Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 1 of 20

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1 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 1 of 20 IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF ARKANSAS WESTERN DIVISION CONNIE JEAN SMITH, individually and on behalf of all others similarly situated v. CASE NO. 4:14CV00435 BSM SEECO, INC. n/k/a SWN Production (Arkansas), L.L.C., et al. PLAINTIFFS DEFENDANTS PLAINTIFF S REPLY IN SUPPORT OF HER EMERGENCY MOTION FOR (A) CONTINUANCE, (B) SHOW CAUSE HEARING, (C) SANCTIONS AGAINST DEFENDANTS AND THEIR COUNSEL, AND (D) INJUNCTIVE RELIEF

2 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 2 of 20 TABLE OF CONTENTS Page INTRODUCTION...1 ARGUMENT...5 I. Civil Contempt and Sanctions Are Appropriate...5 A. Defendants and their Counsel Should be Held in Civil Contempt...5 B. The Court Has the Power to Issue Broad Sanctions...7 C. Defendants Knowingly Disrupted this Litigation, Violated Court Orders, Attempted to Evade the Court s Supervisory Authority and Improperly Communicated with Represented Class Members...9 II. Defendants Should Be Enjoined from Further Settlement Efforts that Exclude Smith Class Counsel...13 CONCLUSION...14 i

3 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 3 of 20 TABLE OF AUTHORITIES Page(s) Cases In re Am. Online Spin-Off Accounts Litig., No. CV RSWL, 2005 U.S. Dist. LEXIS (C.D. Cal. May 9, 2005)...13 Blodgett v. Hanson, No , 2012 U.S. Dist. LEXIS (D. Minn. Oct. 30, 2012)...7 Breswick & Co. v. Briggs, 135 F. Supp. 397 (S.D.N.Y. 1955)...4, 8 Castillo v. Hernandez, No. EP-10-CV-247-KC, 2011 WL (W.D. Tex. Apr. 20, 2011)...1 Chaganti & Assocs., P.C. v. Nowotny, 470 F.3d 1215 (8th Cir. 2006)...6 Chambers v. NASCO, Inc., 501 U.S. 32 (1991)... passim Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976)...13 Hubbard v. Plaza Bonita, L.P., No JLS(WVG), 2011 U.S. Dist. LEXIS (S.D. Cal. June 13, 2011)...8, 10, 12 In re Federal Skywalk Cases, 97 F.R.D. 370 (W.D. Mo. 1983)...1, 4, 5, 12 In re Complaint of PMD Enters., 215 F. Supp. 2d 519 (D.N.J. 2002)...12 Organik Kimya, San. ve Tic. A.S. v. ITC, 848 F.3d 994 (Fed. Cir. 2017)...11 Reynolds v. Beneficial Nat l Bank, 288 F.3d 277 (7th Cir. 2002)...5 In re Rimsat, Ltd., 229 B.R. 914 (Bankr. N.D. Ind. 1998)...7, 12 Romstadt v. Apple Computer, Inc., 948 F. Supp. 701 (N.D. Ohio 1996)...1, 4, 8 ii

4 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 4 of 20 Ryan v. Astra Tech, Inc., 772 F.3d 50 (1st Cir. 2014) Schoenfeld v. Kleiber, No CV-C-NKL, 2007 U.S. Dist. LEXIS (W.D. Mo. Nov. 2, 2007)...5, 6 Van Deelen v. City of Kan. City, No CV-W-GAF, 2006 U.S. Dist. LEXIS (W.D. Mo. July 24, 2006)...7 Other Authorities Arkansas Rule of Professional Conduct Rule iii

