Filed: Dec. 30, 1999
Latest Update: Mar. 02, 2020
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ Nos. 98-3816, 99-1334 _ Christopher J. Petrovic, Janet Hunter, * Elizabeth Marie Ramirez, Mike * Richards, Jimmie L. Van Bibber, and * Barbara Chappell, Individually and as * Class Representatives, * * Appellants, and * * City of Independence, City of Sugar Creek, * Jean Stewart, Lyle Jackson, Marcella * Jackson, John Brockman, Elberta * Brockman, Dorothy J. Brockman, Billy * Appeals from the United States Copeland, Virginia Copeland, Bill
Summary: United States Court of Appeals FOR THE EIGHTH CIRCUIT _ Nos. 98-3816, 99-1334 _ Christopher J. Petrovic, Janet Hunter, * Elizabeth Marie Ramirez, Mike * Richards, Jimmie L. Van Bibber, and * Barbara Chappell, Individually and as * Class Representatives, * * Appellants, and * * City of Independence, City of Sugar Creek, * Jean Stewart, Lyle Jackson, Marcella * Jackson, John Brockman, Elberta * Brockman, Dorothy J. Brockman, Billy * Appeals from the United States Copeland, Virginia Copeland, Bill *..
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United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
Nos. 98-3816, 99-1334
___________
Christopher J. Petrovic, Janet Hunter, *
Elizabeth Marie Ramirez, Mike *
Richards, Jimmie L. Van Bibber, and *
Barbara Chappell, Individually and as *
Class Representatives, *
*
Appellants, and *
*
City of Independence, City of Sugar Creek, *
Jean Stewart, Lyle Jackson, Marcella *
Jackson, John Brockman, Elberta *
Brockman, Dorothy J. Brockman, Billy * Appeals from the United States
Copeland, Virginia Copeland, Bill * District Court for the Western
Stevens, Janeth Stevens, Thomas Larkin, * District of Missouri.
Janey Sturgis, Michael A. Rodak, Michael J. *
Carr, Lucille Carr, Helen C. Butkovich, *
Diane Hall, Paul A. Hedrick, Joyce *
Hedrick, Joseph D. Kenney, John W. *
Kimak, Nancy Kimak, Joseph M. *
Mikula, Sue Ellen Mikula, Mark *
O'Renick, Debbie O'Renick, Dan Salva, *
Amy Salva, Joseph M. Salva, Lora L. *
Salva, Vernon Steinmeyer, Betty *
Steinmeyer, and Charles Woods, *
*
Appellees, and *
*
William Bailey, Vernon Baker, Debbie *
Bazzell, David Beebe, Nancy Beebe, *
Robert Behler, Ernest Bell, Lourine Bell, *
Robert Bledsoe, Debra Bledsoe, Gerald *
Boyle, Edward Buford, Jessie Buford, *
William Buford, Norie Buford, Billy *
Burke, Ila Burke, Doras Butkovich, *
Fabian Butkovich, Filip Butkovich, *
Gladys Butkovich, Joseph Butkovich, *
T. J. Butkovich, Dragica Butkovich, *
Philip Campbell, Catherine Campos, *
David Canzonere, Caroline Canzonere, *
Joseph Carter, Russell Clark, James Coffey, *
Susan Coffey, Jean Colona, Don *
Cook, Darel Cornelius, Debbie Cornelius, *
P. Jean Cornelius, Mark Cosgrove, *
Jerry Creek, Julie Creek, Irene *
Crnkovich, Michael Dale, Judy Dale, *
Richard Deihl, James Devasher, *
Stephanie Devasher, Emil Dykal, Claudia *
Dykal, Harold Echols, Sr.; and Karolyn *
Elliott, Jerry Elliott, Janet Elliott, Cheryl *
England, Herbert Fillmore, Lulua Fillmore, *
Larry Garland, Marjorie Garland, *
Frank Gibbs, John Grayham, Charlotte *
Grayham, William Green, Jacqueline Green, *
Charles Greer, Lynn Greer, Bill *
Haman, Carolyn Haman, Wilbur *
Hamilton, Helen Hamilton, Richard *
Hand, Marcia Haworth, Maxine Hedges, *
Helen Hedrick, John S. Hedrick, Dixie *
Hedrick, John B. Hedrick, Mary Hedrick, *
Joseph Hedrick, Jo Ann Hedrick, Rita *
Hardy Hortenstine, Saul Imiquez, *
Daniela Imiquez, June Jackson, Richard *
Jarrett, Margaret Jarrett, Deanna Kennedy, *
Mary King Kerns, Joe King, William *
James King, James William King, Joseph *
Kipper, Gary Krohm, Pearl Krohm, Ada *
Kulp, Marvyn Lawson, Clara Lewis, *
Hildred Light, Sara Mace, James Mansell, *
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Mary Ann Mansell, Betty Jo McCord, *
Park McClune, II; and Othello McDavitt, *
John Mikulich, Sandra Mikulich, Linda *
Mikulich, Elizabeth Miller, David Muncy, *
Esther Muncy, Timothy James Myers, *
Frank Noch, Betty Noch, Jerry Novak, *
Joseph Olivarez, Janice Olivarez, John *
Owings, Karen Owings, Hoyt Palmer, *
Mary Palmer, Carole Park, William *
Parson, Ruth Patterson, Frank Peljae, *
Doris Peljae, Albert Petroski, William R. *
Platt, Loye Rains, Dorothy Rains, Ray *
Ryan, June Adele Rhoads, Leonard *
Richards, Melissa Richards, Leonard Riley, *
John Rittel, Roze Rittel, John Roach, *
Charles Rogers, Janice Roper, Mike Roper, *
Antonia Roper, Mike E. Roper, Ann Roper, *
Peter J. Roper, R. J. Roper, Jr.; and Mary *
Rozgay, Mireille Rundell, Clifford Sanders, *
Margaret Sanders, Susan Shelby, Juanita *
Slayton, Daniel Slayton, Jr.; and Terry *
Slayton, Larry Smith, Mildred Smith, Zita *
Stanard, F. W. Stanger, Lewayne Starks, *
Clara Stephenson, Albert Stovich, *
Laverna Stovich, Lex Swofford, Ellen *
Swofford, Ronald Taylor, Ottilie *
Thompson, Buelah Tolliver, Luva Vaughan, *
Karl Vaughn, Sherralyn Vaughn, *
Clifford Weakley, Angela Weikal, *
Pamela White, Anna Wix, Kim *
Wollenberg, Beula Fay Worley, *
Clarence Worley, Jerry Wrabec, Leonard *
Wrabec, Mary Wrabec, Steven Yslas, *
Elizabeth Yslas, Jerry Zevecke, Janet *
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Zevecke, John Zevecke, Steve Zevecke, *
and Janet Zevecke, *
*
Appellants, *
*
v. *
*
Amoco Oil Company, *
*
Appellee. *
*
*
_________________________ *
*
Thomas Hart Benton Group, Ozark Chapter, *
Sierra Club, *
*
Amicus Curiae on Behalf *
of Appellants. *
___________
Submitted: September 15, 1999
Filed: December 30, 1999
___________
Before BOWMAN, LAY, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
___________
MORRIS SHEPPARD ARNOLD, Circuit Judge.
