Herding The Cats – Hershey v. Exxonmobil Oil Corp., 2013 WL 66075 (D. Kan., Jan. 4, 2013)
This decision is a useful reminder of how to control potentially expensive and protracted appeals of class settlements by class members who are either genuinely disgruntled or seeking additional leverage for financial reasons. In this case, the settling defendant built in a provision requiring class members who wished to appeal the class settlement to put their money where their mouth was in terms of a robust appeal bond:
Paragraph 5.3 of the Settlement Agreement approved by the court provides:
Any Class Member wishing to remain a Class Member, but objecting to any part of the Settlement can do so only as set forth in the Class Notice attached as Exhibit “C”. Because any appeal by an objecting Class Member would delay the payment under the Settlement, each Class Member that appeals agrees to put up a cash bond to be set by the district court sufficient to reimburse Class Counsel’s appellate fees, Class Counsel’s expenses, and the lost interest to the Class caused by the delay.
In this case, the cash bond in this $60.5 million class settlement amounted to $9,080,000.00, which the prospective appellants argued was prohibitive and barred by Fed. R. App. Pr. 7 and 39. Judge Marten disagreed where the parties had specifically agreed to shift the risks and burdens of the appeal. The would-be appellants then objected to the en terrorem effect of Section 5.3, which the District Court rejected due to the fact that it had already approved that provision over objections during the settlement approval process, and because these particular appellants had not objected to that section previously. Because opt outs would not have standing to appeal the class settlement, provisions like this are a good way to neutralize the ability of professional objectors to derail an otherwise mutually beneficial class settlement and hold the class hostage through a protracted appeal. Note to potential appellants – if you are going to challenge provisions like this, don’t wait until the settlement has already been approved.