Petition for Writ of Certiorari — Chieftain Royalty Company, Petitioner v. Charles David Nutley, et al.

APPENDICES

1a

APPENDIX A

PUBLISH

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

No. 16-6022

CHIEFTAIN ROYALTY COMPANY,

Plaintiff-Appellee,

v.

ENERVEST ENERGY INSTITUTIONAL FUND

XIII-A, L.P.; ENERVEST ENERGY INSTITUTIONAL

FUND XIII-WIB, L.P.; ENERVEST ENERGY INSTITUTIONAL FUND XIII-WIC, L.P.; ENERVEST OPERATING,

L.L.C.; FOURPOINT ENERGY, L.L.C.,

Defendants-Appellees,

and

SM ENERGY COMPANY, (including predecessors,

successors and affiliates),

Defendant.

DANNY GEORGE, personally and as Executor

of the Estate of Beverly Joyce George,

Objector-Appellant.

2a

No. 16-6025

(D.C. No. 5:11-CV-00177-D)

CHIEFTAIN ROYALTY COMPANY,

Plaintiff-Appellee,

v.

ENERVEST ENERGY INSTITUTIONAL FUND

XIII-A, L.P.; ENERVEST ENERGY INSTITUTIONAL

FUND XIII-WIB, L.P.; ENERVEST ENERGY INSTITUTIONAL FUND XIII-WIC, L.P.; ENERVEST OPERATING,

LLC; FOURPOINT ENERGY, LLC,

Defendants-Appellees,

and

SM ENERGY COMPANY, including predecessors,

successors and affiliates,

Defendant.

CHARLES DAVID NUTLEY,

Objector-Appellant.

Filed July 3, 2017

Appeal from the United States District Court for

the Western District of Oklahoma

3a

Before HARTZ and HOLMES, Circuit Judges.*

HARTZ, Circuit Judge.

After settlement of a class action for royalties from

gas wells, the United States District Court for the

Western District of Oklahoma awarded attorney fees to

class counsel and an incentive award to the lead plaintiff to be paid out of the common fund shared by class

members. The court rejected claims by two objectors,

and they appealed. Exercising jurisdiction under 28

U.S.C. § 1291, we reverse and remand. The district

court failed to compute attorney fees under the lodestar method, as required by Oklahoma law in this diversity case, and the incentive award is unsupported by

the record.

I.

BACKGROUND

The underlying class action alleged underpayment

of royalties by the defendants on gas from wells in Oklahoma. The parties reached a settlement for a cash

payment of $52 million, to be distributed pro rata to the

class members after payment of expenses and fees.

Class counsel moved for attorney fees in the amount of

40% of the settlement fund, plus interest; and the lead

plaintiff, Chieftain Royalty Company, requested an incentive award of 1% of the fund. Appellants Charles

David Nutley and Danny George were class members

who objected to these requests. After a hearing on the

*

The Honorable Neil Gorsuch participated in the oral argument but not in the decision. The practice of this court permits

the remaining two panel judges, if in agreement, to act as a quorum in resolving the appeal. See 28 U.S.C. § 46(d); see also United

States v. Wiles, 106 F.3d 1516, 1516, n.*(10th Cir. 1997) (noting

that this court allows remaining panel judges to act as a quorum to

resolve an appeal). In this case, the two remaining panel members

are in agreement.

4a

settlement and fee requests, the court awarded class

counsel 33 1/3% of the fund ($17,333.333.33) as attorney

fees and awarded Chieftain 1/2% of the fund ($260,000)

as an incentive award. The objectors appealed each

award. We address them in turn.

II. ATTORNEY FEE

There are two primary methods for determining

attorney-fee awards in common-fund class-action cases.

The first is the percentage-of-the-fund method, which

awards class counsel a share of the benefit achieved for

the class. See Newberg on Class Actions § 15:63 (5th

ed. 2016) (Newberg). Many courts, including this circuit, consider 12 factors to determine the appropriate

percentage. See Gottlieb v. Barry, 43 F.3d 474, 482 &

n.4 (10th Cir. 1994). These factors were first set forth

in Johnson v. Georgia Highway Express, Inc., 488 F.2d

714, 717–19 (5th Cir. 1974), which was not a commonfund case.

We have stated the factors as:

the time and labor required, the novelty and

difficulty of the question presented by the case,

the skill requisite to perform the legal service

properly, the preclusion of other employment

by the attorneys due to acceptance of the case,

the customary fee, whether the fee is fixed or

contingent, any time limitations imposed by the

client or the circumstances, the amount involved and the results obtained, the experience, reputation and ability of the attorneys,

the “undesirability” of the case, the nature and

length of the professional relationship with the

client, and awards in similar cases.

5a

See Gottlieb, 43 F.3d at 482 n.4. The second method is

the lodestar approach. The court first determines the

lodestar by multiplying the number of hours reasonably

spent on the litigation by a reasonable hourly rate. See

Anchondo v. Anderson, Crenshaw & Assocs. LLC, 616

F.3d 1098, 1102 (10th Cir. 2010). This “produces a presumptively reasonable fee,” but it “may in rare circumstances be adjusted to account for the presence of special circumstances.” Id.

This court has approved both methods in commonfund cases, although expressing a preference for the

percentage-of-the-fund approach. See Gottlieb, 43 F.3d

at 483 (“In our circuit, following Brown [v. Phillips Petroleum Co., 838 F.2d 451 (10th Cir. 1988),] and Uselton

[v. Commercial Lovelace Motor Freight, Inc., 9 F.3d

849 (10th Cir. 1993)], either method is permissible in

common fund cases; however, Uselton implies a preference for the percentage of the fund method.”). Our approach also “has been called a ‘hybrid’ approach, combining the percentage fee method with the specific factors traditionally used to calculate the lodestar.” Id. at

482–83.

The district court chose the percentage-of-the-fund

analysis, explaining that this is “[t]he preferred method

of determining a reasonable attorney fee award in

common fund cases.” JA at 523 (Dist. Ct. Order). It

overruled the objectors’ argument that the lodestar approach should govern and that the fee is excessive under that analysis. The court stated that “[b]oth state

and federal cases recognize and/or permit a percentage

of fund recovery under the common fund doctrine.” Id.

It added that in any event, the result would not have

differed under a lodestar analysis, citing Newberg on

Class Actions § 14.6 at 551 (4th ed. 2002), for the proposition that empirical studies show that the average fee

6a

award is about one-third of the recovery, whichever

method is used. See id. at 524.

Although a contingency-fee agreement allowed

class counsel to recover 40% of any common-fund recovery, the district court ruled that “in fairness and

consistent with the best interest of the Class,” counsel

should recover 33 1/3% of the settlement. Id. at 523. It

stated that an award of that percentage was not unusual, pointing out that “[t]he Tenth Circuit has previously

identified the typical fee range as 23.7% to 33.7%.” Id.

at 526 (citing Brown, 838 F.2d at 455 n.2). It then recited the Johnson factors and found that “most, if not all,

... support Class Counsel’s fee request, as reduced by

the Court.” Id. It explained:

Class Counsel has conducted the Litigation and

achieved the Settlement with skill, perseverance and diligent advocacy;

The Litigation involved complex factual and legal issues and was actively prosecuted for over

four years;

Had Class Counsel not achieved the Settlement, there would remain a significant risk

that Class Representative and the other members of the Settlement Class may have recovered less or nothing from the Settling Parties;

Class Counsel devoted substantial time and resources to achieve the Settlement.

Id. (internal numbering removed). The court added

that its award was informed by “[t]he market rate for

Class Counsel’s legal services.” Id. at 528.

We review a district court’s award of attorney fees

for abuse of discretion. See Gottlieb, 43 F.3d at 486.

This includes review de novo of the legal principles un-

7a

derlying the fee award—such as the choice of whether

to apply state or federal law. See Rosenbaum v. Macallister, 64 F.3d 1439, 1444 (10th Cir. 1995); see also Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405 (1990)

(district court abuses its discretion in Rule 11 determination if ruling is based on an erroneous view of the

law).