Christopher Petrovic and others brought a class action against Amoco Oil
Company in which they sought injunctive and monetary relief for pollution to their
property that allegedly occurred as a result of underground oil seepage originating from
an Amoco petroleum refinery. The appellants in these cases are various plaintiff class
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members who object to the approval of the settlement of this class action and to other
orders entered by the district court1 over the course of the litigation.
The objectors argue that the district court's failure to divide the certified class
into subclasses deprived them of adequate representation, that the settlement agreement
was not fair, adequate, and reasonable, that the notice of settlement fell short of the
requirements of Fed. R. Civ. P. 23(d)(2) and Fed. R. Civ. P. 23(e), and that the district
court erred in granting Amoco's motion for summary judgment on the plaintiffs' claims
under the Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), see 42 U.S.C. §§ 9601-9675. The objectors also maintain that the district
court erred in disqualifying one of the original class counsel and in refusing to award
attorney fees and costs to that counsel, that the district court's award of attorney fees
to the other class counsel was excessive, and that the district court wrongly denied
some of the objectors' motions to intervene in the case so that they could appeal with
respect to the certification of the class and the approval of the settlement. For the
reasons set forth below, we affirm the district court in all respects.
I.
The settlement agreement provides both injunctive and compensatory relief to
the class, which contains more than 5,000 members. With respect to the compensatory
benefits, the settlement agreement divides the affected properties into three groups.
The owners of the 129 properties in "Zone A," which are situated above the
underground oil, are guaranteed to receive 54 percent of the value of their properties.
The owners of the 373 properties in "Zone B," which surrounds Zone A, are guaranteed
to receive $1,300 per property. The owners of the approximately 5,000 properties in
"Zone C," the area farthest removed from the underground oil, receive no guaranteed
compensation, but have access to a "special circumstances" fund to which they, along
1
The Honorable Fernando J. Gaitan, United States District Judge for the Western
District of Missouri.
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with all other property owners, can apply for compensation if they can demonstrate
damage. The objectors contend that the interests of the various property owners are
at odds with each other and, therefore, that the district court should have separated the
class into multiple subclasses, each with its own counsel.
A district court has a duty to assure that a class once certified continues to be
certifiable under Fed. R. Civ. P. 23(a). See Hervey v. City of Little Rock, 787 F.2d
1223, 1227 (8th Cir. 1986). A district court must reconsider a ruling certifying a class,
for instance, if a subsequent development creates a conflict of interest that prevents the
representative party from fairly and adequately protecting the interests of all of the class
members. See Boucher v. Syracuse University,
164 F.3d 113, 118-19 (2nd Cir. 1999).
While the docket does not indicate that the objectors made a formal motion to decertify
or to divide the class, during a hearing on the fairness of the settlement they did
advocate separating the class into subclasses or, in the alternative, decertifying the
class. We believe that this was sufficient to preserve the right of the objectors to
contest the class certification on appeal. See In re Dennis Greenman Securities
Litigation,
829 F.2d 1539, 1542-43 (11th Cir. 1987); cf. Barney v. Holzer Clinic, Ltd.,
110 F.3d 1207, 1213 (6th Cir. 1997).
It is within the discretion of a district court to determine whether the class action
device is appropriate, and we review that decision only for an abuse of discretion. See
Belles v. Schweiker, 720 F.2d 509, 515 (8th Cir. 1983). We recognize, as the
objectors have pointed out, that the Supreme Court has stated that "other specifications
of [Fed. R. Civ. P. 23] -- those designed to protect absentees by blocking unwarranted
or overbroad class definitions -- demand undiluted, even heightened, attention in the
settlement context." Amchem Products, Inc. v. Windsor,
521 U.S. 591, 620 (1997);
see also Ortiz v. Fibreboard Corporation,
119 S. Ct. 2295, 2316 (1999). We believe,
however, that the circumstances in Amchem and Ortiz that called for heightened
attention to the requirements of Fed. R. Civ. P. 23(a) are not present in our case.
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Amchem, 521 U.S. at 601-02, and
Ortiz, 119 S. Ct. at 2305, each involved a
situation in which the parties agreed upon a class definition and a settlement before
formally initiating litigation, and then presented the district court with the complaint,
proposed class, and proposed settlement. The difficulty inherent in such a situation is
that the district court "lack[s] the opportunity, present when a case is litigated, to adjust
the class, informed by the proceedings as they unfold."
Amchem, 521 U.S. at 620. In
our case, however, the parties engaged in more than three years of extensive discovery
and preparation for trial, and the class was certified under Fed. R. Civ. P. 23(b)(3)
many months before the parties reached the settlement. Indeed, the settlement was
reached on the eve of trial.
The difficulties associated with settlements like those in Amchem and Ortiz --
the possibility of "collusion between class counsel and the defendant ... [and] the need
for additional protections when the settlement is not negotiated by a court designated
class representative," Hanlon v. Chrysler Corporation, 150 F.3d 1011, 1026 (9th Cir.
1998) -- are therefore not present here. Although a mandatory class was also certified
for purposes of injunctive relief in connection with the settlement in our case, we think
that this additional certification lacks legal significance in this context. The district
court still had the benefit of the parties' extensive trial preparation, and the definition
of the mandatory class was the same as the definition of the class originally certified
under Fed. R. Civ. P. 23(b)(3) (although, obviously, the mandatory class also included
those who opted out of the class litigation with respect to compensatory relief).