5 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 5 of 20 Plaintiff and Class representative, Connie Jean Smith, respectfully submits this Reply in Support of her Emergency Motion for (A) Continuance, (B) Show Cause Hearing, (C) Sanctions against Defendants and Their Counsel, and (D) Injunctive Relief (Doc. Nos. 372, 373) (the Motion ). 1 For the reasons set forth below, the Motion should be granted. 2 INTRODUCTION Defendants 46-page response in opposition to the Motion (Doc. No. 406) (the Response ) provides a skewed recitation of (1) the history of this litigation; (2) Defendants understanding of and failure to comply with this Court s class certification and notice orders; 3 (3) the relevant case law, including In re Federal Skywalk Cases, 97 F.R.D. 370 (W.D. Mo. 1983) ( Skywalk ), vacated on other grounds; 4 and (4) the purported benefit of the Snow settlement to 1 On May 23, 2017, the Court denied the Motion insofar as it requested a continuance of trial (Doc. No. 372). This Reply addresses the remaining requested relief. 2 Plaintiff incorporates by reference the argument in Plaintiff s Surreply in Opposition to Defendant s Motion for Stay (Doc. No. 380) and any exhibits attached thereto. 3 The Court s class certification and notice orders are abundantly clear. Smith Class Counsel has been appointed to represent the absent Class members in this case and has an attorney-client relationship with those Class members. See Doc. No. 373 at 7-8. Moreover, the Court s notice order directed that one complete and straightforward notice be sent to the Smith Class and did not authorize deviations or additional notice. See id. at 9; see also Doc No Skywalk remains good law as evidenced by the numerous courts that continue to cite to it as authority. See, e.g., Castillo v. Hernandez, No. EP-10-CV-247-KC, 2011 WL , at *3 (W.D. Tex. Apr. 20, 2011) (citing to Skywalk for premise that courts often issue protective orders where parties communicate improperly with class members); Romstadt v. Apple Computer, Inc., 948 F. Supp. 701, 708 (N.D. Ohio 1996) (basing decision on approach taken in Skywalk, while noting that the court in Skywalk... later vacated its opinion ). Indeed, it is clear that the Skywalk court reconsidered its contempt holding and subsequently vacated it because the parties had subsequently entered into serious settlement negotiations and reached a class settlement, not because its analysis had been faulty. See Skywalk, 97 F.R.D. at 384. The subsequent case history on which Defendants rely not only suggests that the contempt holding was proper, it also reveals exactly how the Skywalk federal court used its supervisory authority over that class, to aid the parties in resolving their dispute in the proper federal forum. That the court ultimately vacated the contempt holding in the name of 1

6 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 6 of 20 Smith Class members. 5 While the Response is long on words, it is short on explanations; the Response does not begin to explain how this Court can protect the Smith Class members and its supervisory authority over the Smith Class without ordering corrective notice and sanctions. Defendants cannot avoid the irony of their arguments in the Response which contradict everything Defendants have told this Court for nearly three years. See Doc. No. 384 at 3 ( The settlement does nothing to unravel the appropriateness of the court s analysis that led to the contempt holding in the first instance. 5 The Court is well aware of the history of this litigation and Plaintiff will not repeat it here. The relevant timeline is contained in the Motion. See Motion at 3-5. Importantly, Defendants assertion that Smith counsel was present at the Snow hearing and failed to object to the Snow settlement is an outright misrepresentation. See Response at Local counsel for the Smith Class, Ben Caruth, was in Arkansas state court on May 18, 2017 on another matter for another client. Smith Class Counsel never received advance notice that (1) a mediation was scheduled in Snow; (2) a settlement had been reached that would encompass the Smith Class; or (3) a hearing would take place before Judge Sullivan for preliminary approval of the settlement. Indeed, Smith Class counsel was not invited to attend the hearing nor given an opportunity to be heard. Mr. Caruth, who happened to be in the courtroom on another matter with no prior information regarding the Snow settlement and who was not afforded any opportunity to consult with Plaintiff and Class representative Ms. Smith, was in no position to object to the Snow settlement on behalf of Ms. Smith or the Smith Class. Defendants suggestion that Smith Class Counsel had an opportunity to object to the Snow settlement is misleading and their contention that Smith Class Counsel somehow waived any objection is ridiculous. Moreover, any such objection would have fallen on deaf ears. Indeed, Stacy Burrows, counsel for intervenors in Snow, stated her objection on the record but Judge Sullivan nonetheless preliminarily approved the settlement. If Defendants were truly concerned about the Due Process rights of the Smith Class, they would not have rushed to reach a collusive settlement, obtain its preliminary approval and send out a misleading notice to the Smith Class all in a matter of 4 days and while missing filing deadlines in this case. See Doc. No The same holds true for the March 20, 2017 hearing to which Defendants refer. See Response at Smith Class counsel was not invited to attend that hearing, was not a party to the Snow litigation, and had no standing to object short of moving to intervene. While Smith local counsel, Allen Gordon, was in the courtroom, there is no evidence in the record that supports Defendants contention that he could have done something to prevent the dissemination of the Snow notice to Smith Class members. Moreover, Defendants who were parties to the Snow litigation raised all of the objections that they say Smith Class Counsel didn t raise and took those objections all the way to the Arkansas Supreme Court. Thus, there was nothing more for Smith Class Counsel to do under the circumstances. Any suggestion by Defendants that Smith Class Counsel could have prevented the initial Snow notice from going to Smith Class members is unsupported by the record and is mere speculation. 2

