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Smith v. SEECO, Inc.

United States District Court, E.D. Arkansas, Western Division

June 1, 2017

CONNIE JEAN SMITH, individually and on behalf of all others similarly situated PLAINTIFFS
SEECO, INC. n/k/a SWN Production Arkansas, LLC., DEFENDANTS


         The defendants' motion to disqualify class counsel, remove the class representative, and decertify the class [Doc. No. 417], and defendant DeSoto Gathering Company's motion for a one-week continuance [Doc. No. 418] are denied.

         A. Motion to Disqualify Counsel, Remove Representative, and Decertify Class

         Defendants' motion [Doc. No. 417] is denied because class counsel is adequate, Connie Jean Smith is an adequate class representative, and there is no reason this case cannot proceed as a class action.

         As an initial matter, class counsel has not yet formally responded to this motion, which defendants filed on the Sunday afternoon of Memorial Day weekend. Nevertheless, defendants quickly sought mandamus relief, asserting that I refused to rule on their motion. The record is well-developed, and class counsel recently filed a brief response to a related filing the day prior to defendants' motion. See Doc. No. 416. Thus, there is sufficient information in the record to understand the parties' positions and issue a decision.

         The gist of defendants' motion is that class counsel has become inadequate. It is well- established that “[c]lass counsel must fairly and adequately represent the interests of the class.” Fed.R.Civ.P. 23(g)(4). Although there is flexibility in how class counsel's adequacy is assessed, the general theme is that counsel must “be qualified, experienced and generally able to conduct the proposed litigation.” Eisen v. Carlisle and Jacquelin, 391 F.2d 555, 562 (2nd Cir. 1968). At the time the class was certified, the record demonstrated that class representative Connie Jean Smith selected adequate counsel. Doc. No. 186 at 11-12. Nevertheless, courts have an ongoing duty to monitor the adequacy of representation. See Fed. R. Civ. P. 23(g)(1)(E); In re Integra Realty Res., Inc., 262 F.3d 1089, 1112 (10th Cir. 2001).

         Rule 23(g)(1)(A) provides four factors that courts “must” consider in assessing adequacy. When measured by these factors, class counsel has been more than adequate. For example, counsel's collective experience, which must be considered under Rule 23(g)(1)(A)(ii), in oil and gas litigation and other complex matters, is impressive. See In re Vicuron Pharmaceuticals, Inc. Securities Litigation, 233 F.R.D. 421, 428 (E.D. Pa. 2006) (noting proposed counsel's experience); e.g., Danielson Law Firm Profile, Doc. No. 46-28 (Erik Danielson has represented mineral owners and operators in multiple cases throughout Arkansas for more than nine years); Decl. Geoffrey C. Jarvis ¶ 7, Doc. No. 216 (new addition to class counsel team was lead or co-lead counsel on multiple security class actions); Decl. Melissa L. Troutner ¶¶ 6-7, Doc. No. 309-1 (new addition to class counsel team with experience representing large companies and working for the federal judiciary, including work on class actions).

         It is also clear that counsel's command of the applicable law and resources available to prosecute this case are more than adequate, thus satisfying Rule 23(g)(1)(A)(iii) and (iv). For example, class counsel routinely submits thoroughly researched and compelling briefs on both routine matters and novel legal issues. See, e.g., Rambarran v. Dynamic Airways, LLC, Case No. 14-CV-10138 KBF, 2015 WL 4523222, *9 (S.D.N.Y. 2015) (finding proposed class counsel inadequate when “counsel has demonstrated a lack of ability to litigate on behalf of the class” by failing to make timely motions, prepare an adequate factual record, and prepare briefs with limited citations); Moss v. Lane Co., 50 F.R.D. 122, 126 (W.D. Va. 1970) (noting adequacy “as demonstrated by the pleadings and other memoranda” in case). They were successful in obtaining class certification, defending against defendants' well-researched summary judgment motions, and complying when directed to perform administrative tasks on behalf of the class. See, e.g. Doc. No. 279 at 13 (directing class representative to audit exclusion requests and provide updated report); Doc. No. 283 (updated report provided eight days later). Their ability to vigorously prosecute this case on the class's behalf is best demonstrated by successfully balancing these responsibilities with the unique challenges presented in this case, including filing responses to motions on short notice and defending against a lawsuit filed against them in their personal capacity by lawyers in a competing state court class action. But see, e.g., Kurczi v. Eli Lilly & Co., 160 F.R.D. 667, 679 (N.D. Ohio 1995) (finding class counsel was inadequate when “the proposed class failed to research legal issues adequately and to construct thoughtful pleadings” and were “incapable of handling the workload involved in processing the extensive discovery material which necessarily arises in an action such as this”). Frankly, class counsel's performance thus far has been nothing short of impressive.

         Despite class counsel's skill in representing the class, defendants now argue class counsel cannot continue because of unethical behavior. Rule 23(g)(1)(B) provides that courts “may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class[.]” For example, “any conduct that suggests that class counsel may have been engaging in unethical behavior is relevant in determining the adequacy of the representation.” E. Maine Baptist Church v. Regions Bank, Case No. 405-CV-962 CAS, 2007 WL 3022220, at *5 (E.D. Mo. Oct. 12, 2007) (quotations omitted).

