murphy oil usa united states court of appeal fifth circuit case no

8/14/2019 Murphy Oil USA United States Court of Appeal Fifth Circuit Case No

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NO.

UNITED STATES COURT OF APPEALSFOR THE FIFTH CIRCUIT

PATRICK JOSEPH TURNER, ET ALPlaintiff-Appellee

v.

MURPHY OIL USA, INC.Defendant-Appellant

Appeal from the United States District CourtEastern District of Louisiana

Civil Action No. 05-4206Consolidated Cases

APPELLANT'S ORIGINAL BRIEF FILED ON BEHALF OFMURPHY OIL USA, INC.



KERRY J. MILLER (LSB NO. 24562)JOSEPH N. MOLE (LSB NO. 09538)PAUL C. THIBODEAUX (LSB NO. 29446)FRILOT L.L.C.1100 Poydras Street, Suite 3700New Orleans, LA 70163-3700Telephone : (504) 599-8000Facsimile: (504) 599-8100

-AND-

DANIEL L. DYSART (LSB NO5156)DYSART & TABARY

Three Courthouse SquareChalmette, LA 70043Telephone: (504) 271-8011Facsimile: (504) 271-8020

COUNSEL FOR DEFENDANT-APPELLANT,MURPHY OIL USA, INC.

ii



NO. _

UNITED STATES COURT OF APPEALSFOR THE FIFTH CIRCUIT

PATRICK JOSEPH TURNER, ET ALPlaintiffl Appellee

v.

MURPHY OIL USA, INC.Defendantl Appellant

CERTIFICATE OF INTERESTED PERSONS

Undersigned counsel of record certifies that the following listed

persons and entities have an interest in the outcome of this case. These

representations are made in order that the Judges of this Court may

evaluate possible disqualification or recusal.

1. Murphy Oil USA, Inc., Defendant-Appellant

2. Sidney D. Torres, III, Liaison Counsel on Behalf of Court

Appointed Plaintiffs' Steering Committee

3. Law Office of Sidney D. Torres, Liaison Counsel on Behalf of

Court Appointed Plaintiffs' Steering Committee

4. Kerry J. Miller, Attorney for Murphy Oil, USA, Inc.

iii



5, Joseph N. Mole, Attorney for Murphy Oil USA, Inc.

6, Paul C. Thibodeaux, Attorney for Murphy Oil USA, Inc.

7. Frilot L.L.C" Counsel for Murphy Oil USA, Inc.

8. Daniel L. Dysart, Attorney for Murphy Oil USA, Inc.

9. Dysart & Tabary, Counsel for Murphy Oil USA, Inc.

Joseph N. Mole

Attorney for Murphy Oil USA, Inc.Defendant -Appellant

Dated:

IV



CORPORATE DISCLOSURE STATEMENT

Murphy Oil USA, Inc. is a wholly owned subsidiary of Murphy Oil

Corp., a publicly traded company.

JOSEPH N. MOLEATTORNEY FOR MURPHY OILUSA, INC.

v



STATEMENT REGARDING ORAL ARGUMENT

This case presents novel significant issues concerning a class action

defendant's rights to unspent settlement funds, following full payment of all

claims to all class members. The District Court, on the basis of

jurisprudence involving punitive statutes and class actions in which there

were unclaimed settlement funds, found that the defendant, who had spent

approximately $17 million more than anticipated on one phase of the

settlement. was not entitled to reallocation or reversion of the excess of $5

million from another phase of the settlement. After specifically finding that

the class has been fully paid, and can be paid no more, because that would

represent a windfall, the District Court ordered a cy pres procedure

designed to find a donee to whom the rest of the defendant's money can be

given.

This is a complex case involving novel and important issues of

federal class action procedure and law, as well as Louisiana legal

principles of contract interpretation and enforcement. For these reasons,

Appellant respectfully submits, pursuant to Fifth Circuit Rule 28.2.4, that

oral argument would be helpful to the Court.

vi



TABLE OF CONTENTS

CERTIFICATE OF INTERESTED PERSONS iii

CORPORATE DISCLOSURE STATEMENT v

STATEMENT REGARDING ORAL ARGUMENT vi

TABLE OF CONTENTS vii

TABLE OF AUTHORITIES ix

STATEMENT OF JURISDICTION xii

ISSUES PRESENTED FOR REViEW xiii

I. STATEMENT OF THE CASE 1

II. STATEMENT OF FACTS 2

III. PROCEEDINGS BELOW 9

IV. SUMMARY OF ARGUMENT 11

V. STANDARD OF REViEW 13

VI. ARGUMENT 14

A. A cy pres distribution is inappropriate in this case 14

B. Murphy has standing to seek a reversion orreallocation 17

VII



C. The Non-Reversion Clause does not preventreallocation ~ 18

D. Under Louisiana law, it is impossible to furtherperform the Settlement Agreement, and it should berescinded 21

E. The statutory basis for the class action settlement isnot punitive, and does not prevent reversion orremediation 24

F. Murphy is entitled to equity 27

VII. CONCLUSION 29

CERTI FICATE OF COMPLIANCE 31

CERTI FICATE OF SERViCE 32

viii



TABLE OF AUTHORITIES

FEDERAL CASES

Catlin v. United States, 324 U.S. 229, 65 S. Ct. 631 (1945) xii

Diamond Chemical Co., Inc. v. Akzo Nobel Chemicals B.V., 2007WL 2007447 (D.D.C. July '10, 2007) 16

Diamond Chemical Co., Inc. v. Akzo Nobel Chemicals B.V., 517F.Supp. 2d 212 (D.D.C. May 14, 2007) 25

In re Airline Ticket Commission Antitrust Litigation, 268 F.3d 619,623 (8th Cir. 2001) 14