7 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 7 of 20 irony that defendants now want the federal case to play second-fiddle is duly noted. ). Nor can Defendants avoid two simple truths evidenced by the troubling chain of events they triggered in this litigation. See Doc. No. 384 at 3. First, in an attempt to settle on the cheap and avoid a trial here, Defendants entered into a collusive reverse auction settlement that (i) pays the Snow plaintiffs attorneys two-thirds (⅔) of the cash benefit ($20 million), (ii) judicially endorses a fraudulently-created gathering charge which guarantees Defendants $101 million in future profits from the Smith Class, and (iii) provides less than $10 million to be shared amongst over 12,000 settlement class members to address well over $193 million in actual and statutory damages. Second, as evidenced by the Snow transcript, Defendants violated ethical rules and the Court s Orders and disrupted this litigation by sending notice to the Smith class. See at 6 ( [A]s part of the settlement, SEECO has provided funds so that we can get this Class Notice out beginning tomorrow. ). In addition to violating Court Orders and the attorney-client relationship between Class Counsel and the Class, the notice rushed out around midnight on May 19 was misleading because it contained no reference to the Smith case nor any explanation of how the Snow settlement effects Smith Class members. Given the misleading nature of the Snow notice and the fact that this Court s notice advised Class members that if they DO NOTHING, they will [s]tay in this lawsuit and stay in [this] Class (Doc. No. 244, Ex. 1), approximately 12,000 Smith Class members would have no reason to respond to the Snow notice. Instead, they would reasonably rely on the representations in the Smith notice that this Court would oversee their claims that would be litigated by Smith Class Counsel in federal court. Smith Class members have been provided no reason to believe otherwise. This is not a mistake. Defendants knowingly created this situation in an effort to jam a collusive settlement through state court before the impending trial in this case. The Court cannot 3

8 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 8 of 20 allow the claims of Smith Class members over which it exercises supervisory control to be waived or their Due Process rights to be violated as a result of Defendants end-run around the Court s supervisory authority. See Skywalk, 97 F.R.D. at 377 (noting havoc would result from allowing the defendants to make an end-run around [the court s] supervisory authority and be nearly irremedial. ); Romstadt v. Apple Comput., 948 F. Supp. at 708 (finding any judgment entered in the [state] proceeding shall not have, as to any class member in the federal proceeding, res judicata or similar effect unless such class member has taken advantage of the [state] settlement by affirmatively accepting one of the items being offered to the class members in that case ); Breswick & Co. v. Briggs, 135 F. Supp. 397, 403 (S.D.N.Y. 1955) (finding as a result of defendant s inequitable conduct, they would not be allowed to reap the benefit of their state court settlement). Moreover, Defendants attempt to frame the Snow settlement as fair in light of the damages analysis is this case is absurd. 6 The settlement has all of the earmarks of a reverse auction it s a sell-out settlement to the lowest bidder in exchange for massive attorneys fees for Snow counsel (67% of the cash settlement amount) which guarantees Defendants $101 million in future profits from the Smith Class. See Doc. No. 384 at 6 ( For example, in March 2017, there were concerns expressed in Snow that there had been no discovery on the merits, State Tr. 91:22-92:23, 92:2 (describing the amount of information Snow counsel must digest as 6 Plaintiff will not use this Reply to respond to Defendants unfounded attacks on her damages expert, Saul Solomon. See Response at Rather, Plaintiff incorporates by reference the arguments in her Response in Opposition to Defendants Motion to Exclude Testimony of Expert Saul Solomon and the exhibits attached thereto. See Doc. No Moreover, Mr. Solomon s expert reports which are based on reliable damages methodologies speak for themselves and the jury will decide the appropriate amount of damages in this case. Suffice it to say that when summary judgment was denied and Defendants faced well over $193 million in actual and statutory damages in this federal court, they quickly retreated to state court to collusively settle on the cheap. 4

