County royalty owners arm themselves for war
http://m.cleburnetimesreview.com/news/article_0111ca50-2ebe-11e4-b9...
The David and Goliath war by Johnson County land owners against Chesapeake Energy may well have gained a pair of new troops on Tuesday.
Albert and Vertis Gibbs, who are Chesapeake royalty owners, attended a Cleburne Conference Center presentation by the lawyer who is suing Chesapeake on behalf of about 3,000 area royalty owners.
“The big dogs started something,” Albert Gibbs said. “Now the little guy’s getting involved.”
About 60 lessors were on hand for the latest in the ongoing series of talks, designed to inform them of the issues, by Fort Worth attorney Dan McDonald.
“They have stolen hundreds of millions of dollars,” from Johnson and Tarrant County royalty owners who leased land to Chesapeake, McDonald said. “There is only one word to describe what they’ve done: stealing.”
McDonald is enlisting an army of plaintiffs who might not otherwise be able to hire a litigator; their individual claims are relatively small, and their potential judgments insignificant to Chesapeake....
However, a few new details emerged at the local meeting.
McDonald told the Cleburne crowd that District Judge William Bosworth will be handling the cases he’s filing here.
“They’re all consolidated,” McDonald said. “Judge Bill Bosworth is going to be the Chesapeake judge.”
Bosworth presides over the 413th District Court in Cleburne.
“Judge Bosworth is an excellent judge,” McDonald said. “I couldn’t be happier.”
McDonald, who has put together a sophisticated media campaign that includes a website devoted to the Chesapeake cases as well as billboards and a weekly 6 p.m. Wednesday royalty owners’ teleconference, told the crowd he’s hired an accountant with years of experience in the oil and gas industry to analyze clients’ royalty checks.
On the conference center wall McDonald presented a table of one royalty owner’s payments from Chesapeake and other operators over four years. According to the graphic, underpayments ranged from an average of 54 cents per 1,000 cubic feet of natural gas in April 2011 to $1.88 per 1,000 cubic feet in May 2011.
In September, Chesapeake and McDonald are set to have a hearing on the motion to begin trying the Johnson County cases next spring, but ultimately McDonald said he expects Chesapeake to settle.
The Fort Worth Star-Telegram last week reported that Chesapeake agreed to pay the city of Arlington $700,000 after officials there sued, alleging that the company did the same thing McDonald is charging it did to land owners here: deducted post-production costs it was not entitled to.
“Under the agreement, Chesapeake will no longer subtract post-production costs and the city’s royalty will be calculated based on the highest price received by Chesapeake when the gas is sold or the price established by a formula,” the Star-Telegram reported. “Arlington’s deal mirrors one that Chesapeake reached with Dallas/Fort Worth Airport in 2012 for $5 million. That deal also established a formula for royalty payments.
“Chesapeake also quietly settled with the Tarrant Regional Water District earlier this year when it agreed to pay the district $1.8 million for royalties on 100 leases from January 2008 through October 2011.”
McDonald’s firm is gearing up to handle the cases.
“We have added four lawyers and six new legal assistants to work on our Chesapeake litigation and we need much more space,” McDonald wrote in an email. “We have over 3,000 Chesapeake royalty owner clients. We expect to have at least 10,000 by the end of the year.”
Barbara Smith owns two acres of land at Bowman Springs Road in Arlington. Chesapeake has a lease on one acre and another company leases drills on the other.
She only recently heard about the lawsuits, but she’s going to send McDonald her Chesapeake paperwork.
“Chesapeake is paying me less than half what Vantage is paying for the same land,” she said. “I kept calling and they won’t do anything.”
Chesapeake declined to comment.
Taking aim on Chesapeake royalty underpayment
Views: 13786
Replies to This Discussion
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Permalink Reply by Skip Peel - Mineral Consultant on -
Thanks for the update, Henry.
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Permalink Reply by Hopeful About Natural Gas on -
Henry, thanks for your work on this - you've been posting on this for years. I am glad for you that it is going forward and I am looking forward to seeing how this plays out!
PS: you should also be writing a book about all this. I'm still Hopeful About Natural Gas for the long term - but some days I feel hung.
HANG
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Permalink Reply by JHH on
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Thanks Henry for all you have done on this issue. I went to the Marshall, Texas attorney meeting. There were only about a half dozen people who showed up. Unfortunately, our Chesapeake leases expired without drilling and the rest that produced were right at 4 years and older... and have since been farmed out to NFR and now Sabine. We've sent a letter to Sabine asking about why it is charging almost 50% for transportation costs. It seems almost like the problems we had with Chesapeake. Will update when we get some answers.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Trial date set for first Louisiana royalty lawsuit against Chesapeake Energy
Posted: May 19, 2015 6:55 PM CST Updated: May 20, 2015 6:46 AM CST
By KSLA Staff ARKLATEX (KSLA) -
The first Louisiana royalty lawsuit filed against Chesapeake Energy by the McDonald Law Firm has been set for trial next year in Houston. The lawsuit, which is set to go to trial on April 4, 2016, is paving the way for what is expected to be a hard-fought battle between Chesapeake Energy and Louisiana gas royalty owners.
The lawsuit claims that gas royalty owners were cheated out of several hundred million dollars by the energy giant.
The suit was filed in February on behalf of a DeSoto Parish property owner.