In Re Holocaust Victim Assets Litigation, 424 F.3d 158, 165 (2dCir. 2005) 14, 15

In re Tarrer, 273 B.R. 724, 738 (Bankr. N.D. Ga. 2002) 29

McCarty COrJ~. v. Pullman v. Kellog, 751 F.2d 750 (5 Cir. 1985) 24

Muncy v. City of Dallas, Texas, 123 Fed. Appx. 601 (C.A. Tex.2005) xii

Peavy-Byrnes Lumber Co. v. Long-Bell Lumber Co., 55 F.Supp.654 (W.D. La. 1944), aff'd 150 F.2d 49 (5th Cir. 1944) 19

Powell v. Georgia Pacific Corp., 199 F.3d 703, 706 (8th Cir. 1997) 14

Sixth District Building & Loan Assn., 181 So. 618 (La. App.Orleans 1938) 24

Turner v. Murphy Oil U.S.A'I Inc., 234 F.R.D. 597 (E.D. La. 2006) 4

Wilson v. Southwest Airlinesl Inc., 880 F.2d 807, 811 (C.A. 51989) 14, 17, 18,25,28,29

IX



STATE CASES

Adle v. Prudhomm~, 16 La. Ann. 343 (La. 1861) 24

Castano v. Bellina, 503 SO.2d 195 (La. App. 4 Cir. 1998), writdenieq, 506 SO.2d 1226 (La. 1987) 23

Durbin v. Cockerham, 442 SO.2d 634 (La. App. 1 Cir. 1983) 25

Pittman v. Pittman, 836 SO.2d 369, 372 (La. App. 1 Cir. 2002),writ denied, 853 SO.2d 642 (La. 2003) 24

FEDERAL STATUTES

28 U.S.C. §1291 xii

28 U.S.C. §1331 xii

28 U.S.C. §1332(a) xii

33 U.S.C. §2701 xii

STATE STATUTES

LA. CIV. CODEart. 667 (Westlaw 2009) 26





LA. CIV. CODE art. 1966 (Westlaw 2009) 22




x



LA. CI\!. CODE art. 2317 (Westlaw 2009) 26

LA. CIV. CODE art. 2322 (Westlaw 2009) 26

LA. CI\!. CODE art. 3082 (Westlaw 2009) 24

LA. REV. STAT. § 30:2015.1 (Westlaw 2009) 26

FEDERAL RULES

FED. R. CIV. P. (23)(b)(3) 4

FED. R. CIV. P. 23(c)(2) " 4

FED. R. CIV. P. 23(d) 10

Fifth Circuit Local Rule 28.2.4 vi

OTHER AUTHORITIES

Litvinoff, 5 CIVIL LAWTREATISE,LAWOFOBLIGATIONS§16.61 (2009) 22

Rubenstein, Alba Conte and Newberg, 3 NEWBERGONCLASSACTIONS § 10: 15, 10:24 (2008) 16, 18

MISELLANEOUS

2003 La. Acts No. 1166 §1 26

xi



STATEMENT OF JURISDICTION

This is a class action resulting from the crude oil spill that occurred

during Hurricane Katrina at the Murphy Refinery in Meraux, Louisiana.

Jurisdiction in the District Court was based on 28 U.S.C. §1332(a),

inasmuch as it involved a plaintiff class made up of present and former

residents of S1. Bernard Parish, and well over $5 million was at issue.

Subject matter jurisdiction existed under 28 U.S.C. §1331 because it was

brought, in part under the Oil Pollution Act, 33 U.S.C. §2701, et seq.

Appellate Jurisdiction exists under 28 U.S.C. §1291. The order

appealed from is a post-judgment final order that decided Murphy's motion

for a reversion of unused settlement funds. Catlin v. United States, 324

U.S. 229, 65 S. Ct. 631 (1945); Muncy v. City of Dallas, Texas, 123 Fed.

Appx. 601 (C.A. 5 Tex. 2005).

xii



ISSUES PRESENTED FOR REVIEW

1. Did the District Court commit error when it denied Murphy's

Motion to Revert/Reallocate Surplus Compensation Funds, and

instead ordered a cy pres disposition of $5 million in Murphy's

unused compensation funds when one hundred percent of all

compensation claims were already fully paid out?

2. Has the Settlement Agreement between Murphy and the Class

Members become impossible to perform due to the fact that all

Class Members have been fully compensated?

3. Should the Settlement Agreement be rescinded due to

Murphy's error in calculating the amount necessary to fully

compensate the Class Members?

xiii



I. STATEMENT OF THE CASE

This appeal arises from a class action Settlement Agreement (the

"Agreement") approved by the District Court on January 30, 2007. Under

that Agreement, Murphy agreed to pay a total of $330 million to victims of a

crude oil spill that occurred in its refinery in S1. Bernard Parish, Louisiana

as a result of Hurricane Katrina in August-September, 2005. The victims

were residents and homeowners in Meraux, Louisiana whose property was

affected by the spill. Prior to the Settlement Agreement, and even prior to

certification of the class, Murphy began a process of remediation and buy

out of area homes (hereinafter, the "Voluntary Settlement Program"). As

part of the Agreement, Murphy agreed to fund compensation payments to

individual Class Members totaling $120 million, based on a formula that

included average home size and average number of occupants per

residence. Murphy and the PSC used average occupancy and square

footage figures derived from Murphy's experience in its Voluntary

Settlement Program.