9 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 9 of 20 a huge amount of information ) and expert reports had not yet been prepared, id. 92:12-92:15; yet, Snow counsel was able to attend what appears to be a one-day mediation in May 2017 and agree to a fair and reasonable settlement for thousands of royalty owners that he did not yet represent (i.e., the non-arkansas citizens) ); see also Reynolds v. Beneficial Nat l Bank, 288 F.3d 277, 283 (7th Cir. 2002) (discussing the practice whereby the defendant in a series of class actions picks the most ineffectual class lawyers to negotiate a settlement with the hope that the district court will approve a weak settlement that will preclude other claims against the defendant ). One thing is apparent to Plaintiff and the Court [u]nder the circumstances, the defendants have clearly worked the system in both courts to obtain the best result for themselves. Doc. No. 384 at 4. As such, it is wholly appropriate indeed, necessary for the Court to enter sanctions against Defendants counsel for their bald attempt to end-run around the Court s supervisory authority, its Orders and ethical rules. See Skywalk, 97 F.R.D. at ; see also Doc. No ARGUMENT I. Civil Contempt and Sanctions Are Appropriate A. Defendants and their Counsel Should be Held in Civil Contempt Notwithstanding Defendants arguments to the contrary, Defendants misconduct meets the standard for civil contempt. See Schoenfeld v. Kleiber, No CV-C-NKL, 2007 U.S. Dist. LEXIS 81581, at *5 (W.D. Mo. Nov. 2, 2007) ( A party may be held in civil contempt for failure to comply with a court order if (1) the order the contemnor failed to comply with is clear and unambiguous, (2) the proof of noncompliance is clear and convincing, and (3) the contemnor has not diligently attempted to comply in a reasonable manner. (internal citation omitted). 5

10 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 10 of 20 Here, there were two clear and unambiguous orders that Defendants knowingly violated the class certification order certifying the Smith Class and appointing Smith Class Counsel and the notice order providing specific instructions regarding the form and manner of notice that may be sent to the Class. See Doc No. 186 at 17; Doc No There is no ambiguity in those orders and Defendants cannot credibly argue that they misunderstood the attorney-client relationship established by the class certification order or the fact that any further notice to the Smith Class would need to be approved by this Court. See Mot. at The Court has the inherent power to punish contempt. See Chambers v. NASCO, Inc., 501 U.S. 32, 44 (1991). Given that Plaintiff has shown that Defendants violated the Court s orders, the burden is on Defendants to (1) explain why, categorically and in detail, [they were] unable to comply; (2) show that [their] inability to comply was not self-induced, and (3) show that [they] made in good faith all reasonable efforts to comply. See Schoenfeld, 2007 U.S. Dist. LEXIS 81581, at *6. Defendants have failed to meet that burden because they have not shown an inability to comply or that they made good faith reasonable efforts to comply. Rather, they jointly asked the Snow court to approve notice to be sent to Smith Class members and funded that notice in violation of this Court s orders. See Mot. at 1. To the extent Defendants believed the Court s orders were unclear which they were not Defendants had an obligation to seek clarification of the court s order[s]. Chaganti & Assocs., P.C. v. Nowotny, 470 F.3d 1215, 1224 n.2 (8th Cir. 2006) ( [A] party to an action is not permitted to maintain a studied ignorance of the terms of a decree in order to postpone compliance and preclude a finding of contempt. ) (internal citation omitted). Failing to request the Court s approval or clarification of the Court s orders and sending a second notice to the represented Smith Class members are grounds for contempt. 6

