settlement agreement between plaintiffs and …
TRANSCRIPT
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February 3, 2015
STATE OF NEW MEXICO COUNTY OF SANTA FE FIRST JUDICIAL DISTRICT COURT PHILLIS IDEAL and COLLINS PARTNERS, LTD., Plaintiffs, vs. Case No. No. D-0101-CV-2003-02310 BP AMERICA PRODUCTION COMPANY, Defendant.
SETTLEMENT AGREEMENT BETWEEN PLAINTIFFS AND DEFENDANT
This Settlement Agreement is entered into between Plaintiffs Phillis Ideal and Collins
Partners Ltd., individually and on behalf of the certified Class (“Plaintiffs”) as defined
below and BP America Production Company ("Defendant BP"), and is subject to approval
by the First Judicial District Court, County of Santa Fe, State of New Mexico (the “District
Court”). This agreement is referred to herein as the “Settlement Agreement”. The
Plaintiffs and Class Members in the Action (as defined herein) and Defendant BP are
referred to herein as the "Settling Parties" or "Parties".
RECITALS
WHEREAS, Plaintiffs filed the Action (as defined herein) in the District Court on
December 22, 2003. Plaintiffs alleged that Defendant BP underpaid owners of royalty and
overriding royalty interests in coal seam or coalbed methane gas (“CBM”) produced from
the Fruitland formation in the San Juan Basin in northwestern New Mexico and burdening
oil and gas leases held by Defendant BP. Specifically, Plaintiffs alleged that Defendant BP
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(a) improperly deducted certain costs and expenses necessary to place CBM in marketable
condition before calculating royalties and overriding royalties; (b) improperly deducted other
post production costs in excess of those actually and reasonably incurred; and (c) failed to
compute and pay certain members of the Class whose overriding royalty instruments
specify that their overriding royalties shall be computed and paid at the same time and in
the same manner as royalties payable to the United States or other similar clause.
Plaintiffs alleged that the time period covered by their claims started from approximately
January 1, 1989 to the present;1
WHEREAS, on February 23, 2010, the District Court entered its Order Certifying
Class Action, a copy of which is attached hereto as Exhibit A and incorporated by this
reference herein(the “Class Certification Order”). On August 6, 2010, notice was sent to
the prospective class members pursuant to the order of the District Court (the "First
Notice"). A list of the Class Members to whom notice was sent is attached as Exhibit B.
The Class Members were afforded the opportunity to opt-out of this Action, and certain
Class Members did so. A List of the Class Members who properly opted-out is attached
hereto as Exhibit C;2
WHEREAS, subsequently, on September 17, 2012, the District Court entered a
Stipulated Order Approving Forms of Supplemental Notice To Prospective Class
Members, a copy of which is attached hereto as Exhibit D and incorporated by this
reference herein. On October 2, 2012, a supplemental notice was mailed to the
prospective class members pursuant to the order of the District Court (the "Supplemental
Notice"). A list of the Class Members to whom the supplemental notice was sent is
1 During the pendency of the case, the District Court entered summary judgment in favor of Defendant BP, dismissing the Class Claims before December 22, 1997. 2 The opt-out lists will conform to any final determination of the District Court concerning the untimely opt-outs.
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attached as Exhibit E. The Class Members to whom the supplemental notice were sent
were afforded the opportunity to opt-out of this Action, and some did. A List of the Class
Members to whom the supplemental notice was sent and who opted-out is attached hereto
as Exhibit F;
WHEREAS, Defendant BP has denied all material allegations of the complaints
filed in the Action and has raised numerous affirmative defenses;
WHEREAS, Class Counsel (as defined herein) have aggressively litigated this class
action for about twelve years, conducted an extensive investigation of the facts,
circumstances, and transactions involved in the Action, and the named Plaintiffs and
Class Counsel, being well advised, believe the settlement set forth herein (the
“Settlement”) to be fair, reasonable and acceptable. Defendant BP has produced data,
information and material to Plaintiffs relating to class certification issues and the payment
of royalties and overriding royalties to Class Members. For example, Plaintiffs’ extensive
discovery and investigation includes deposing various corporate representatives of
Defendant BP, consulting with accounting and marketing experts, preparing and
reviewing the pleadings filed in the Action, researching the law applicable to this Action,
fully litigating numerous discovery motions and dispositive motions, and fully preparing
for a jury trial scheduled to begin on January 12, 2015;
WHEREAS, pursuant to the order of the District Court, the parties engaged in
extensive and contentious settlement negotiations and mediation sessions with Judge
James Hall (retired) that resulted in a settlement and the execution of a Confidential
Memorandum of Understanding (“MOU”) on January 9, 2015;
WHEREAS, Class Counsel believe that the Class Claims (defined herein) have merit
and are supported by the evidence. Plaintiffs are prepared to vigorously prosecute the
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claims raised in this action against Defendant BP. However, Class Counsel recognize the
risks and uncertainties of prosecuting any action and the expense and length of
proceedings necessary to prosecute the Action through trial and appeals. Class Counsel
believe this proposed Settlement Agreement confers significant benefits to the Class
Members. Based upon their evaluation, and as a result of extensive, lengthy and difficult
arms-length negotiations with Defendant BP, Class Counsel are satisfied that the terms and
conditions of this proposed Settlement Agreement are fair, reasonable, adequate and in the
best interests of the Class Members, as defined herein;
WHEREAS, Defendant BP admits no wrongdoing concerning Class Claims and
has in the past and is prepared to continue in the future to vigorously defend against
those claims. Nevertheless, taking into consideration the cost and expense of further
proceedings, the strengths and weaknesses of the Class Claims and Defendant's
defenses, the uncertainties and risks associated with further litigation, and other
appropriate factors, Defendant desires to effectuate the Settlement in order to avoid
further expense, inconvenience, and the distraction of burdensome and protracted
litigation, to obtain the orders contemplated by this Settlement Agreement, and to
finally resolve certa in claims which were or could have been alleged in the Action
against Defendant BP;
WHEREAS, except for the Reserved Claims (as defined herein), the Parties
have voluntarily agreed to settle the Action after consultation with competent legal
counsel of their own selection; and
WHEREAS, the parties entered into the Confidential MOU agreeing to the material
terms of the Settlement, and agreed that the final terms of the Settlement would be
embodied in a definitive settlement agreement.