Murphy also agreed to pay an estimated $72 million in remediation

funds. The Court recognized that Murphy had already voluntarily spent $52

million for remediation. The $20 million for remaining remediation efforts

was an estimate. Murphy agreed to pay whatever was required above that

1



number, regardless of the estimate. As of the date of the Order appealed

from, Murphy had spent $95 million in remediation, or $23 million more

than estimated, due to unforeseen complications such as disruption due to

returning residents and rebuilding efforts, and the escalating costs of labor

and materials. The compensation program cost only $115 million, or $5

million less than allocated to the program. As a result, on August 20, 200B,

Murphy filed a motion entitled Murphy Oil USA, Inc.'s Motion to

Revert/Reallocate Surglus Comgensation Funds, or, Alternatively, to

Reform the Settlement Agreement. Murphy sought the following alternative

relief: (1) a reversion of the unspent $5 million in the Compensation

Program; (2) reallocation of the $5 million to partially offset the $23 million

excess spent on remediation; or (3) reformation of the Settlement

Agreement to conform the amount of Murphy's compensation payment to

the amount actually spent on full payment of all compensation claims. By

Order dated February 13, 2009, the District Court denied Murphy's motion

and instead indicated it would "appoint a committee to recommend a cy

pres distribution .... " Rec. Doc. 2736. Murphy appeals from that Order.

II. STATEMENT OF FACTS

Murphy Oil USA, Inc. ("Murphy") operates a refinery in St. Bernard

Parish, Louisiana. The Appellee is the Plaintiffs' Steering Committee

2



("PSC") appointed by the District Court on January 30, 2006 to represent

the interests of the class certified by the Court on January 30, 2006,

consisting or residents and property owners who were affected by the spillof crude oil from Murphy's refinery during Hurricane Katrina.

The oil spill in question occurred as a result of the catastrophic

flooding of St. Bernard Parish during and after Hurricane Katrina, which

struck Louisiana on August 29, 2005. The resulting floodwaters caused

one of the crude oil storage tanks on Murphy's refinery to lift off its

foundation and to spill crude oil onto the surrounding property. The crude

oil mixed with floodwaters caused damage to property in the area

surrounding the Murphy refinery. Immediately after the catastrophe, in

early September, 2005, Murphy undertook cleanup and remediation efforts

in public spaces and for homeowners in the surrounding area, and it

undertook its program of voluntary settlements with residents in the area of

its refinery.

On September 9, 2005, the first of many lawsuits regarding this

accident was filed against Murphy. Ultimately, a total of 27 class action

suits were consolidated into a single class action before the United States

District Court for the Eastern District of Louisiana. Under the management

of the District Court, Murphy negotiated with the Class Action Plaintiffs

3



through their executive committee and their liaison counsel. Following

extensive discovery, testing, and motion practice, on January 12 and 13,

2006, the Court held a two day class certification hearing and certified thematter as a class action pursuant to Federal Rule of Civil Procedure

23(b)(3). See Turn~r v. Mur~hy Oil U.S.A., Inc., 234 F.R.D. 597 (E.D. La.

2006). The District Court certified a class composed of residents and

property owners within specific geographic boundaries adjoining the

Murphy refinery. The District Court directed the issuance of appropriate

notice pursuant to Rule 23(c)(2) of the Federal Rules of Civil Procedure,

and it provided a procedure to permit class members to opt out of the class

action litigation.

On September 25, 2006, Murphy and the PSC notified the District

Court that they had come to an amicable resolution of the case, and on

October 9, 2006, the parties presented a Final Settlement Agreement and

Notice Program to the Court. The Settlement Agreement was approved by

the District Court by Order and Reasons dated January 30,2007. The total

tentative amount that Murphy agreed to pay in connection with the

settlement was $330 million, comprised of four separate categories, as

follows:

4



Compensation Program $120 million

Voluntary Settlement Program $ 83 million

Buy-Out Program $ 55 million

Remediation Program $ 72 million

TOTAL $330 million

In its opinion approving the Settlement Agreement, the District Court

noted that the Agreement creates an allocation plan that divides the class

members geographically into zones based on levels of contamination. P.

29. Murphy was required to spend $55 million on purchasing homes and

property in the "Buyout" Zone, at the approved price of $40 per square foot.

Id.

The Settlement Agreement allocates $120,000,000 for compensation

for class members. The amount of compensation paid to each class

member depended first on the zone in which his or her property was

located, then on the total square footage of property, the number of

persons who resided at the property, and the commercial loss. The

Settlement Agreement sets a price per square foot and per person in each

zone (eJ1. $19.25 per square foot and $3,375 per occupant in Zone One).

The District Court found that the compensation formula was "within the

reasonable range of recovery" and "reasonable." Rec. Doc. 1072 at p. 30.

5



Murphy also agreed to remediate the entire area certified as

containing the class. Properties were to be "remediated to the satisfaction

of governmental regulators and this Court .... " Rec. Doc. 1072 at pp. 31-32. The cost of this element of the Settlement Agreement was only

estimated at $52 million, and Murphy agreed to pay the full cost of

remediation, whatever it turned out to be. "This feature of the Settlement

Agreement's remediation provision is important because it ensures the

health and safety of the community and places it at the highest level of

priority." kL at 32.

The Settlement Agreement acknowledged that Murphy had paid

$83,264,000 "in past compensation payments" in the voluntary program

undertal<en by Murphy.

The Settlement Agreement recites that its

total value is currently estimated at $330,126,000.00 (may bemore or less depending on actual remediation costs). It is theintent of the Recovery Program to compensate ClassMembers for crude oil related damageonly.

Rec. Doc. 742-1 at p. 14 (emphasis added). The "Recovery Program"

consists of the Buy-Out and Compensation Programs. The District Court

specifically found that as a whole the Settlement was fair, reasonable and

adequate, and "squarely falls within the reasonable range of relief for

6



property damage and fully addresses the Plaintiff class members' claims."

Rec. Doc. 1072 at p. 32.

None of the settlement funds described in the Settlement Agreement

were set aside, segregated, or pre-paid by Murphy into any sort of separate

account, or into the custody of the Plaintiffs or the PSC or any third party.

Rather, the parties agreed upon a payment Agent, and Murphy forwarded

specific individual settlement and expense items as requested by the Agent

as claims were settled. All "unpaid" settlement amounts are still part of

Murphy's general operating funds.