Appellants argue that Oklahoma law governs the

award of attorney fees in this case and requires using

the lodestar approach rather than a percentage-of-thefund analysis. We agree.1

Because federal jurisdiction in this common-fund

case is based on the diversity of the parties, see 28

U.S.C. § 1332, the doctrine established in Erie R.R. Co.

v. Tompkins, 304 U.S. 64 (1938), requires us to apply

Oklahoma law governing the award of attorney fees in

common-fund cases. Under Erie, “federal courts in diversity cases must respect the definition of statecreated rights and obligations by the state courts.”

Byrd v. Blue Ridge Rural Elec. Coop., 356 U.S. 525, 535

(1958). In other words, the federal courts must recognize state-created substantive rights. Those rights include “the rules of decision by which [the] court will adjudicate [substantive] rights.” Mississippi Pub. Corp.

v. Murphree, 326 U.S. 438, 446 (1946) (describing prohibition in Rules Enabling Act, 28 U.S.C. § 2072(b),

against federal rules of procedure that modify substantive rights); see Shady Grove Orthopedic Assocs., P.A.

1

We reject appellee’s contention that appellants waived this

argument in district court. The district court wrote: “Objectors

Danny George and Charles David Nutley objected to Class Counsel’s fee request and the amount of fees requested on the grounds

that Oklahoma law applies to Class Counsel’s request, under Oklahoma law, a lodestar analysis is required, and the fees are excessive under either analysis.” JA 523 (Dist. Ct. Order).

8a

v. Allstate Ins. Co., 559 U.S. 393, 407 (2010) (plurality

opinion); Scottsdale Ins. Co. v. Tolliver, 636 F.3d 1273,

1280 (10th Cir. 2011) (applying Oklahoma statute authorizing award of fees to defendant when judgment

awarded is less than amount of offer of judgment). But

the Erie doctrine sometimes also requires federal

courts to apply state law that, in other contexts, might

be deemed matters of procedure. “[T]he twin aims of

the Erie rule [are] discouragement of forum-shopping

and avoidance of inequitable administration of the

laws.” Hanna v. Plumer, 380 U.S. 460, 468 (1965). To

advance those aims, at least when there is no contrary

federal rule of civil procedure properly enacted under

the Rules Enabling Act, see Shady Grove, 559 U.S. 393

(2010), the Erie doctrine requires federal courts to

“conform as near as may be—in the absence of other

considerations—to state rules even of form and mode

where the state rules may bear substantially on the

question whether the litigation would come out one

way in the federal court and another way in the state

court if the federal court failed to apply a particular

rule.” Byrd, 356 U.S. at 536–37.

We now apply this doctrine in the present context.

To begin with, it is necessary to distinguish between

two different types of attorney fees, depending on the

basis for the fee award. In this circuit we have used the

labels substantive and procedural to classify the two

types of fees. Substantive fees are those that “are tied

to the outcome of the litigation” and procedural fees are

those that are “generally based on a litigant’s bad faith

conduct in litigation.” Scottsdale, 636 F.3d at 1279.

These labels are shorthand for those attorney fees that

are governed by Erie (substantive fees) and those that

are not (procedural fees). Substantive fees are part and

parcel of the cause of action over which we have diver-

9a

sity jurisdiction. For example, if the cause of action is

for bad-faith denial of insurance coverage and state law

authorizes an award of attorney fees to a successful insured, then the right to an award of attorney fees is

part of the state substantive right and the federal court

must recognize it. In contrast, an attorney-fee award

against bad-faith conduct in the litigation has nothing

to do with the nature of the cause of action and does not

derive in any way from state substantive law. “[F]eeshifting here is not a matter of substantive remedy, but

of vindicating judicial authority.” Chambers v. NASCO, Inc., 501 U.S. 32, 55 (1991) (internal quotation

marks omitted) (applying federal law in imposing sanctions for bad-faith litigation conduct in diversity case).

One way to see that Erie deference to state law has no

purchase in this context is to note that “there is no risk

that [an award of sanctions for bad-faith conduct during

litigation] will lead to forum-shopping.” Id. at 53.

This appeal concerns substantive attorney fees.

Whether to award counsel a fee out of a common fund is

not based on whether counsel behaves properly during

the litigation; rather, the award is “tied to the outcome

of the litigation.” Scottsdale, 636 F.3d at 1279 (emphasis added) (fee award based on comparison of ultimate

judgment to offer of judgment). In this context we

have said, “In a diversity case, the matter of attorney’s

fees is a substantive legal issue and is therefore controlled by state law.” N. Tex. Prod. Credit Ass’n v.

McCurtain Cty. Nat’l Bank, 222 F.3d 800, 817 (10th

Cir. 2000) (affirming denial of attorney fees because Oklahoma law did not authorize such an award for successful defense against claims of fraud and conspiracy). Our

position finds support in leading authorities. Moore’s

Federal Practice states that “when ... fees are connected to the substance of the case,” the question of wheth-

10a

er a fee should be awarded is substantive.

§ 124.07[3][b] (3d ed. 2011) (Moore’s). And Wright &

Miller endorses the view that “state law [is] controlling

when it forbids an award of attorney’s fees” and that

“when state law provides for the recovery of an attorney’s fee as a part of the claim being asserted[,] ... the

federal court should permit an award of a fee on the

theory that it is part of the substantive right in issue.”

10 Charles Alan Wright, Arthur R. Miller, Mary Kay

Kane & Richard L. Marcus, Federal Practice and Procedures § 2669 at 263 (3d ed. 2014) (Wright & Miller).2

There remains, however, the question whether the

federal court must follow state law governing how to

calculate the proper attorney fee. On that issue, there

is no binding precedent in this circuit. But cf. Davis v.

Prudential Prop. & Cas. Co., 145 F.3d 1345, at *3 (10th

Cir. 1998) (unpublished disposition) (“The calculation

of attorney’s fees in a diversity case is determined with

reference to state law.” (emphasis added)). But there

appears to be a consensus among those circuits that

2

The treatise suggests that there may be some contrary authority, stating that “cases have held that a federal judge has discretion to allow or disallow attorney fees, and have concluded that

the judge’s exercise of this discretion is not to be fettered by state

doctrines relating to attorney’s fees.” 10 Wright & Miller § 2669 at

261–62. But the six cases cited for this proposition are distinguishable from our case. Two of the cases involved fee sanctions

for bad-faith conduct in litigation. See Chamber, 501 U.S. at 45–

46; Republic of Cape Verde v. A & A Partners, 89 F.R.D. 14, 20

n.12 (S.D.N.Y. 1980). And in the other four the jurisdiction of the

federal court was based on a federal question, not diversity. See

Bank of China v. Wells Fargo Bank & Union Trust Co., 209 F.2d

467, 473 (9th Cir. 1953); Palomas Land & Cattle Co. v. Baldwin,

189 F.2d 936, 938 (9th Cir. 1951); Aspira of New York, Inc. v. Bd.

of Educ. of City of New York, 65 F.R.D. 541, 541– 42 (S.D.N.Y.

1975); Bank of America Nat’l Tr. and Sav. Ass’n v. Mamakos, 57

F.R.D. 198, 199 (N.D. Cal. 1972).

11a

have considered the matter. We have found decisions

from five other circuits. When state law governs

whether to award attorney fees, all agree that state law

also governs how to calculate the amount. See, e.g., In

re Volkswagen & Audi Warranty Extension Litig., 692

F.3d 4, 15, 21–22 (1st Cir. 2012) (in diversity case “the

issue of attorneys’ fees has long been considered for

Erie purposes to be substantive and not procedural,

and so state-law principles normally govern the award

of fees,” and “[t]he district court should determine

which method [lodestar or multifactor approach] Massachusetts would apply here”); Mathis v. Exxon Corp.,

302 F.3d 448, 461 (5th Cir. 2002) (“State law controls

both the award of and the reasonableness of fees

awarded where state law supplies the rule of decision.”); Davis v. Mut. Life Ins. Co. of New York, 6 F.3d

367, 382–83 (6th Cir. 1993); Riordan v. Nationwide Mut.

Fire Ins. Co., 977 F.2d 47, 53 (2d Cir. 1992); N. Heel

Corp. v. Compo Indus., 851 F.2d 456, 475 (1st Cir.

1988).3

A leading treatise lends further support. Moore’s

states, “When state law controls, state law governs not

only the right to fees but also the method of calculating

the fees.” Moore’s § 124.07[3][b] (emphasis added). The

calculation of attorney fees is considered substantive

law because “[t]he method of calculating a fee is an inherent part of the substantive right to the fee itself and

reflects substantive state policy.” Id. (footnote omitted).