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NOW, THEREFORE, IT IS HEREBY AGREED by the Settling Parties that,
subject to final approval by the District Court and entry of the Final Order, the
Released Claims shall be released, settled and dismissed with prejudice and on the
merits, subject to the following terms and conditions:
SECTION 1.0 -- DEFINITIONS.
Unless otherwise expressly provided in this Settlement Agreement, the following
terms, as used in this Settlement Agreement, have the following meanings:
1.1 “Action” means the litigation filed by the Plaintiffs and entitled Phillis Ideal and
Collins Partners, LTD., a Texas Limited Partnership v. BP America Production Company
filed in the First Judicial District Court, County of Santa Fe, State of New Mexico, Case No.
D-0101-CV-2003-02310.
1.2 "Administrative Expenses" means the full and complete fees and costs of
the Settlement Administrator and any accountants retained by him or her, including without
limitation the cost of the settlement notices and claims administration (including any
expenses of the Settlement Administrator).
1.3 “Defendant BP” means BP America Production Company, its current and
former parents, their predecessors, affiliates, assigns, successors, subsidiaries and its
members, partners, officers, directors, agents, representatives, and employees.
1.4 “CBM” means coal seam or coalbed methane gas produced only from the
Fruitland formation in the San Juan Basin in New Mexico during the Class Period. “CBM”
shall not be construed to include natural gas produced from the Fruitland Sands formation.
1.5 "CBM Royalty Deductions" means costs incurred prior to the gas being
acceptable into the interstate pipeline including gathering, field transportation, marketing
fees, compression, decompression, dehydration, processing or treatment, fuel (plant and
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pipeline) and Natural Gas Processor's tax and taken before the remittance of all non same
as fed royalties and overriding royalties due to the Class Members by Defendant BP.
1.6 “Class” means the class certified under the Class Certification Order.
1.7 “Class Counsel” means Peifer, Hanson & Mullins, P.A.; The Eaves Law
Firm, P.A.; Sutin, Thayer & Browne, P.C.; and Mary E. Walta, P.C., counsel to the
Plaintiffs.
1.8 “Class Members” means all members of the Class identified in the First
Notice, the Supplemental Notice, or the Class Settlement Notice, or to whom the
Publication Notice is directed who did not opt out of the Action. "Class Members" and "the
Plaintiffs" does not include any person or entity who was not previously specifically
identified on the attached class lists (Exhibits B, E and G, hereto). The Class Members'
claims are set forth in the Sixth Amended Class Action Complaint For Violation Of Oil And
Gas Proceeds Payment Act, et al. filed in the Action. As discussed below, the Plaintiffs will
compile and provide to the First Judicial District a list of additional Class Members, if any,
who elect to “opt-out” after mailing of the Class Settlement Notice and publication of the
Publication Notice.
1.9 “Class Period” means the period from January 1, 1989 to the date of
Preliminary Approval.3
1.10 “Class Settlement Notice” means the notice to Class Members of the Final
Approval Hearing and terms of the Settlement, substantially in the form attached as Exhibit
H to this Settlement Agreement, and as approved by the District Court, advising the Class
Members of their rights concerning this Settlement and other procedures appropriate for
obtaining Final Approval of this Settlement Agreement..
3 See footnote 1 above.
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1.11 “Court Approval” means the entry by the District Court in the Action of a
final order of approval, in the form of an order to be agreed upon by the Parties after
notice to the Class Members and a f inal approval hearing, signifying final approval of
this Settlement Agreement in accordance with Rule 1-023(E) NMRA.
1.12 "Deductions from Settlement Amount" means the Class Members’
compensation, Class Representatives' incentive awards, Class Counsel’s attorneys' fees
(as approved by the District Court), applicable New Mexico gross receipts taxes, and
reimbursement of Class Counsel of all actual expenses of this litigation (as approved by the
District Court), any other litigation costs of Plaintiffs, and all applicable taxes, if any,
assessable on the Settlement Amount or any portion thereof.
1.13 “Distribution Check” means a check payable to an Eligible Class Member in
the net amount that is payable to such Eligible Class Member pursuant to the Plan of
Allocation.
1.14 “Distribution Date” means each date on which Distribution Checks are sent
to Eligible Class Members.
1.15 The "District Court" means the First Judicial District Court, County of Santa
Fe, State of New Mexico.
1.16 “Eligible Class Member” means each of the Class Members entitled to
receive a Distribution Check pursuant to the Plan of Allocation.
1.17 “Endorsement Language” means the release language contained on
each payment check to an Eligible Class Member stating that:
By endorsing this Distribution Check, payee represents and warrants that the payee is or was the owner of the Released Claims hereby released, has not assigned or otherwise transferred the Released Claims to anyone else, and will indemnify the Class Representatives, Class Counsel for the Class Members and Defendant BP against a claim by anyone else as the owner of that Released Claim.
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1.18 "Escrow Account" means that special interest-bearing “Qualified
Settlement Fund” (as defined in Section 1.468B-1(a) of the U.S. Treasury Regulations)
account established at Bank of America by the Settlement Administrator.
1.19 “Final Approval” means that the Court Approval has become final, either by
exhaustion of any time for a member of the Class who has properly and timely objected
to the Stipulation and Settlement to appeal the Court Approval, with no appeal being
filed, by completion of any appeals filed by members of the Class which appeals have
been resolved favorably, or, if there are no objections to the Settlement, by the District
Court's entry of the Final Order.
1.20 “Final Fairness Hearing” means the hearing before the District Court at
which the District Court shall consider:
A. Whether this Settlement Agreement, including the Exhibits to this
Agreement, should be approved as fair, adequate, and reasonable;
B. Whether a Final Order should be entered;
C. Whether the application of Class Counsel for payment of attorneys’
fees plus New Mexico gross receipts taxes, and all costs and expenses, should be
approved;
D. Whether the application for payment of an incentive award to the
Class Representative should be approved; and,
E. Any other matters addressed by the District Court in conjunction with
items (A) - (D) of this paragraph.
1.21 “Final Order” means the Final Order, Judgment of Dismissal and Release
to be drafted by Class Counsel and counsel for Defendant BP.
1.22 “First Notice” means the notice of class certification sent to Class
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Members on August 6, 2010.
