The Oklahoma Supreme Court has overturned a lower court’s $19 million attorney fee award and a $400,000 incentive award in a class action lawsuit filed against Continental Resources Inc and lasted for years.
The ruling came in an appeal filed by Daniel McClure, an attorney and a mineral interest owner in the case. The court considered three issues in the matter, whether the state’s class action attorney fee statute allows for the percentage-of-common-fund method in calculating attorney fees, whether the district court abused its discretion in awarding 40% of the common fund to class counsel equaling more than $19 million in attorney fees and a $2,500 hourly rate and whether the district court abused its discretion in awarding a $400,000 incentive award to the named class representatives.
In each case, the justices ruled ‘yes’.
The potential class representatives was more than 33,000 Oklahoma royalty owners. The Supreme Court ruled the district court abused its discretion in calculating attorney’s fees under the percentage method, awarding fees that totaled more than 300% of the actual hours worked and equaled a $2,500 hourly rate.
The justices also ruled the lower court abused its discretion in granting an incentive award not based on evidence of the actual work performed by the class representatives in the case.
Litigation in the case lasted for more than 7 years without a trial until a settlement agreement was reached. The lower court approved the agreement and required Continental to pay $49,800,000 into a common fund plus an an estimated $7.5 million for other claims. It also provided for an estimated $50 million for claims during a future production period.
However, the justices ruled the lower court abused its discretion in awarding 40% of the common fund for attorney fees. They stated the 40% was “excessive” in comparison to the average percentage of 20% to 30%.
The high court also stated that the lower court was wrong in never allowing McClure to see detailed time records and the records were never subjected to an adversarial contest at an evidentiary hearing.
“The district court had a fiduciary duty to give full adversarial scrutiny to the attorney’s fees requested based on its trust relationship with the class. Instead, the district court deprived McClure–standing in the shoes of the other 33,890 royalty owners–of the opportunity to review or meaningfully challenge the very fees he and the other class members are required to pay from their own royalty interests,” stated the justices in their decision.
The high court sent the matter back to the lower court.
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