The Supreme Court of Oklahoma tossed a $19 million attorneys’ fee award, along with a $400,000 incentive payment to named class representatives, in a case alleging that Continental Resources Inc. underpaid oil and gas royalties due to Oklahoma mineral owners.
Oklahoma’s fee statute provides judges with discretion in calculating fee awards based on percentage of the common fund, the court ruled. It overruled an appeals court ruling requiring use of the lodestar method, which is calculated based on the number of hours reasonably worked at a reasonable hourly rate.
But the district court abused its discretion in approving the “excessive” sums here, totaling more than 300% of the actual hours worked at a $2,500 hourly rate, the court said in the yet-to-be-published Tuesday ruling.
Had the lower court calculated fees under the lodestar method without any enhancement, the fees would have been $6.3 million, according to the ruling.
The underlying settlement had an estimated value in excess of $100 million, comprising a $57.3 million cash payment for two different sets of claims—one worth $49.8 million, and the other worth $7.5 million—plus an agreement by the oil and gas exploration and production company not to deduct an estimated $50 million in gathering and transportation charges from future royalties due.
The challenged award was based only on the $49.8 million fund. Class counsel was separately awarded $3 million in attorneys’ fees for the $7.5 million agreement, which was reached later.
The contingency agreement between plaintiffs and class counsel provided for a 40% award.
The court also addressed incentive awards for the first time, although they’re routinely granted in Oklahoma. It held that “incentive awards are justified as payment for reasonable services rendered by class representatives on behalf of the class that were helpful to the litigation.”
But the awards can’t be arbitrary and must be based on evidence in the record, the court said.
Here, the district court awarded $100,000 to each of the four plaintiff trusts, or $200,000 to each class representative, without any explanation. Awarding the trusts, as opposed to the class representatives “implies the award was not based on the actual work performed,” the court said.
Justice James R. Winchester authored the opinion, joined by justices M. John Kane IV, Richard Darby, Yvonne Kauger, James E. Edmondson, Noma Gurich, Dustin P Rowe, and Douglas L. Combs, who wrote a separate concurrence, to state that he believes a $12.5 million award—equal to 25% of the common fund—would be reasonable.
Burns & Stowers PC and Park, Nelson, Caywood & Jones LLP represented class representatives, who sought certiorari of the Court of Civil Appeals ruling.
Objector Daniel McClure was represented by Crowe & Dunlevy.
The case is Strack v. Cont’l Res., Okla., No. 117276, 4/20/21.