HomeMy WebLinkAbout20051637.tiff DISTRICT COURT
CITY AND COUNTY OF DENVER
1437 Bannock Street
Denver, CO 80202
Plaintiffs: WILLIAM FRANK BOULTER, ET AL,
Defendant:
KERR-McGEE ROCKY MOUNTAIN CORPORATION,
a Delaware corporation.
♦ COURT USE ONLY •
Charles Carpenter #012197 Case Number: 04 CV 7739
Attorney at Law
1775 Sherman Street, Suite 2550
Denver, CO 80203 Courtroom: 3
(303) 831-1745
Fax: (303) 839-9318
George A. Barton Mo. Bar No. 26249
Law Offices of George A. Barton, P. C.
800 W. 47th St. Suite 700
Kansas City, MO 64112
(816) 300-6250
Fax: (816) 300-6259
ATTORNEYS FOR PLAINTIFFS
NOTICE OF PROPOSED CLASS ACTION SETTLEMENT WITH DEFENDANT
KERR-MCGEE ROCKY MOUNTAIN CORPORATION
TO: THE POTENTIAL MEMBERS OF THE SETTLEMENT CLASS
IMPORTANT NOTICE: YOUR LEGAL RIGHTS MAY BE AFFECTED
PLEASE READ THIS NOTICE CAREFULLY.
THIS IS NOT A LAWSUIT BY THE DEFENDANT AGAINST YOU.
b-o 1-0S 2005-1637
THIS NOTICE OF SETTLEMENT DOES NOT REQUIRE YOU TO DO ANYTHING.
PLEASE FEEL FREE TO TALK TO YOUR OWN ATTORNEY AND TAX ADVISORS
CONCERNING THIS NOTICE.
1. WHY You SHOULD READ THIS NOTICE
This notice is sent to you to inform you about the proposed settlement of a class action lawsuit
captioned above ("Lawsuit") that was brought on behalf of certain royalty payees (including overriding
royalty payees) who have received royalty payments from Kerr-McGee Rocky Mountain Corporation
("Kerr-McGee Rocky Mountain") for natural gas, condensate or natural gas liquids ("Hydrocarbons")
produced in Weld, Adams, Broomfield, Elbert, Arapahoe and Boulder Counties, Colorado. The
settlement has been preliminarily approved by the Court. As explained below, you may be entitled to
benefits under this settlement if you do not opt-out of the settlement and the settlement is approved by the
Court.
You could be a member of the class of royalty payees defined below who are covered by a
proposed settlement of the Lawsuit. In this notice, the settlement is referred to as the "Kerr-McGee
Rocky Mountain Settlement" and the class of Kerr-McGee Rocky Mountain Hydrocarbon royalty payees
covered by the Settlement is referred to as the "Kerr-McGee Rocky Mountain Settlement Class." The
Settlement Class includes the following:
All individuals and entities to whom Kerr-McGee Rocky Mountain (including its
predecessors in interest, HS Resources, Inc. and Elk Exploration, Inc.) has paid
or currently is paying royalties (either on its own behalf or on behalf of Other
Working Interest Owners) under oil and gas leases, overriding royalty
assignments, or any other document conveying or transferring a royalty interest
in natural gas and liquids from wells located in Weld, Boulder, Adams,
Broomfield, Elbert and Arapahoe Counties (the "Subject Counties"), Colorado,
according to the business records maintained by Kerr-McGee Rocky Mountain.
The defined Class excludes the federal government, the State of Colorado, Indian
tribes and any persons or entities that: (1) have reached settlement agreements
with Kerr-McGee Rocky Mountain relating to royalty underpayment claims; (2)
appeared as parties in Kerr-McGee Rocky Mountain Corporation v. Clyde L.
Abbett, et al., Case No. 2001 CV 5929 (Denver Dist. Ct. 2001); (3) have received
more than $20,000 from Kerr-McGee Rocky Mountain between September 2001
and September 2004 in working interest payments; or (4) currently serve as
justices or judges of the State of Colorado, and their current spouses.
The Court has appointed the Plaintiffs as class representatives for the Kerr-McGee Rocky Mountain
Settlement Class.
