In an effort to streamline the growing level of litigation against Chesapeake Energy over royalty payments, a state judicial panel has appointed two Tarrant County judges to hear pretrial motions on issues such as evidence and testimony.
The panel last week appointed state district judges Dana Womack and David Evans to initially oversee more than 100 cases filed against Chesapeake in Tarrant, Dallas and Johnson counties alleging underpayment of royalties from wells in the Barnett Shale.
The court agreed to grant multidistrict litigation status, or MDL, for the cases, which share similar allegations, agreeing that it would be more efficient to allow the judges to handle the early stages of the cases instead of having them distributed among a wide number of courtrooms.
Once Womack and Evans make decisions on those early legal maneuvers, the cases will be sent back to other trial courts for final disposition.
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Gordon Pennoyer, a spokesman for Chesapeake, declined to comment.
While it appears to be a technical move, Chesapeake’s request for MDL status was unusual and may be a sign that the company once seen as the face of the shale revolution in Texas is struggling to keep track of legal attacks on multiple fronts.
In lawsuits filed by landowners and public entities, Chesapeake is accused of “self dealing” by shipping the gas to market through affiliate companies and then deducting excessive costs. Some landowners say they shouldn't be paying for post-production costs at all.
Chesapeake has argued in its other legal disputes that the procedures it uses to drill, market and sell the gas are acceptable and that it pays what is known as the “weighted average sales price” it gets from an unaffiliated third party less the actual post-production costs incurred in moving the gas.
Fort Worth attorney Dan McDonald has almost created a cottage industry out of suing Chesapeake over royalty payments. McDonald said he could file as many as 400 lawsuits — naming about 40,000 individual plaintiffs — by the end of the year.
Chesapeake’s attorneys have stated that there are 28 identical paragraphs in McDonald’s lawsuits alleging facts common to royalty payments and only two paragraphs with allegations specific to each lawsuit.
“I’m extremely pleased. I expect this to start moving ahead very, very quickly,” McDonald said.
In its decision, the three-judge panel based in Austin directed 73 cases filed by McDonald to Womack, and an additional 24 cases filed by other attorneys to Evans. Attorneys for those plaintiffs argued against being lumped in with McDonald.
While the court doesn’t give a rationale for splitting up the cases, observers say it’s due to the broad allegations made in McDonald’s lawsuits about how the company allegedly cheated royalty owners while the others lawsuits are disputes over details of a specific lease. Evans has leases in the Barnett Shale.
Consolidating cases will eliminate duplicative discovery, avoid conflicting trial settings and judicial rulings while conserving judicial resources and promoting “the just and efficient conduct” of all of the Chesapeake royalty litigation in the Barnett Shale, court documents state.
Before Chesapeake's filing, there was evidence that the lawsuits were starting to clog the courts.
In Johnson County, all three state district judges recused themselves over conflicts of interests, forcing Evans, who also is the administrative judge for 18 counties in North Texas, to scramble and find new judges for the cases.
Max B. Baker, 817-390-7714