3

Chieftain suggests that the Supreme Court held in Boeing

Co. v. Van Gemert, 444 U.S. 472, 478 (1980), that federal law governs how to calculate fees in a common-fund case. But there is no

discussion in that case regarding what law governs. The decision

cannot be authority on an issue not addressed.

12a

Here, the attorney-fee award was based on the

outcome of the litigation not the district court’s power

to discipline the litigants. State law therefore governs

the propriety of granting a fee award. And we must

also apply the State’s rules on how the amount of the

fee is to be calculated because they are “rules of decision by which [the] court will adjudicate [the] right[] [to

the fee].” Murphree, 326 U.S. at 446. After all, if there

is no sufficient federal interest to override a state’s decision not to allow common-fund attorney fees, it is

hard to see how there could be a sufficient interest to

override state law on how to compute the fee. To be

sure, the ultimate standard for awarding a fee under

either the lodestar or Johnson methodology is whether

the fee is reasonable, so one might argue that the

method of calculation to determine reasonableness is

merely a matter of procedure. But it is state substantive law that cabins the meaning of reasonable. If state

law declares that failure to wear a seatbelt while riding

in a motor vehicle is never unreasonable (or is always

unreasonable), there can be no question that a federal

court hearing a common-law negligence claim in diversity must comply with that declaration. Similarly, a

federal court in a diversity action must follow state law

declaring that, absent extraordinary circumstances, a

reasonable attorney fee is the fee computed under the

lodestar method. We therefore see no reason to depart

from what appears to be the consensus view that state

law governs how to calculate a substantive attorney

fee.

Chieftain nevertheless relies on Federal Rule of

Civil Procedure 23(h), which governs class actions in

federal court, arguing that “the method used to assess

the reasonableness of [class counsel’s] fee is a procedural matter governed by Rule 23(h), not state proce-

13a

dural law.” Chieftain Br. at 18. We agree that this

would be a more challenging issue if a federal rule of

procedure said, for example, that fees should be calculated under the Johnson methodology. We would first

have to determine whether the rule violated the prohibition in the Rules Enabling Act against rules that

modify substantive rights. See 28 U.S.C. § 2072(b).

And then assuming (although, for reasons discussed

above, we doubt the validity of the assumption) that

the rule passed muster, we would probably have to apply it. See Shady Grove, 559 U.S. at 393. But Rule

23(h) does not establish a rule of decision for assessing

attorney fees.4 It provides that “[i]n a certified class

action, the court may award reasonable attorney’s fees

and nontaxable costs that are authorized by law or by

4

Rule 23(h) states in full:

Attorney’s Fees and Nontaxable Costs. In a

certified class action, the court may award reasonable attorney’s fees and nontaxable costs that are authorized by law or by the parties’ agreement. The

following procedures apply:

(1) A claim for an award must be made by motion under Rule 54(d)(2), subject to the provisions of this subdivision (h), at a time the court

sets. Notice of the motion must be served on

all parties and, for motions by class counsel, directed to class members in a reasonable manner.

(2) A class member, or a party from whom

payment is sought, may object to the motion.

(3) The court may hold a hearing and must

find the facts and state its legal conclusions

under Rule 52(a).

(4) The court may refer issues related to the

amount of the award to a special master or a

magistrate judge, as provided in Rule

54(d)(2)(D).

14a

the parties’ agreement.” And it outlines procedures to

be followed before granting such an award: “A claim

for an award must be made by motion ... at a time the

court sets”; “[n]otice of the motion must be served on

all parties and, for motions by class counsel, directed to

class members in a reasonable manner”; “[a] class

member, or a party from whom payment is sought, may

object to the motion”; “[t]he court may hold a hearing

and must find the facts and state its legal conclusions ... .”; and “[t]he court may refer issues related to

the amount of the award to a special master or a magistrate judge ... .” In short, the rule addresses only how

to conduct the court proceedings for determining the

fee award. It does not provide any rules to guide the

court on how to calculate the amount of the award.

Thus, we turn to Oklahoma law to determine how

to compute the attorney fee in this case. The controlling precedent is Burk v. Oklahoma City, 598 P.2d 659

(Okla. 1979), a common-fund case. That decision directed that to enable a court to determine attorney

fees, attorneys in Oklahoma must henceforth (the attorneys in that case were excused from this requirement) present “detailed time records showing the work

performed and offer evidence as to the reasonable value for the services performed.” Id. at 663. This allows

the court to determine the lodestar. See id. Then other

factors can be considered to provide an “incentive fee

or bonus.” Id. at 661 (internal quotation marks omitted); see Hess v. Volkswagen of Am., Inc., 341 P.3d 662,

667 (Okla. 2014) (the lodestar “fee may be enhanced by

application of certain factors”). The enhancement factors set forth in Burk have now been codified in a state

statute. See 12 O.S. Supp. 2013 § 2023(G)(4)(e) (effective September 10, 2013, for motions filed after that

date). The statutory factors are essentially the same as

15a

the Johnson factors, with the only material difference

being that the statutory factors include the risk of recovery in the litigation. Compare id. with Johnson, 488

F.2d at 717–19.

Burk continues to be good law. See, e.g., Hess, 341

P.3d at 667; Spencer v. Okla. Gas & Elec. Co., 171 P.3d

890, 895 (Okla. 2007). We have been pointed to no contrary Oklahoma authority, nor have we found any. If

anything, the Oklahoma Supreme Court has limited the

application of the enhancement factors. In Hess it declared that “[t]here is a strong presumption that the

lodestar method, alone, will reflect a reasonable attorney fee.” 341 P.3d at 671. In support of that presumption the court cited Perdue v. Kenny A. ex rel. Winn,

559 U.S. 542, 552–54 (2010), thereby signaling that it

would follow the lead of the United States Supreme

Court in greatly limiting departures from the lodestar

figure.

The district court did not use the lodestar method

to calculate class counsel’s fee in this case. Class counsel failed to provide the information necessary to apply

that method. As already noted, in 1979 the Oklahoma

Supreme Court stated that attorneys seeking fees must

present “detailed time records” and “evidence as to the

reasonable value for the services performed.” Burk,

598 P.2d at 663. Class counsel did not come close to

performing this task. As the district court recognized,

“Now, if I were to determine that the lodestar is applicable, then I think you will agree with me we just don’t

have enough information in this case right now.” JA at

467–68. (Transcript of Fairness Hearing). Although

class counsel claimed to have spent “much more” than

10,000 hours on the case, id. at 434, the firm acknowledged that “we don’t keep detailed time records on

every hour we do in these cases,” id. at 421. Any time

16a

figures were mere estimates. To be sure, the district

court stated that “utilization of either the common fund

or lodestar method would not affect this Court’s ruling.” Id. at 524. But this statement was not, and could

not have been, based on computing the fee by both

methods. Rather, the court was simply noting that empirical studies indicated that awards turned out to be

about the same under both methods.

Therefore, we must set aside the attorney-fee

award. The district court will have to decide in the first

instance whether any award can be made in light of the

absence of contemporaneous time records. It is unfortunate that class counsel did not do the necessary

homework on Oklahoma law.5

III. INCENTIVE AWARD

At the fairness hearing, class counsel sought an incentive award for the lead plaintiff, Chieftain, for its

involvement in the litigation through its President,

Robert Abernathy. Such awards are not uncommon.

An empirical study published in 2006 reviewed 374

opinions in class actions from 1993 to 2002. See Theodore Eisenberg & Geoffrey P. Miller, Incentive Awards

to Class Action Plaintiffs: An Empirical Study, 53

UCLA L. Rev. 1303 (2006) (Empirical Study). It re5

Finally, we reject appellant Nutley’s argument that the

award of a fee is inappropriate because of a conflict of interest between class counsel and Chieftain. Nutley argues that Chieftain

and class counsel have a longstanding arrangement of filing class

actions together, that this “produces a disabling conflict of interest

that deprived the class of adequate representation,” and that this

“should deprive Class Counsel of their right to demand a fee.”

Aplt. Br. (Nutley) at 58. We question whether this argument was

preserved below. But in any event, this alleged relationship is not

enough in itself to establish a disabling conflict.