This Notice describes who is eligible to participate in the proposed Kerr-McGee Rocky Mountain
Settlement, the nature of the Lawsuit, the terms of the proposed Kerr-McGee Rocky Mountain Settlement
and some factors to consider in making your decision concerning the Kerr-McGee Rocky Mountain
Settlement. This notice also explains that the Judge who is hearing this case will hold a final fairness
hearing to decide whether to approve the Kerr-McGee Rocky Mountain Settlement on September IS,
2005, at 8:30 a.m. in Courtroom 3 of the District Court of the City and County of Denver, Colorado,
located at 1437 Bannock Street, Denver, Colorado. This notice describes your legal rights in connection
with the Kerr-McGee Rocky Mountain Settlement, the hearing and the Lawsuit. The notice also explains
your choices with regard to the Kerr-McGee Rocky Mountain Settlement. As a member of the Kerr-
McGee Rocky Mountain Settlement Class, you may choose to do one of the following:
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(1) Remain in the Kerr-McGee Rocky Mountain Settlement Class, receive the benefits of the
Kerr-McGee Rocky Mountain Settlement and release certain claims as explained in this
Notice (see Section 6 of this Notice if you wish to do this);
(2) Exclude yourself from the Kerr-McGee Rocky Mountain Settlement Class and not
release any claims, but also not be entitled to the benefits of the Kerr-McGee Rocky
Mountain Settlement(see Section 7 of this Notice if you wish to do this); or
(3) Remain in the Kerr-McGee Rocky Mountain Settlement Class, but object to the Kerr-
McGee Rocky Mountain Settlement(see Section 8 of this Notice if you wish to do this).
2.WHAT IS A CLASS ACTION?
A class action is a type of lawsuit in which a named Plaintiff brings a suit on behalf of all of the
members of a similarly situated group to recover damages and other relief for the entire group, without
the necessity of each member filing an individual lawsuit, incurring expenses or appearing as an
individual plaintiff. Class actions are used by the courts when the claims raise issues of law or fact that
are common, making it fair to bind all class members to the orders and judgments in the case, without the
necessity of multiple lawsuits involving hearing the same claims over and over.
3. THE LAWSUIT
Plaintiffs, on behalf of themselves and all other similarly situated royalty payees, filed the above-
captioned lawsuit against Kerr-McGee Rocky Mountain on September 21, 2004 in the District Court for
the City and County of Denver, Colorado. This Lawsuit seeks monetary and declaratory relief against
Kerr-McGee Rocky Mountain for a class of private(non-governmental) natural gas royalty payees, except
certain payees who are working interest owners in Kerr-McGee Rocky Mountain properties with royalty
payment obligations. This Lawsuit is pending before the Honorable Robert S. Hyatt, District Judge of the
District Court for the City and County of Denver, State of Colorado.
The Plaintiffs have alleged Kerr-McGee Rocky Mountain deducted or adjusted from royalties
certain charges for costs that should not have been deducted. Specifically, the Plaintiffs asserted that
Kerr-McGee Rocky Mountain should not have deducted from Hydrocarbon royalties any costs incurred
between the wellhead and the tailgate of a processing plant to make the gas marketable. These deductions
are referred to in this Notice as "Disputed Deductions." The Plaintiffs also allege that Kerr-McGee
Rocky Mountain has improperly reduced the value of Hydrocarbons for purposes of calculating royalties
by incorrectly pricing and measuring the Hydrocarbons.
The parties have engaged in limited discovery and preliminary motions. In order to attempt
resolution of the claims without additional costly litigation, Plaintiffs and Kerr-McGee Rocky Mountain
agreed to mediate the claims alleged by the Plaintiffs ("Claims"). The settlement described in this Notice
is the result of those negotiations.
Counsel for the Named Plaintiffs and the proposed Class believe that the issues before the Court
are complex, and there is an uncertainty as to the outcome of the Kerr-McGee Rocky Mountain Litigation
should it proceed to trial. Kerr-McGee Rocky Mountain denies all of the Plaintiffs' Claims and continues
to deny any wrongdoing or liability to Plaintiffs or any member of the Kerr-McGee Rocky Mountain
Settlement Class, in any amount, in connection with the Claims. Kerr-McGee Rocky Mountain contends
that Plaintiffs' Claims have no merit, and that Kerr-McGee Rocky Mountain would prevail at trial in the
Lawsuit, including any necessary appeal.