One of the key provisions of the Agreement that is at issue in this

appeal is item VI(5), at p. 16: "Non-reversion - All future payments

under the Buyout and Compensation Programs will be spent for the

benefit of Class Members" (hereinafter the "Non-Reversion Clause").

It is uncontested that Murphy has spent far more than $330 million

under the Agreement. The Remediation Program, which was estimated at

$72 million, has actually cost $95 million, or $23 million more than the

parties' best estimate in January, 2007. This was largely due to the added

cost of performing remediation in a community that experienced rapid and

unexpected repopulation and rebuilding, and to the escalating costs of

labor and materials.

7



The Compensation Program, estimated at $120 million by both

parties, has cost only $115 million. The principal reason is that the $120

million estimate was based on Murphy's experience with its Voluntary

Settlement Program. In this pre-settlement program, Murphy's experience

was that each household contained an average of 2.9 residents and was

2,000 square feet in size. By contrast, under the Agreement's

Compensation Program, Murphy compensated an average of slightly less

than 2.9 persons per household and the average actual residence was

closer to 1,900 square feet. As a result, the parties overestimated the

amount needed to fund the compensation formula set out in the

Agreement. There is no more to be spent.

The actual cost of the Agreement funded by Murphy is as follows:

Compensation ProgramSettlement PaymentsBuyout Program

Voluntary Settlement Program

Remediation Program

Environmental Testing

TOTAL

$114 million$ 55 million

$ 83 million

$ 95 million

$ 18 million

$365 million

In addition to the $365 million in damages actually paid by Murphy,

the District Court ordered, and Murphy has paid, a total of $33,746,241 in

8



the Class Members' attorneys' fees and costs. Ree. Doc. 2545. Thus,

Murphy has expended a total of almost $400 million.

Every class member eligible for the buyout or compensation has

been paid the full amount due to him or her, based on the geographic

location and size of his or her residence in each zone defined in the District

Court's class certification order. The remediation program has been fully

funded and has been completely successful. In total, Murphy has spent

$23 million more on remediation than estimated. By contrast, it cost $5

million less than estimated to fund the Compensation Program. There are

no "silent" class members and no unclaimed settlement funds. There is

nothing left on which to spend the $5 million.

III. PROCEEDINGS BELOW

As a result of this imbalance, Murphy filed its Motion to

Revert/Reallocate Surplus Compensation Funds or, Alternatively, Reform

the Settlement on August 20, 2008. Rec. Doc. 2453. Murphy sought a

return of the approximately $5 million in excess funds allocated to the

Compensation Program. It argued:

1. All Class Members and Class Counsel have been fully paid;

2. Murphy has paid approximately $23 million more than

estimated on remediation and testing;

9



3. Murphy has a good equitable claim to these funds; and

4. The Non-Reversion Clause could not have been intended to

cover this situation, or, alternatively, should be reformed basedon error.

The PSC opposed based principally on the Non-Reversion Clause,

and suggested a cy pres distribution. Rec. Doc. 2472. The District Court

agreed, and denied Murphy's motion.

The District Court first refused to reform the Settlement Agreement in

light of the Non-Reversion Clause. It noted that the intent of that clause is

that ail compensation funds be spent for the benefit of the class. It then

noted Rule 23(d) of the Federal Rules of Civil Procedure gives the court

great discretion to manage a class action and to decide the disposition of

unclaimed funds, and that Federal Courts have listed five possible

alternatives for distribution of unclaimed class action funds:

Federal courts have held that a district court's alternatives fordistributing unclaimed class action funds include: (1) pro ratadistribution of the funds to located or claiming class members;(2) reversion to defendants; (3) distribution as additionalattorneys' fees to class counsel; (4) escheat to a governmental

body: and 95) cy pres distribution.

Order and Reasons, Rec. Doc. 2736 at p. 7 (citations omitted).

The District Court ruled out escheat, as neither party sought it. It also

held that neither party has a legal claim to the remaining balance of the

10



fund and that "all class members who presented their claims received full

payment due them,"

While the District Court held that it would be inappropriate to give the

money to the claimants who had already been compensated "because that

would give them a windfall", and that class counsel have already been fully

compensated, it also held that it would be inappropriate to give the funds to

Murphy because it was charged with "environmental wrongdoing,

deterrence is one component of the legislative policy underlying the

claimants' suit, the Settlement Agreement reflects the intent of the parties

that all funds would be used for the benefit of the class, and the purpose of

redressing the destruction of the community for the benefit of the class has

not been fully consummated," Rec. Doc. 2736 at pp. 11-12, In light of

these factors, the District Court held it was appropriate to distribute the

remaining compensation funds under the cy pres doctrine, "in a manner

which will benefit the community devastated by the incident giving rise to

this lawsuit." ~ at p. 13.

IV. SUMMARY OF ARGUMENT

The Recovery Program is ambiguous, in light of the facts, in that it

provides for non-reversion of Compensation Funds but also provides that

the "intent of the Recovery Program [is] to compensate Class Members for

11



crude oil related damage only," The words of the Non-Reversion Clause

are also impossible to implement under the District Court's ruling. The

Non-Reversion Clause mandates that "all future payments under the

Buyout and Compensation Programs will be spent for the benefit of Class

Members." The District Court itself recognized that it could not spend the

$5 million excess compensation funds on behalf of the Class Members,

who have already been fully compensated. However, a cy pres payment of

such funds for the indirect benefit of non-class members who have not

suffered crude oil damages will in effect be a forced punitive payment by

Murphy as well as violation of the stated intent of the Recovery Program.

The reallocation and partial set-off of the $5 million excess

compensation funds against Murphy's $23 million remediation payment in

excess of the amount estimated in the Agreement would be the use most

consistent with the parties' expressed intent. Such a use would represent

an allowable indirect compensation to the Class Members for "crude oil

related damages only."