Keeping the appropriate deferential standard of review in mind, we turn now to
the merits of the objectors' position. They appear to make two arguments in support
of subdividing the class. They argue first that the boundaries of the zones were
arbitrarily and inaccurately established. They also challenge the propriety of the award
of compensation to the holders of property in Zone A, which was far greater than the
compensation to the holders of property in Zone B, which in turn was far greater than
the compensation to holders of property in Zone C. It appears to us, however, that both
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of these arguments are more properly directed to the objectors' contention that the
settlement was not fair, adequate, and reasonable. Although the extent of the pollution
varied from property to property, possibly necessitating different awards of damages,
the objectors do not clearly explain why the remedial interests of the class members are
in conflict.
If the objectors mean to maintain that a conflict of interest requiring subdivision
is created when some class members receive more than other class members in a
settlement, we think that the argument is untenable. It seems to us that almost every
settlement will involve different awards for various class members. Indeed, even if
every class member were to receive an identical monetary award in settlement, the true
compensation would still vary from member to member since risk tolerance varies from
person to person (i.e., a more risk-averse class member would place a greater premium
on the certainty of a settlement award than a less risk-averse class member would).
We also do not believe, as the objectors suggest, that the stark conflicts of
interest that the Supreme Court discerned in Amchem and Ortiz are present here. In
those cases the Court found that a conflict existed between class members who already
had asbestos-related injuries (and who would want to maximize immediate payout) and
class members who might develop asbestos-related injuries in the future (and who
would want to maximize testing, protection from inflation, and future fund size). See
Amchem, 521 U.S. at 626, and Ortiz,
119 S. Ct. 2319-20. We note that the injuries
involved in those cases were extraordinarily various, both in terms of the harm
sustained and the duration endured. Our case, on the other hand, involves a discrete
and identified class that has suffered a harm the extent of which has largely been
ascertained.
During oral argument, the objectors suggested that the underground oil is
migrating, and therefore that the danger in this case is analogous to the danger of latent
asbestos exposure. The danger, it seems to us, turns on a matter of degree, however,
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and we do not think that the district court abused its discretion in finding that the
conflict of interest here, if any, failed to rise to a level at which the concerns expressed
in Amchem and Ortiz would become applicable. Cf. DeBoer v. Mellon Mortgage Co.,
64 F.3d 1171, 1175 (8th Cir. 1995), cert. denied,
517 U.S. 1156 (1996) (noting that the
class representatives fairly and adequately represented the class where there was no
indication that their interests were antagonistic to the remainder of the class or that the
claims were not vigorously pursued). The district court found, moreover, that it was
"not likely" that there would be significant migration of the underground oil plume, a
finding that is not clearly erroneous.
Nor do we believe that the other cases cited by the objectors -- In re General
Motors Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F.3d 768 (3rd
Cir. 1995), cert. denied,
516 U.S. 824 (1995), and Broussard v. Meineke Discount
Muffler Shops, Inc.,
155 F.3d 331 (4th Cir. 1998) -- are apposite. First, as Amoco and
the class counsel point out, the class in each of those cases included distinct subgroups
of plaintiffs, but all of the class representatives in each case came from only one of the
subgroups. See General Motors
Corp., 55 F.3d at 800-01, and
Broussard, 155 F.3d at
337-39. In our case, on the other hand, the 33 class representatives included owners
of property located in a variety of locations, including all three compensation zones.
Second, we believe that the remedial interests of the various class members
differed to a much greater extent in General Motors Corp. and Broussard than in our
case. The plaintiff class in General Motors Corp., 55 F.3d at 779, included owners of
individual pickup trucks and owners of fleets of pickup trucks. The settlement agreed
to by the class representatives, all of whom were owners of individual pickup trucks,
provided vouchers for $1,000 toward the purchase of a new pickup truck as the primary
compensation to the class. See
id. at 780. The use restrictions on these vouchers,
however, rendered them substantially less valuable to owners of large fleets of trucks.
See
id. at 781. The "structural assurance" of adequate representation required by
Amchem, 521 U.S. at 627, was not present because none of the class representatives
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was a fleet owner, and because the purchasing and replacement needs of the fleet
owners were much different from the needs of the individual owners. See General
Motors Corp., 55 F.3d at 801, 808-09.
The internal conflict was even more patent in the class certified in Broussard.
The class members in that case were current and former franchisees of Meineke
Discount Mufflers who were suing Meineke for breach of contract. See Broussard, 155
F.3d at 334, 338. Included in this class was a large group of current franchisees who
signed a waiver giving up their rights personally to recover any damages from the
alleged breach of contract. See
id. at 336, 338. The Broussard court found that two
subgroups of the class were in obvious conflict: the current franchisees who signed the
waiver and the former franchisees. See
id. at 338. The current franchisees who signed
the waiver had nothing to gain from a large damages award payable to the class
members, and would be harmed by a judgment that adversely affected Meineke (with
whom they had an ongoing franchisor-franchisee relationship). See
id. The former
franchisees, on the other hand, directly benefited from a large damages award payable
to the class, and had no incentive to keep Meineke financially healthy. See
id.
We see no analogous conflict in our case. Each property owner stands to gain
from Amoco's agreement to compensate landowners for damage already sustained to
property, and from Amoco's undertaking steps to revitalize the community and to
increase property values. All property owners have access to the "special
circumstances" fund, to which they may make an application for compensation if they
feel that they have suffered any damage as a result of the pollution from Amoco's
refinery. The substantial difference in remedial needs seen in General Motors Corp.
and Broussard are simply not present here.
We note in passing that during oral argument the objectors provided an
additional justification for subdivision that they raised below but did not raise in their
brief on appeal. Two of the plaintiffs in the consolidated litigation were the
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municipalities in which the polluted land was located. As part of the settlement
agreement, Amoco granted an easement to the municipalities to construct and maintain
a major roadway on Amoco's property, and Amoco indemnified the municipalities from
any related environmental liabilities that might arise from the construction. The
objectors argue that obtaining these concessions was the only motivating factor for the
municipalities, and that such a motivation is too far removed from the motivations of
the other class members.