17a

ported that incentive awards were granted in about

28% of settled class actions; on average the incentive

award was .16% of the class recovery, with a median of

.02%. Id. at 1303. The average award per class representative was $15,992 and the median award was

$4,357. Id. at 1348. More recent studies have shown a

marked increase in the frequency of incentive awards,

with the rate approaching 80% by 2011. See Newberg

§ 17:7. The average award dropped to $11,697 and the

median increased to $5,250 in a study of cases from 2006

to 2011. See id. 17:8.

Counsel for Chieftain offered two grounds for an

incentive award. One was the “risk or burden” Mr. Abernathy incurs as a result of his role as lead plaintiff.

Counsel gave two examples. First, because he is litigating against a company called Merit, “he is not able to

sit and talk to people at Merit like an ordinary royalty

owner would because they know he’s our client and

they know he is in these cases, so he has to go through

a little different procedure. And it’s very difficult for

[Mr. Abernathy] to just do basic deals at times compared to your average royalty owner.” Id. at 440. Second, during this litigation he could not talk to the law

firm that ordinarily does his estate planning, because

that firm represents defendants in the underlying action. Counsel added that “there is a lot of hardship and

risk when you’re in the State of Oklahoma where a lot

of the buildings downtown are oil and gas companies

and you live here and you’re going against them in several different cases in ways that they don’t like.” Id.

Counsel for Chieftain also sought to justify an incentive award by describing Mr. Abernathy’s contribution to the case—his services rendered—as follows:

18a

He is a licensed attorney. He has represented to me that he spent somewhere around

200 to 300 hours working in this case. And I

know that without looking at any—what he

does every day. I know that he has been directly involved in this case.

His deposition was taken in this case. He

attended, I believe, two of the depositions in

this case. He helps us prepare for all kinds of

things during the settlement process. He reviews the pleadings in this case. He has been

active in reviewing the pleadings for the settlement and the settlement documentation.

He is an advocate of royalty owners here in

the state of Oklahoma. He has many, many

friends that are royalty owners that he is in direct contact with about what happens in these

cases and their rights in general.

As I mentioned, he told me a story recently, the OCC has had him go out and speak to

out-of-state Oklahoma royalty owners. He was

telling me—I think it was last year he was in

Fort Myers and a lady came up to him and said,

Are you the Chieftain from Chieftain vs. QEP?

He said, Yes.

She said, I want to give you a hug.

He said, Why?

She said, I got $40,000 in that case. Thank

you for what you did.

So, you know, this isn’t, as the objectors

try to insinuate, some guy who is just out there

and doesn’t know what he is doing and letting

19a

the lawyers run amuck over him. He is a real

active helpful client.

Also, in this case, because there is this future component, somebody has got to look out

and see if the defendants are actually complying with their future benefits under the settlement.

And what we will do and what Mr. Abernathy will do is we will look at his statements

every month. We will probably have Ms. Ley

and class counsel look at them too. We will be

doing this for the next three years to make

sure that nothing changes on the way his payments are calculated.

We had an audit provision in the QEP case.

We don’t have it here. But, based on that experience, I think Mr. Abernathy would say—

when we talked—it will probably be another 50

hours to 100 hours doing that over the next

three years. Hopefully, it’s not that much, but

we have no way to know. So this is real time.

He is a licensed attorney.

JA at 438–39 (Transcript of Fairness Hearing).

The district court agreed that Chieftain should receive an incentive award. It stated that “‘a class representative may be entitled to an award for personal risk

incurred or additional effort and expertise provided for

the benefit of the class,’” id. at 528 (Dist. Ct. Order)

(quoting UFCW Local 880–Retail Food Emp’rs Joint

Pension Fund v. Newmont Mining Corp., 352 F. Appx.

232, 235 (10th Cir. 2009)), and that “[c]ase contribution

awards are meant to compensate class representatives

for their work on behalf of the class, which has benefit-

20a

ed from their representation,” id. (internal quotation

marks omitted). It also observed that “[i]ncentive

awards are not uncommon and are particularly given

where a common fund has been created for the benefit

of the entire class.” Id. at 529. It concluded that it

should consider “(1) the actions the class representative

took to protect the interests of the class; (2) the degree

to which the class has benefitted from those actions;

and (3) the amount of time and effort the class representative expended in pursuing the litigation.” Id.

The district court ruled as follows:

A Case Contribution Award is appropriate in

this case. Class Representative—through its

President, Robert Abernathy—has been actively involved in this Litigation since its inception. Mr. Abernathy has contributed by reviewing draft pleadings and motions, searching

for and producing records, reviewing filings,

communicating regularly with Class Counsel,

making himself available by telephone during

the formal mediation, continuously monitoring

the Litigation and settlement process, and approving the terms of the Settlement. Mr. Abernathy’s efforts helped lead to a settlement

that greatly benefits the Class, and Class Representative should be rewarded for those efforts.

Id.

As for the amount of the award, the district court

said that 1/2% of the fund was “fair” and “reasonable.”

Id. at 530. In reducing the award from the amount

sought (1%), the court pointed to the reduction of the

attorney fee sought and stated that “a commensurate

reduction of the requested [incentive reward] is appro-

21a

priate.” Id. The court also pointed out that “[s]imilar

[incentive] awards have been granted in similar cases.”

Id. (citing opinions in other cases, apparently involving

royalty litigation, in Oklahoma federal district court in

which the incentive award was between 1% and 2% of

the settlement amount).

We review a district court’s grant of an incentive

award for abuse of discretion. See Cobell v. Jewell, 802

F.3d 12, 23 (D.C. Cir. 2015); Montgomery v. Aetna Plywood, Inc., 231 F.3d 399, 408 (7th Cir. 2000); UFCW Local 880, 352 F. App’x at 235 (“Generally, our standard

of review for a district court’s award of attorney fees in

the class-action context is abuse of discretion”; and “the

district court’s familiarity with the parties and the proceedings supports an abuse-of-discretion standard” in

reviewing an incentive award); Newberg § 17:21 (endorsing analysis in UFCW Local 880).

Appellant Nutley argues on appeal that incentive

awards are unlawful per se in common-fund cases. He

asserts that two U.S. Supreme Court decisions—Cent.

R.R. & Banking Co. v. Pettus, 113 U.S. 116 (1885), and

Trustees v. Greenough, 105 U.S. 527 (1881)—“hold that

a litigant whose efforts create a common fund may recover expenses reasonably incurred, including its reasonable attorneys’ fees, but not incentive awards for

services rendered.” Aplt. Br. (Nutley) at 27. But Nutley forfeited any argument about the general legality of

incentive awards by failing to raise it below. We cannot find any indication in the record that Nutley raised

this argument in district court. On the contrary, he

stated in his written objection to the award that incentive awards are sometimes proper. See JA at 319 (Nutley’s objection) (“The concept of a service award is not

unfamiliar in this Circuit, and may be appropriate when

necessary to induce people to become named repre-

22a

sentatives, or to compensate personal risk or ‘additional

effort expended’ by the representative in prosecuting

the suit.”). Nutley claims that he preserved this issue

because “[a]t the fairness hearing, [his] counsel challenged Chieftain’s right to claim any award for Abernathy’s time on the case.” Aplt. Joint Reply Br. at 24–

25. As that statement suggests, however, his counsel

spoke at the fairness hearing only of the propriety of

Chieftain’s incentive award—not of the legality of

these awards in general. See JA at 459–62 (Transcript

of Fairness Hearing). And the district court made no

ruling on the broader issue. Because this argument

was forfeited, we can review only under the plain-error

standard. See Richison v. Ernest Grp., Inc., 634 F.3d

1123, 1130 (10th Cir. 2011). But ordinarily we will not

even do that unless the party specifically argues plain

error in its briefs, see id. at 1131, and Nutley’s briefs

made no such argument.

We therefore turn to the specific award in this case.

As stated above, Chieftain raised in district court two

potential grounds for receiving an incentive award.