11 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 11 of 20 See id. The assessment of attorney s fees and fines are appropriate sanctions to compensate Plaintiff for Defendants civil contempt. See Schoenfeld, 2007 U.S. Dist. LEXIS 81581, at *4-5. B. The Court Has the Power to Issue Broad Sanctions In addition to sanctions for civil contempt, the Court has the inherent power to issue broad sanctions for Defendants bad faith conduct and ethical violations. It is well-settled in the Eighth Circuit that a district court is vested with discretion to impose sanctions upon a party under its inherent disciplinary power. Van Deelen v. City of Kan. City, No CV-W- GAF, 2006 U.S. Dist. LEXIS 50734, at *33 (W.D. Mo. July 24, 2006), aff d in part, modified in part, 2007 U.S. App. LEXIS (8th Cir. 2007) (internal citation omitted). The Court s inherent authority to impose sanctions may be exercised in order to control its own judicial proceedings. See Chambers, 501 U.S. at 43 (courts have inherent power to impose sanctions for bad-faith conduct based on the control necessarily vested in courts to manage their own affairs so as to achieve the orderly and expeditious disposition of cases ). In many cases, monetary sanctions alone are not sufficient to serve compensatory and deterrent purposes. See, e.g, In re Rimsat, Ltd., 229 B.R. 914, 923 (Bankr. N.D. Ind. 1998) ( Members of the legal profession have an obligation not only to their clients, but also to the court and all of civilized society... The failure of lawyers to subscribe to appropriate standards of professional conduct holds the legal profession up to public scorn and contempt. Such conduct leaves a tarnish which, if not contained, threatens to undermine further the standing of the profession and the judicial system we are sworn to uphold. ) (internal citation omitted) (emphasis added) (alterations in original). Under the Court s inherent authority, sanctions may be used to deter a litigant from engaging in conduct which abuses the judicial process. Blodgett v. Hanson, No

12 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 12 of 20 (JRT/JJG), 2012 U.S. Dist. LEXIS , at *9 (D. Minn. Oct. 30, 2012) (internal citation omitted); see also Hubbard v. Plaza Bonita, L.P., No JLS(WVG), 2011 U.S. Dist. LEXIS 64015, at *32 (S.D. Cal. June 13, 2011), aff d 630 F. App x 681 (9th Cir. 2015) ( An inherent powers sanction is meant to vindicate judicial authority. ) (internal citation omitted). Inherent power sanctions are broader than contempt, Rule 11 and Rule 37 sanctions. See id.; Chambers, 501 U.S at The Court already has recognized as much: As other federal courts have noted, retreating to state court to negotiate a settlement without notice to the federal parties creates havoc and represents an end-run around [the court s] supervisory authority. In re Federal Skywalk Cases, 97 F.R.D. 370 (W.D. Mo. 1983), reconsideration granted and contempt order vacated (Jan. 13, 1983). Other similar situations have occurred elsewhere with courts taking a strong stance to protect the rights of those involved. See e.g., Romstadt v. Apple Computer, Inc., 948 F Supp. 701, 708 (N.D. Ohio 1996) (ruling that continuing forward with a state court settlement while a federal case was pending would not have full faith and credit after noting [the defendant] was able to pick and choose among its adversaries who were, at least in theory, representing the same client ); Breswick & Co. v. Briggs, 135 F. Supp. 397 (S.D.N.Y. 1955) (barring use of res judicata because the defendants are not in equity entitled to utilize a judgment based on a settlement negotiated behind the backs of the active plaintiffs here ). Doc No. 384 at 3. Here, the Court must take an equally strong stance to protect the Smith Class, vindicate its judicial authority and deter this type of bad faith conduct in the future. See id. at 5-6 ( There are very serious concerns about defendants behavior here, and the settlement terms and chain of events leading to the state court judge s preliminary approval must be thoroughly briefed and analyzed. As has been expressed by other courts, the integrity of the defendants actions here turn on the facts. See, e.g., Romstadt, 948 F. Supp. at (noting concern with not informing state court judge of events in other cases) ). As long as counsel for Defendants have been given notice and an opportunity to be heard which they have Defendants Due Process is not violated. See Ryan v. Astra Tech, Inc., 772 F.3d 50, 61 (1st Cir. 2014) (finding defendant s due 8