The interests of the various plaintiffs do not have to be identical to the interests
of every class member; it is enough that they "share common objectives and legal or
factual positions," see 7A Charles Alan Wright, Arthur R. Miller, and Mary Kay Kane,
Federal Practice and Procedure: Civil 2d § 1769 at 367 (2d ed. 1986). We note that
the municipalities are not members of the class, and that they have separate counsel.
In this case, moreover, all of the plaintiffs seek essentially the same things:
compensation for damage already incurred, restoration of property values to the extent
possible, and preventive steps to limit the scope of future damage.
Both the municipalities and the individual property owners stand to gain from
Amoco's cooperation in the construction of the new roadway and the anticipated
community revitalization and increased property values. Similarly, both the individual
property owners and the municipalities stand to gain from Amoco's taking remedial
steps to clean up the pollution and restore the usability (both real and perceived) of the
land. We do not think that the district court abused its discretion in failing to find that
the participation of the municipalities created a conflict of interest among the plaintiffs.
II.
The objectors assert that the settlement agreement approved by the district court
is not "fair, reasonable, and adequate," In re Flight Transportation Corporation
Securities Litigation, 730 F.2d 1128, 1135 (8th Cir. 1984), cert. denied,
469 U.S. 1207
(1985), as Fed. R. Civ. P. 23 requires. "The district court's assessment as to the
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reasonableness of a settlement 'will not be overturned unless the party challenging the
settlement clearly shows that the district court abused its discretion.' " DeBoer, 64 F.3d
at 1176-77, quoting Van Horn v. Trickey,
840 F.2d 604, 607 (8th Cir. 1988).
Two justifications are typically offered for this deferential standard of review.
First, " '[g]reat weight is accorded [to the trial court's] views because [it] is exposed to
the litigants, and their strategies, positions and proofs.' " Grunin v. International House
of Pancakes, 513 F.2d 114, 123 (8th Cir. 1975), cert. denied,
423 U.S. 864 (1975),
quoting Ace Heating and Plumbing Co. v. Crane Co.,
453 F.2d 30, 34 (3rd Cir. 1971).
Second, "[a] strong public policy favors agreements, and courts should approach them
with a presumption in their favor." Little Rock School District v. Pulaski County
Special School District No. 1,
921 F.2d 1371, 1388 (8th Cir. 1990). Although a trial
court must consider the terms of a class action settlement to the extent necessary to
protect the interests of the class, "[j]udges should not substitute their own judgment as
to optimal settlement terms for the judgment of the litigants and their counsel."
Armstrong v. Board of School Directors,
616 F.2d 305, 315 (7th Cir. 1980), overruled
on different grounds, Felzen v. Andreas,
134 F.3d 873, 875 (7th Cir. 1998).
The objectors recognize that approvals of settlements are ordinarily treated with
deference, but contend that we should engage in a heightened level of scrutiny in this
case for three reasons. First, they assert that the covenants in the settlement agreement
limit the ability of the class members to bring future suits against Amoco and various
governmental agencies, which is against public policy, a fact that the district court
failed to recognize, they say. It seems to us, however, that even if the district court
misconstrued a provision of the settlement agreement, the standard of review would not
change; we simply would not defer to the district court's point of view on that particular
provision. Cf. Wiener v. Roth, 791 F.2d 661, 662 (8th Cir. 1986) (per curiam)
(application of incorrect state law not necessarily ground for reversing district court's
approval of settlement or changing standard of review). We also do not read Angela R.
v. Clinton,
999 F.2d 320, 324 (8th Cir. 1993), on which the objectors rely, to say that
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consent decrees that limit the ability of citizens to enforce statutory rights are subject
to a more exacting standard of review than other such decrees. Angela R. itself, 999
F.2d at 325, which involved an extraordinarily far-reaching consent decree with a
governmental agency, applied an abuse of discretion standard.
Indeed, another case to which the objectors refer us seems to run strongly
contrary to their argument. In United States v. City of Alexandria, 614 F.2d 1358,
1361 (5th Cir. 1980), the court noted that an abuse of discretion standard generally
applies to appellate review of judicial approvals of consent decrees. Although the City
of Alexandria court,
id. at 1361-62, decided instead to apply heightened scrutiny, it did
so because the district court had rejected the consent decree. The court explained that
the "public policy in favor of voluntary settlements" would be undermined by a
standard that gave district courts too much discretion to reject them.
Id. at 1362. The
rationale supporting heightened scrutiny in City of Alexandria, namely, the public
policy favoring settlements, does not apply, of course, when, as here, a district court
approves a consent decree.
The objectors also assert that the customary deference should not be accorded
in this case because the district court did not conduct an evidentiary hearing prior to
making its ruling on the proposed settlement. We note, however, that the district court
explained its approval of the settlement in exquisite detail and included supporting
facts, unlike the lower courts in the cases relied on by the objectors. See Stovall v.
City of Cocoa, 117 F.3d 1238, 1241, 1244 (11th Cir. 1997), and City of
Alexandria,
614 F.2d at 1360. We also point out that each of these cases involved a situation in
which the lower court denied the proposed consent decree, a circumstance that
triggered the heightened scrutiny in those cases. See
Stovall, 117 F.3d at 1240-41, and
City of
Alexandria, 614 F.2d at 1360.
The parties in our case, prior to reaching a settlement, engaged in extensive
discovery, argued numerous motions (including motions for summary judgment and for
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class certification), and in so doing submitted voluminous supporting memoranda with
citations to affidavits and deposition testimony. Under these circumstances, and
recognizing that the purpose of a settlement is to avoid the expense and delay of a trial,
we do not believe that the district court's order should be given greater scrutiny simply
because the court did not allow evidence to be presented at the fairness hearing. See
DeBoer, 64 F.3d at 1176-78; see also Van
Horn, 840 F.2d at 606.
The objectors argue finally that heightened scrutiny of the district court's order
is required because the court's order was a virtually verbatim adoption of the proposed
order offered by Amoco and the class counsel. We have held, however, that even a
verbatim adoption of proposed findings of fact does not change the standard of review.