1.23 “MOU” means the Confidential Memorandum of Understanding entered into
by the Settling Parties in this action dated January 9, 2015.
1.24 “Net Settlement Amount” means the Settlement Amount less the Class
Representative’s incentive awards, Class Counsel’s attorneys’ fees and New Mexico gross
receipts taxes (as approved by the District Count), reimbursement of Class Counsel of all
actual expenses of the Action (as approved by the District Court), any other approved costs
and expenses of Plaintiffs and all appropriate taxes, if any, assessable on the Settlement
Amount or any portion thereof.
1.25 "New Settlement Funds" means the portion of the Settlement Amount paid
by Defendant BP in the amount of Fifty-Five Million Dollars ($55,000,000.00).
1.26 “Parties” means the Class Members and Defendant BP.
1.27 The "Plaintiffs" means Phillis Ideal and Collins Partners, Ltd., individually
and on behalf of the Class.
1.28 The “Plan of Allocation” means the document subject to approval by the
District Court describing the distribution of the proceeds of the Net Settlement Amount.
1.29 "Prior Settlement Funds" means the sum of approximately Ten Million Four
Hundred Thousand Dollars ($10.4 million) Defendant BP already paid to Same as Fed
Class Members during the pending lawsuit which Defendant BP described as “prior period
adjustments” made in 2013 and credited as partial payment of the Settlement Amount.
Those payments were the subject of a partial summary judgment entered in this case in
favor of the Class by the District Court on November 5, 2014.
1.30 “Preliminary Approval” means the preliminary approval of the Settlement
Agreement by the District Court pursuant to an Order Granting Preliminary Approval.
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1.31 “Publication Notice” means the notice of settlement published to Class
Members after Preliminary Approval of the Settlement Agreement. The Publication Notice
is attached as Exhibit I to this Settlement Agreement. The Publication Notice will allow
Class Members who did not receive the First Notice or Supplemental Notice to opt out of
the Class, as well as to object to the Settlement Agreement or to make a claim pursuant to
the Plan of Allocation.
1.32 “Qualified Settlement Fund” means the Settlement Amount which is to be
deposited in a Qualified Settlement Fund pursuant to, and within the meaning of, Sections
1.468B-1 et seq. of the Regulations of the United States Department of the Treasury.
1.33 “Released Claims” means all claims that were asserted in the Action or
could have been asserted in the Action by the Class Members, whether arising from
contract, tort, statute or in law or equity, with respect to the Subject Royalty Obligations
burdening Defendant BP's production, whether operated or non-operated, of CBM from the
Fruitland formation in the San Juan Basin in New Mexico during the Class Period, other
than the Reserved Claims, including acts, omissions, or failures to act related to the Action.
other than the Reserved Claims.
1.34 “Reserved Claims” means:
A. Any and all claims against Defendant BP insofar as they apply to non-
CBM (i.e. conventional) natural gas, oil or natural gas liquids produced from non-Fruitland
formations in the San Juan Basin in northwestern New Mexico, including but not limited to
the Steven J. Abraham, et al., v. BP America Production Company, U.S.D.C. -- NM case
no. CIV-09-961 WDS/KBM ("Abraham") settlement. All claims concerning conventional gas
or hydrocarbons other than natural gas produced from the Fruitland formation are
specifically excluded from this settlement and are not released. Also excluded from this
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settlement and not released are claims concerning natural gas produced from the Fruitland
Sands formation;
B. Any claims arising out of ordinary course of business mistakes and
corrections of mathematical errors by Defendant BP for which Defendant BP may make
prior period adjustments as may be necessary and appropriate in the ordinary course of
business;
C. Except for the claims subject to and covered by the Future Royalty
Methodology provided in paragraph 3, any claims arising from Subject Royalty Obligations
burdening production of CBM from the Fruitland formation in the San Juan Basin after the
Class Period;
D. Any claims by Class Members regarding royalty or overriding royalty
interests that burden oil and gas leases held by Defendant BP and producing CBM
(whether operated and paid by BP or by third-parties) for which Defendant BP has not
provided, with respect to such interests, names, addresses, current decimal ownership
percentages, tax identification numbers, and volumes of CBM attributable thereto, and
information reasonably necessary in order for the Settlement Administrator and Class
Counsel may make an allocation to such interests pursuant to the Plan of Allocation; and
E. Any claims arising out of the enforcement of the Settlement
Agreement.
1.35 “Royalty Interests” means royalty and overriding royalty interests owned by
the Class Members.
1.36 "Same as Fed Class Members" means all Class Members whose leases,
overriding royalty instruments or assignments expressly require that royalties be computed
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and paid on the same basis as royalties are computed and paid to the United States of
America.
1.37 “Settlement Administrator” means the person or entity that Class
Counsel retains, and the District Court approves, to provide any services in connection
with performing the terms of this Settlement Agreement.
1.38 “Settlement Amount” means the total sum of $65.4 million consisting of the
combined Prior Settlement Funds and the New Settlement Funds.
1.39 “Settling Parties” means the Plaintiffs and Defendant BP.
1.40 “Subject Royalty Obligations” means obligations arising from those leases,
assignments or other agreements of the Class Members containing the terms of the royalty
and overriding royalty interests that burden oil and gas leases held by Defendant BP in the
San Juan Basin in New Mexico that produce CBM, including without limitation, any
obligations express or implied relating to the calculation, disclosure, payment or remittance
of royalties.
1.41 "Supplemental Notice" means the supplemental notice that was mailed on
October 2, 2012 to prospective class members pursuant to an order of the District Court.
SECTION 2.0 -- MUTUAL INTENT TO IMPLEMENT THIS SETTLEMENT AGREEMENT PROMPTLY. 2.1 It is the mutual intent of the Settling Parties to consummate this Settlement
Agreement promptly.
