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

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I corresponded with Mr. Dugas, and he answered my questions...

"1. we are suing for past damages, attorney's fees, exemplary or punitive damages and for an injunction to stop CHK from continuing to overcharge.

2. Our contingency fee only applies to what we recover for our clients.  It does not include a percentage of any future royalty payments.  Please keep in mind, that we can also recover attorney's fees and expect to, so most clients will not have to pay the contingency fee out of their recovery, CHK will pay it."

To me, it looks like a no-brainer for Louisiana residents.  What are our choices?  Take CHK on ourselves?  That's not an option for anyone with only a few acres under lease.  Wait for the AG to file criminal charges?  Never gonna happen.  So what other recourse is there for a small land owner?  

Even if these guys did nothing but get an injunction to keep CHK from overcharging in the future, that would be worth it to me.  What am I missing?  Why shouldn't people join in?

Thanks, Henry.  Good info. Makes sense to me, from what little I know. Also, Preston is from Metairie, Louisiana, and has a license to practice law in TX and Louisiana. He now lives in Fort Worth. If there's a piece of the puzzle we're missing, maybe someone will cough it and explain another side of this. 

One downside is if CHK has better attorneys (or better luck with the judge) than Mr. Preston (or whoever you hire to try your case) and if you lose then you are most likely stuck with the underpayment forever.  Remember in a court of law, the guilty are not always found guilty. 

One other question I would ask is if the case is settled out of court, can an injunction against future overcharging be enforced against CHK, without going back to court and again suing for back royalties.

That's exactly what I was thinking Henry.......Why shouldn't people join in??

Henry, I do not have a lease with Chesapeake.  I am an unleased mineral owner who was forced pooled and went non-consent on the drilling and completion of a well in Bossier Parish, LA.  I have about one acre, was offered $25,000 lease bonus which I first rejected and then decided to accept but was told by Chesapeake that the offer was withdrawn.  My average gas price used to calculate the payout for my back-in is ridiculous, probably less than $2.70 per mcf.  The well will not payout by any reasonable estimate.  There will probably be seven more wells drilled on the section force pooled in the future.  Do I have any recourse?


Call the McDonald Law Firm and see. I have no idea if they will take on unleased mineral owners who think they are also being scammed.  That's all I can suggest.  Good luck.

Thank you everyone for the great questions. I posted the article to spread awareness rather than solicit business.

I have friend requested everyone who has left a comment or question, so as to not appear to be soliciting on this website.  Please accept me, and I will be happy to answer any questions via message or you can call me at 817.717.5081.

Chesapeake is not only cheating royalty owners in TX and LA, it has done this everywhere, and thus, everyone should be aware of what's going on.

I listened in to the teleconference tonight (9/17/2014).  Here are my notes:

The speaker began by reminding us that we own the oil and gas under our land,  (Actually, I don't think this is technically true.  Isn't it the case that no one owns them until they are brought to the surface?)  And that CHK needs us, the landowners to run their company.

He then talked about how CHK sold its gathering system, but inked a fixed-price deal when they did so.  And now, when they have little production, they are still paying that high fixed price.  They are passing that high price on to their royalty owners unfairly (illegally?), and that is the crux of the lawsuit.  He said that in August 2011, CHK sent out a letter in which they notified the royalty owners about how CHK is entitled to deduct more from the royalty checks than they had been deducting in the past, so this is when they view the illegal deductions began

Next he said that in the course of their current investigation they found that this started at the top, i.e., with Aubrey.  Then lots of bad words about Aubrey and the pervasive culture of theft at CHK.

What does McDonald Law Firm (MLF) plan to do?  They want to represent every CHK royalty owner who has been underpaid.  Strength in numbers -- only way to get CHK's attention.  They will represent each royalty owner on an individual basis -- the attorney/client relation is with each royalty owner.  He said something about wanting to file the lawsuit on behalf of units (drilling units?), so they want to get as many owners in a unit as possible.

It doesn't matter if you signed the standard lease or have a lease that prohibits deductions.  MLF asserts that CHK's post-production charges are excessive and unreasonable compared to what a reasonable operator would charge for these things.

MLF is hired on a contingency basis.  They will front all expenses, e.g., filing paperwork, taking depositions, hiring experts, etc.  Their fee will come out of any settlement or judgement.  Their fee will NOT be applicable to any royalty interests going forward.

 They plan to plead for recovery of attorney fees.  If they get that, then mineral owners will get back everything they are owed.

If you engage MLF to represent you in this case, then once they have the signed contract from you, they will send you a "Welcome Packet," which contains the signed contract, and it will tell you what you must send to them, e.g., copies of lease, etc.

OK.  henry here....  We were not able to ask questions on the teleconference -  it was all listening.  I would hope someone would go to one of the meetings in Mansfield next week, and take notes and post them here.  

Here are some questions I would ask:  

1.  Given that CHK is listening in on all of your meetings, how will you ever have a good discussion among the plaintiffs that does not include CHK?

2.  Is your firm large enough to handle such a huge case?

3.  How long will the sign-up period run?

Henry, I'm wondering:  Did MLF get the required pre-approval from the LA Bar Association for their print ad in the Shreveport Times?  And, has the firm or it's unnamed Shreveport attorney or attorneys  reviewed the LA Code of Professional Responsibility in regard to the ad? 

No clue, Skip.  But I'm guessing that the answer is "no," since you asked the question.

I don't know the answers yet, Henry.  I will follow up and post if I learn anything.

In the meantime maybe  Preston will answer those two questions.


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