See Jones v. International Paper Co., 720 F.2d 496, 499 (8th Cir. 1983). We agree
with the objectors that verbatim adoption of proposed findings of fact and rulings of
law ought ordinarily to be avoided, as such a practice can obfuscate the extent to which
the order was the "product of personal analysis and interpretation by the trial judge,"
id. But we note that the district court in our case rejected several pages of findings
proposed by Amoco and the class counsel, an act that reflects more than just a cursory
analysis and interpretation. See McDowell v. Safeway Stores, Inc.,
753 F.2d 716,
717-18 (8th Cir. 1985). We are also moved somewhat by the argument that where the
facts of a case are complex, "practical considerations justify the judge's decision not to
rewrite those findings which are accepted as proper,"
id. at 718.
With a deferential standard of review therefore again in mind, we turn to the
merits of the objectors' argument that the proposed settlement is not fair, reasonable,
and adequate. The most important consideration in this context is " 'the strength of the
case for plaintiffs on the merits, balanced against the amount offered in settlement.' "
Grunin, 513 F.2d at 124, quoting West Virginia v. Charles Pfizer and Company, Inc.,
314 F. Supp. 710, 740 (S.D. N.Y. 1970), aff'd,
440 F.2d 1079 (2d Cir. 1971), cert.
denied,
404 U.S. 871 (1971). With regard to the monetary compensation, the objectors
note that two members of the class who opted out and pursued their claims individually
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were later victorious and received an award far greater than what was guaranteed in the
settlement. See Slayton v. Amoco Oil Co., No. CV97-14626, slip op. at 3-4 (Jackson
County, Mo., Cir. Ct. Feb. 5, 1999) (unpublished) (awarding 50 percent of the property
value in compensatory damages for contaminated property, and $500,000 in punitive
damages, to each plaintiff). We note, however, that under the settlement the owners
of property in Zone A receive significantly more in monetary compensatory damages:
54 percent of the property value, net of attorney fees and costs. Although the Slayton
plaintiffs ultimately received an amount of punitive damages that outweighed the
shortfall in compensatory damages, we do not believe that the speculative possibility
of punitive damages (the Slayton case was not yet decided when the district court ruled
on the proposed settlement) is enough to find that the district court abused its discretion
in approving the settlement.
We also reject the contention that the injunctive relief that the class received is
inadequate. To begin with, we believe that it was far from certain that the class would
receive any injunctive relief at all. At the time of settlement, the class had only two
remaining avenues through which injunctive relief could be achieved: a claim under the
Resource Conservation and Reclamation Act (RCRA), see 42 U.S.C. §§ 6901-6992k,
and the trespass claims of a few class members (Amoco had already been granted
summary judgment on the trespass claims of the vast majority of the class). Given the
findings of fact by the district court, we believe that the likelihood that the objectors
would receive injunctive relief at trial was quite small.
To receive injunctive relief under RCRA, the class had to demonstrate that
Amoco's handling of solid or hazardous waste created an "imminent and substantial
endangerment to health or the environment," see 42 U.S.C. § 6972(a)(1)(B). The
district court in this case specifically found that the petroleum constituents were located
many feet below the ground, and only in low concentrations. The district court also
noted that the area residents did not use the underground water as a drinking source,
and that there was no substantial risk of personal injury or harm to the environment.
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Although the objectors point to some conflicting evidence, we do not believe that the
court's findings are clearly erroneous. It seems unlikely, therefore, that the class would
be able to make the required showing that there is "a threat which is present now"
(emphasis in original), Price v. United States Navy, 39 F.3d 1011, 1019 (9th Cir.
1994), and that "the potential for harm is great," United States v. Aceto Agricultural
Chemicals Corp.,
872 F.2d 1373, 1383 (8th Cir. 1989). For the same reasons, it is also
unlikely that an injunctive remedy would be awarded on the individual trespass or
nuisance claims. See Williams v. Monsanto Co.,
856 S.W.2d 338, 340 (Mo. Ct. App.
1993) ("[f]or trespass to lie the pollution must be at a level so as to constitute an actual
interference with the possession of the land").
As part of the settlement agreement Amoco agreed to take various steps to
contain and remediate the underground oil, to test the purity of the community drinking
water in the future, to work with the community to facilitate the reuse of the
contaminated property, and to make concessions to local governments so that a
roadway could be built. Although the objectors contest the effectiveness of the various
measures, they do not convince us that the district court abused its discretion in
approving the settlement, particularly given what were, to say the least, the very limited
prospects of injunctive relief.
The objectors also assert that the settlement agreement is unacceptable because
it contains what they characterize as an unreasonable "gag order." In the agreement,
the class members covenant not to "commence or prosecute any civil judicial,
administrative, regulatory or other suit, action, claim, complaint ... whatsoever in any
jurisdiction ... based in whole or in part on the Claims released." The objectors contend
that this covenant is both unreasonable and unconstitutional because it prevents class
members from complaining to and suing administrative agencies for failure to enforce
environmental laws.
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We disagree with both the objectors' interpretation of the covenant and their
assessment of its reasonableness. First, we note that the "[c]laims released" referred
to in the covenant not to sue must necessarily be only those claims held by class
members against Amoco. We do not believe that a suit against a third-party
governmental agency relating to that agency's failure to enforce environmental
regulations in the affected area would be "based in whole or in part" on the claims of
the class members against Amoco.
Any potential ambiguity that exists is eliminated by the repeated statements in
the appellate briefs of both Amoco and the class counsel, the drafters of the contract,
that the "covenant plainly does not preclude class members from petitioning or suing
... any third-party [] concerning the cleanup." Cf. J. S. DeWeese Co. v. Hughes-
Treitler Manufacturing Corp., 881 S.W.2d 638, 644 (Mo. Ct. App. 1994) (permitting
extrinsic evidence to resolve ambiguities). The agreement simply does not provide any
direct protection or immunity to environmental regulatory agencies whatsoever: It
neither explicitly nor implicitly designates any third-party beneficiaries, and no
governmental agency could use the covenant not to sue as a defense, as the objectors
suggested during oral argument.
The objectors, moreover, ignore the second sentence of the covenant not to
sue,which provides that "[r]eleasors are not precluded from seeking enforcement of this
Agreement and its provisions." Since Amoco agrees elsewhere in the settlement to
"perform any environmental remediation ... required ... by any court ... or any other
state or federal agency," and to take "all reasonable measures to comply with current
or future orders of ... federal or state environmental regulatory agencies," it seems
apparent to us that the class members will be able to take any complaints about
Amoco's compliance directly to the district court. As the class counsel points out, this
approach may have distinct advantages over seeking administrative relief, given the
powers available to the district court to enforce its orders.