A. The Settling Parties will cooperate in good faith and exercise their
reasonable best efforts to effectuate and implement all of the terms and conditions of this
Settlement Agreement within the time periods set out herein. The Settling Parties agree to
use their reasonable best efforts to prepare any other documents necessary to implement
and consummate this settlement including, but not limited to, a Class Settlement Notice to
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members of the Class, Publication Notice to class members, Preliminary and Final Approval
Orders, and related documents to be submitted to the District Court for Preliminary and
Final Approval as may be necessary to effectuate the purposes and intent of this
Settlement Agreement;
B. The Class Members shall be bound by the Settlement Agreement and
all proceedings, orders and judgments in the Action if the Settlement Agreement is
approved and becomes Final;
C. The Settling Parties shall jointly submit this Settlement Agreement,
including the Exhibits attached to this Agreement, to the District Court for preliminary
approval as soon as is reasonably practical;
D. Upon submission of the Settlement Agreement for Preliminary
Approval, the Settling Parties shall request that the District Court enter an Order of
Preliminary Approval;
E. In proceedings before the District Court (and before any appellate
courts, if necessary), the parties shall take all steps reasonably necessary to obtain final
approval of the Settlement;
F. The Settling Parties shall agree to entry of a Final Order by the District
Court following the Final Fairness Hearing; and
G. The Settling Parties specifically agree to cooperate and share
information reasonably available in the ordinary course of business and calculated to locate
Class Members or their lawful successors or assigns and to calculate payments pursuant to
the Plan of Allocation. Specifically as to Defendant BP, it is required only to provide
information kept in the ordinary course of business regarding: (i) identification of the Class
Member and their BP owner number; (ii) the last known address of each identified Class
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Member; (iii) the social security number or federal tax ID number for each identified Class
Member. Defendant BP is not expected to conduct chain of title, title searches or prepare
abstract reports or opinions concerning ownership interests of a Class Member.
SECTION 3.0 -- RELIEF FOR THE CLASS.
3.1 Settlement Amount. In consideration for this Settlement Agreement, and in
full and final settlement of the Released Claims (and excluding the Reserved Claims),
Defendant BP shall make payment of the New Settlement Funds in good funds by wire
transfer as provided in Section 3.5 of this Settlement Agreement.
3.2 Costs, Fees, Expenses and Taxes Included. The Settlement Amount
includes the Class Members’ compensation, Class Representative's incentive awards,
Class Counsel’s attorneys' fees plus gross receipts taxes (as approved by the District
Court) and reimbursement of Class Counsel of all actual expenses of this Action (as
approved by the District Court), any other litigation costs of Plaintiffs, and all applicable
taxes, if any, assessable on the Settlement Amount or any portion thereof.
3.3 Costs of Administration. In addition to the Settlement Amount, Defendant
BP shall pay reasonable Administrative Expenses. Such fees and costs shall not exceed
the aggregate sum of $350,000.00. The Settlement Administrator and accountant shall
submit monthly itemized statements of fees and costs to Plaintiff’s counsel and counsel for
BP.
3.4 Plan of Allocation. The distribution of the Net Settlement Amount shall be
administered pursuant to a Plan of Allocation which is attached as Exhibit J to this
Settlement Agreement and is subject to the approval of the District Court. Defendant BP
shall have no participatory or approval rights with respect to the Plan of Allocation, and the
District Court’s rejection of Plaintiffs' Plan of Allocation shall not affect the validity or
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enforceability of this Settlement Agreement. Defendant BP takes no position with respect
to the form and/or substance of Plaintiffs’ Plan of Allocation and shall have no responsibility
for the implementation of Plaintiffs’ Plan of Allocation. Subject to the District Court's
authority to disapprove the Settlement, the District Court's refusal to approve a particular
Plan of Allocation shall not otherwise affect the validity or enforceability of the Settlement
Agreement. With respect to the Plan of Allocation:
A. In order to implement the Plan of Allocation, and within thirty (30)
calendar days after preliminary approval of the Settlement Agreement, Defendant BP shall
provide Class Counsel and the Settlement Administrator an accurate updated owner list of
all Class Members' royalties and overriding royalties for CBM from the Fruitland formation
in the San Juan Basin in New Mexico, including Class Member addresses, and Class
Member taxpayer identification numbers. To the extent that other information is required to
identify Class Members or to calculate payments pursuant to the proposed Plan of
Allocation and provided that the information is reasonably available to Defendant BP, then
Defendant BP will cooperate in good faith to provide that information;
B. In the event of the death or disability of a Class Member, Defendant
BP will provide reasonable information from the current accounting system for the
reissuance of settlement checks to the Class Member's estate, heirs, trustees, guardians or
conservators. Defendant BP is not expected to conduct chain of title, title searches or
prepare abstract reports or opinions concerning ownership interests of a Class Member.
C. Class Counsel, and the Settlement Administrator under direction of the
District Court, will be responsible for the general supervision and administration of this
Settlement with respect to notification to the Class. The Settlement Administrator will be
responsible for issuing the checks from the Net Settlement Amount to the Class Members,
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though the Settlement Administrator is excused from issuing checks to any Class Member,
if the Net Settlement Amount payable to such Class Member for the entirety of the Class
Period is less than ten dollars ($10.00);
D. Each settlement check issued by the Settlement Administrator shall
include the Endorsement Language. The Settlement Administrator will provide to Class
Counsel and Defendant BP copies of the endorsements on the distribution checks;
E. The Plan of Allocation shall contain provisions for additional
distributions to the Class Members and/or the cy pres of undistributed Settlement Amounts;
and
F. None of the Settlement Amount is allocated to increase the prices or
values or the volumes of CBM produced by Defendant BP during the Class Period.
3.5 Escrow. Within ten (10) business days of Preliminary Approval, Defendant
BP will deposit – by wire transfer according to instructions to be provided by Class Counsel
-- the New Settlement Funds into the Escrow Account. The Settlement Amount shall be
held in the Escrow Account and subject to the terms and conditions of an escrow
agreement and instructions, a copy of which is attached as Exhibit K to this Settlement
Agreement (the “Escrow Agreement and Instructions”). Defendant BP and the named
Plaintiffs shall have the right to audit amounts paid from the Escrow Account. Class
Representatives' incentive awards, Class Counsel’s attorneys’ fees (as approved by the
District Court), reimbursement of Class Counsel of all actual expenses of the Action (as
approved by the District Court), any other litigation costs of Plaintiffs and all applicable
taxes (including without limitation to New Mexico gross receipts taxes), if any, shall be paid
from the Escrow Account within fourteen (14) days after Final Approval. The balance of
the Net Settlement Amount shall be disbursed to Class Members as provided in the Court-
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approved Plan of Allocation after Final Approval. In no event, however, shall any money
be disbursed to Class Members or paid out for class representatives’ incentive awards,
Class Counsel’s attorneys’ fees, reimbursement of Class Counsel of actual expenses,
reimbursement of other litigation costs of Plaintiffs, applicable taxes, if any, until the time
for the Parties to exercise their termination rights pursuant to Section 5.4 has passed
without the Parties exercising such rights.
