Slemmer v. Kaiser Ventures

Filed 8/18/06 Slemmer v. Kaiser Ventures CA4/2

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

California Rules of Court, rule 977(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 977(b). This opinion has not been certified for publication or ordered published for purposes of rule 977.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

FOURTH APPELLATE DISTRICT

DIVISION TWO

APPEAL from the Superior Court of San Bernardino County. Christopher J. Warner, Judge. Reversed with directions.

The Dzivi Law Firm, Dale C. Lysak; Bartel & Droste and Alan J. Droste for Plaintiffs and Appellants.

Bingham McCutchen, William Bates and Heather C. Beatty for Defendant and Respondent.

This opinion approves the class action settlement agreed upon by the parties to this appeal (Cal. Rules of Court, rule 1859),^[1] approves the stipulated reversal with the direction to enter a new judgment specified in the settlement (Code Civ. Proc., § 128, subd. (a)(8) (section 128(a)(8)), and orders the reversal with directions.

BACKGROUND

Plaintiffs Thomas M. Slemmer et al. (Slemmer), who represent a class, appeal from a summary judgment granted to Kaiser Ventures LLC (Kaiser). Kaiser is one of a number of defendants in the underlying action. The defendants other than Kaiser are referred to as the Fontana Union Defendants. Essentially, the class consists of certain present and former minority shareholders of Fontana Union Water Company involved in a suit against the water company, its major shareholders, and the water company's officers and directors. Kaiser, formerly one of the major shareholders, was the only defendant to prevail on a motion for summary judgment, generally on the ground that Kaiser was not responsible for the alleged wrongs. The superior court accordingly entered judgment in Kaiser's favor and dismissed the action against Kaiser with prejudice. Slemmer brought the appeal to challenge the judgment, and Kaiser and Slemmer agreed to settle the appeal.

Key terms in the settlement between Kaiser and Slemmer are: Slemmer will not pursue the appeal, Slemmer and the class will release claims against Kaiser (and related entities and individuals), and Kaiser will be paid its litigation costs in the amount of $28,083.06. In exchange, Kaiser will pay $160,000 into a Settlement Common Fund (Fund) for the benefit of the class.

Separately, before trial, the Fontana Union Defendants and Slemmer entered into a settlement of the action between them. Key terms of Slemmer's settlement with the other defendants include: the Fontana Union Defendants will pay $16.5 million dollars into the Fund for the benefit of the class, to compensate class members for the impaired value of their stock. In exchange, class members who currently own water company shares will surrender their shares to two of the Fontana Union Defendants, Slemmer will dismiss the case against the Fontana Union Defendants, and Slemmer and the class will release claims against the Fontana Union Defendants.

Kaiser agreed to Slemmer's request, in order to reduce Slemmer's administrative costs, to administer both settlements from the same Fund, to provide one notice to the class concerning both settlements, and to request the superior court to hold simultaneous approval hearings regarding the two settlements. Kaiser also agreed that Slemmer and class counsel could seek reimbursement of fees and costs from the Fund containing both settlement payments.

Here we deal only with the class settlement with Kaiser, because the judgment appealed by Slemmer as class representative was only in favor of Kaiser. The judgment did not involve any, and benefited none, of the Fontana Union Defendants.

The disposition requested by Slemmer and Kaiser is to reverse the summary judgment appealed, but with the direction to enter a new judgment identical to the reversed judgment with the exceptions that (1) Kaiser shall pay $160,000 to the Fund, as provided in the parties' settlement agreement, which settlement is approved in this opinion, and (2) the specification of $28,083.06 as the amount of Kaiser's cost award, which award had already been made without specifying an amount.

APPROVAL OF CLASS ACTION SETTLEMENT

Settlement of a class action suit requires the approval of the court. (Rule 1859(a).) A two-step process is required. First, the court preliminarily approves the settlement and the class members are notified as directed by the court. (Rule 1859(c), (f).) The class members are notified of the date of a final approval hearing and of deadlines and means by which to object to, or opt out of, the proposed settlement. (See rule 1859(f).) Second, the court conducts the final approval hearing inquiring into the fairness of the proposed settlement. (Rule 1859(g).) After the final approval hearing, if the judge approves the settlement, a judgment is entered on the settlement with provision for continued jurisdiction for the enforcement of the judgment. (Rule 1859(h).)

The trial court does not have the jurisdiction to affect an appealed judgment in any way during the pendency of the appeal ‑‑ only the Court of Appeal has that jurisdiction. (See Code Civ. Proc., § 916, subd. (a).) Thus, this court must approve the class action settlement and enter the judgment. However, in this case the trial court had the means and experience with the case helpful to conduct the class action settlement approval proceedings. Therefore, by order filed June 19, 2006, this court appointed the trial judge, the Honorable Christopher J. Warner, as referee to conduct the necessary proceedings and report to this court regarding the approval of the class action settlement. (People v. Superior Court (Laff) (2001) 25 Cal.4th 703, 733 [appellate court authority to appoint referees with and without consent of the parties].)

Pursuant to that order, Judge Warner, acting as our referee, filed an order preliminarily approving the Kaiser Settlement Agreement and approving the Notice of Proposed Settlement and Final Approval Hearing to be mailed to the class no later than June 22, 2006. In the same order, Judge Warner, acting as the superior court judge, preliminarily approved the Fontana Union Settlement Agreement between the class and the remaining defendants other than Kaiser, and approved the same notice for mailing to the class with respect to the defendants other than Kaiser. The notice informs class members of the final approval hearing date and how to opt out or object.

The final approval hearing was held July 24, 2006, and the referee's report and recommendation were filed in this court on the same date. No class member opted out or objected to the proposed settlement. The Fontana Union Defendants (defendants other than Kaiser) contributed $16.5 million dollars, and Kaiser contributed $160,000, to the Fund. The contributions differ because of the disparity in the number of contributors; because, of all the defendant contributors, only Kaiser had already obtained a judgment on the merits in its favor; and because class members who currently own water company shares are surrendering their shares as part of their settlement with the Fontana Union Defendants only. The settlement proposes that, before final distribution to the shareholders, out of the Fund will be paid (1) the reasonable costs of third party vendors for administering and distributing the fund, (2) $28,083.06 costs to Kaiser, and (3) compensation to the class representative, Thomas M. Slemmer, and the attorney fees and costs of counsel for the class, both amounts awarded in the discretion of the superior court. The net distribution per share (approximately $11,500 per share) will exceed any amount ever previously paid per share.

Based on these facts related to the proposed settlement, our referee found the Kaiser settlement to be in good faith under Code of Civil Procedure section 877.6. Our referee also found the settlement â€