13 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 13 of 20 process was not violated where pro hac vice admission was revoked and monetary sanctions were imposed based on attorney misconduct). Moreover, the Court is not required to find specific discovery abuses or contempt in order to impose sanctions for bad faith conduct. Chambers, 501 U.S at 48 (the inherent power to sanction extends to a full range of litigation abuses). C. Defendants Knowingly Disrupted this Litigation, Violated Court Orders, Attempted to Evade the Court s Supervisory Authority and Improperly Communicated with Represented Class Members As described in the Motion, Defendants knowingly disrupted this litigation, violated Court orders, attempted to evade the Court s supervisory authority and improperly communicated with represented Class members. The Court need only compare previous statements made by Defendants counsel to the current record to see that Defendants knowingly trampled on the Due Process rights of Smith Class members in their attempt to jam a collusive settlement through state court and avoid trial in this case. 7 Instead of asking this Court for approval of a notice to be sent to the Smith Class, which they previously acknowledged was necessary, Defendants rushed to provide misleading notice to the Smith Class, which failed to mention the this case, the fact that Defendants motion for summary judgment was largely denied and that trial was weeks away. See Doc. No That the Snow notice was sent at 11:45 pm on May 19, 2017 is telling Defendants wanted to make sure this Court did not have the opportunity to rule on Plaintiff s pending TRO motion before the misleading notice was sent. 7 See Doc. No at 17 (SEECO s brief opposing class notice filed in Snow) ( [R]efusal to acknowledge Smith in the proposed form of notice renders the proposed notice confusing and misleading in ways that violate Rule 23 and Due Process. ); Doc. No at 9 (SEECO brief to Arkansas Supreme Court) ( [The] strategic avoidance of this Court s review of its notice to the class before notice was sent cannot go without consequences. The harm this defective notice has caused cannot be undone. The notice that is now on its way will only serve to confuse the class that has already been constituted in the federal case. ). 9

14 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 14 of 20 There is no dispute that Defendants knew that the Snow settlement notice would be misleading by omitting any mention of the Smith case. Armed with this knowledge, counsel nonetheless, JOINTLY requested (with the Snow plaintiff lawyers in tow) that the Snow court approve and disseminate a notice which would, as they have admitted, guarantee confusion among Smith Class members. This is intentional misconduct was designed, as Mr. Powell and Mr. Askew put it, to deny the Smith Class members their rights under Rule 23 and the Due Process clause of the United States Constitution. Indeed, we now know based on the Snow transcript, that Defendants funded the misleading notice campaign. See at 6 ( [A]s part of the settlement, SEECO has provided funds so that we can get this Class Notice out beginning tomorrow. ). With a complete disregard for Smith Class members Due Process rights, Defendants also agreed to a mere 30-day settlement opt-out period. See id. at 7. As recognized by the Court, Defendants conduct was knowing and intentional: The defendants also criticized sending any notice at all in Snow because it would interfere with Smith, either on constitutional grounds or because notice would be misleading or otherwise defective. See Doc. No Nonetheless, with a settlement in hand, the defendants were apparently willing to dispense all of these (and many others) concerns and push forward a settlement in record-setting time. Compare, e.g., Doc. No at 33 (defendants arguing a sixty-day opt out period is required), with Doc. No at 25 (jointly moving for only a thirtyday opt out period for settlement purposes). Doc. No. 384 at 6. In circumstances such as this where Defendants bad faith conduct was knowing and intentional courts have imposed sanctions to vindicate their judicial authority and deter future conduct. See Hubbard, 2011 U.S. Dist. LEXIS 64015, at *30 ( Under this inherent power, and unlike statutory sanctions provisions, the Court may sanction a broad range of improper litigation tactics. ) (internal citation omitted). Indeed, certain courts have imposed case 10