3.6 Future Royalty Methodology. After Final Approval by the District Court, the
CBM Royalty Deductions shall be subject to the following terms:
A. Defendant BP shall eliminate all deductions from the calculation,
payment and remittance of all royalties and overriding royalties due on CBM production to
the Class Members by Defendant BP for: (1) gathering fees (including gathering, field
transportation, marketing fees, compression, decompression, dehydration, processing,
treatment and natural gas processor's taxes) and fuel for company-operated gathering
systems; and (2) third-party gathering fees (including gathering, field transportation,
marketing fees, compression, decompression, dehydration, processing, treatment and
natural gas processor's taxes);
B. Notwithstanding the provisions of Paragraph 3.6 A, based on
Defendant BP's representation that the majority of the CBM at issue is processed through
the Val Verde and Milagro treatment plants and that the current contracts with the Val
Verde and Milagro plants expire no earlier than 2019, Defendant BP will have the right to
continue to deduct pipeline fuel and plant fuel charges Defendant BP incurs on CBM
production, in the form of its existing contractual third-party fuel charges and volumetric
reductions for fuel;
C. Defendant BP will have the right to continue to deduct third-party
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charges for the extraction of NGLs attributable to CBM production at the non-Blanco plants
and Defendant BP will have the right to deduct the previously agreed upon Abraham
settlement [specifically Section 3 "Reduction of Processing Cost Royalty Deduction" in the
Abraham Settlement Agreement] processing costs related to the Blanco plant (about 8.1
cents per gallon);
D. These payment methodology changes shall be effective for the
January 2015 production month. Defendant BP shall fully implement the Future Royalty
Methodology by January 1, 2016, and make a prior period adjustment for 2015 to account
for the difference between its current royalty payment methodology and the Future Royalty
Payment Methodology. If for any reason Defendant BP fails to make the prior period
adjustments when due, it will also pay applicable interest under the Proceeds Payment
Act;
E. All Class Members whose leases, overriding royalty instruments or
assignments require that royalties be computed and paid on the same basis as royalties
are paid to the United States of America (the Same as Fed Method) shall be unaffected by
the Future Royalty Methodology. Such Same as Fed royalty owners should be paid
pursuant to Defendant BP's obligations for the calculation of such royalties and overriding
royalties as provided in the underlying assignments.
F. Defendant BP shall implement this Future Royalty Methodology in
accordance with the provisions set forth in subsection 3.6 D. above, and will employ this
Future Royalty Methodology until the earliest of the following:
(i) the Court of Appeals for the State of New Mexico issues an opinion
ruling on the deductibility or non-deductibility of any or all of the CBM Royalty Deductions
for which the New Mexico Supreme Court denies certiorari; or
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(ii) New Mexico Supreme Court issues an opinion ruling on the
deductibility or non-deductibility of any or all of the CBM Royalty Deductions; or
(iii) the fifth anniversary of the date of Final Approval of this
settlement by the District Court;
(iv) in any event, Defendant BP’s obligations under the Future
Royalty Payment Methodology shall completely expire no later than the fifth anniversary of
the date of the Final Approval of this settlement by the District Court.
G. Provided that Defendant BP fully complies with the provisions of the
Future Royalty Methodology set forth above, during the subject 5 year period, unless an
intervening final New Mexico appellate opinion decides the deductibility or non-deductibility
of any or all of the CBM Royalty Deductions, then Defendant BP shall not be liable to the
Class regarding the propriety of the CBM Royalty Deductions being taken during the
period that the Future Royalty Methodology applies, except as provided in subsection 3.6
D., above. Likewise, Defendant BP shall not assert that the Future Royalty Methodology is
binding upon the Class for any time period other than expressly provided herein. Provided
that Defendant BP fully complies with the provisions of the Future Royalty Methodology set
forth above, the parties understand and agree that there will be no retroactive changes or
adjustments to payments made in accordance with the Future Royalty Methodology
specified herein;
H. If pursuant to subsection 3.6 F (i) and (ii), one of those events occurs
before Defendant BP has fully implemented the Future Royalty Methodology, then
Defendant BP agrees that it will nevertheless comply with and make the prior period
adjustments pursuant to the Future Royalty Methodology for the time period before those
events occur; and
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I. All of BP's obligations regarding the Future Royalty Methodology shall
be binding upon BP's successors-in-interest.
SECTION 4.0 -- ATTORNEYS’ FEES AND EXPENSES AND CLASS REPRESENTATIVES INCENTIVE AWARDS.
4.1 Attorney Fee Application. Class Counsel intend to apply to the District
Court for an award of attorneys’ fees plus applicable New Mexico gross receipts taxes
thereon incurred in prosecuting Class Claims and for services rendered up to and including
the date this Settlement is final, with such award to be paid out of the Escrow Account.
Any such application for an award of attorneys’ fees shall not exceed one-third (33 and 1/3
percent) of the total Settlement Amount, plus applicable New Mexico gross receipts taxes
thereon. If the Final Order is appealed, Class Counsel’s attorneys’ fees and litigation and
other expenses as awarded by the District Court shall be increased by their proportionate
share of any interest earned on, or earnings derived from the Escrow Account from the
date the Final Order is entered by the District Court, until the attorneys’ fees and litigation
expenses are paid. For purposes of the foregoing sentence, the phrase “proportionate
share” means the ratio of the sum of Class Counsel’s attorneys’ fees and litigation
expenses to the total of the principal amount of the Settlement Amount.
4.2 Costs and Expenses. At the Final Fairness Hearing, Class Counsel may
apply to the District Court for reimbursement of reasonable out of pocket litigation
expenses, to include expenses incurred up to the Final Fairness Hearing, distribution of
the Settlement Amount to the Class and completion of the administration of the Settlement
Amount as ordered by the District Court. Such litigation expenses shall be paid from the
Escrow Account at the time specified in Section 4.4.