Class Counsel and the Plaintiffs have considered both the benefits of the proposed Kerr-McGee
Rocky Mountain Settlement and the risks of proceeding if the Kerr-McGee Rocky Mountain Settlement
were rejected. Class Counsel and the Plaintiffs have concluded that the proposed Settlement provides
substantial benefit to the Kerr-McGee Rocky Mountain Settlement Class; resolves substantial issues
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without prolonged litigation and expense; avoids the delay and expense of likely appeals; eliminates
inherent risks of litigation; provides members-of the Kerr-McGee Rocky Mountain Settlement Class who
do not opt out of the Kerr-McGee Rocky Mountain Settlement with significant benefits; and is in the best
interests of the Kerr-McGee Rocky Mountain Settlement Class. Plaintiffs and Class Counsel have
concluded that the proposed Settlement is fair,reasonable and adequate.
4.THE SETTLEMENT
As a potential member of the Kerr-McGee Rocky Mountain Settlement Class, you may be
entitled to receive certain benefits in accordance with the proposed Kerr-McGee Rocky Mountain
Settlement. The entire agreement is set forth in the Kerr-McGee Rocky Mountain Settlement Agreement.
This Notice summarizes the Kerr-McGee Rocky Mountain Settlement. However, you may examine the
Kerr-McGee Rocky Mountain Settlement Agreement in addition to the summary contained within this
Notice. You may review the entire Kerr-McGee Rocky Mountain Settlement Agreement in the file for the
Lawsuit maintained by the Court. To receive a copy of the Settlement Agreement, please make a written
request to Class Counsel at the address provided in Section 10 of this Notice.
The claims resolved in the Kerr-McGee Rocky Mountain Settlement involve alleged improper
calculation and payment of royalties based on (i) Disputed Deductions from the royalties paid to members
of the Settlement Class for gathering, compression, dehydration, treatment and processing of natural gas
that is allegedly required to make the Hydrocarbons marketable, and (ii) allegedly incorrect pricing and
measurement of Hydrocarbons for purposes of royalty calculation.
Kerr-McGee Rocky Mountain has agreed to pay a total of $6,400,000.00 in order to settle the
Lawsuit, to be paid into an interest bearing escrow account on or before May 9, 2005 ("Settlement
Fund"). The amount of the Settlement Fund that will be available for distribution to the members of the
Kerr-McGee Rocky Mountain Settlement Class who do not timely elect to be excluded from the Kerr-
McGee Rocky Mountain Settlement Class (i.e. do not "opt out" of the Kerr-McGee Rocky Mountain
Settlement Class), pursuant to the procedure described in Section 7 of this Notice, will be determined by
multiplying their percentage participation, as set forth in a Preliminary Allocation Schedule to be filed
with the Court, times $6,400,000.00 (less amounts attributable to persons who opt out of the Class). The
expenses and attorneys' fees of the Plaintiffs and Class Counsel ("Litigation Expenses"), as approved by
the Court, will be subtracted from the Settlement Fund to determine the amount available for distribution
to the members of the Kerr-McGee Rocky Mountain Settlement Class. Kerr-McGee Rocky Mountain has
agreed to pay all the costs of this Notice. You may receive a copy of Class Counsel's Application
regarding Litigation Expenses by making a written request to Class Counsel at the address provided in
Section 10 of this Notice, or you may inspect the Court file at the address provided in Section 11 of this
Notice.
Percentage entitlement of royalty payees to the Settlement Fund will be based, primarily, on the
volume of gas produced and sold by Kerr-McGee Rocky Mountain attributable to their royalty interests
during a pre-determined period of time prior to September 2004, in proportion to the total volume
attributable to all the royalty interests for all members of the Kerr-McGee Rocky Mountain Settlement
Class over that same period.
For production produced and sold by Kerr-McGee Rocky Mountain from and after January 1,
2005, your royalties will be paid pursuant to one of the two Future Payment Methods defined in the Kerr-
McGee Rocky Mountain Settlement Agreement which are generally described as follows:
A. For Hydrocarbons produced and sold by Kerr-McGee Rocky Mountain under wellhead
percent-of-proceeds contracts in existence on September 21, 2004, future royalties will be
based on 106.5 percent of the sales proceeds received by Kerr-McGee Rocky Mountain under
the wellhead percent-of-proceeds contract. If Kerr-McGee Rocky Mountain receives its
portion of the residue gas in-kind, Kerr-McGee Rocky Mountain will pay royalties based on
its portion of the residue gas at 106.5 percent of the first of the month spot index price for
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U
Colorado Interstate Gas Company-Rocky Mountains published in F.E.R.C.'s Gas Market
Report.