One was the risk or burden incurred by Chieftain and

Mr. Abernathy. Courts have recognized that an award

may be appropriate to provide an incentive to act as a

named plaintiff. See In re Synthroid Mktg. Litig., 264

F.3d 712, 722–23 (7th Cir. 2001) (“Incentive awards are

justified when necessary to induce individuals to become named representatives ... . But if at least one

[class member] would have stepped forward without

the lure of an ‘incentive award,’ there is no need for

such additional compensation.”); Cook v. Niedert, 142

F.3d 1004, 1016 (7th Cir. 1998) (“Because a named

plaintiff is an essential ingredient of any class action, an

incentive award is appropriate if it is necessary to induce an individual to participate in the suit.”); Newberg

23a

§ 17:3 (incentive awards can “incentivize class members

to step forward” despite risks such as the possibility

that the class representative could be liable for the

costs of the suit or might face retaliation).

The district court, however, did not justify the incentive award on the basis of any risk or burden incurred by Chieftain or Mr. Abernathy or on the need

for an incentive for Chieftain to act as a named plaintiff.

Indeed it made no findings on the subject. This is understandable, given (1) that the notice to the class stated that the requested incentive award would be compensation for time and effort (with no mention of risk or

burden) and (2) that the presentation of risk and burden at the hearing on the award was quite weak.6 Accordingly, there is no foundation for us to affirm, in

whole or in part, the incentive award on this ground.

6

There was no assertion that Mr. Abernathy had been retaliated against or even ostracized as a result of serving as lead plaintiff. His inability to employ an attorney from the law firm of opposing counsel to assist him with his estate planning is hardly

cause for a bonus. He did not say that he could not negotiate deals

with energy companies; he complained only that he had to do it a

little differently than other royalty owners might have to, and he

provided no specifics on how this process was more timeconsuming or expensive than the norm. And the court could give

little weight to the bald statement that “there is a lot of hardship

and risk,” JA at 440, to going against major companies in the state,

particularly when counsel indicated that Mr. Abernathy is a respected and even beloved member of the community. Further, his

company recovered unpaid royalties from the suit, which should

be incentive enough for most plaintiffs, particularly when royalty

litigation may be the business model for the company. See Robles

v. Brake Masters Sys., Inc., No. CIV 10-0135 JB/WPL, 2011 WL

9717448, at *12 (D.N.M. Jan. 31, 2011) (denying an incentive award

in part because lead plaintiff “offer[ed] no argument or evidence,

competent or otherwise, that other class representative[s] were

not forthcoming, and that an incentive award [was] justified for

bringing a representative forward”).

24a

The district court is free to decide in the first instance

whether under the circumstances of this case—

including the absence of an initial court finding on the

matter—Chieftain should be given another opportunity

on remand to make a better showing under the risk-orburden rationale.

Hence, we need analyze only Chieftain’s second argument in support of an award—that it would fairly

compensate for the services rendered by Mr. Abernathy. Our first task is to determine the governing

law. We think it clear that, as with the attorney-fee

award discussed above, Erie requires us to apply Oklahoma law. Unfortunately, the Oklahoma Supreme

Court apparently has not addressed incentive fees, nor

have we been directed to or found any opinions by lower courts of that state. Our task then is to make an informed prediction of what the State’s highest court

would do. See United States v. Badger, 818 F.3d 563,

568–69 (10th Cir. 2016). When “no state cases exist on a

point, we turn to other state court decisions, federal decisions, and the general weight and trend of authority.”

Sender v. Simon, 84 F.3d 1299, 1303 (10th Cir. 1996) (internal quotation marks omitted). In conducting this

analysis we have the advantage of a treatise on class

actions that discusses and cites relevant judicial decisions.

To begin with, we note that courts regularly give

incentive awards to compensate named plaintiffs for

the work they performed—their time and effort invested in the case. See, e.g., Cobell v. Salazar, 679 F.3d 909,

922–23 (D.C. Cir. 2012) (district court did not err in

finding that lead plaintiff’s “singular, selfless, and tireless investment of time, energy, and personal funds to

ensure survival of the litigation [merited] an incentive

award”); Rodriguez v. West Publ’g Corp., 563 F.3d 948,

25a

958 (9th Cir. 2009) (“Incentive awards ... are intended

to compensate class representatives for work done on

behalf of the class ... .”). These services typically include “monitoring class counsel, being deposed by opposing counsel, keeping informed of the progress of the

litigation, and serving as a client for purposes of approving any proposed settlement with the defendant.”

Newberg § 17:3. The award should be proportional to

the contribution of the plaintiff. See Phillips v. Asset

Acceptance, LLC, 736 F.3d 1076, 1081 (7th Cir. 2013) (if

the lead plaintiff’s services are greater, her incentive

award likely will be greater); Rodriguez, 563 F.3d at

960 (incentive award should not be “untethered to any

service or value [the lead plaintiff] will provide to the

class”); Newberg § 17:18.

In our view, however, the Oklahoma Supreme

Court would not approve the award given here. The

district court granted Chieftain a 1/2% incentive award

of $260,000. Yet the weight of authority apparently disfavors percentage-based awards. See Newberg § 17:16

(“Percentage-based awards are disfavored, if not altogether forbidden.”). There are several reasons to reject the practice. Most importantly, “scaling those rewards according to the size of the common fund is at

best a rough proxy in that the services and risks are

not necessarily directly related to the size of the settlement.” Id. In addition, percentage awards “skew

the class representatives’ incentives by encouraging

them to hold out for greater recovery ... when in fact

the class’s interest would be best served by a settlement”; “percentage awards privilege monetary recoveries over other remedies, such as injunctive relief,

creating a potential conflict between the interest of the

class representative and the class”; “percentage awards

threaten to be excessive”; and “paying the class repre-

26a

sentatives a portion of the settlement fund is simply

unseemly: it gives the appearance that the representative is either a professional plaintiff, or bounty hunter,

not a servant for the class.” Id. (footnotes omitted). If

a percentage calculation is to be made at all, it should

be made only to “check a flat award for excessiveness

by reference to the percentage of the fund it represents.” Id.

We therefore examine whether the award to Chieftain can be justified as payment at a reasonable rate for

reasonable time expended on services rendered that

were helpful to the litigation and did not duplicate what

could be performed less expensively by counsel. Appellant George concedes that such payment would be

proper.7 See Aplt. Br. (George) at 30. And this approach to measuring the value of the work is consistent

with the Oklahoma Supreme Court’s lodestar approach

to attorney-fee awards in common-fund cases. The

question is what rate and what efforts are reasonable.

The answer must be supported by sufficient evidence in

7

We reject appellant Nutley’s argument that Chieftain is not

entitled to any incentive award at all. He states on appeal that

“Chieftain argued below that it should be compensated because

Abernathy’s work ‘as an attorney, contributed to the prosecution

and resolution of this case.’” Aplt. Br. (Nutley) at 32 (quoting Fee

Memorandum, JA 305). He contends that “a litigant who is also an

attorney is not entitled to collect attorneys’ fees that might otherwise be authorized.” Id. at 33. And he says that “seeking compensation as an attorney produces a conflict of interest sufficient

to disable Chieftain from acting as an adequate representative for

the class.” Id. We do not think Mr. Abernathy is seeking compensation for his legal work but, as we discuss below, the record does

not contain sufficient evidence of what services he provided that

entitle him to an award. Once this is established, the district court

should determine in the first instance whether he can be compensated for any “legal work” and, if so, what the amount of compensation should be.

27a

the record. See Cook, 142 F.3d at 1016 (upholding district court’s incentive award after noting that findings

justifying the award were “well-supported by the evidence”). This evidence might be provided through “affidavits submitted by class counsel and/or the class representatives, through which these persons testify to

the particular services performed, the risks encountered, and any other facts pertinent to the award.”

Newberg § 17:12. “Courts may also receive this evidence by live testimony at the fairness hearing.” Id.

They “regularly reject awards where the relevant facts

are not sufficiently documented.” Id. (collecting cases).

The record before us is devoid of evidence from

which a computation could be made. The district court

was not provided supporting documents either when

deciding to grant the incentive award or when determining the amount of the award. Instead, as can be

seen in the excerpt from the transcript above, counsel

spoke broadly about the tasks Mr. Abernathy had performed in the case and offered an anecdote about a

class member in a previous suit who was grateful for

his work there. When discussing the time Mr. Abernathy had expended on the case, counsel did not provide detailed contemporaneous records but offered only

approximations and generalities. See JA at 438 (Transcript of Fairness Hearing) (“[Mr. Abernathy] spent

somewhere around 200 to 300 hours working in this

case.”); id. at 439 (“[I]t will probably be another 50

hours to 100 hours [of work for Mr. Abernathy] over

the next three years.”). Therefore, in keeping with our

prediction of what the Oklahoma Supreme Court would

command, we must reverse for abuse of discretion and

remand for further fact-finding.