         Defendants' argument focuses on a fee-sharing agreement between class counsel in this federal case (“Smith”) and a related state court class action, Snow v. SEECO (“Snow”). Smith and Snow began as two putative class actions proceeding on parallel paths with no chance of intersection. In Snow, which was filed in state court in 2010, the class representative's original complaint sought a class consisting of “persons or entities who are citizens of the State of Arkansas.” Compl., Snow v. SEECO, Inc., , Case No. 15CV-10-126 (Conway County Cir. Ct., Ark. May 7, 2010) (emphasis added); Matter of Phillips, 593 F.2d 356, 358 (8th Cir. 1979) (proper to take judicial notice of state court pleadings absent a dispute). In Smith, the class representative sought a class of persons and entities excluding “citizens of the State of Arkansas.” Compl. ¶ 48, Doc. No. 1 (filed July 25, 2014). In other words, when Smith and Snow began, they sought to litigate the same issues, on the same leases, and against the same defendants, but Smith would represent everyone that Snow did not. On October 14, 2014, Snow's class became certified. SEECO, Inc. v. Snow (“SEECO”), 506 S.W.3d 206, 210 (Ark. 2016).

         According to the record, counsel for defendant SEECO contacted Snow's counsel after Snow was certified “to discuss the possibility of a global resolution of the claims.” Doc. No. 417-2 at 7; Smolen Aff. ¶ 7, Doc. No. 417-5 (attorney representing all statements in the brief filed in state court, Doc. No. 417-2, are true and accurate and that he has personal knowledge to substantiate that conclusion). In December 2014, counsel for Snow and counsel for Smith discussed a plan for the future prosecution of both cases, and they entered into a “fee sharing agreement, ” which until recently, was apparently intended to remain confidential. Id. at 8. Smith class counsel does not deny the existence of the agreement. See Doc. No. 416 at 1. In reviewing that agreement, it appears Snow and Smith counsel agreed that their intention was to continue on their respective tracks - i.e., Snow would only focus on Arkansas citizens and Smith would stick to everyone else. Doc. No. 417-3 at 2. The agreement also provided that if either class negotiated a settlement that affected the claims of the other class, the lawyers would share the court-approved attorneys' fees. Id.

         In February 2015, while Snow was hung up on appeals in Arkansas state courts, see SEECO, 506 S.W. at 211 (“SEECO filed a notice of appeal on October 28, 2014.”), a mediation was held in California in an attempt to reach a global settlement. Doc. No. 417-2 at 10. That mediation was unsuccessful. Defendants and class counsel dispute whether the agreement survived after mediation. See Doc. No. 416 at 2 (“However, once that mediation failed, the fee sharing agreement was no longer in effect.”).

         In May 2015, while appeals in Snow were pending, Smith attempted to certify a class that excluded “members of the class certified in Eldridge Snow v. SEECO, Inc.” and another related state court class action. Doc. No. 45 at 2. The motion was denied on November 17, 2015, because it was impossible to determine who was in those state court classes and who was not. Doc. No. 110 at 4. In December 2015, Smith moved for certification again, this time excluding royalty owners “with an Arkansas address.” Doc. No. 113 at 2. If her request was denied, Smith also proposed an alternative class without the “Arkansas address” exclusion. Id. at 12. In response, defendants collectively argued that Smith's proposed class with the “Arkansas address” exclusion “creates unnecessary confusion and opens the door to compatible judgments, simply to preserve what appears to be a division of proceeds among cooperating plaintiff lawyers in the state and federal lawsuits.” Doc. No. 125 at 1.

         On April 11, 2016, Smith's alternative class was certified - i.e., a class of royalty interest owners without the “Arkansas address” exclusion. Doc. No. 186. On September 12, 2016, notice was sent by first-class mail to over 12, 000 royalty interest owners. See Hamer Dec. ¶¶ 3-4, Doc. No. 244. The notice period ended soon thereafter, with relatively few exclusions received, and of those received, many were from attorneys involved in state court class actions seeking en masse exclusion. See Doc. No. 279 at 7-12. The Snow appellate saga finally ended on January 19, 2017, when the Supreme Court of Arkansas denied rehearing on their decision to affirm certification of the Snow “Arkansas citizens” class. SEECO, Inc. v. Snow, Case No. 15-197, 2017 Ark. LEXIS 13, at *1 (Jan. 19, 2017). For much of 2017, the relationship between Snow and Smith persisted: Smith overlapped with Snow, but only Smith was ready for trial.

         Smith is set for trial in four days. On May 16, 2017, Snow counsel and defendants attended mediation without Smith counsel's knowledge. Doc. No. 343 at 3; Doc. No. 416 at 2. Although Snow only consisted of “Arkansas citizens, ” Snow class counsel negotiated a settlement for all royalty interest owners - i.e., the same or similar arrangement SEECO approached Snow counsel with back in late 2014. That settlement paperwork reflecting the new class definition was signed on May 18, 2017, which is the same date a state court judge preliminarily approved ...

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