by the court resolves a lawsuit, such as a

settlement, fees and costs may still be awarded under the common benefit doctrine.” (Doc.

79, at 10) (quoting In re Maniaci-Canni, 2013 WL 5314348, at *4 (E.D.N.Y. 2013)). That

statement may well be accurate, but in this case, there has been no settlement of Plaintiff's

lawsuit against BKV and the other Defendants and, in fact, as previously noted, class

certification is not ripe and has yet to be ruled upon. Further, in Maniaci-Canni, the Court

found that equitable considerations which would warrant the plaintiff's claim for the

imposition upon other plaintiffs of expert fees were not present. Thus, the Court observed:

Further, Sofia [the party seeking reimbursement of expert fees when the matter

settled] has not adequately demonstrated that the Respondents were unjustly

enriched at Sofia’s expense, or that the expert reports were the catalyst or the

proximate cause of the benefits the Respondents gained through the

settlement.

In re Maniaci-Canni, 2013 WL 5314348, at *8. Further, the Court noted that the matter

involved “five claimants” all of whom were represented by counsel throughout the case. □□□

at *9. The Court also emphasized that there was no “lead counsel, liaison counsel, or

maritime counsel designated to perform the bulk of the work in this case on behalf of all

claimants.” /d. Instead:

[e]ach party, including the Respondents, was represented by his or her own

respective attorneys at all court conferences and at every stage of the litigation,

including the (i) investigative stage (ii) preparation and interposing of pleadings;

(iii) formulation of discovery demands and/or responses; (iv) day-to-day

handling of the litigation; (v) summary judgment and (vi) settlement

negotiations.

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Id. Finally, the Court noted that Plaintiff Sofia “was aware that Respondents had retained

their own experts.” /d.

Thus, the decision in Maniaci-Canni provides no support for Slamon in this case

where no settlement has been reached and there is no evidence of efforts on the parts of

Plaintiff's counsel establishing a causal nexus between the work done at the preliminary

stages of this lawsuit and the lease amendments and releases entered into by the

Defendants and the various settling lessors on their individual leases with BKV.

Plaintiffs citation to New Leadership Committee v. Davidson, 23 F.Supp.2d 301

(E.D.N.Y. 1998), advanced for the proposition that the “absence of judgment is not a bar to

an award of attorney's fees under the common benefit doctrine where plaintiff can

demonstrate that the litigation was the catalyst or approximate cause for the result that

produces benefits for class” (Doc. 79, at 10), is also unavailing. Similar to Hall v. Cole,

supra, New Leadership Committee presented a suit by members of the Flushing New York

Local of the American Postal Workers Union against certain local union officers and

appointed members of the election committee of the Local. Plaintiffs there alleged

violations of the Labor Management Reporting and Disclosure Act, 29 U.S.C. § 411, and the

Labor Management Relations Act, 29 U.S.C. § 185. The plaintiffs alleged a scheme by the

defendants to suppress dissent within the Local. However, before an evidentiary hearing

was held on the motion for preliminary injunction brought by the Plaintiffs, the parties agreed

to settle some of the claims at issue. Following the hearing, which addressed some of the

40

remaining claims, a report and recommendation was issued granting relief to Plaintiffs on

these remaining claims. Thereafter, the parties entered into a stipulation in which the

defendants agreed to provide the relief recommended by the magistrate judge and settled

all remaining claims. Plaintiffs then sought attorney's fees incurred in responding to

Defendants’ objections to the report and recommendation and the supplemental report to

which no objections were filed. 23 F.Supp.2d at 302-303. The Court issued a

recommendation that Plaintiffs be awarded attorney's fees in the amount of $54,986.25.

This amount was increased by an award of costs in a supplemental report and

recommendation granting $567.05 for such costs. /d. at 306, 313.

The basis for the award of attorney's fees and costs, however, provides Slamon with

no support for his claim for the establishment of a common benefit fund. Since Hall v. Cole,

it is well settled in cases brought under the LMRDA, where members of the union are

successful, by judgment or settlement, in reforming the unlawful practices of their union and,

in particular, vindicating the free speech and voting rights of Title | of that statute, that a

common benefit has been conferred upon all members of the union such that attorney's

fees are properly paid from the union’s treasury. See New Leadership Committee, 23

F.Supp.2d at 307-309 (collecting cases).

The decision in Goldberg v. Hall, 1988 WL 215393 (S.D.N.Y. 1988) cited by Plaintiff

(Doc. 79, at 10), presents merely another case where the award of attorney's fees granted

was preceded by findings made which were “adverse to the defendants” but which the Court

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nonetheless found showed “[t]he nexus between plaintiff's lawsuit and the union’s reversal

of the decision [prompting Plaintiffs suit] evident.” Goldberg, 1988 WL 215393, at *5.