15 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 15 of 20 dispositive sanctions, including default judgments, where conduct is particularly egregious. See Organik Kimya, San. ve Tic. A.S. v. ITC, 848 F.3d 994, 1006 (Fed. Cir. 2017) (affirming imposition of default judgment based on misconduct); id. at ( [H]ere, as in other areas of the law, the most severe in the spectrum of sanctions provided by statute or rule must be available to the district court in appropriate cases, not merely to penalize those whose conduct may be deemed to warrant such a sanction, but to deter those who might be tempted to such conduct in the absence of such a deterrent. ). Accordingly, Plaintiff requests the Court order the following sanctions: Defendants produce all communications between Defendants counsel and Snow plaintiffs counsel. Lift the protective order on Plaintiff s expert reports so that they may be made available to Judge Sullivan to evaluate on a complete record whether the Snow settlement is fair, reasonable and adequate. 8 Order all counsel of record and in-house counsel, including General Counsel, 9 to defendants to appear in person before the Court to show good cause as to why they should not be held in contempt of Court and/or sanctioned. Award Class counsel fees incurred since May 18, Based on its inherent ability to control its proceedings, the Court has the power to and should enter the above sanctions. See Chambers, 501 U.S. at 45 (finding outright dismissal of a lawsuit is within the court s discretion); id. ( Consequently, the less severe sanction of an assessment of attorney s fees is undoubtedly within a court s inherent power as well.... a court may assess attorney s fees as a sanction for the willful disobedience of a court order ) (internal citation 8 9 Defendants have agreed to this sanction. See Response at 29, n.9. Defendants contend that the Court does not have personal jurisdiction over SWN s General Counsel, John Ale, and cannot compel his appearance in court. However, Mr. Ale signed the Snow settlement agreement as a representative of SWN. The Court has the power to compel a party representative, whether it is Mr. Ale or another officer, to attend a hearing in this matter. 11

16 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 16 of 20 omitted); In re Complaint of PMD Enters., 215 F. Supp. 2d 519, 531 (D.N.J. 2002) (revoking pro hac vice admission because pro hac vice is a privilege, and as such, the privilege may be revoked as a sanction for unethical behavior ); Rimsat, 229 B.R. at 923 (granting motion for sanctions and revoking pro hac vice admissions and striking appearances); Hubbard, 2011 U.S. Dist. LEXIS 64015, at *36 (reporting counsel s conduct to state bar where it may have violated statutes and Rules of Professional Conduct). Here, Defendants willfully disregarded the Court s class certification and notice orders and violated Arkansas Rule of Professional Conduct Rule 4.2 which prohibited Defendants from communicating with the certified Class represented by Smith Class Counsel. 10 See Doc. No. 373 at 16, n.8. Accordingly, the Court must honor its supervisory duties under Rule 23 by sanctioning Defendants. See Skywalk, 97 F.R.D. at 376, ( If this Court permits the defendants to make an end-run around its supervisory authority, the principle that will be established for future class actions is unconscionable. Defendants would, from this day forward, be free to select the counsel of their choice in attempting to defeat a class action.... This Court could not simultaneously honor its supervisory duties under Rule 23 and allow such activity to take place. ). 10 Defendants contend that the Snow notice was sent by a court-appointed notice administrator pursuant to the Snow court s order. See Response at Defendants cannot avoid a Rule 4.2 violation because they did not physically send the notice. Defendants jointly requested that the Snow court approve the notice and funded the notice campaign with knowledge that Smith Class members were represented by Smith Class Counsel pursuant to this Court s class certification order. This is the Rule 4.2 violation. According to Defendants themselves, the fact that the Snow court entered an order (before even reading the settlement agreement) at the request of Defendants approving the dissemination of notice does not remove their conduct from the purview of Rule 4.2. See Doc. No at 69:11-25 ( The Rules of Professional Conduct prohibit the [Snow] lawyers from contacting those absent class members. Those absent class members are represented by [Smith] counsel. And they can t, it seems to me, use a third party to do that. [T]here s a big issue here as to whether the Court should participate in the sending of class notice to a lot of people represented by other lawyers on the very same claims. We just don t think that s appropriate. ). 12