The District Court was wrong in its conclusion that Murphy could

receive no benefit whatsoever from this process because of "the deterrent

component of the legislative policy underlying the claimants' suit. ... " To

the contrary, the code provisions and statutes that underlie the Class

12



Action are not punitive in nature, but have as their purpose the

compensation of those who suffered damages due to the negligence of

others, and provide only for remediation of these damages. The District

Court was wrong when it based its denial of Murphy's motion on the

mistaken premise that the Settlement Agreement requires Murphy to

redress "the destruction of the community for the benefit of the class" and

that Murphy has not yet done that. Murphy is not responsible for the

destruction of St. Bernard Parish by Hurricane Katrina, and the Settlement

Agreement recognizes that its purpose is to offer redress only to those who

suffered physical damages due to a crude oil spill that was caused by the

hurricane. To the extent that Murphy is responsible for redress of harm in

relation to this catastrophe, such redress is owed only to those whom the

Court defined in a precise geographical area that was damaged by the spill.

A cy pres distribution as contemplated by the District Court would be both

an excess compensation to the already fully paid class members, and a

punitive payment for the benefit of non-class members.

V. STANDARD OF REVIEW

The District Court has "broad supervisory powers" with respect to the

administration and allocation of settlement funds. This exercise of these

powers is reviewable under an abuse of discretion standard. In Re

13



Holocaust Victim Assets Litigation, 424 F.3d 158, 165 (2d Cir. 2005);

Powell v. G.eorgia Pacific Corp., 199 F.3d 703, 706 (8th Cir. 1997); Wilson

v. Southwest Airlines. Inc., 880 F.2d 807, 811 (C.A. 5 1989). A District

Court's interpretation of a class action Settlement Agreement is reviewed

de novo. In re Airline Ticket Commission Antitrust Litigation, 268 F.3d 619,

623 (8th Gir. 2001).

VI. ARGUMENT

A. A cy pres distribution is inappropriate in this case.Most of the cy pres or reversion cases cited by the District Court and

by the PSC in its opposition to Murphy's motion dealt with unclaimed

settlement funds that had been paid into an escrow or other separate

account, and which were no longer in the custody and control of the

defendant. The funds in those cases were unclaimed because there were

"silent" members of the class who could not be found or who failed to make

a claim to their share of the settlement.

There are two facts that make this case unique. First, there are no

funds that are unclaimed by "silent" class members who failed to participate

in the claims process. All eligible class members in the Buyout Zone have

appeared and have been fully compensated. There is an excess of $5

million in the compensation portion of the Settlement Agreement because

14



the parties made a mistake in estimating the amount necessary to satisfy

all compensation claims. As the District Court noted, it is inappropriate to

distribute the excess compensation funds to the class, because it has

already been fully paid.

The second fact unique to this case is that the settling defendant,

Murphy, was not ordered and did not deposit the $330 million Settlement

Amount in an escrow account or any other account controlled by a third

party. Rather, upon approval of the Agreement by the District Court,

Murphy paid into a settlement account only the amount of settlement

payments that had been agreed upon and liquidated as of that date.

Thereafter, and up to the present, Murphy has paid from its own general

operating funds the amount of each claim as that claim emerges from the

Proof of Claim Process. See Rec. Doc. 742-1 at p. 17,11V1.7. Thus, if the

District Court's order is not reversed, and a cy pres charitable payment is

approved, Murphy will issue a check or wire transfer for $5 million from its

own account to whatever donee the District Court selects.

Murphy's situation is completely distinguishable from those cases that

have used a cy pres procedure to dispose of unclaimed class action

settlement funds. For example, in In re Holocaust Victim Assets Litigation,

424 F.2d 158 (2d Cir. 2005), the court created a discrete $1.25 billion

15



settlement fund, $100 million of the fund was allocated to class members

who were "not susceptible to individualized claims," As a result, a cy pres

distribution was approved for the benefit of needy Jewish, Roma,Jehovah's Witness, disabled and homosexual survivors of the holocaust.

In Diamond Chemical Co., Inc. v. Akzo Nobel Chemicals B.V., 2007 WL

2007447 (D,D.C. July 10, 2007), the district court approved a cy pres

distribution of the unclaimed portion of an antitrust settlement fund. As

recognized in NEWBERGON CLASS ACTIONS, a cy pres distribution is

appropriate when "there is an adjudicated aggregate class recovery which

results in unclaimed funds", or when "all members [of a class] cannot be

located or do not claim their recovery," Rubenstein, Alba Conte and

Newberg, 3 NEWBERGONCLASSACTIONS § 10:15, 10:24 (2008). In such

cases, a cy pres distribution helps to vindicate the "compensatory functions

of the substantive cause of action that is being enforced in a class action

format" Id. In this case, there are no individuals whose claims were "not

susceptible to individualized claims." To the contrary, all persons who were

harmed by the spill were identified and included in the class. There is no

one left to compensate, directly or indirectly.

If the District Court orders Murphy to make a $5 million cy pres

payment to a charity for the indirect benefit either of the class or of non-

16



class members, that will violate two other principles: First, such a forced

payment by Murphy would violate Clause VI of the Settlement Agreement,

which reads: "It is the intent of the Recovery Program to compensate class

members for crude oil related damages only." Rec. Doc. 742-1 at p. 14.

Murphy has fully paid all remediation costs due to the crude oil spill, and it

has fully paid all compensation claims. There are no further crude oil

related damages suffered by the class. Second, such a forced payment

would violate the District Court's own holding that "[i]t would be

inappropriate to give the money exclusively to claimants who have already

been compensated because that would give them a windfall." Ree. Doc.

2736 at p. 11. It is a windfall to give already-compensated class members

any more direct or indirect benefits. There are no "silent" class members

for whom a cy pres payment will be an indirect benefit. In short, there is no

possible cy pres payment that can be consistent with the Settlement

Agreement's stated principle that it is intended to compensate class

members for crude oil related damages only.

