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May 15, 2014

Fort Worth school district sues Chesapeake Energy

The lawsuit claims that the company improperly deducted costs from its royalty payments to the school district.

The Fort Worth school district has filed a lawsuit against Chesapeake Energy Corp. and its former chief executive officer alleging that the company improperly deducted its own expenses from royalties owed to the school district and its taxpayers.

The lawsuit, filed late Thursday afternoon in Tarrant County Judge Tom Lowe’s 236th District Court, names former Chesapeake CEO Aubrey McClendon, company affiliates and its joint venture partner, Total.

Chesapeake has “potentially shorted the school district through all forms of gamesmanship,’’ said Ralph Duggins, a business litigation attorney for Cantey Hanger, which is representing the school district in the lawsuit. “They try to mask what’s really going on here and it allows them to try to pass on costs to royalty owners.”

He has also filed lawsuits against the company and its affiliates on behalf of other governmental entities, including the city of Fort Worth.

Chesapeake Energy spokesman Gordon Pennoyer declined to comment Thursday afternoon. The company has also declined to comment on similar lawsuits echoing the allegations that the company improperly deducted expenses from royalty payments. The company is being sued numerous times in North Texas..

Just in the past year, the cities of Fort Worth and Arlington, the Arlington school district, a group including Fort Worth developer Ed Bass and Trinity Valley School and another group including a half-dozen prominent Fort Worth residents have filed lawsuits over royalty payments.

According to Thursday’s filing in district court, Chesapeake promised the school district “cost-free” royalties when persuading it to sign leases, Duggins said.

“After they got the leases, they started charging the school district costs,” Duggins said.

Chesapeake Energy is the second-largest producer in the Barnett Shale and also in the United States.

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