ExxonMobil recently attempted to settle a class action involving the payment of gas royalties. As part of that settlement, it agreed to a provision that would impose a severe appeal bond on any objectors who might wish to appeal an unsuccessful objection. The clause read:
Because any appeal by an objecting Class Member would delay the payment under the Settlement, each Class Member that appeals agrees to put up a cash bond to be set by the district court sufficient to reimburse Class Counsel’s appellate fees, Class Counsel’s expenses, and the lost interest to the Class caused by the delay.
(Emphasis added.) This provision imposed greater costs on appealing objector than the requirements of Federal Rule of Appellate Procedure 7, which usually govern the posting of appeal bonds. ExxonMobil lost nothing by agreeing to this provision, but its real benefit was for plaintiffs’ counsel, who often cannot be paid while the case is still ongoing. (Thus the reasoning behind quick-pay provisions.)
The settlement did draw objectors, and they did not prevail in front of the district court. When they appealed, the parties invoked the settlement agreement’s appeal bond provision. As a result, the Tenth Circuit was faced with the question posed by Hershey v. ExxonMobil Oil Corp: what rule controlled the appeal bond, FRAP 7, or the settlement clause? The court held that FRAP 7 was not exclusive, and so the parties could decide on additional requirements. (The objectors, as class members, would be bound by the agreement unless they opted out, at which point they would lose standing as objectors.) The objectors argued that this would functionally deprive them of a right to appeal. The Tenth Circuit disagreed.
Appellants tell us the appeal rights of objectors to a settlement agreement can henceforth be extinguished in every class action by the simple expedient of including in the settlement agreement an appeal-bond provision such as the one presented here. Not so! Had Appellants made their present argument to the district court in a timely fashion, there would be a genuine issue as to whether they had actually agreed to–and were therefore bound to honor–the appeal-bond provision.
(Emphasis added.) The decision is logical enough, as far as it goes. But it is essentially a one-time victory for settlement parties. From this point forward, it is a safe bet that any settlement agreement that includes an appeal bond clause like this will draw objections, if for no other reason than to preserve any objectors’ appellate rights. Much like the quick-pay provision, I would argue that the appellate bond provision has likely just become a red flag for objectors and courts alike.