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
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Replies to This Discussion
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Permalink Reply by Francis Mayo on
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LA Code of Professional Responsibility. Now that is a real knee slapper.
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Permalink Reply by Skip Peel - Mineral Consultant on -
Attorneys that are admitted to practice before the LA State Bar are required to abide by the codes. Those that violate one or more may not find that it is a laughing matter.
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If they get caught or offend the wrong power. Otherwise, it is highly amusing.
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Permalink Reply by Henry on -
I'll toss other questions to Mr. Dugas.....
-- Why did you choose to file in Cleburne?
-- Will this be one lawsuit with a gazillion plaintiffs, or will it be a gazillion individual lawsuits? Will a single judgement be issued, or will it be on a plaintiff-by-plaintiff basis?
-- Will the rules and judgements be different for plaintiffs from different states?
-- If a settlement is offered, can some plaintiffs take the settlement and others still go to trial?
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Permalink Reply by gary brannon on
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CHK will try to change the venue to Federal Court. That seems to be their standard go to strategy to add cost and make lawsuits go away. From my own experience I'd say file on them and stick to your guns even if it means you wind up at the 5th Circuit.
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Permalink Reply by jim weyland on
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if someone knows, does louisiana have a statute akin to the federal false claims act of 1863?
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Permalink Reply by Skip Peel - Mineral Consultant on
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gary, I agree. The contest over venue can last up to two years in some cases. Then once venue is determined a court date must be set. It could easily be three years from filing on suit to a day in court. The McDonald Firm seems to be banking on a settlement with CHK as opposed to a directed verdict.
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CHK does not want to go to court with this case now that it's pants are down around it's ankles. They are guilty as hell, it is provable and the number of plaintiffs if they prevail is a real spine-breaker.
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Permalink Reply by Skip Peel - Mineral Consultant on
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That's what McDonald thinks. If they are correct, my hats off to 'em. I do not think they will prevail.
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i ask again, does anyone know if the pelican state has a 'qui tam' statute with provisions similar to the federal false claims act of 1863?
imo, if the answer is 'yes' then such an act is potentially very relevant to the interests of many of those participating in this discussion.
for the record, i am not an attorney (as if there was any question)
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Louisiana has a very weak qui tam or false claims statute. In the case of federal false claims other state's statutes are used and Louisiana's is bypassed in a federal multistate claim, if the target affords it . Texas has a stronger one. This has been related to me by Qui Tam attorneys (Phillips and Cohen)
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Permalink Reply by Henry on
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Here are my notes from the teleconference on 9/24/2014. Note: I joined in 6 minutes late, so I did not catch the name of the speaker, but based on the discussion, I think it was Mr. McDonald.
... speaker read up on CHK and was astonished as to how much they had cheated their royalty owners. He was stunned, and decided to step up to help his neighbors, friends, family. He claimed to have a lot of passion on this topic.
He talked about the nature of the scheme. I described that in my notes from the last telecon, so I won't repeat that here.
The speaker discussed a client -- a Mr. Miller who lives in Johnson County, TX. Mr Miller has a couple hundred acres and has 5 different operators of his wells. He saved all his stubs, put it into a spreadsheet, and compared the prices. [Aside: Gee, who has done something like that on this site?] The four "honest operators" all paid significantly more than did CHK. The most egregious example was in April 2012, at the nadir of gas prices, the four "honest operators" paid about $1.80, and CHK paid $0.22. [OUCH!!]
The speaker said there is one word for this: cheating and stealing. [Sounds like two words to me.]
The speaker said that when a jury in Johnson County sees this, they will say that CHK are crooks. The speaker says no other conclusion can be drawn from this.
What does McDonald Law Firm (MLF) propose to do? Not a class action suit. Plaintiffs just get a "gift certificate" in class action lawsuits and attorneys get all the money. They will file a suit for each and every royalty owner. They will batch up the suits according to drilling units. Once they have some critical mass within a drilling unit, they will file for those owners in that unit. They have already filed cases in Texas. Several have trial dates -- May 18 for one in Ft. Worth. And June, Aug, and Sept in Johnson County. They hope to have settlements and or trials within 2015 for these cases.
MLF will work on a contingency fee. They will take a percentage of what is owed to the landwowner from past royalties. They plan to sue to make CHK pay legally going forward, and they will take none of this. And they plan to sue to have their fees reimbursed by CHK -- if they get this, then mineral owner gets all of his/her back royalties.
henry here: That's my summary. My personal opinion is that CHK will never roll over so easily. From personal experience, I can tell you that they will drag this thing out forever, and appeal any verdicts that go against them. But the speaker sounded extremely confident of winning. Who knows.
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