The Fort Worth-based McDonald Law Firm, which represents nearly 2,500 Louisiana gas royalty owners, is expected to file at least 10 more lawsuits this week.
In September 2014, several hundred mineral rights owners attended a series of meetings offered by the McDonald Law Firm after the owner of the firm, Dan McDonald says he was given the runaround himself by Chesapeake and had to fight for the royalties owed to him. McDonald, who is not an oil and gas attorney, says he learned through his personal experiences in trying to get answers from the natural gas giant.
Since his experience, he vowed to reach out to others going through similar issues.
McDonald says they're not looking to file a class action lawsuit against Chesapeake but rather hundreds of them individually.
The law firm has reportedly already recruited more than 4,000 claimants in Texas and elsewhere.
Copyright 2015 KSLA. All rights reserved.
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Permalink Reply by tc on
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I expect this to end badly for either Chesapeake(monetary) or the royalty owners(unmet expectations) and maybe the court system. I do see a class action settlement sometime in the future, because I can see the courts saying no to having 10,000 trials in their courts. Soon or later a pool of money will be placed in a trust fund and a administrator will divvy out the funds, like in the Gulf spill.
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Permalink Reply by Skip Peel - Mineral Consultant on
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My concern is that some participants in these mass tort suits seem to think that they will recoup the monies deducted from their royalty payments. I don't think that is an accurate characterization of how these types of suits often turn out. Maybe Henry can shed some light on how the attorneys are wording their promises to plaintiffs.
IMO the most likely positive outcome for plaintiffs is to receive a modest check in the form of a settlement. I doubt that the attorneys are focused on making case law. I think they are focused on a pay day. If Chesapeake follows their usual legal strategy the April court date will be reset - probably more than once. They will draw out the process and let the attorneys get enough money invested in the litigation that they are prone to settle. The lead firm appears to know this is a likely outcome and are willing to make the investment in expectation of a reasonable profit over and above their out of pocket expenses.
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Permalink Reply by Gary Joseph Anselmo on
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One good outcome is the continued publicity of the industry's culture and predatory nature. No matter what kind of lease agreement is negotiated for the individual landowner (citizen or municipality), it is meaningless. Exactly how many of CHK's competitors have openly condemned the supposed "black sheep" of the O&G racket? More of this publicity and a leasehound/landman will be as welcomed as The Watchtower Society or a telemarketer.
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Permalink Reply by Henry on
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I will respond here to both Skip's and tc's comments.
First, to tc....There will be no class-action settlement, because this is not a class-action suit here. The courts will tolerate hundreds (not 10,000) of trials here. As an example of how this will be done in this CHK case, the two sides have agreed that a single ruling will be made regarding the rules of evidence and things like that. In other words, a single judge will here arguments from both sides on procedures and rules, and the ruling will be applicable to all cases. I don't know if this will be done at the county level, or state level, but this will be one way to avoid tying up the courts.
Now, as Skip says, the attorneys are interested in a payday (obviously). Someone (the McDonald Law Firm or an investor) has put up a lot of money to get this going, with the hope of a future payoff. McDonald Law Firm specializes in these so-called "mass tort" cases, so they know how this works, and how to do it. They would not leap in to this, if they did not expect a payday.
What will the plaintiffs receive? I cannot say if it will be modest or not. Obviously the first trial, set for June (I think), could set the tone for how this will go. CHK will obviously fight like hell. I cannnot say if there will be a settlement or not, because each and every individual plaintiff can choose what to do. I can imagine there are some plaintiffs who don't have a ton of money at stake who would refuse to settle and want the full-up trial just to expose CHK or just for entertainment purposes. Others will quietly take a settlement.
And yes, Skip is right on delay tactics. CHK will likely try to delay the first trial, just to drive up costs. However, IMHO delays will not be as stressful to plaintiffs as they would be in a one-on-one trial. I've been in one-on-one lawsuits, and I have a relative in this suit also. The stress level in this one is zero, while the stress level in a one-on-one trial is off scale. So most plaintiffs won't care too much if there is a big delay - that will take away some of CHK's leverage.
I think we need to see what comes out of the remaining depositions, and whether or not the first case goes to trial in June. Sit tight -- we may know a lot more within the next few months.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Henry, are the lawyers telling plaintiffs they will get the monies deducted from their royalty payments back? And are you sure the decision to settle or continue to a verdict is up to each plaintiff? Not to the lawyers?
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Permalink Reply by Henry on
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In all the teleconferences and discussions I've had with McDonald Law Firm (MLF), this is the way the case has been explained to me....
Each individual plaintiff may choose to accept a settlement offer (if one is offered) or go to trial. There is no collective outcome. Even within a single lawsuit, where there might be a dozen plaintiffs, each plaintiff may choose a different path (i.e., trial vs. settlement).
MLF has repeatedly said they plan to sue for attorneys' fees as part of each lawsuit. If the case goes to trial and the plaintiff wins and attorneys' fees are awarded, then the plaintiff will get 100% of what he/she is owed If the case goes to trial and the plaintiff wins, but attorneys' fees are not granted, then the plaintiff gets what is owed, minus the 39% attorneys' fees and the 10% for other things like expert witnesses.
MLF has been consistent on this throughout the case.
If I am incorrectly stating anything here, I hope Mr. Dugas will step in and correct me.
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Permalink Reply by Skip Peel - Mineral Consultant on
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Thanks for the clarification.
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