B. For Hydrocarbons not produced and sold by Kerr-McGee Rocky Mountain under wellhead
percent-of-proceeds contracts in existence on September 21, 2004, future royalties will be
based on the first of the month spot index price for Colorado Interstate Gas Company-Rocky
Mountains published in F.E.R.C.'s Gas Market Report, plus $0.135 per MMBtu, regardless of
the price received by Kerr-McGee Rocky Mountain or any of its affiliates, times the total
MMBtu produced under the lease as determined at the first meter after the wellhead where
both volume is measured and Btu content is sampled ("Measurement Point"), and then
allocated back to each well pro rata based upon the MMBtu's delivered from each well.
Kerr-McGee Rocky Mountain will be entitled to deduct up to $0.34 per MMBtu in reasonable
actual costs incurred after the Measurement Point in order to deliver gas to the interstate
pipeline (whether regulated or unregulated).
Upon final Court approval, all members of the Kerr-McGee Rocky Mountain Settlement Class
who choose not to timely exclude themselves from the Kerr-McGee Rocky Mountain Settlement Class
(i.e. do not "opt out" of Kerr-McGee Rocky Mountain Settlement Class) will receive the benefits of the
Settlement and will be bound by the resulting Order in the Lawsuit, baring them from bringing any claim
against Kerr-McGee Rocky Mountain related to royalty calculations which are covered by the Settlement
Agreement ("Settled Claims"). If a member of the Kerr-McGee Rocky Mountain Settlement Class does
not opt-out, that member (if eligible) will receive payment of a portion of the Settlement Fund equal to
that member's percentage entitlement times the amount of the Settlement Fund available for distribution,
and may not thereafter bring Claims. Additionally, a member who does not opt out agrees that Kerr-
McGee Rocky Mountain may pay and report royalties in the future according to the applicable Future
Payment Method, and that such payment shall satisfy Kerr-McGee Rocky Mountain's contractual
obligations to each member who does not opt-out. If you sell or transfer your interest, the new owner or
transferee also will be entitled to receive and be bound to accept payment of future royalties calculated in
accordance with the applicable Future Payment Method. For more detailed information regarding the
terms of the settlement,please read the Kerr-McGee Rocky Mountain Settlement Agreement.
5. THE COURT HAS CONDITIONALLY APPROVED THIS SETTLEMENT
The Court has ordered that for purposes of this proposed Settlement only, this case may proceed
as a class action and that the Kerr-McGee Rocky Mountain Settlement Class shall be conditionally
certified. This does not mean that Plaintiffs would be successful if the case went to trial. The Court has
made no final determination as to the merits of the Lawsuit, and this notice and the proposed Settlement
do not imply that Kerr-McGee Rocky Mountain is liable to Plaintiffs or to any member of the Kerr-
McGee Rocky Mountain Settlement Class for any of the Claims. Furthermore, if this proposed
Settlement is not finally approved or is withdrawn at any time, the parties have agreed that the conditional
class certification shall be void and of no effect. There are also other circumstances under which the
parties may cancel the Settlement Agreement. In any such event, the Lawsuit would proceed as though
no class had been certified previously.
6.REMAINING A MEMBER OF THE SETTLEMENT CLASS
If you choose to remain a Kerr-McGee Rocky Mountain Settlement Class member, you do not
need to take any action whatsoever. The Class representatives and the Class Counsel for the Kerr-
McGee Rocky Mountain Settlement Class will represent your interests as a member of the Kerr-McGee
Rocky Mountain Settlement Class. You will not be charged for their services or any costs other than the
payment of Litigation Expenses from the Settlement Fund that are approved by the Court. However, you
will be bound by the judgment and final disposition of the case and you may receive a Distribution
Check for your share of the Settlement Fund approximately 55 days after the Effective Date of the
Settlement Agreement (as defined in the Kerr-McGee Rocky Mountain Settlement Agreement). If you
are a Kerr-McGee Rocky Mountain Settlement Class member, you will be barred from bringing any
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further legal action against Kerr-McGee Rocky Mountain or its affiliates as described in Section 4 of this
Notice.