B. Murphy has standing to seek a reversion orreallocation.

The District Court found that Murphy has no legal right to the

"remaining funds". It cited Rubenstein, Alba Conte and Newberg, 3

NEWBERG ONCLASSACTIONS§10:21 (4th ed. 2002) and Wilson v. Southwest

'17



Airlines, Inc., sUQr~,at 880 F.2d 811. However, as noted in NEWBERG, that

has been the ruling in some class actions "because the defendant, who

paid the judgment, was not the rightful owner of the unclaimed portion of

the judgment deposited in the escrow account." NEWBERG, §upra at

§10:24. That was the case in Wilson, where the defendant, Southwest

Airlines, was seeking a reversion of part of a fund established by a consent

decree following trial of liability. The decree stated:

The fund shall become nonrefundable to Defendant upon thisdecree becoming a final non-appealable judgment. Anyresidual fund may be utilized, after all payment of back pay, asthe Court directs.

880 F.2d at 810. In this case, by contrast, Murphy does not seek

"reversion" in the literal sense, because there is no separate fund. It seeks

to prevent payment of $5 million more of its own funds, when it has alreadypaid out $23 million more than contemplated by the Agreement. Murphy

clearly has standing to contest the spending of more of its money than

needed to satisfy the Settlement Agreement, and it has the legal right to

claim money in its own possession and control. It seeks to resist payment

of more than it owes to satisfy all claims against it.

C. The Non-Reversion Clause does not preventreallocation.

18



The "Non-Reversion" Clause simply states: "All future payments

under the Buyout and Compensation Programs will be spent for the benefit

of Class Members." Clause VI. 7 provides that Murphy only pays claimsunder the Compensation Program as they are approved as part of the

Proof of Claim process. Clause VI states that it is the intent of the

Recovery Program that only class members will be paid, and only for

damages caused by the crude oil spill. Since all compensation payments

have been or will be made to class members, and there is no "fund" in the

control of a third party that has not been distributed, there is nothing to

"revert" to Murphy. Since all class members have been paid, there are no

more "future payments" contemplated by the Agreement.

The Settlement Agreement provides that it is to be interpreted under

Louisiana law. Rec. Doc. 741-1 at p. 29. Louisiana Civil Code Article 2050

provides that "Each provision in a contract must be interpreted in light of

the other provisions so that each is given the meaning suggested by the

contract as a whole." Where there are conflicting provisions in two different

paragraphs of the agreement, the one appearing in the first paragraph in

sequence prevails. Peavy-Byrnes Lumber Co. v. Long-Bell Lumber Co., 55

F.Supp. 654 (W.O. La. 1944), aff'd 150 F.2d 49 (5th Cir. 1944). Clause VI,

which limits recovery to class members for crude oil damage only, comes

19



first in the Settlement Agreement. Notwithstanding this rule, it is possible to

interpret Clauses VI and VI.5 consistently, if Clause VI.5 is interpreted

literally so as to apply only to "future payments" and not to payments not

yet requested and not necessary to the Compensation Program. Article

2049 of the Louisiana Civil Code is of assistance:

A provision susceptible of different meaning must be interpretedwith a meaning that renders it effective and not with one thatrenders it ineffective.

Under the buyout provisions of the Agreement, it is spelled out that if

Murphy does not spend all of the $55 million allocated for buyouts on

properties in the Buyout Zone, then it is required to buy properties outside

the "class area". Rec. Doc. 742-1, Clause VI.1.b, p. 15. There is no similar

provision requiring Murphy to spend the remainder of the $120 million

compensation fund on anything.

In this case, since there is no "fund" and no provision allowing the

Court to utilize any residual or unclaimed portion as it sees fit, the best way

to render the Settlement Agreement effective and consistent as a whole is

to consider the unspent $5 million portion of the Compensation Program as

a partial offset of the excess $23 million already expended above the

amount estimated for the purpose in the Settlement Agreement.

20

----~-------- .. -----------



D. Under Louisiana law, it is impossible to furtherperform the SettlementAgreement, and it should berescinded.

Murphy's Agreement to pay a total of $330,126,000.00 for the

"Compensation Program" is set forth in the Settlement Agreement in

Section VI, entitled Recovery Program. This section gives the details of

and the sums allocated to each part of the overall program. These are the

"Buyout Program" ($55 million), the "Compensation Program" ($120

million), the "Remediation Program" ($51,862,000 in "past mediation" andan estimated $20 million in "future mediation") and the "Past Compensation

Program" ($83,264,000). The preamble to Section VI states: "It is the

intent of the Recovery Program to compensate Class Members for

crude oil related damage only." Subsection 5 of the Settlement

Agreement states that "All future payments under the Buyout and

Compensation Programs will be spent for the benefit of Class

Members."

It is impossible to spend the last $5 million of Murphy's Compensation

Fund consistently with the above provisions of the Settlement Agreement,

which clearly state the intent and condition that such funds can be spent

only for crude oil related damages suffered by Class Members. Louisiana

law provides for such an eventuality:

21



When a fortuitous event has made a party's performanceimpossible in part, the court may reduce the other party'scounterperformance proportionally, or, according to thecircumstances, may declare the contract dissolved.

LA.CIV. CODE art 1877 (Westlaw 2009).

In a unilateral contract when fUliher performance is rendered

impossible, the simple solution is to consider the contract extinguished.

Litvinoff, 5 CIVIL LAW TREATISE, LAW OF OBLIGATIONS§16.61 (2009).

(Louisiana cases have no trouble finding that a contract "comes to an end

when the performance of the obligation of one of the parties becomes

impossible.") The Agreement, having already been performed in excess of

Murphy's original obligation, should be brought to an end.