With respect to Koppel v. Wien, 743 F.2d 129 (2d Cir. 1984), cited by Plaintiff as

‘reversing and remanding for a determination of fees where plaintiff showed the result

obtained was proximately caused by the lawsuit even though no final determination had

been entered and the action had been dismissed as moot” (Doc. 79, at 10), the Court of

Appeals in Christensen v. Kiewit-Murdock Investment Corporation, summarized its prior

decision in Koppel as follows:

In Koppel, two participants in a real estate venture sued two of the venture's

general partners, seeking to enjoin a modification of the venture agreement.

After commencement of the law suit, the defendants decided not to modify the

agreement, and the suit was dismissed. The issue before our Court was

whether the law suit “entitle[d] the plaintiffs to recover their attorney's fees for

having conferred a benefit on the [venture’s] participants.” 743 F.2d at 130. In

remanding the case to the district court to consider whether there was a causal

connection between the law suit and the defendants’ decision not to modify the

agreement, we suggested that a fee award against the defendants might be

appropriate if it “would result in a pass-through of such litigation costs to all the

[venture's] participants.” /d. at 135. We observed that “[t]he better course,

however, would be to impose any award directly upon [the venture].” /d.

815 F.2d 206, 211 (2d Cir. 1987).

Koppel, therefore, is not a case addressing the application of the common benefit

fund doctrine in the circumstances such as those present here, where a lawsuit has been

initiated, class certification has only recently been moved for and has yet to be granted, no

settlement has been reached and no judgment entered, and there is an attempt to impose

on putative Class Members an obligation to pay counsel fees to Plaintiff's counsel, who is

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also putative class counsel, for settlements entered into by lessors of Defendants BKV (and

its predecessors, also Defendants here) prior to any class certification, settlement or

judgment.

Plaintiff also cites In re FedEx Ground Package System, Inc., Employment Practices

Litigation, 2011 WL 611883 (N.D. Ind. 2011), for the proposition that the Court's power to

issue a set-aside order “creating a common benefit fund” in a class action, multi-district

litigation, or similar complex litigation “is unquestioned.” (Doc. 79, at 4).

In FedEx, a multi-district litigation case, co-lead counsel sought creation of a fund to

be used to compensate themselves and all counsel who worked in the Multi-District

Litigation for the benefit of all plaintiffs. The Court denied the motion without prejudice “in

the event of reversal of this court's summary judgment opinions currently on appeal.” 2011

WL 611883, at “1. The Court had issued an order that in most cases the Plaintiff FedEx

drivers were independent contractors and not employees of FedEx. The litigation had

spawned four categories of cases: those in which the court granted class certification but

held the plaintiffs to be independent contractors; cases in which the court granted class

certification and found the plaintiffs to be employees as a matter of state law; cases in which

the court denied class certification which were then remanded; and fee shifting cases

involving Title VII discrimination claims for violations of other federal labor laws which were

also remanded. /d.

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Co-lead MDL counsel requested that the Court enter an order that would create a

common benefit fund for the compensation of co-lead and MDL counsel that would have

established a special master to decide petitions for reasonable attorney's fees and costs to

be paid by FedEx. /d. at*2. The proposal also addressed non-fee shifting claims and

encouraged co-lead counsel to settle with local counsel and to require submission of

disputes to a special master to decide the proper allocation of fees and costs. Counsel

representing the South Dakota plaintiffs objected to the motion in whole and argued that the

court did not have jurisdiction over the cases it had remanded before the entry of a set-

aside order. /d. The Court denied the motion for the entry of a common benefit set aside

order “without prejudice in the event of a reversal of this court’s summary judgment opinions

on appeal, and in that circumstance this court will not re-visit attorney fee issues related to

remanded cases.” /d. at *7. While the Court acknowledged its jurisdiction to “ensure the

fair and equitable distribution of attorneys’ fees among the various plaintiffs’ attorneys in this

MDL litigation, including any MDL member case filed in, removed to, or transferred to this

court under the auspices of this litigation,” it also made clear:

[t]his court doesn’t have jurisdiction over cases never actually before this court,

whether state or federal, even though it’s possible that attorneys in state or

federal cases might use the work done by co-lead and MDL counsel before this

court.

Id, at “3. The Court further indicated that it denied the motion for entry of a set-aside order

creating a common benefit fund for two reasons:

44

(1) the merits of the core of this litigation have been decided against the

plaintiffs in all but a few cases; and (2) the plaintiffs acknowledge what this

court suspected, which is that the nature of the cases remanded or yet to be

remanded are such that any allocation of attorneys’ fees must be determined

on a case by case basis.

Id. at *5.

Plaintiff in the present action misquotes the Court in FedEx, presumably for brevity’s

sake. What the Court there stated is as follows:

The court's power to issue a set-aside order creating a common benefit fund in

a multi-district litigation is unquestioned. “The ‘common fund’ doctrine allows

a court to distribute attorneys’ fees from a common fund created by settlement

or judgment in a class action” or similar complex litigation.