4.3 Class Representatives' Compensation. Subject to approval and
modification by the District Court, the Class Representatives shall each be entitled to seek
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court approval of a payment of up to $125,000 out of the Settlement Amount for services
as class representatives, within fourteen (14) days after Final Approval, in addition to any
amounts due to them as Class relief to be paid by the Settlement Administrator from the
corpus of the Escrow Account. District Court approval of Class Representatives'
compensation in an amount less than stated herein shall not negate any other provisions
of this Settlement Agreement, which shall remain fully effective and enforceable.
4.4 Fees, Costs and Expenses. Any costs of suit or attorneys’ fees approved
by the District Court shall, within fourteen (14) days after Final Approval, and the expiration
of the time for the Parties to exercise their termination rights pursuant to Section 5.4
without the Parties exercising their termination rights, be paid from the Escrow Account.
District Court approval of an attorneys’ fee and/or costs in an amount less than the amount
requested by Class Counsel - or the District Court’s disallowance of any award of fees or
expenses - shall not negate any other provisions of this Settlement Agreement, which shall
remain fully effective and enforceable.
4.5 Approval by the Court. All fees, costs and expenses to be deducted from
the Settlement Amount must be approved by the District Court. Defendant BP shall take
no position on any application for fees and reimbursement of costs or expenses made by
Class Counsel or by the Class Representatives or any application for awards out of the
Escrow Account to the Class Representatives. This Settlement Agreement is not
contingent on the District Court’s approval of any application for such fees, expenses or
awards out of the Settlement Amount.
SECTION 5.0 -- ADMINISTRATION.
5.1 Settlement Administrator. Class Counsel has selected KCC Class Action
Services LLC (together with its affiliates) to act as Settlement Administrator. The
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Settlement Administrator, acting pursuant to the Escrow Agreement and Instructions, shall
be responsible for the general supervision and administration of the Settlement Amount
deposited in the Escrow Account, the allocation (in accordance with the Plan of Allocation)
and distribution of the Settlement Amount and any required notification of Class Members
regarding the Settlement. All fees, costs and expenses to be disbursed from the Escrow
Account must be approved by the District Court. The Settlement Administrator shall be
permitted, with the approval of the Parties, to retain accountants and legal counsel to
assist in its administration of the Settlement and the Escrow Agreement and Instructions.
Subject to satisfaction of its duties and obligations under this Settlement Agreement,
Settlement Administrator, or any successor hereafter appointed, may resign and shall be
discharged of its duties upon the appointment of a successor Settlement Administrator, as
Class Counsel, with the consent of Defendant BP, shall determine. Each such successor
Settlement Administrator shall have all the power, authority, rights and privileges hereby
conferred upon the original Settlement Administrator, and the term “Settlement
Administrator” as used herein shall be deemed to include such successor Settlement
Administrator.
Class Counsel and the Settlement Administrator shall be responsible for
communicating distributing, allocating and administering any matters pertaining to the
settlement and the Settlement Amount among or with Class Members or any persons
claiming to be a part of the Class. Defendant BP shall refer all inquiries concerning the
Settlement Agreement to the Settlement Administrator or Class Counsel.
In accordance with the settlement approval provisions of Rule 1-023 NMRA, notice
of this settlement, as approved by the District Court, will be provided to all Class Members
as ordered by the District Court.
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5.2 Court Approval. Promptly after the execution of this Settlement Agreement,
the Parties shall submit this Settlement Agreement and supporting papers, including the
Plan of Allocation, to the District Court.
The Plaintiffs shall (i) file with the District Court a Motion for Order of Preliminary
Approval, (ii) submit to the District Court an Order Granting Preliminary Approval in the
form attached as Exhibit L to this Settlement Agreement, and (iii) jointly request the
District Court to enter an Order establishing procedures for notice to the Class Members
for Final Approval, and other procedures appropriate for obtaining Court Approval of this
Settlement Agreement.
5.3 Reasonable Best Efforts. The Parties agree to make reasonable best
efforts to do all things reasonably necessary to secure Preliminary Approval and Final
Approval of this Settlement Agreement by the District Court at the earliest possible date
and to effectuate immediately such Court Approval, if granted; provided that the foregoing
shall not require Defendant BP to provide any additional consideration (excepting the
Administrative Expenses) or to take or forebear from taking any action for the benefit of the
Class Members. The Settling Parties specifically agree to cooperate and share information
reasonably available in the ordinary course of business and calculated to locate Class
Members or their lawful successors or assigns and to calculate payments pursuant to the
Plan of Allocation.
5.4 Termination. If the substance of this Settlement Agreement or a material
provision of the Settlement Agreement does not receive Final Approval or is materially
modified by the District Court, then Class Counsel, any Class Representative or Defendant
BP may, at his, her or its option, declare the Settlement Agreement null and void by written
notice to the District Court and to counsel for the other parties filed and served within ten
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(10) business days of the entry of an order not granting District Court approval or Final
Approval or having the effect of disapproving or materially modifying the terms of the
Settlement Agreement. If this Settlement Agreement is terminated pursuant to this Section
5.4, or for any other valid reason under this Settlement Agreement, then the New
Settlement Funds shall be returned to Defendant BP by the Settlement Administrator and
the Parties will be restored to their respective positions in the Action as of the date of this
Settlement Agreement. In that event, the litigation will proceed as if this Settlement
Agreement had never been executed, and this Settlement Agreement and
representations made in conjunction with this Settlement Agreement may not be used
in the Action or otherwise for any purpose. Except for termination of the settlement as
set forth in above, no portion of the corpus of the New Settlement Funds or the interest
thereon shall be returned to Defendant BP. The funds and interest thereon shall be
disbursed pursuant to the terms of the Settlement Agreement and the Plan of
Allocation.
5.5 Stay. The Parties agree that all proceedings other than those directed
toward settlement of this action shall be held in abeyance.
5.6 Class Notice of Settlement; Objections. In accordance with the settlement
approval provisions of Rule 1-023 NMRA, the Class Settlement Notice and publication of
the Publication Notice (along with a website link to this Settlement Agreement, exhibits and
the First Notice) shall be provided to all Class Members by the Settlement Administrator.