In addition, any further payment by Murphy would be without legal

cause. An obligation undertaken without lawful cause is a nullity. LA. CIV.CODE art. 1966 (Westlaw 2009). In this case, Murphy has no lawful

obligation to pay what has turned out to be $5 million more than it owed for

compensation to class members. See Castano v. Bellina, 503 SO.2d 195

(La. App. 4 eir. 1998), writ deniec!, 506 SO.2d 1226 (La. 1987). An

obligation that does not exist cannot be the lawful cause of an agreement

to pay. Id.; LA. CIV. CODE 2301 et seq.

Finally, Murphy's undertaking to pay more than it owed was based on

error. LA. CIV. CODEart. 1949 (Westlaw 2009). Murphy's calculation of the

22



amount needed to fully fund its compensation obligations was based on the

average size and average occupancy rate of residences experienced

during the Voluntary Settlement Program. A list of all information

concerning Murphy's payments under this program, including the recipients

of each payment, the amount of each payment and the address to which

the payment applied was attached to the Settlement Agreement as Exhibit

4. This information led to the calculation of $120 million as the proper

amount for compensation. The actual average square footage and

occupancy of residences subject to the Settlement Agreement turned out to

be slightly less than the corresponding averages for the residences subject

to the voluntary compensation program. This Voluntary Settlement

Program information was available to and used by both sides, and is the

direct cause of the erroneous calculation of the compensation component

of the Agreement. Certainly, the size and occupancy of the residences are

facts entirely within the control of and imputable to the Class Members who

owned and lived in those residences.

"Consent to a contract may be vitiated by error. ... " LA. CIV. CODE

art. 1948 (Westlaw 2009). When consent is lacking, the contract may be

annulled. LA. CIV. CODE art. 1952 (Westlaw 2009). In the case of a

unilateral error, a contract is voidable if there was justifiable reliance on an

23



error that bears upon a principal cause of the contract, and if the other

party knew or should have "known that the erroneous facts within their

control could be relied upon." ~; McCarty Corp. v. Pullman v. Kellog, 751F.2d 750 (5 Cir. 1985).

The fact that the contract in question is a settlement agreement is

immaterial. "A compromise may be rescinded for error, fraud, and other

grounds for the annulment of contracts .... " LA. CIV. CODE art. 3082

(Westlaw 2009). A clerical mistake in calculation is sufficient to rescind a

settlement Sixth District Building & Loan Assn~, 181 So. 618 (La. App.

Orleans 1938). A compromise can be annulled based on a mistake in

calculation. Adle v. Prudhomme, 16 La. Ann. 343 (La. 1861). A

compromise in the form of a stipulated judgment may be rescinded if it is

based on an error concerning the matter in dispute. Pittman v. Pittman,

836 SO.2d 369, 372 (La. App. 1 Cir. 2002), writ denied, 853 SO.2d 642 (La.

2003); Durbin v. Cockerham, 442 SO.2d 634 (La. App. 1 eir. 1983).

E. The statutory basis for the class action settlement isnot punitive, and does not prevent reversion orremediation.

The District Court based its denial partly on the reasoning that the

"legislative policy underlying [the claims against Murphy] operates to deter

injury and unlawful activity, disgorge unjust enrichment, and compensate

24



victims." Ree. Doc. 2736 at p. 11. Accordingly, the District Court held that

it would be inappropriate to give the unclaimed $5 million to Murphy

because of this deterrent intent, and because "the purpose of redressing

the destruction of the community for the benefit of the class has not been

fully consummated." In Diamond _Chemical CO'1 Inc. v. Akzo Nobel

Chemicals B.V., 517 F.Supp. 2d 212 (D.D.C. May 14, 2007), which

involved a class action settlement based on claims of price fixing under

Section 1 of the Sherman Act, the District of Columbia trial court

distinguished this Court's decision in Wilson v. Southwest Airlines, supra,

which allowed a reversion, as follows:

Indeed, a number of the cases that Defendants cite in supportof their claim for reversion - cases which arise in context otherthan under the antitrust laws - specifically distinguishthemselves from situations involving the Sherman Act Forinstance, in VVilson v. Southwest Airlines, a case involving ajudgment that the defendant violated Title VII, the Court allowedreversion to the defendant, noting "we find a situation here verydifferent from [one in which] the defendants have violated theSherman Act, the overriding policy of which is punishment anddeterrence. Here, [defendant] was found in violation of Title VII,the policy of which ... is compensatory rather than punitive."Wilson, 880 F.2d at 815. See also Friedman v. LansdaleParking Auth., No. Civ. A. 92-7257, 1995 WL 141467, *3-4

(E.D. Pa. Mar. 31, 1995) (allowing reversion to defendant ofsettlement funds in an action brought under Rule 1O(b) of theSecurities Exchange Act, and distinguishing Folding Carton onthe grounds that it was brought under the Sherman Act).

25



517 F.Supp. 2d at 219. The Sherman Act is literally punitive, since it

mandates treble private damages. In some sense, all statutes that impose

liability for damages based on fault have a deterrent effect and intent, but

the distinction drawn by the courts is between expressly punitive statutory

intent on the one hand and causes of action that are compensatory or

remedial on the other. If Title VII of the civil rights act is compensatory and

not inconsistent with a reversion, then so are the legal bases for this suit.

The District Court certified the class under specific causes of action

based on Louisiana tort and environmental law. This included negligence,

strict liability, nuisance, trespass, and ground water contamination under

Louisiana Civil Code articles 2315, 667, 2317 and 2322 and LSA-R.S.

30:2015.1 Rec. Doc. 226 at pp.12-1 9. The listed code articles all speak in

terms of compensation. For example, article 2315, the basis of Louisiana

tort law recites:

Every act whatever of man that causes damage to anotherobliges him by whose fault it happened to repair it.

The legislative intent behind LSA-R.S. 30:2015.1 is "interpretative,

remedial, and procedural.. "2003 La. Acts. No. 1166 §1, eff. July 2,

2003.