2011 WL 611883, at *5. However, the Court also noted that:

Set-aside orders creating common benefit funds usually are created early in a

litigation in anticipation of the plaintiffs’ success. No authority suggests a

practice of creating common benefit funds when the plaintiffs haven’t

succeeded on the core of their litigation. Cf. In re Air Crash Disaster, 549 F.2d

at 1017 (“The power of the court to order compensation, and payment of it . . .

is reinforced by the body of law concerning the inherent equitable power of a

trial court to allow counsel fees and litigation expenses out of the proceeds of

a fund that has been created, increased or protected by successful litigation.”

(emphasis in the original).

Id. at *6.

Because FedEx involved multi-district litigation, there are many aspects of that case

which have no application here; however what does have application are the principles cited

by the Court therein that: (1) a court does not have jurisdiction over cases not actually

before it; and (2) the power of the court to order compensation and to allow counsel fees in

litigation expenses out of the proceeds of a fund requires that the fund has been created,

45

increased, or protected by successful litigation. See also, Boeing Co. v. Van Gemert, 444

U.S. 472, 479, 100 S.Ct. 745, 62 L.Ed.2d 676 (1980).

Finally, this Court is constrained to point out that, as a result of this Court’s Order of

July 27, 2018, Defendant BKV was required to send curative notices, the text of which is set

forth in Doc. 58-1, to all putative Class Members to whom BKV had sent prior

communications which the Plaintiff had challenged as misleading, false or incomplete. The

Court's Order declared that any settlement entered into by BKV with any lessor party to an

oil and gas lease with BKV which required the execution of a cover letter, a Full and Final

Release and/or a Lease Amendment and Ratification was unenforceable unless and until

the class member re-signed and returned the cover letter, Full and Final Release and/or

Lease Amendment and Ratification (collectively designated the “Material”) after receipt of

the curative notice. The curative notice specifically notified members of the putative class

that Plaintiff Slamon had filed a complaint on behalf of himself and others similarly situated

against Carrizo and Reliance and was seeking to have the case certified as a class action

on behalf of “[alll persons or entities who own property within the Commonwealth of

Pennsylvania and who are, or have been, a royalty owner under a Paid Up Oil and Gas

Lease with Defendants in which natural gas has been produced under the lease (the

‘Class’).” The notice identified Attorney LeVan of the LeVan Law Group, LLC, and Attorney

Abramson of Berger & Montague P.C. as representing Plaintiff Slamon in the class action.

The notice set forth the claims alleged in the class action as well as BKV’s acquisition of the

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class leases from Carrizo and Reliance. Further, the notice explained the “BKV Materials”

and the consequence of signing the cover letter, the Lease Amendment and Release. The

notice stated in bold print that “[b]y signing the Materials, you will be entitled to receive a

sum certain within 60 days, but will be precluded from joining the Class and potentially will

be giving up valuable claims.” (Doc. 58-1).

In addition the notice warned:

You may be entitled to more (or less) money under the claims asserted in the

Class Action.

(Id. at 3). The notice further provided: “[ylou should also note that if you sign the Materials

to accept BKV's offer, Class Counsel may claim entitlement to a portion of your signing

bonus funds as attorneys’ fees under the ‘common benefit doctrine.” (/d.).

Despite the extensive explanation offered to members of the putative class and,

perhaps more importantly, notwithstanding this Court’s Order rendering unenforceable any

prior execution of a cover letter, release, or lease amendment so as to allow putative Class

Members an opportunity to decide against settling their claims against BKV and the other

Defendants in light of the intent of Plaintiff to seek class certification, various lessors

nonetheless again entered into releases and lease amendments with BKV in exchange for

valuable consideration.

From this sequence of events, the Court cannot draw the inferences which Plaintiff

argues should be drawn: (1) that the filing of Plaintiff's lawsuit and its actions thereafter in

opposing motions to dismiss and engaging in discovery present a clear nexus between

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those actions and the individual settlements undertaken by various lessors; (2) so as to

allow the conclusion that this lawsuit has conferred a substantial benefit upon the settling

lessors which (3) requires the establishment of a common benefit fund.

V. CONCLUSION

For the forgoing reasons, Plaintiff's Motion for an Order Establishing a Common

Benefit Fund (Doc. 75) will be denied.’

A separate Order follows.

°

□ VN

Robert D. Mariani

United States District Judge

1 The Court also notes that other than argument set forth in his brief, Plaintiff has not provided this

Court with any evidence by deposition, affidavit or otherwise showing the required “clear nexus” between

Plaintiffs initiation of suit and his efforts thereafter and the individual settlements entered into by any

individual lessor within the putative class.

48