Judge allows accountants to bill him monthly in class actions

By Steve Korris | Aug 27, 2010


CHARLESTON – Handling claims in two class actions over oil and gas leases turned so tough that accountants in charge held out for more money.

The Charleston firm of Arnett & Foster continues as claim administrator in both cases, for the moment, through the intervention of U.S. District Judge Joseph Goodwin.

On Aug. 23, Goodwin signed an order allowing Arnett & Foster to submit monthly bills to him rather than to Equitable Production Company.

He set a Sept. 2 status conference on the dispute.

On the same day in the other case, he approved a compromise that resulted from mediation he ordered between the firm and Dominion Resources Services.

Last year, Goodwin approved a $50 million settlement in the Dominion action.

This year, he approved a $27 to $33 million settlement in the Equitable action.

He appointed Arnett & Foster to administer the settlements.

This March, after Dominion rejected contract amendments Arnett & Foster proposed, the accountants filed a motion to force the changes on Dominion.

Xavier Staggs, of Kay Casto and Chaney in Charleston, wrote that Dominion shifted work to Arnett & Foster and requested additional work the parties never contemplated.

Henry Lawrence, of Steptoe and Johnson in Clarksburg, answered that the firm sought to increase the contract's not-to-exceed price from $1,159,000 to $1,850,000.

Dominion proposed a compromise, he wrote.

"The claims administrator never responded to Dominion's proposal but instead filed the instant motion within 30 minutes of receipt of Dominion's proposal and tacked on a claim for an additional $100,000," he wrote. "The claims administrator offers no assurance that this is the final cost for completion of the project.

"With no incentive to complete the administration, the claims administrator continues to delay the final settlement payment date beyond the represented February 5 date and continues to submit monthly invoices in excess of the not-to-exceed price.

"There are presently some 3,000 deceased class members whose heirs have never been identified by the claims administrator," he wrote. "Their settlement payments total approximately $1.6 million."

Staggs replied in April that, "Dominion is the sole cause for any delays."

"Dominion promised a streamlined, automated process, but did not deliver," he wrote. "Dominion's failure ignorantly created extensive additional work for the claims administrator.

"Dominion cannot fail to perform its responsibilities and then expect the claims administrator to absorb the costly consequences."

At a hearing in May, Goodwin denied Arnett & Foster's motion to amend the contract.

On June 22, Arnett & Foster moved to withdraw as administrator.

At a hearing on June 30, Goodwin ordered mediation.

Parallel problems arose with the Equitable settlement, prompting Arnett & Foster to notify Goodwin on July 7 that its contract would expire on July 31.

On July 28, Staggs asked Goodwin to allow the firm to submit to the court monthly fee applications at rates in the terminated agreement.

On Aug. 11, Richard Gottlieb of Charleston answered for Equitable that Arnett & Foster apparently wasn't interested in fulfilling its responsibilities.

He wrote that Equitable was seeking proposals from an experienced administrator and plaintiff's counsel was assisting in the review of a replacement.

He wrote that in the interim, Equitable wouldn't object to Arnett & Foster filing monthly applications with the court.

On behalf of plaintiffs, Marvin Masters of Charleston wrote on Aug. 20 that Goodwin should hold a status conference on the possible withdrawal of Arnett & Foster.

"Plaintiffs truly believe that it never would have come to this had it not been for Arnett & Foster's experience in the other litigation," he wrote.

He asked if a new administrator was truly aware of issues it must address, writing that estate issues in oil and gas litigation are extremely complex.

On Aug. 23, Goodwin found good cause to allow Arnett & Foster to submit monthly fee applications to him.

He granted the status conference Masters requested.

Meanwhile, mediation patched up Arnett & Foster's contract with Dominion.

They filed a joint motion to withdraw Arnett & Foster's motion to withdraw as claims administrator, and Goodwin granted the motion.

Masters and other class counsel obtained a $10 million fee in the Dominion action.

They requested more than $6 million in the Equitable action, but Goodwin asked for more information in May and hasn't reached a decision.

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