Friday, September 6, 2013

Chesapeake Energy Agrees to Settle Royalty Class Action Lawsuit for $7.5 Million

Chesapeake Energy agreed to settle a class action lawsuit that alleged that Chesapeake breached its contracts with leaseholders and its implied duty to pay the proper royalty amount to leaseholders. The Plaintiffs, Pennsylvania leaseholders with leases containing "Market Enhancement Clauses," had alleged that Chesapeake improperly deducted "post-wellhead" costs from their royalty payments and that the gas was sold in an "unmarketable condition" to Chesapeake's affiliates and third parties, which breached Chesapeake's duty to sell the gas at the higher "marketable condition" rate and reduced the Plaintiff's royalty.  Chesapeake denied all of the allegations.  While U.S. District Court Judge Malachy Mannion must approve of the settlement before it takes effect, Governor Tom Corbett issued a statement on September 4, 2013, stating that he was "pleased with the proposed settlement" and that the "settlement is a significant step forward in protecting the interests of Pennsylvania landowners."

The Plaintiff's complaint and Chesapeake's answer may be found at the U.S. District Court for the Middle District of Pennsylvania, Docket No.: 3:13-cv-02289-MEM

Tom Panighetti
September 6, 2013

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