Any Class Member may object to the Settlement by filing a written objection with the District
Court and mailing it to Class Counsel and to Defendant BP's Counsel, by first-class mail
postmarked no later than fifteen (15) calendar days prior to the Final Fairness Hearing. The
objection must set forth: (a) an identification of the action, e.g. Ideal v. BP America
25
Production Company; (b) the Class Member’s full name, address, (c) information sufficient
to identify the Class Member’s ownership interest; and (d) in clear and concise terms, the
legal and factual arguments supporting the objection.
5.7 Allocation and Distribution. To the extent practicable and consistent with
the principle that only actual Class Members should be paid, the distribution of the Net
Settlement Amount will be made in accordance with the procedures to be set forth in the
Settlement Agreement and Plan of Allocation, subject to approval by the District Court.
The Plan of Allocation, when approved by the District Court shall govern distribution of the
Net Settlement Amount.
5.8 Sole Recourse. Except as otherwise provided in this agreement, all
approved payments to Eligible Class Members, Class Representatives, Class Counsel, and
any other payments in connection with this Settlement, after the Effective Date, shall be
paid exclusively from the New Settlement Funds. This provision shall not be construed to
preclude Class Counsel from applying for an attorneys’ fee award from the New Settlement
Funds based on 33 1/3% of the Prior Settlement Funds. With the exception of
Administrative Expenses and Future Royalty Payment Methodology, in no event shall
Defendant BP be liable for any payment other that the $55 million payment. The sole
recourse of any person claiming any payment from the Settlement, any right to payment
under or in any way related to this Agreement or to any matter related in any way to the
Released Claims including, without limitation, Class Members, Class Counsel, or any
person claiming by, through, or on behalf of any of the foregoing, or any costs of litigation or
resulting from a dispute among the Eligible Class Members regarding the distributions of
the Settlement Amount shall be against the Escrow Account.
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5.9 Termination; Refunds. If any Party terminates this Settlement Agreement
pursuant to Section 5.4 of this Settlement Agreement, if this Settlement Agreement is
terminated by the District Court or if the Settlement Agreement does not receive Final
Approval, then (i) the balance of the New Settlement Funds in the Escrow Account shall be
returned immediately to Defendant BP by wire transfer of good funds, as further described
in the Escrow Agreement, and (ii) Defendant BP shall not be entitled to any refund of funds
already expended for Administrative Expenses, if any. Except for a termination, the entire
balance of the New Settlement Funds and interest thereon shall be disbursed pursuant to
the terms of this Settlement Agreement and the Plan of Allocation.
SECTION 6.0 -- RELEASE IN FAVOR OF DEFENDANT BP.
Upon the later to occur of Final Approval, expiration of the time for the Parties to
exercise their termination rights without the Parties exercising their termination rights and
deposit by Defendant BP of the Settlement Amount into the Escrow Account, the Class
Representatives and each Class Member shall be conclusively deemed to have fully,
finally, completely, irrevocably, unconditionally and forever released and discharged
Defendant BP from liability on and for all of the Released Claims. Such release will be
effective as of the date of Final Approval. Excluded from the Released Claims are the
Reserved Claims.
SECTION 7.0 -- DISMISSAL.
In connection with the motion for Final Approval, Class Counsel shall provide to
Defendant BP's counsel a Final Order that includes an order dismissing with prejudice the
Released Claims. The proposed order of dismissal shall dismiss all Released Claims (but
not the Reserved Claims) in the Action with respect to Defendant BP with prejudice and
such order of dismissal will extinguish any liability of Defendant BP with respect to such
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Released Claims.
SECTION 8.0 -- NO ADMISSION OF LIABILITY.
This Settlement Agreement represents the proposed settlement of disputed claims
and does not constitute, nor shall it be construed as, an admission of the correctness of any
position asserted by any party, nor an admission of liability or of any wrongdoing by any
party or as an admission of any strengths or weaknesses of the claims of the Plaintiffs or
Defendant BP's defenses, nor evidence of custom and practice in the oil and gas industry.
In addition, this Settlement Agreement, nor any statement, transaction or proceeding in
connection with the negotiation, execution, or implementation of the MOU or the Settlement
Agreement will be intended to be or construed as or deemed to be evidence of an
admission or concession by Defendant BP of any liability or wrongdoing or of the truth of
any allegations against Defendant BP, of any evidence that Defendant BP accedes in
certification of a class for purposes other than settlement, and none of them shall be
admissible in evidence for any such purpose in any proceeding.
The Settling Parties agree that, except as agreed to herein, this settlement in no way
impairs the Class Members’ rights to future royalties or overriding royalties from the
production of oil or gas from their respective Royalty Interests.
SECTION 9.0 – MISCELLANEOUS.
9.1 Confidentiality. Except to alert the District Court of the need to schedule a
hearing on the preliminary approval of this settlement, no Party shall initiate any publicity
relating to or making any public comment regarding this Agreement or settlement until the
District Court has issued the Preliminary Approval Order.
9.2 Public Statements. Defendant BP will have the ability in its sole discretion
to approve or reject any press releases, notices or any other public statements that may be
28
made by Class Counsel and the Class Representatives relating in any way to the MOU or
the Settlement Agreement. Class Counsel and the Class Representatives will have the
ability in their sole discretion to approve or reject any press releases, notices or any other
public statements that may be made by Defendant BP relating in any way to the MOU or
the Settlement Agreement. Public statements do not include briefs or filings with the
District Court in connection with seeking Preliminary Approval, Final Approval or District
Court oversight and administration of the settlement or filings with or disclosures to any
governmental agency.
9.3 Jurisdiction; Governing Law. The District Court shall retain exclusive and
continuing jurisdiction with respect to implementation and enforcement of the terms and
conditions of this Settlement Agreement, for the sole purpose of assuring that all benefits
hereunder are properly provided, and all Parties to this Settlement Agreement submit to the
jurisdiction of the District Court for such purposes. This Settlement Agreement shall be
interpreted and enforced under and in accordance with the laws of the State of New
Mexico. To avoid doubt, the District Court does not have or retain jurisdiction over any
Reserved Claim other than the Reserved Claim set forth in Section 1.33(E).