28a

IV. CONCLUSION

We REVERSE the attorney-fee and incentive

awards and REMAND for further proceedings consistent with this opinion. We AFFIRM the district

court’s Order and Judgment Granting Final Approval

of Class Action Settlement.

29a

APPENDIX B

UNITED STATES DISTRICT COURT FOR THE

WESTERN DISTRICT OF OKLAHOMA

Case No. CIV-11-177-D

CHIEFTAIN ROYALTY COMPANY

Plaintiff,

v.

SM ENERGY COMPANY

(including predecessors, successors and affiliates),

ENERVEST ENERGY INSTITUTIONAL FUND XIII-A,

L.P., ENERVEST ENERGY INSTITUTIONAL FUND

XIII-WIB, L.P., ENERVEST ENERGY INSTITUTIONAL

FUND XIII-WIC, L.P., ENERVEST OPERATING, L.L.C.,

AND FOURPOINT ENERGY, LLC,

Defendants.

ORDER AWARDING ATTORNEYS’ FEES,

REIMBURSEMENT OF LITIGATION EXPENSES

AND CASE CONTRIBUTION AWARD

Before the Court is Class Representative’s Motion

for Approval of Attorneys’ Fees, Reimbursement of

Litigation Expenses and Case Contribution Award

[Doc. No. 123] (the Motion) and Memorandum of Law in

Support Thereof [Doc. No. 124] (the Memorandum),

wherein Class Counsel seeks an award of attorneys’

fees constituting forty percent (40%) of the $52,000,000

30a

Settlement Cash Amount, plus interest,1 reimbursement of Litigation Expenses not to exceed $900,000,

plus interest, and a Case Contribution Award to Class

Representative of 1% of the Settlement Cash Amount

to be paid out of the Gross Settlement Fund. The

Court has considered the Motion and Memorandum, the

objections thereto, and all matters submitted in connection with the proceedings on the Final Approval Hearing conducted on November 30, 2015. The Court finds

the Motion should be granted as follows:

1. This Order incorporates by reference the definitions in the Settlement Agreement and all terms not

otherwise defined herein shall have the same meanings

as set forth in the Settlement Agreement.

2. The Court, for purposes of this Order, incorporates herein its findings of fact and conclusions of law

from its Order and Judgment Granting Final Approval

of Class Action Settlement as if fully set forth.

3. The Court has jurisdiction to enter this Order

and over the subject matter of the Litigation and all

parties to the Litigation, including all Settlement Class

Members.

1

In addition to the $52,000,000 Settlement Cash Amount, the

Settling Parties have agreed that, for a period of thirty-six (36)

months from and after the date of the Stipulation and Agreement

of Settlement [Doc. No. 111-1] (the “Settlement Agreement”),

which was dated August 5, 2015, they will not deduct from royalty

payments any costs associated with marketing, gathering, transporting, compressing, dehydrating, treating, blending or processing. Class Representative’s experts have estimated these

changes to the Settling Parties’ royalty payment methodology to

have a minimum present value of $2,965,000. When added to the

Settlement Cash Amount, the total benefit conferred on the Class

is at least $54,965,000 (“Total Settlement Amount”). Class Counsel does not seek a separate fee for the future benefits.

31a

4. Notice of Class Counsel’s request for an award

of attorneys’ fees and reimbursement of Litigation Expenses and Class Representative’s request for a Case

Contribution Award was given to all Settlement Class

Members who could be identified with reasonable effort. The form and method of notifying the Settlement

Class of the request for an award of attorneys’ fees, reimbursement of Litigation Expenses and Case Contribution Award is hereby determined to have been the

best notice practicable under the circumstances, constitutes due and sufficient notice to all persons and entities entitled to receive such notice, and fully satisfies

the requirements of Rule 23 of the Federal Rules of

Civil Procedure and due process.

5. The Notice stated that Class Counsel would

seek an award of attorneys’ fees in an amount not to

exceed forty percent (40%) of the Settlement Cash

Amount and the reimbursement of Litigation Expenses

in an amount not to exceed $900,000. The Notice further stated Class Representative would seek a Case

Contribution Award of 1% of the Settlement Cash

Amount. Similarly, in their Motion and Memorandum,

Class Representative and Class Counsel requested attorneys’ fees of forty percent (40%) of the Settlement

Cash Amount, requested reimbursement of expenses

actually incurred in the past and expected to be incurred in the future not to exceed $900,000, and requested a Case Contribution Award of 1% of the Settlement Cash Amount for Class Representative.

6. Class Counsel and Class Representative provided the Court with evidence in support of their request for attorneys’ fees, reimbursement of Litigation

Expenses and Case Contribution Award, including: (1)

the Motion and Memorandum; (2) the Declaration of

Layn R. Phillips [Doc. No. 116]; (3) the Declaration of

32a

Geoffrey Miller [Doc. No. 119]; (4) the Declaration of

Steven S. Gensler [Doc. No. 120]; (5) the Declaration of

Bradley E. Beckworth and Robert N. Barnes on Behalf

of Class Counsel [Doc. No. 122-2]; (6) the Declaration of

Robert Abernathy on Behalf of Class Representative,

Chieftain Royalty Company [Doc. No. 122-1]; (7) the

Declaration of Michael Burrage [Doc. No. 117]; (8) the

Declaration of Dan Little [Doc. No. 118]; and (9) the affidavits of numerous absent Class Members [Doc. Nos.

122-6 through 122-11]. This evidence was submitted to

the Court well before the objection and opt-out deadline. Two objections were submitted by class members

Danny George and Charles David Nutley. Class Counsel also asserted additional information in support of its

request for attorneys’ fees and reimbursement of Litigation Expenses at the Final Approval Hearing.

7. Class Counsel is hereby awarded $470,605.75 in

reimbursement of Litigation Expenses, plus interest

earned on this amount at the same rate as the Gross

Settlement Fund. The Court concludes Class Counsel’s

expenses to date were necessary and reasonable to litigate and resolve the Litigation. Class Counsel demonstrated that all expenses were reasonable and were actually incurred in the prosecution of this Litigation on

behalf of the Settlement Class. Further, to the extent

Class Counsel incurs reasonable and necessary expenses above this amount, but not exceeding the noticed total amount of $900,000 throughout the remainder of the

Litigation, they are entitled to reimbursement for such

additional expenses upon fourteen (14) days written notice to the Court.

8. The Court notes that this award of Litigation

Expenses, plus any future expenses Class Counsel may

incur and recover in accordance with the terms of the

Notice, does not and shall not include the Administra-

33a

tion, Notice and Distribution costs associated with effectuating the Settlement which, per ¶ 1.1 of the Settlement Agreement, will be paid directly from the Settlement Amount. The Settlement Administrator, Rust

Consulting, Inc., estimates the total Administration,

Notice and Distribution Costs will not exceed

$188,868.00. Accordingly, the Escrow Agent is hereby

authorized to distribute Administration, Notice and

Distribution Costs to the Settlement Administrator in

an amount not to exceed a total of $188,868.00.

9. The Settlement has created a fund of

$52,000,000 in cash and also binding changes to the Settling Parties’ royalty payment methodology that has an

estimated minimum present value of $2,965,000.2 The

preferred method of determining a reasonable attorney

fee award in common fund cases is the percentage of

fund analysis. Class Counsel seeks an attorney’s fee

constituting 40% of the Settlement. Though the contingency fee agreement allows Class Counsel to recover

40% of any common fund recovery, the Court believes

that, in fairness and consistent with the best interest of

the Class, Class Counsel should recover thirty-three

and one third percent (33 1/3%) of the fund. The foregoing award of fees and expenses is fair and reasonable

and shall be paid to Class Counsel from the Gross Settlement Fund in accordance with the terms of the Settlement Agreement. The distribution of attorneys’ fees

among Class Counsel shall be within Class Counsel’s

sole discretion.