In holding Murphy responsible for "redressing the destruction of the

community," the District Court has gone beyond the express purpose the

26



Settlement Agreement it approved, and it blurred the distinction between

the crude oil spill caused by Hurricane Katrina and Hurricane Katrina itself.

There is no evidence that the spill caused any damages outside the classarea. The Settlement Agreement strictly limits Murphy's payment

responsibility to the carefully drawn geographic area impacted by the crude

oil spill, and there is no portion of either the underlying statutory scheme or

the Settlement Itself that can be characterized as punitive.

F. Murphy is entitled to equity.

There is no dispute that Murphy has "stepped up to the plate" in

connection with the Hurricane Katrina disaster. As the District Court noted

in its Order and Reasons certifying the class:

Since the spill, Defendant Murphy Oil has worked with the

Environmental Protection Agency (EPA) and LouisianaDepartment of Environmental Quality (LDEQ) to assess thescope of the damage and to recover the oil that was spilled.Additionally, Murphy has developed a "settlement zone" andhas undertaken a massive settlement program with residents ofthe area near the spill. Murphy has also begun cleanup andremediation efforts in public areas and for homeowners whohave settled their claims with Murphy.

Rec. Doc. 226 at p. 2. All this happened before a class was certified.

Since then, Murphy has voluntarily paid more than was estimated, and has

paid every compensation and buy-out claim without the District Court's

intervention. In order to settle, Murphy abandoned its defenses that but for

27



the hurricane and the negligence of the Corps of Engineers, there would

have been no spill, and that the class members' considerable losses were

due to the storm surge and not crude oil, since all of their homes were well

under water at the time of the spill. The money Murphy has poured into St.

Bernard Parish through its payments to the class members and to the

numerous contractors employed to effectuate remediation, buy-outs and

the settlement program has contributed significantly to the revitalization of

the parish.

Murphy's case is similar to but stronger than that of Southwest in

Wilson y. Southwest Airlines, Inc., supra. This Court held that Southwest

had a "substantial equitable claim" to a reversion from a Title VII sex

discrimination based settlement fund, notwithstanding a non-reversion

clause and a judgment of liability, and the fact that Southwest sought

reversion from a separate escrow fund to which it had no legal claim. This

was due to Southwest's voluntary settlement program:

Southwest's equitable claim is premised on the fact that all themoney in the fund originally belonged to it. Southwest turnedover the money for the specific and limited purpose ofcompensating the class. It did so in the expectation thatcompensating the class would exhaust the fund. The record ofthe fairness hearing reveals that Southwest and class counselboth wrongfully assumed that claims alone would amount to$900,000 or more of the fund, exclusive of expenses. SinceSouthwest turned over its money in the clear and reasonableexpectation that the money was required for the specific

28



purpose of compensating the class, its equitable claim to anymoney remaining after the accomplishment of that purpose iscompelling.

880 F.2d at 813. The principal distinguishing characteristic in Wilson is thatclass counsel approved Southwest's claim, because it entered into a

settlement with Southwest in which it received a share of the unclaimed

funds, and here, the PSC has already been fully paid, and can receive no

more, and has opposed a reversion.

In light of these facts, it would be inequitable to order Murphy to

surrender its property rights to its own money for the indirect benefit of

either class members who have been paid, or non-class members who

suffered no harm. See In re Tarrer, 273 B.R. 724, 738 (Bankr. N.D. Ga.

2002).

VII. CONCLUSION

For the reasons described above, it is respectfully suggested that the

District Court's Order of February 13, 2009 should be reversed and

vacated, and that any further obligation of Murphy to fund the Remediation

Program should be extinguished and rescinded, or, alternatively, set off

against the mediation costs it has incurred in excess of the original

estimate described in the Settlement Agreement.

29



Respectfully submitted,

KERRY J. MILLER (LSB NO. 24562)JOSEPH N. MOLE (LSB NO. 09538)PAUL C. THIBODEAUX (LSB NO. 29446)FRILOT L.L.C.1100 Poydras Street, Suite 3700New Orleans, LA 70163-3700Telephone: (504) 599-8000Facsimile: (504) 599-8100

-AND-

DANIEL L. DYSART (LSB NO5156)DYSART & TABARYThree Courthouse SquareChalmette, LA 70043Telephone: (504) 2"11-8011Facsimile: (504) 271-8020

COUNSEL FOR DEFENDANT-APPELLANT,MURPHY OIL USA, INC.

30



CERTIFICATE OF COMPLIANCE

I ceriify that this brief complies with the type-volume limitation of Fed.

R. App. P. 32 (a)(7)(8) because this brief contains words,

excluding the parts of the brief exempted by Fed. R. App. P. 32(a)(7)(B)(iii).

The brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5) and the type style requirements of Fed. R, App. P. 32(a)(6)

because this brief has been prepared in a proportionally spaced typeface

using Microsoft Word 8.0 in Arial 14 pt.

The undersigned understands a material misrepresentation in

completing this certificate, or circumvention of the type-volume limits in

Fed. R. App. P. 32(a)(7), may result in the Court's striking the brief and

imposing sanctions against the person signing the brief.

JOSEPH N. MOLEATTORNEY FOR DEFENDANT-APPELLANT

31



CERTIFICATE OF SERVICE

I cetiify that on this _ day of , 2009, a copy of the

foregoing pleading as well as a labeled CD containing an electronic copy of

the forgoing pleading have been served on the following persons via United

States Mail, properly addressed and First Class postage prepaid, at the

addresses below:

Honorable Eldon E. Fallon

District Court JudgeUnited States District Court,Eastern District of Louisiana500 Poydras Street, Room C456New Orleans, LA 70130

JOSEPH N. MOLE

murphy oil usa united states court of appeal fifth circuit case no

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