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The objectors' next difficulty with the settlement agreement is that the outline of
the compensation zones is allegedly arbitrary and leads to disproportionate results.
Although we agree that unfairly disparate treatment of class members runs contrary to
Fed. R. Civ. P. 23, see Lurns v. Russell Corp., 604 F. Supp. 1335, 1336 (M.D. Ala.
1984), but see also Holmes v. Continental Can Co.,
706 F.2d 1144, 1148 (11th Cir.
1983) ("there is no rule that settlements [must] benefit all class members equally"), we
do not believe that any subgroup of this class was treated unfairly. The objectors
contend that underground oil contaminated certain properties in Zone B, and therefore
that the wide disparity between Zone A and Zone B compensation is not reasonable.
With regard to the existence of contamination in Zone B, however, the district court
explicitly considered and rejected the evidence offered by the objectors, finding more
credible the evidence of contamination used to designate the zone boundaries. We do
not believe that the district court clearly erred in its factual findings.
The objectors also argue that the relief given to owners of property in Zone C
is wholly inadequate. It seems to us, however, that the district court could reasonably
conclude, as it did, that the owners of property in Zone C receive significant benefits
from the community revitalization efforts, the monitoring of wells, and remediation
efforts that Amoco agreed to undertake. Although the objectors complain that owners
of property in Zone C are subjected to easements on their land to facilitate the cleanup,
this "cost" is proportionately offset by the benefit creating the cost, namely,
environmental cleanup. To the extent that there is no cleanup, there is no infringement
on property rights, and the Zone C property owners still benefit from the community
revitalization activities and the de-stigmatization of the area.
In addition to assessing the relative merits of the plaintiffs' claims, a court, in
examining the compensation provided by a settlement, should consider the defendant's
ability to pay, the anticipated length and complexity of further litigation, and the amount
of opposition to the settlement. Grunin, 513 F.2d at 124. In this case, the district court
explicitly considered all of these matters and found that they did not require the
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settlement to be disapproved. We agree with the district court's evaluation of the
relevant considerations.
While it is undisputed that Amoco could pay more than it is paying in this
settlement, this fact, standing alone, does not render the settlement inadequate.
Although this case was settled on the eve of trial, significant further litigation, both in
a trial projected to last at least a few weeks and in the inevitable appeals, would be
needed to resolve the case. Finally, fewer than 4 percent of the class members objected
to the settlement, significantly fewer than the number of objectors to other settlements
that have been approved. See Van Horn, 840 F.2d at 606. Although we agree that the
"vociferous[ness]" of the objectors, General Motors
Corp., 55 F.3d at 812, should also
be considered, and that the objectors in our case have indeed vigorously objected to the
settlement, we do not believe that disapproval of the settlement is warranted here. See
County of Suffolk v. Long Island Lighting Co.,
907 F.2d 1295, 1325 (2nd Cir. 1990).
III.
The objectors also complain that the notice of the settlement sent to the class
members violated the requirements of Fed. R. Civ. P. 23(d)(2) and Fed. R. Civ. P.
23(e), see also Fed. R. Civ. P. 23(c)(2), because it did not adequately describe the
settlement's terms. They emphasize that while the notice of settlement stated the
maximum aggregate amount that Amoco would pay to the class as a whole, it did not
say how this amount would be distributed among the individual members of the class.
Under Fed. R. Civ. P. 23(e), the district court directs the form of the notice of
settlement, and the notice need only satisfy the "broad 'reasonableness' standards
imposed by due process." Grunin, 513 F.2d at 121. The Supreme Court has found that
the notice must be "reasonably calculated, under all the circumstances, to apprise
interested parties of the pendency of the action and afford them an opportunity to
present their objections." Mullane v. Central Hanover Bank and Trust Co.,
339 U.S.
306, 314 (1950). The notice in this case unquestionably alerted the recipients that they
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were members of a pending class action, that a settlement had been proposed, and that
they had the right to state their objections at a fairness hearing.
We recognize that the information provided to the class members in the notice
must be structured "in a manner that enables class members rationally to decide
whether they should intervene in the settlement proceedings or otherwise make their
views known." Reynolds v. National Football League, 584 F.2d 280, 285 (8th Cir.
1978). Under
Reynolds, 584 F.2d at 285, the notice of settlement must be sufficiently
detailed to permit class members to determine the potential costs and benefits involved,
or at least whether additional investigation into the matter would be an efficient use of
their time. This standard has been met here. The notice described with sufficient
particularity the stakes involved: the settlement of environmental claims against
Amoco, the award of significant injunctive relief, and the potential aggregate payout
of over seven million dollars in compensatory damages. Significantly, the notice also
provided a telephone number that the class members could call for more information.
See In re Prudential Insurance Co.,
148 F.3d 283, 328 (3rd Cir. 1998), cert. denied,
119 S. Ct. 890 (1999) (approving use of "800" number in scheme of notice).
We do not agree with the objectors' contention that a mailed notice of settlement
must contain a formula for calculating individual awards. It is well settled that the
notice " 'is not required to provide a complete source of information.' " DeBoer, 64
F.3d at 1176, quoting Maher v. Zapata Corp.,
714 F.2d 436, 452 (5th Cir. 1983). The
weight of authority rejects the proposition that a specific formula must always be
included in the notice. See
Grunin, 513 F.2d at 122 (finding that a notice "may consist
of a very general description of the proposed settlement"); see also In re "Agent
Orange" Product Liability Litigation,
818 F.2d 145, 170 (2nd Cir. 1987), cert. denied,
484 U.S. 1004 (1988). In our case the mailed notice provided a reasonable summary
of the stakes of the litigation, and class members could easily acquire more detailed
information, including data on potential individual awards, through the telephone
number that was provided. Due process requires no more.
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IV.
The objectors next dispute the district court's grant of summary judgment for
Amoco on the claim that the class made under CERCLA. Assuming, arguendo, that
the objectors may properly raise this issue in an appeal from the approval of a class
action settlement, we find that the district court's grant of summary judgment to Amoco
on that claim was proper.