Should you remain in the Settlement Class, and the settlement is approved, you will:
1) Receive your allocated share of the funds paid by Kerr-McGee Rocky Mountain, if eligible.
2) Release all Settled Claims.
3) Consent to the calculation of the royalty value pursuant to the Future Payment Method.
Certain claims are expressly excluded from Settled Claims, and, consequently are not covered by
the Settlement. These Reserved Claims include any claims arising out of any mathematical mistakes by
Kerr-McGee Rocky Mountain concerning volumes, price, value or decimal interest when calculating
royalty payments arising on or after January 1, 2005.
7.REQUEST TO BE EXCLUDED FROM THE SETTLEMENT CLASS
You may elect to be excluded from the Kerr-McGee Rocky Mountain Settlement Class. If you
elect to be excluded from the Kerr-McGee Rocky Mountain Settlement Class, you will not be bound by
any judgment, disposition or Settlement of the Class action, nor will you receive any of the benefits of
this Class action, including the payments of any monies from the Settlement Fund. Likewise, Kerr-
McGee Rocky Mountain will not be obligated to calculate Hydrocarbon royalties paid to you in the future
under the terms of the Future Payment Method set forth in the Kerr-McGee Rocky Mountain Settlement
Agreement. You will retain, and will be free to pursue, any claims you may have on your own behalf
against Kerr-McGee Rocky Mountain. Kerr-McGee Rocky Mountain will be free to assert any defenses
or counterclaims it may have against you. You should consult with your own attorney, at your cost, to
receive that attorney's advice about your rights under the Settlement Agreement. To be excluded from
the Class, you must provide a written election to be excluded from the Kerr-McGee Rocky Mountain
Settlement Class to George Barton of the Law Offices of George A. Barton, P.C. at the address set
forth in Section 10 of this notice. The election must contain the full name, current address, telephone
number and signature of the person requesting exclusion. The written election must be postmarked on
or before July 1, 2005. If your spouse or anyone else shares your interest in the royalty payments, they
must also follow this procedure if they want to be excluded from the Class.
Any potential Kerr-McGee Rocky Mountain Settlement Class member may revoke that member's
election to be excluded from the Kerr-McGee Rocky Mountain Settlement Class. If you wish to revoke
your request to be excluded from the Kerr-McGee Rocky Mountain Settlement Class, you must deliver a
written signed statement that you request to revoke your election to be excluded from the Kerr-McGee
Rocky Mountain Settlement Class to George Barton of the Law Offices of George A. Barton, P.C. by July
15, 2005. By revoking the election to be excluded,the potential Kerr-McGee Rocky Mountain Settlement
Class member becomes a Kerr-McGee Rocky Mountain Settlement Class member with all the rights of a
Kerr-McGee Rocky Mountain Settlement Class member at the time of the revocation.
Class Counsel will provide a compilation of all potential class members who request to be
excluded from the Kerr-McGee Rocky Mountain Settlement Class to the Court.
8. RIGHT TO OBJECT TO THE KERR-MCGEE ROCKY MOUNTAIN CLASS SETTLEMENT
If you do not opt out from the Kerr-McGee Rocky Mountain Settlement Class, you may object to
the settlement. All objections shall be in writing and must be filed on or before August 24,2005 with
this Court at the address of the District Court Clerk at 1437 Bannock Street, Room 256, Denver,
Colorado, 80202. However, in order to be heard at the hearing, you must file a Notice of Intent to
Appear at the Final Fairness Hearing with this Court by August 24,2005, in addition to your written
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objection. You may appear personally or by separate legal counsel. The objection must also be mailed to
each of the following and postmarked on or before August 24, 2005:
Counsel for Settlement Class Counsel for Kerr-McGee Rocky Mountain
GEORGE A. BARTON MICHAEL J. GALLAGHER
LAW OFFICES OF GEORGE A. BARTON, P.C. DAVIS GRAHAM& STUBBS LLP
800 W. 47TH ST., SUITE 700 1550 17TH STREET, SUITE 500
KANSAS CITY, MO 64112 DENVER, CO 80202
PHONE: (816)300-6250
FAX: (816) 300-6259
CHARLES CARPENTER
ATTORNEY AT LAW
1775 SHERMAN STREET, SUITE 2550
DENVER, CO 80203
PHONE: (303) 831-1745
FAX: (303) 839-9318
If you wish to file an objection,your objection must set forth the full name, current address
and telephone number of the person making the objection. In addition, the objection must include:
(a) a written statement of the position that the objector wishes to assert; (b) a written statement of
the grounds for that objection; and (c) copies of any papers,briefs or other documents the objector
may submit in support of his or her objection. Any Kerr-McGee Rocky Mountain Settlement Class
member who does not file a notice of intent to appear at the final fairness hearing may be prohibited from
participating at the hearing. Any Kerr-McGee Rocky Mountain Settlement Class member who does not
file objections in a timely manner may be foreclosed from raising an objection to such matters.