9.4 Authority. Each Party represents (a) that he, she or it has authority to enter
into this Settlement Agreement, (b) that the signatory below signing on his, her or its behalf
is authorized to sign on behalf of such Party for which he or she has signed, subject to
Final Approval of this Settlement Agreement by the District Court and (c) assuming the due
authorization, execution, and delivery of this Settlement Agreement by the other Parties,
this Settlement Agreement constitutes the legal, valid, and binding obligations of such
Party, enforceable against such Party in accordance with its terms.
9.5 Binding Agreement. This Settlement Agreement shall be binding upon and
29
inure to the benefit of the Parties’ successors and assigns. Neither this Settlement
Agreement nor any of the rights, interests, or obligations hereunder shall be assigned, in
whole or in part, by any of the Parties without the prior written consent of each of the other
Parties, other than an assignment by will or by the laws of descent and distribution, and
any attempted assignment in violation of this provision shall be null and void.
9.6 Enforcement. The Parties agree and intend that this Settlement Agreement
is binding and fully enforceable and that, once signed by all Parties with appropriate
authority, no Party may withdraw or seek to alter the material terms of this Settlement
Agreement, except as authorized under Section 5.4, above.
9.7 Non-Disparagement. Neither Settling Party will knowingly disparage the
litigation or the settlement, the application for attorney fees or the application for incentive
awards. Defendant BP will take no position regarding Class Counsel's proposed fee and
expense application, proposed incentive awards or the proposed Plan of Allocation.
9.8 Reliance. The Plaintiffs' willingness to enter into this Settlement is, in part,
made in reliance upon the accuracy of the data and other information Defendant BP has
provided during discovery in the Action. The data and information Defendant BP has
provided during discovery in the Action to Class Counsel and experts engaged by Plaintiffs
is the same data and information that Defendant BP has provided to its own experts
engaged in connection with the Action. Defendant BP represents that to the best of its
knowledge the information it has provided is accurate.
9.9 Nature of Settled Claims. The Settling Parties expressly recognize that the
Settlement Amount does not include any payments for the adjustment to the value, price or
volumes of the CBM from the Fruitland formation underlying the San Juan Basin of New
Mexico from which deductions were taken from the royalties and overriding royalties due to
30
the Class Members.
9.10 Counterparts. This Settlement Agreement may be executed in
counterparts, each of which is hereby deemed an original, but all of which together shall
constitute one and the same instrument.
9.11 Entire Agreement. This Settlement Agreement and the exhibits hereto
(the “Exhibits”), constitute the entire agreement and obligation between and among the
Parties with respect to the claims and defenses in the Action and Released Claims, and
supersede all prior oral and written settlement negotiations, agreements,
understandings, discussions and communications between and among the Parties with
respect to the subject matter hereof, and specifically replace and supersede the MOU.
Except for this Settlement Agreement and the Exhibits, there are no other warranties,
representations, covenants, promises, undertakings or understandings by or among the
Parties to this Settlement Agreement related in any way to the Settlement. Any
modification or waiver of, deletion or addition to the terms of this Settlement Agreement
must be in writing, mutually agreed upon, signed by or on behalf of all Parties or their
successors in interest and approved by the District Court in this Action.
9.12 Incorporation by Reference. All of the Exhibits are material and integral
parts of this Settlement Agreement and are fully incorporated herein by reference.
9.13 Advice of Counsel. Each Party acknowledges that he, she or it has been
and is being fully advised by competent legal counsel of such Party’s own choice and
fully understand the terms and conditions of this Settlement Agreement, and the
meaning and import thereof, and that such Party’s execution of this Settlement
Agreement is with the advice of such Party’s counsel and of such Party’s own free will.
9.14 Construction. The provisions of this Settlement Agreement shall, where
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possible, be interpreted in a manner to sustain their legality and enforceability.
9.15 No Further Accounting or Readjustment. Except as provided in this
Settlement Agreement, Defendant BP shall not be required to retroactively account, adjust,
make prior period adjustments, or provide amended check stub or royalty remittances for
the payments to be made to the Class Members pursuant to the Plan of Allocation.
Defendant BP agrees that it will not attempt to reduce or recapture the New Settlement
Funds through any subsequent recalculations or adjustments of Class Members' royalty
payment accounts. Defendant BP agrees that it will not attempt to reduce or recapture
those Prior Settlement Funds from the Same as Fed Class Members and that the Prior
Settlement Funds shall not be subject to recalculation by Defendant BP. However,
Defendant BP shall be allowed to take prior period adjustments, both favorable and
unfavorable, as volumes or prices may be revised in the normal course of business.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
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THIS SETTLEMENT AGREEMENT has been executed by the undersigned as of
______________, 2015.
NAMED PLAINTIFF:
__________________________ Phillis Ideal
NAMED PLAINTIFF:
__________________________ Collins Partners, Ltd. By: Michael Collins
APPROVED: ______________________________ Charles R. Peifer Robert E. Hanson Matthew R. Hoyt PEIFER, HANSON & MULLINS, P.A. Post Office Box 25245 Albuquerque, NM 87125-5245 Telephone: (505) 247-4800 THE EAVES LAW FIRM, P.A. John M. Eaves Post Office Box 35670 Albuquerque, NM 87176-5670 Telephone: (505) 888-4300 SUTIN, THAYER & BROWNE, P.C. Derek V. Larson Post Office Box 1945 Albuquerque, NM 87103-1945 Telephone: (505) 883-3371 MARY E. WALTA, P.C. Mary E. Walta P.O. Box 32958 Santa Fe, NM 87594-2958 Telephone: (505) 983-6269 Counsel for Plaintiffs and the Class
33
BP AMERICA PRODUCTION COMPANY: By: __________________________
Name: _______________________
Title: ________________________
APPROVED: ____________________________________ Scott S. Barker WHEELER TRIGG O’DONNELL LLP 370 Seventeenth Street, Suite 4500 Denver, Colorado 80202 Telephone: (303) 244-1800 [email protected] HOLLAND & HART, LLP Bradford C. Berge Adam G. Rankin Post Office Box 2208 Santa Fe, New Mexico 87504-2208 Telephone: (505) 988-4421 [email protected] [email protected] HOLLAND & HART, LLP Christopher A. Chrisman 555 17th Street, Suite 3200 Denver, Colorado 80202-3979 Telephone: (303) 295-8013 [email protected] Attorneys For Defendant BP