17 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 17 of 20 II. Defendants Should Be Enjoined from Further Settlement Efforts that Exclude Smith Class Counsel Per the Court s May 23, 2017 Order (Doc. No. 384), this case is proceeding to trial on June 5, 2017 less than one week from today. Given Defendants previous attempts to evade the Court s supervisory authority and the impending trial, the Court should enjoin Defendants from: (1) further settlement efforts that exclude Smith Class Counsel, including any efforts to modify the Snow settlement or any notice related thereto; and (2) communicating or agreeing to fund or facilitate any further communication with members of the Smith Class beyond any specific communication authorized by this Court. 11 These are troubling circumstances, indeed. The Court should proceed to trial and enjoin any activities that threaten its resolution of this case, including those detailed in the Motion. See Doc No. 384 at 4 ( [T]here are also strong policy reasons for not deferring to state courts simply out of convenience. Colorado River Water Conservation Dist. v. United States, 424 U.S. 800, 817 (1976) ( [A]s between state and federal courts, the rule is that the pendency of an action in the state court is no bar to proceedings concerning the same matter in the Federal court having jurisdiction[.] ) ). 11 Defendants attempt to distinguish this case from others involving multi-district litigation fails. The policy concerns supporting the authority of federal courts in MDLs providing a single forum for the efficient resolution of nationwide class claims and avoiding forum shopping apply equally here. See In re Am. Online Spin-Off Accounts Litig., No. CV RSWL, 2005 U.S. Dist. LEXIS 45625, at *16 (C.D. Cal. May 9, 2005) ( The purpose of MDL litigation is to allow centralization and to prevent the type of forum-shopping that can occur from reverse auctions. ). Indeed, throughout this litigation, Defendants have consistently argued that this Court is the proper forum for broad resolution of all royalty owners claims. As the Court recently noted (Doc. No. 342): [T]he defendants opposed [ ] exclusions [to the class definition], most notably arguing [t]his case, which Plaintiff Smith commenced in federal court, is the proper vehicle indeed, the only forum for obtaining that prompt, once-and-for-all, judicial resolution. Doc. No. 117 at 2 (emphasis in original). The defendants got their wish: a single, nationwide class action, in federal court, to decide once-and-for-all the claims presented. Doc. No 384 at

18 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 18 of 20 CONCLUSION For the foregoing reasons and the reasons in the Motion, Plaintiff respectfully requests the Court grant Plaintiff s Motion and enter an Order (1) imposing appropriate sanctions; and (2) enjoining Defendants from the activities described in the Motion. Respectfully submitted, Dated: May 31, 2017 ALLEN GORDON Arkansas Bar Number BEN H. CARUTH Arkansas Bar Number GORDON, CARUTH & VIRDEN P.L.C. 105 South Moose Street Morrilton, AR Telephone: Facsimile: agordon@gcvlaw.com bcaruth@gcvlaw.com JOSEPH H. MELTZER Pennsylvania Bar Number KIMBERLY A. JUSTICE Pennsylvania Bar Number MELISSA L. TROUTNER Pennsylvania Bar Number NATALIE LESSER Pennsylvania Bar Number KESSLER TOPAZ MELTZER & CHECK, LLP 280 King of Prussia Road RADNOR, PA Telephone: Facsimile: jmeltzer@ktmc.com kjustice@ktmc.com mtroutner@ktmc.com nlesser@ktmc.com /s/brian Cramer BRIAN CRAMER Oklahoma Bar Number JACK MATTINGLY, JR. Oklahoma Bar Number TANNER W. HICKS Oklahoma Bar Number MATTINGLY & ROSELIUS, PLLC 210 W. Oklahoma Ave. Guthrie, OK Telephone: Facsimile: brian@mroklaw.com jackjr@mroklaw.com tanner@mroklaw.com ERIK DANIELSON Arkansas Bar Number DANIELSON LAW FIRM, PLLC 2195 N. College Ave. Fayetteville, AR Telephone: Ext 4 Facsimile: erik.danielson@danielsonlawfirm.com BRAD SEIDEL Arkansas Bar Number SEIDEL LAW FIRM, PC 9433 Fm 2244 Rd. Bldg. 1, Suite

19 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 19 of 20 Austin, TX Telephone:

20 Case 4:14-cv BSM Document 426 Filed 05/31/17 Page 20 of 20 CERTIFICATE OF SERVICE I certify that on May 31, 2017, I electronically transmitted the attached document to the Clerk of Court using the ECF System for filing. Based on the records currently on file, the Clerk of Court will transmit a Notice of Electronic Filing to all counsel of record. /s/brian Cramer 16