9. FINAL FAIRNESS HEARING
A final fairness hearing will be held before Judge Robert S.Hyatt on September 15,2005,at
8:30 a.m. in Courtroom 3 of the District Court for the City and County of Denver, located at 1437
Bannock Street, Denver, Colorado. The purpose of the hearing will be to finally determine whether the
proposed Settlement is fair, reasonable and adequate, and whether a final judgment approving the Kerr-
McGee Settlement Agreement should be entered. The amount of the attorney's fees and costs to be paid
from the Kerr-McGee Rocky Mountain Settlement Fund to Class Counsel will also be determined at this
hearing. The hearing may be continued or adjourned without further notice to the Kerr-McGee Rocky
Mountain Settlement Class.
If the Settlement is approved, Plaintiffs and each member of the Kerr-McGee Rocky Mountain
Settlement Class who has not properly and timely elected to be excluded from the Kerr-McGee Rocky
Mountain Settlement Class will be bound by the Settlement. Additionally, the respective heirs, executors,
administrators, representatives, agents, successors, and assigns of the Kerr-McGee Rocky Mountain
Settlement Class members will be deemed bound by the Kerr-McGee Rocky Mountain Settlement as to
that member's royalty interests. Likewise, the Kerr-McGee Rocky Mountain Settlement will bind Kerr-
McGee Rocky Mountain and its successors and assigns.
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10.ATTORNEYS FOR THE PARTIES
Attorneys for the Plaintiffs and the Kerr-McGee Rocky Mountain Settlement Class ("Class Counsel"):
George A. Barton
Law Offices of George A. Barton, P.C.
800 W. 47`°Street, Suite 700
Kansas City, MO 64112
Phone: (816) 300-6250
Fax: (816)300-6259
Charles Carpenter
1775 Sherman Street, Suite 2550
Denver, CO 80203
Phone: (303) 831-1745
Fax: (303) 839-9318
Attorneys for Kerr-McGee Rocky Mountain Corporation:
Michael J. Gallagher
Gale T. Miller
Christopher A. Chrisman
Davis Graham& Stubbs LLP
1550 Seventeenth Street, Suite 500
Denver, CO 80202
ANY QUESTIONS CONCERNING THE SETTLEMENT SHOULD BE DIRECTED TO CLASS
COUNSEL.
In any written correspondence with the attorneys or submissions to the Court, it is important that
the envelope and any documents inside contain the following case name and identifying numbers:
Boulter, et al., v. Kerr-McGee Rocky Mountain Corp.
CASE No. 04 CV 7739
In addition, you must include your full name, address and telephone number.
11. IF YOU WANT TO INSPECT THE COURT FILE
The complaints, answers, pleadings, court orders and other documents, including the Settlement
Agreement, are on file in this case, and may be inspected and copies made of the file at the following
address:
District Court
City and County of Denver
1437 Bannock Street, Room 38
Denver, CO 80202
DO NOT WRITE OR TELEPHONE THE CLERK'S OFFICE if you have any questions
about this notice or the Settlement. Please address any questions regarding the notice or the proposed
Settlement in writing to Class Counsel. It is sufficient to address your questions to George Barton of the
LAW OFFICES OF GEORGE A. BARTON, P.C., one of the Class Counsel listed above.
DO NOT CALL COURT OR THE COURT CLERK
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