CERCLA generally provides a cause of action to a private person, see 42 U.S.C.
§ 9659(a)(1), seeking relief from another person, see 42 U.S.C. § 9607(a), who has
caused a "hazardous substance," see 42 U.S.C. § 9601(14), to pollute an area. The
plaintiffs' CERCLA claim alleged that Amoco had caused hazardous substances to
contaminate property owned by the class members. The statute, however, specifically
excludes "petroleum" from the definition of "hazardous substance." See id. This
"petroleum exclusion" has been interpreted to apply to "unrefined and refined gasoline
even though certain of its indigenous components and certain additives during the
refining process have themselves been designated as hazardous substances." Wilshire
Westwood Associates v. Atlantic Richfield Corp.,
881 F.2d 801, 810 (9th Cir. 1989);
see also Cose v. Getty Oil Co.,
4 F.3d 700, 704 (9th Cir. 1993). The district court
found that all of the contaminants involved in this case fell within the petroleum
exclusion, and therefore that the class had no cause of action against Amoco under
CERCLA.
We review a grant of summary judgment de novo, and draw all reasonable
inferences in favor of the nonmoving party. See Wallin v. Minnesota Department of
Corrections, 153 F.3d 681, 686 (8th Cir. 1998). In our case, experts retained by both
sides stated that the pollution plume consisted of refined and unrefined petroleum
hydrocarbon products. Although the class provides some evidence that various
hazardous substances are found in the soil, it fails to offer any evidence to refute the
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findings of Amoco's expert and of its own expert that the hazardous substances found
are constituents of crude oil or refined petroleum products.
On appeal the objectors contend that the hazardous substances that they claim
are present "are not found naturally in petroleum," but cite nothing in the record to
support that conclusory statement. Even if we give full credence to the evidence that
the objectors claim demonstrates the presence of hazardous substances, therefore, a
grant of summary judgment to Amoco on the CERCLA claims is appropriate, as no fact
finder could reasonably conclude that the petroleum exception does not apply.
V.
The objectors also appeal from the district court's disqualification of one of the
original class counsel. The district court found that an impermissible conflict of interest
was created by the fact that two of the class representatives were close relatives (the
husband and a sister-in-law) of a partner in the firm in question. "The decision to grant
or deny a motion to disqualify an attorney rests in the discretion of the [district] court,
and we will reverse this determination only upon a showing of abuse of that discretion."
Harker v. Commissioner, 82 F.3d 806, 808 (8th Cir. 1996). "When reviewing [the]
decision of a district court on a motion for disqualification of an attorney, we apply the
same rules governing the professional conduct of attorneys that the district court ...
adopted."
Id. The Western District of Missouri follows the Rules of Professional
Conduct adopted by the Missouri Supreme Court. See W.D. Mo. Local R. 83.5(c)(2).
The Missouri Supreme Court, in turn, adopts the Rules of Professional Conduct of the
American Bar Association. See Mo. S. Ct. R. 4.
Whether an impermissible conflict of interest is present when a class counsel is
a close relative of a class representative is a question of first impression in our circuit.
A survey of the case law of other jurisdictions reveals a difference of opinion, compare
Zylstra v. Safeway Stores, Inc., 578 F.2d 102, 104 (5th Cir. 1978), Susman v. Lincoln
American Corp.,
561 F.2d 86, 90, 96 (7th Cir. 1977), Zlotnick v. TIE Communications,
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Inc., 123 F.R.D. 189, 194 (E.D. Pa. 1988) (close familial relationship between class
counsel and class representative inappropriate), with Werlinger v. Champion
Healthcare Corp.,
598 N.W.2d 820, 827-28 (N.D. 1999), In re Greenwich
Pharmaceuticals Securities Litigation, No. 92-3071,
1993 WL 436031, at *2 (E.D. Pa.
Oct. 25, 1993) (unpublished) (familial relation between class counsel and class
representative allowed).
The objectors contend that all of the cases relied on by Amoco were following
Canon 9 of the Canons of Ethics, which were part of the Code of Professional
Responsibility, and which prohibited even the "appearance of impropriety." The Rules
of Professional Conduct, which supplanted the Code of Professional Responsibility in
1986, do not, however, contain the language of Canon 9. The most applicable current
stricture is Rule 1.7of the Rules of Professional Conduct, which prohibits a lawyer from
representing a client if the representation of that client will be either directly adverse
to another client or materially limited by the lawyer's own interests.
We have held that cases applying the "appearance of impropriety" standard
found in the Canons of Ethics do not govern our review of decisions applying the Rules
of Professional Conduct. Harker, 82 F.3d at 808-09. We believe, however, that the
rationale of Zylstra is also applicable in jurisdictions applying the Rules of Professional
Conduct. The Zylstra
court, 578 F.2d at 104, found that "there is a reasonable
possibility that some specifically identifiable impropriety will occur" when a class
counsel is closely related to a class representative. See also Phillips v. Joint Legislative
Committee,
637 F.2d 1014, 1023 (5th Cir. 1981), cert. denied,
456 U.S. 960, 971
(1982). We agree with the Fifth Circuit on this point.
In situations where there is a close familial bond between a class counsel and a
class representative, it seems to us that there is a clear danger that the representative
may have some interests in conflict with the best interests of the class as a whole when
making decisions that could have an impact on attorney fees. The "appearance of
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impropriety" language in Zylstra does not lessen its holding that a conflict of interest
exists when a class counsel and a class representative are closely related. The lack of
a prohibition on the "appearance of impropriety" in the Rules of Professional Conduct
does not "alter the underlying principle that an attorney owes undivided loyalty to the
client." In re Allstate Ins. Co., 722 S.W.2d 947, 951 (Mo. 1987) (en banc). We
believe, therefore, that a district court applying the Rules of Professional Conduct may
grant a motion for disqualification if there is a close familial relationship between the
class counsel and a class representative.
