Lawsuit Filed Against Chesapeake for Violating Racketeering Laws

  by  steakpinball

Indik & McNamara, P.C. Announces Antitrust and RICO Lawsuit Against Chesapeake Energy and Williams Partners By Landowners in Bradford County, Pennsylvania

Pennsylvania landowners claim they have been systematically underpaid royalties owed to them in connection with natural gas produced from the Marcellus Shale as a result of the wrongful deduction of impermissible post-production costs, which are arbitrary, excessive and unreasonable in amount due to anticompetitive conduct involving gas gathering pipelines.

Philadelphia, PA - February 19, 2015. More than 90 landowners and other owners of royalty interests in natural gas produced in Bradford County, Pennsylvania have filed a lawsuit asserting that Chesapeake Energy Corporation and Williams Partners, LP, formerly known as Access Midstream Partners, L.P., have conspired to restrain trade in the market for gas gathering services in and around Bradford County, in violation of federal antitrust laws. The lawsuit also alleges that Chesapeake Energy and Williams Partners engaged in a scheme and transactions to help Chesapeake solve financial problems associated with the massive amount of debt that it incurred in acquiring oil and gas leases at the expense of royalty interest owners, in violation of the Racketeer Influenced and Corrupt Organizations Act (RICO).

According to the complaint, filed on Tuesday in the U.S. District Court for the Middle District of Pennsylvania in Scranton, the transactions between Chesapeake Energy and Williams Partners have artificially inflated the costs of gas gathering services by eliminating competition in the market, resulting in a $5 Billion financial windfall for Chesapeake Energy, and in the ongoing underpayment of royalties to landowners and other royalty interest owners, as a result of the improper deduction of the artificially inflated costs.

The lawsuit also includes claims for breach of contract, and for an accounting and declaratory relief, against Chesapeake Appalachia, Anadarko E&P Company LP, Statoil USA Onshore Properties, Inc., and Mitsui E&P USA LLC, based on their alleged underpayment of royalties as a result of the improper deduction of gathering and other post-production costs.

Although Chesapeake is facing antitrust claims by the Attorney General of Michigan, attorneys for the Bradford County royalty interest owners say that it is the first case raising antitrust claims relating to gathering systems in the Marcellus Shale region:

“While several class action lawsuits and class arbitrations have been filed against Chesapeake based on similar allegations, this is the first direct action by Pennsylvania royalty owners seeking to address what we believe is one of the underlying causes of the problem – the fact that the gathering pipeline system in most of Bradford County, and in parts of Sullivan, Susquehanna and Wyoming Counties, were, and for the most part still are, owned and controlled by the same companies responsible for paying royalties on the gas transported through those pipelines, resulting in an inherent conflict of interest, as well as harm to competition”, said Thomas McNamara, one of the attorneys for the plaintiffs. “The terms of the transaction by which Chesapeake sold its interests to Access Midstream (now Williams Partners) only made the problem worse” , said McNamara.

Unlike several other pending actions and arbitration claims alleging underpayment of royalties, the lawsuit by the Bradford County royalty owners asserts the direct claims of each of the plaintiffs, rather than claims on behalf of a class.

“Our clients were not satisfied with relying on the efforts of other individual royalty owners to protect their rights and interests through class actions or class arbitrations, which are largely driven by attorneys, or with the terms of settlements which have been proposed to date. As a result, they have retained us to pursue their direct claims, on a group basis, which enables them to have more direct input into and control over their claims”, stated attorney Christopher Jones, of Towanda.

“This initial case is on behalf of only royalty owners who receive royalties under leases originally signed with Anadarko or T.S. Calkins. We also currently represent hundreds of other royalty owners who signed leases directly with Chesapeake Appalachia or other gas companies,” said attorney Taunya Knolles Rosenbloom, of Athens.

The royalty owner plaintiffs in the lawsuit are being represented by a team of lawyers with two Bradford County, Pennsylvania, law firms -- Christopher D. Jones, of Griffin, Dawsey, DePaola & Jones, P.C., in Towanda, and Taunya Knolles Rosenbloom, of the Law Offices of Taunya Knolles Rosenbloom in Athens --, together with Philadelphia attorney Thomas McNamara, of Indik & McNamara, P.C., as co-counsel.

A copy of the complaint in A&B Campbell Family LLC, et al. v. Chesapeake Energy Corporation, et al., Case No.3:15-cv-00340-MEM may be obtained from the Marcellus Royalty Action website athttp://www.marcellusroyaltyaction.com, or from the Clerk of the U.S. District Court.

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