10. Objectors Danny George and Charles David

Nutley objected to Class Counsel’s fee request and the

amount of fees requested [Doc. Nos. 130 and 133] on the

2

As noted, Class Counsel does not seek fees on the value of

royalty payment methodology changes.

34a

grounds that Oklahoma law applies to Class Counsel’s

request, under Oklahoma law, a lodestar analysis is required, and the fees are excessive under either analysis. The Court overrules both objections on the

grounds advanced therein. Both state and federal cases

recognize and/or permit a percentage of fund recovery

under the common fund doctrine. See Brown v. Phillips Petroleum Co., 838 F.2d 451, 452-53 (10th Cir.

1988); Fent v. State ex rel. Dept. of Human Services,

2010 OK 2, ¶ 27, 236 P.3d 61, 70; Brady v. UBS Fin.

Services, Inc., 696 F. Supp. 2d 1263, 1268 (N.D. Okla.

2010) (“the Oklahoma Supreme Court has recognized

the common-fund doctrine for an award of attorney

fees.”) (citation omitted). In addition, utilization of either the common fund or lodestar method would not

affect this Court’s ruling. See 4 ROBERT NEWBERG,

Newberg on Class Actions § 14.6 at 551 (4th ed. 2002)

(“Empirical studies show that, regardless whether the

percentage method or the lodestar method is used, fee

awards in class actions average around one-third of the

recovery.”). Lastly, as stated herein, the Court finds a

reduction of attorney’s fees is appropriate, independent

of Objectors’ contentions. Indeed, the more significant

reductions urged by Objectors would be inappropriate

under the circumstances here.

11. In making this award of attorneys’ fees and reimbursement of Litigation Expenses to be paid from

the Gross Settlement Fund, the Court makes the following findings of fact and conclusions of law in addition to those set forth above:

(a) The Settlement has created a fund of

$52,000,000 in cash and also binding changes to the

Settling Parties’ royalty payment methodology

that has an estimated minimum present value of

$2,965,000. Settlement Class Members will benefit

35a

from the Settlement that occurred because of the

efforts of Class Counsel;

(b) The fee sought by Class Counsel was negotiated by and has been endorsed as fair and reasonable by Class Representative, Chieftain Royalty

Company, who, through its President, Robert Abernathy, was actively involved in the prosecution

and resolution of the Litigation;

(c) Copies of the Notice were mailed to over

21,000 Settlement Class Members and expressly

stated that Class Counsel would apply for attorneys’ fees in an amount not to exceed forty percent

(40%) of the Settlement Cash Amount and reimbursement of Litigation Expenses incurred by

Class Counsel in connection with the prosecution

and resolution of the Litigation in an amount not to

exceed $900,000, plus interest. Only two objections

were asserted.

The preferred approach for determining attorneys’

fees in common fund cases is the percentage of the fund

method. Rosenbaum v. MacAllister, 64 F.3d 1439, 1445

(10th Cir. 1995); Gottlieb v. Barry, 43 F.3d 474, 482–483

(10th Cir. 1993). Under the percentage of the fund

method, an appropriate fee is equal to a reasonable percentage of the common fund. Brown v. Phillips Petroleum Co., 838 F.2d 451, 452-53 (10th Cir. 1988); Fent,

236 P.3d at 70 (“When an individual’s efforts succeed in

creating or preserving a fund that benefits similarly

situated non-litigants, equity powers may be invoked to

charge that fund with attorney fees for legal services

rendered in its creation or preservation”) (citing Oklahoma Tax Commission v. Ricks, 1994 OK 115, 885 P.2d

1336, 1339).

36a

Under this approach, the trial court evaluates the

reasonableness of the requested percentage by analyzing the applicable factors contained in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974).

See Brown, 838 F.2d 451. The Johnson factors include:

the time and labor required, the novelty and difficulty

of the question presented by the case, the skill requisite

to perform the legal service properly, the preclusion of

other employment by the attorneys due to acceptance

of the case, the customary fee, whether the fee is fixed

or contingent, any time limitations imposed by the client or the circumstances, the amount involved and the

results obtained, the experience, reputation and ability

of the attorneys, the undesirability of the case, the nature and length of the professional relationship with the

client, and awards in similar cases. Gottlieb, 43 F.3d at

483 n. 4 (citing Johnson, 488 F.2d at 717-19). “[R]arely

are all of the Johnson factors applicable; this is particularly so in a common fund situation.” Uselton v. Commercial Lovelace Motor Freight, Inc., 9 F.3d 849, 854

(10th Cir. 1993) (citing Brown, 838 F.2d 456). The

Court finds that most, if not all, of the Johnson factors

support Class Counsel’s fee request, as reduced by the

Court;

(d) Class Counsel has conducted the Litigation

and achieved the Settlement with skill, perseverance and diligent advocacy;

(e) The Litigation involved complex factual

and legal issues and was actively prosecuted for

over four years;

(f) Had Class Counsel not achieved the Settlement, there would remain a significant risk that

Class Representative and the other members of the

37a

Settlement Class may have recovered less or nothing from the Settling Parties;

(g) Class Counsel devoted substantial time and

resources to achieve the Settlement;

(h) As set forth in the Memorandum, most, if

not all, of the Johnson factors support Class Counsel’s fee request here, as reduced by the Court;

(i) An award of thirty-three and one third

percent (33 1/3%) of the Settlement Cash Amount

is not unusual. The Tenth Circuit has previously

identified the typical fee range as 23.7% to 33.7%.

Brown, 838 F.2d at 455 n. 2. And fees in the range

of one-third of the common fund are frequently

awarded in class action cases as fair and reasonable. See, e.g., In re Thornburg Mortgage, Inc. Sec.

Litig., 912 F. Supp. 2d 1178, 1257 (D.M.N. 2012)

(“Fees in the range of 30–40% of any amount recovered are common in complex and other cases

taken on a contingency fee basis.”) (citations omitted); Cimarron Pipeline Const., Inc. v. Nat’l Council On Compensation Ins., No. CIV-89-822-T, 1993

WL 355466, at *2 (W.D. Okla. June 8, 1993) (same);

Lucas v. Kmart Corp., No. 99–cv–01923, 2006 WL

2729260, at *6 (D. Colo. July 27, 2006); see also 4

Newberg On Class Actions § 14:6 (4th ed. 2002)

(“Empirical studies show that, regardless whether

the percentage method or the lodestar method is

used, fee awards in class actions average around

one-third of the recovery.”); STUART J. LOGAN ET

AL., Attorney Fee Awards in Common Fund Class

Actions, 24 Class Action Rep. 167, 167 (2003) (reporting that the median award of attorney fees was

31.6% based on a survey of 1,200 class action settlements). The Court’s award here is more in line

38a

with the average range in such cases than the higher fee award requested by counsel, and thus represents compensation that is fair for both counsel and

the Class.

(j) In awarding attorneys’ fees, courts have

the discretion to award fees based solely on a percentage of the fund approach and are not required

to conduct a lodestar analysis in common fund class

actions. See, e. g., CompSource Oklahoma v. BNY

Mellon, N.A., No. CIV-08–469, 2012 WL 6864701 at

*8 (citing Union Asset Mgmt. Holding A.G. v. Dell,

Inc., 669 F.3d 632, 644 (5th Cir. 2012));

(k) The market rate for Class Counsel’s legal

services also informs the determination of a reasonable percentage to be awarded from the common fund as attorneys’ fees;

11. Finally, Class Counsel seeks a Case Contribution Award (i.e., an incentive award) of one percent

(1%) of the $52,000,000 Settlement Cash Amount for

Class Representative Chieftain Royalty Company. Objectors oppose Class Counsel’s request on the grounds

it is unreasonable, arbitrary, and raises serious conflict

of interest questions. In making its determination, the

Court makes the following findings of fact and conclusions of law:

(a) The Notice stated that Class Representative would move for a Case Contribution Award of

one percent (1%) of the Settlement Cash Amount

as compensation for its time and effort in the Litigation. Class Representative filed its Motion for

Approval of Attorneys’ Fees, Litigation Expenses

and Case Contribution Award fourteen (14) days

prior to the deadline for Settlement Class Members

to object.