We also disagree with the objectors' contention that the district court erroneously
relied on the "appearance of impropriety" standard in reaching its conclusion. The
district court's order explicitly cited to Rule 1.7 of the Rules of Professional Conduct
and correctly found that the rationale of cases like Zylstra and Susman was applicable
in a conflict-of-interest analysis. Although we do not hold that a close familial
relationship between a class counsel and a class representative necessarily calls for
disqualification, we do not believe that the district court abused its discretion in finding
an impermissible conflict of interest here. The disqualification of the entire firm in
question, instead of only the relevant partner, was also proper. See Mo. S. Ct. R. 4-
1.10(a) ("[w]hile lawyers are associated in a firm, none of them shall knowingly
represent a client when any one of them practicing alone would be prohibited from
doing so by [Rule 1.7]").
The final argument of the objectors is that even if there were an improper
relationship between the class counsel in question and two of the class representatives,
this difficulty was cured when the two representatives became class members only.
The district court rejected this argument, finding that one of the removed
representatives remained a "de facto class representative" even after her formal status
was changed from "representative" to "member."
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We agree that a class member may exert such influence over class
representatives and other class members as to be found a "de facto representative" for
the purposes of granting a motion to disqualify. See Fechter v. HMV Industries, 117
F.R.D. 362, 364 (E.D. Pa. 1987). The danger of biased decision-making is not
necessarily cured by simply changing a person's title from "class representative" to
"class member"; disqualification may still be appropriate if the class member continues
to exert a significant influence. The record in this case indicates that Carole Park, a
prominent member of the community, played a very active role in the initiation of the
lawsuit and in subsequent litigation. It is also worth noting that the firm in question
brought this suit with not one but two class representatives who were closely related
to the relevant partner and was not very forthcoming with that information. Under
these circumstances, we do not believe that the district court abused its discretion when
it found that although Ms. Park's status changed from representative to member,
"nothing [] changed except a label."
VI.
The objectors contend that even if the dismissal of the firm in question was
proper, the district court erred in refusing to award attorney fees and costs for work
performed by that firm before and after disqualification. We disagree.
Decisions of the district court regarding attorney fees in a class action settlement
will generally be set aside only upon a showing that the action amounted to an abuse
of discretion. See Grunin, 513 F.2d at 126. As discussed above, the Western District
of Missouri adopts the definition of "misconduct" that appears in the Rules of
Professional Conduct of the Missouri Supreme Court. Once misconduct has been
found, an attorney admitted to practice before the federal court may be disbarred,
reprimanded, or "subjected to such other disciplinary action as the circumstances
warrant." See W.D. Mo. R. 83.5(c)(1).
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In this case, the district court explicitly found that the conflict of interest of the
firm in question constituted a serious violation of the firm's duty to the class, and that
such a violation required the termination of the firm's employment. Under these
circumstances, the district court could properly deny the firm any recovery for services
rendered prior to the disqualification, even if those services conferred some benefit on
the class. We do not believe that this result is overly harsh or incongruent with the law
of other jurisdictions. For example, the Missouri Supreme Court found that a complete
forfeiture of fees is warranted when "a lawyer's clear and serious violation of a duty to
a client is found to have destroyed the client-lawyer relationship." International
Materials Corp. v. Sun Corporation, Inc., 824 S.W.2d 890, 895 (Mo. 1992) (en banc).
The district court's denial of attorney fees and costs for services rendered after
disqualification of the relevant firm was also proper. To recover fees from a common
fund, attorneys must demonstrate that their services were of some benefit to the fund
or enhanced the adversarial process. See Elliott v. Sperry Rand Corp., 680 F.2d 1225,
1227 (8th Cir. 1982) (per curiam); see also Class Plaintiffs v. Jaffe and Schlesinger,
P.A.,
19 F.3d 1306, 1308 (9th Cir. 1994) (per curiam). In our case, the efforts of the
firm in question do not appear to have changed any of the terms in the settlement
agreement. We note that although the firm intimated to the district court that Amoco
increased its settlement offer because of the firm's efforts in parallel cases, the district
court's refusal to draw the desired inference was not an abuse of discretion. In
addition, unlike in Elliott, and for the reasons provided above with respect to the need
for subclasses, there was insufficient indication that the objectors or any other subgroup
of class members needed separate counsel.
Under these circumstances, we do not believe that the district court abused its
discretion when it found that the firm's "post-disqualification involvement has not
meaningfully or materially contributed to the adversarial nature of the proceedings or
to the terms of the Settlement Agreement," and denied an award of attorney fees. This
finding also forecloses the prospect of the firm's recovering fees under the familiar
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principles of quantum meruit. See, e.g., International Materials Corp., 824 S.W.2d at
895 ("[a]s in all cases involving quantum meruit recovery, the services must have
enriched the client in the sense of benefits conferred").
VII.
The objectors also complain that the district court erred in approving the fees
awarded to the remaining class counsel. The district court evaluated the proposed fee
award using the "percentage of the fund" method. The court found that the proposed
fee constituted 24 percent of the monetary compensation to the class, and therefore that
the fee was reasonable, particularly given that significant nonmonetary benefits are also
being given to the class. We do not believe that the district court abused its discretion.
It is well established in this circuit that a district court may use the "percentage of the
fund" methodology to evaluate attorney fees in a common-fund settlement, see Johnston
v. Comerica Mortgage Corp., 83 F.3d 241, 244-45 (8th Cir. 1996), and a fee of 24
percent of the monetary benefits in this case appears reasonable. See Court Awarded
Attorneys Fees, Report of the Third Circuit Task Force,
108 F.R.D. 237, 247 n.32 (3rd
Cir. 1985) (suggesting that awards in the range of 20 percent to 25 percent are
reasonable).
The district court also verified the reasonableness of the fee award by calculating
the fee under a "lodestar" approach -- totaling the hours worked and multiplying them
by a typical hourly fee. The objectors suggest a number of flaws in the data used to
calculate the award under the lodestar approach. Having found that the district court's
approval of the fee under the "percentage of the fund" approach was proper, however,
we need not address these criticisms. In so finding, we note that although use of the
"lodestar" approach is sometimes warranted to double-check the result of the
"percentage of the fund" method, we detect no indication here that the award is overly
generous.
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VIII.
The objectors argue in their brief that the district court erred in refusing to allow
certain objectors to intervene in the case so that they could appeal some of the district
court's rulings. As the objectors recognize in their brief, however, we need not address
this issue, since neither Amoco nor the class counsel contests the standing of at least
one of the objectors to raise the above-stated issues.
IX.
For the foregoing reasons we affirm the judgment of the district court in all
respects.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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