39a

(b) “[A] class representative may be entitled

to an award for personal risk incurred or additional

effort and expertise provided for the benefit of the

class.” UFCW Local 880–Retail Food Emp’rs

Joint Pension Fund v. Newmont Mining Corp., 352

Fed. Appx. 232, 235-36 (10th Cir. 2009) (citing Parker v. Time Warner Entm’t Co., L.P., 631

F.Supp.2d 242, 279 (E.D.N.Y. 2009)). Case contribution awards are meant to “compensate class representatives for their work on behalf of the class,

which has benefited from their representation.” In

re Marsh ERISA Litig., 265 F.R.D. 128, 150

(S.D.N.Y. 2010). Incentive awards are not uncommon and are particularly given where a common

fund has been created for the benefit of the entire

class. Allapattah Services, Inc. v. Exxon Corp., 454

F. Supp. 2d 1185, 1218-19 (S.D. Fla. 2006). When

considering the appropriateness of an award for

class representation, the Court should consider: (1)

the actions the class representative took to protect

the interests of the class; (2) the degree to which

the class has benefitted from those actions; and (3)

the amount of time and effort the class representative expended in pursuing the litigation. Tuten v.

United Airlines, Inc., 41 F. Supp. 3d 1003, 1010 (D.

Colo. 2014) (citing Cook v. Niedert, 142 F.3d 1004,

1016 (7th Cir.1998)). “Incentive awards ... are within the discretion of the court.” Id. (quoting Frank

v. Eastman Kodak Co., 228 F.R.D. 174, 187

(W.D.N.Y.2005)).

(c) A Case Contribution Award is appropriate

in this case. Class Representative—through its

President, Robert Abernathy—has been actively

involved in this Litigation since its inception. Mr.

Abernathy has contributed by reviewing draft

40a

pleadings and motions, searching for and producing

records, reviewing filings, communicating regularly

with Class Counsel, making himself available by

telephone during the formal mediation, continuously monitoring the Litigation and settlement process, and approving the terms of the Settlement.

Mr. Abernathy’s efforts helped lead to a settlement

that greatly benefits the Class, and Class Representative should be rewarded for those efforts.

(d) The Court, however, concludes in this case

that a Case Contribution Award of one-half percent

(.5%) of the Settlement Cash Amount is fair, reasonable and should be awarded to Class Representative. This award represents $260,000 to be

paid from the settlement funds. In light of the

Court’s reduction of the attorney’s fees sought, a

commensurate reduction of the requested Case

Contribution Award is appropriate. The Class

Representative’s entitlement to this amount seems

clear to the Court, in light of the representative’s

significant contributions to the litigation and settlement.

(e) Similar case contribution awards have been

granted in similar cases. See, e.g., Allapattah, 454

F. Supp. 2d at 1220 (awarding 1.5% case contribution award); Chieftain Royalty Co. v. Laredo Petroleum, Inc., No. CIV-12-1319-D 2015 WL 2254606,

at *5 (W.D. Okla. May 13, 2015) (awarding Chieftain a 1% case contribution award); Cecil v. Ward

Petroleum Corp., CJ-2010-462, District Court of

Grady County, OK (awarding 1% case contribution

award); Drummond v. Range Res., CJ-2010-510,

District Court of Grady County, OK (awarding 1%

case contribution award); Robertson v. Sanguine,

Ltd., No. CJ-02-150, District Court of Grady Coun-

41a

ty, Oklahoma (July 11, 2003) (awarding 1% class

representative fee); Velma-Alama Indep. Sch.

Dist. No. 15 v. Texaco Inc., No. CJ- 2002-304, District Court of Stephens County, Oklahoma (Dec. 22,

2005) (awarding l-2% of total settlement amounts);

Continental Resources, Inc. v. Conoco Inc., No. CJ95-739, District Court of Garfield County, Oklahoma (Aug. 22, 2005) at 11 (“Court awards to Class

Representatives of 1% of the common fund are typical in these types of actions, with some awards approaching 5% of the common fund.”);

(f) Messrs. George and Nutley’s objections are

overruled on the grounds advanced therein. First,

notwithstanding Objectors’ contentions, the Court

deemed a reduction in the Case Contribution

Award was warranted. Second, incentive payments to class representatives do not, by themselves, create an impermissible conflict between

class members and their representatives. In re

Online DVD-Rental Antitrust Litig., 779 F.3d 934,

943 (9th Cir. 2015). The Court finds neither evidence of a conflict of interest between Class Representatives and the class members nor proof of collusion between Class Representative and Class

Counsel, see id.;

(g) The foregoing award shall be paid to Class

Representative from the Gross Settlement Fund,

and such payment shall be made at the time and in

the manner provided in the Settlement Agreement,

with interest from the date the Settlement Fund

was funded to the date of payment at the same net

rate that interest is earned by the Settlement

Fund.

42a

13. Any appeal or any challenge affecting this Order Awarding Attorneys’ Fees, Reimbursement of Litigation Expenses, and Case Contribution Award shall

in no way disturb or affect the finality of the Order and

Judgment Granting Final Approval of Class Action

Settlement, the Settlement Agreement or the Settlement contained therein.

14. Exclusive jurisdiction is hereby retained over

the parties and the Settlement Class Members for all

matters relating to this Litigation, including the administration, interpretation, effectuation or enforcement of

the Settlement Agreement and this Order.

15. There is no reason for delay in the entry of this

Order and immediate entry by the Clerk of the Court is

expressly directed pursuant to Rule 54(b) of the Federal Rules of Civil Procedure.

IT IS SO ORDERED this 23rd day of December,

2015.

Signature

TIMOTHY D. DeGIUSTI

UNITED STATES DISTRICT JUDGE

43a

APPENDIX C

PUBLISH

UNITED STATES COURT OF APPEALS

FOR THE TENTH CIRCUIT

No. 16-6022

(D.C. No. 5:11-CV-00177-D)

(W.D. Okla.)

CHIEFTAIN ROYALTY COMPANY,

Plaintiff-Appellee,

v.

ENERVEST ENERGY INSTITUTIONAL FUND

XIII-A, L.P.; ENERVEST ENERGY INSTITUTIONAL FUND

XIII-WIB, L.P.; ENERVEST ENERGY INSTITUTIONAL

FUND XIII-WIC, L.P.; ENERVEST OPERATING, L.L.C.;

FOURPOINT ENERGY, L.L.C.,

Defendants-Appellees,

and

SM ENERGY COMPANY, (including predecessors,

successors and affiliates),

Defendant.

DANNY GEORGE, personally and as Executor

of the Estate of Beverly Joyce George,

Objector-Appellant.

44a

No. 16-6025

(D.C. No. 5:11-CV-00177-D)

(W.D. Okla.)

CHIEFTAIN ROYALTY COMPANY,

Plaintiff-Appellee,

v.

ENERVEST ENERGY INSTITUTIONAL FUND

XIII-A, L.P.; ENERVEST ENERGY INSTITUTIONAL FUND

XIII-WIB, L.P.; ENERVEST ENERGY INSTITUTIONAL

FUND XIII-WIC, L.P.; ENERVEST OPERATING, LLC;

FOURPOINT ENERGY, LLC,

Defendants-Appellees,

and

SM ENERGY COMPANY, including predecessors,

successors and affiliates,

Defendant.

CHARLES DAVID NUTLEY,

Objector-Appellant.

Filed April 11, 2018

Before HARTZ and HOLMES, Circuit Judges.

ORDER

These matters are before the court on Chieftain

Royalty Company’s Petition for Rehearing and Rehearing En Banc. We also have a joint response from

the appellants.

Upon consideration, the request for panel rehearing is denied by the original panel members. We have,

45a

however, amended the original opinion sua sponte. The

amendments are limited, and have been made at pages

12 and 26 of the decision. A copy of the revised Opinion

is attached to this order. The Clerk is directed to vacate the prior Opinion and to file the attached revised

decision nunc pro tunc to the original filing date of July

3, 2017.

The Petition and response, as well as the amici

briefs on rehearing, were also circulated to all the judges of the court who are in regular active service and

who are not recused. See Fed. R. App. P. 35(a). As neither judge on the original panel nor any judge in regular active service asked that a poll be called, the request for en banc rehearing is likewise denied.

Entered for the Court

_

Signature

ELISABETH A. SHUMAKER, Clerk