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Chesapeake seeks to move royalty lawsuits to Houston

Attorney explains Chesapeake royalty lawsuits

At a September 2014 community meeting at the New Genesis United Methodist Church, attorney Dan McDonald spoke to potential clients about the lawsuits he planned to file against Chesapeake Energy.
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At a September 2014 community meeting at the New Genesis United Methodist Church, attorney Dan McDonald spoke to potential clients about the lawsuits he planned to file against Chesapeake Energy.

Chesapeake Energy is seeking to move trials over allegations that it cheated property owners out of millions in royalty payments to Houston, claiming that a media blitz has made it virtually impossible to get a fair trial in North Texas.

Attorneys for the Oklahoma City-based energy company also argue that the sheer number of cases filed by one Fort Worth law firm — 435 lawsuits covering 22,443 plaintiffs — will make it difficult to empanel an impartial jury in Tarrant and Johnson counties.

The McDonald law firm’s “no-holds-barred” campaign on billboards, websites, community meetings — and even koozies — “created a significant and unfounded bias” against Chesapeake “in the minds of a high percentage of potential jurors,” the request states.

“These widely disseminated advertisements literally claim that the defendants are ‘stealing’ from and ‘ripping off’ their Johnson and Tarrant County royalty owners” with no factual support, the petition states, and have “poisoned the jury pools.”

There can be no doubt that the McDonald Firm’s multi-year, comprehensive, disparaging smear campaign against the Chesapeake Defendants has poisoned the jury pool in both Johnson and Tarrant Counties,

court document filed by Chesapeake attorneys

Chesapeake filed its request for a change in venue in the first 10 trials scheduled before state District Judge Dana Womack on Friday evening, according to documents provided to the Star-Telegram. The first trial stemming from the sweeping litigation filed by the McDonald law firm is scheduled for April 25 in Fort Worth with one to be held each month in a different Tarrant County court until January 2017.

Gordon Pennoyer, a spokesman for Chesapeake, declined comment, directing the newspaper to the court filings.

Dan McDonald called the Chesapeake request “pretty predictable.”

“But I think that even they know that there are 1.2 million potential jurors in Tarrant County and it is beyond reason that we can’t get a fair jury in Tarrant County,” he said.

The lawsuits accuse Chesapeake of “self-dealing” by shipping gas to market through affiliate companies and then deducting costs. Some landowners say they shouldn’t be paying postproduction costs at all. Chesapeake argues in court documents that it has complied with lease terms and denies using “fraudulent transactions.”

Starting in late 2013, McDonald has used aggressive marketing tactics to recruit potential clients in the Barnett Shale.

In community meetings, sometimes held in churches, McDonald will pace in front of those gathered and act like a fiery preacher proselytizing to his flock. He likens Chesapeake officials to being an “embezzler” and a “thief” that has made off with royalty owners’ money.

He also turned up the heat on Chesapeake by shelling out money for 12 billboards across North Texas attacking the company, setting up a website called RoyaltyRipoff.com and sending out more than 100,000 mass mailings, some that flatly accused the company of fraud.

In a deposition used in the change of venue request, the marketing director for McDonald’s law firm, when pressed about what they haven’t done, answered: “We didn’t have a hot air balloon,”

change of venue request

Describing his effort as a “populist movement,” at one meeting in 2014 to mostly small leaseholders, McDonald said: “I can’t tell you how dishonest these people are. The dishonesty is breathtaking.”

Even Chesapeake admits that it has been an amazingly effective outreach on Facebook, Twitter, Google, and in television and newspaper advertisements, that has “drawn thousands of plaintiffs into its web.” In the Star-Telegram alone, Chesapeake says McDonald bought 206 ads costing $151,951, court documents state.

In a deposition used in the change of venue request, the marketing director for McDonald’s law firm, when pressed about what they haven’t done, answered: “We didn’t have a hot air balloon.”

All of this will make it difficult to pick an impartial jury, Chesapeake’s attorneys contend. In Johnson County, there are about 100,000 people in the available jury pool. McDonald represents more than 8,500 people in that county, and sent out mailers to over 22,000 addresses.

In Johnson County, all three state district judges stepped down from hearing the cases because they either held mineral interests subject to Chesapeake leases, were included in one of the lawsuits filed by McDonald or had too many close friends or relatives involved in the cases.

I can't tell you how dishonest these people are. The dishonesty is breathtaking,

attorney Dan McDonald before a community meeting in 2014

In Tarrant County, while the jury pool includes about 1.2 million people, the 13,820 plaintiffs include 432 businesses, 26 churches, seven governmental entities and four schools. In Tarrant, McDonald has mailed to 83,475 addresses, court records state.

“Members of the Tarrant County jury pool cannot avoid being swayed by the vicious criticism directed at Chesapeake,” the company’s court filings state.

Chesapeake recommends Harris County as the place to conduct the trials because the McDonald media campaign has not targeted leaseholders there. Harris also is a good venue because Total E&P USA has offices there. Total, a branch of the French energy company, owns a 25 percent stake in Chesapeake’s Barnett Shale holdings and is also named in the lawsuits.

If the court decides that Cheseapeake can’t get a fair trial in Johnson County, but can in Tarrant, then the Johnson County cases should be moved there, the court documents said.

Womack is one of two Tarrant County judges overseeing the initial stages of the lawsuits against Chesapeake, which have been granted multidistrict litigation status. Under that system, one judge hears pretrial motions to provide consistent court rulings and cut down on court costs.

Womack was appointed to hear the cases filed by McDonald. State District Judge David Evans was appointed the multidistrict judge for about 30 cases filed against Chesapeake over similar claims by other attorneys.

Many of these are “high-value” cases brought by large landowners, businesses and government institutions who make similar accusations against Chesapeake. A review of court records indicates that Chesapeake’s attorneys have resolved, in one way or another, at least 14 of these lawsuits.

One of the latest settlements was with the Fort Worth School District for an undisclosed amount. In court filings, the city of Fort Worth has made similar claims, saying the energy company owed it at least $33.5 million in contract breaches and damages. The Star-Telegram has filed an open records request seeking the school district settlement amount, but a confidentiality agreement has kept the district from releasing it.

The Texas Attorney General’s office is reviewing the Star-Telegram’s request.

Max B. Baker: 817-390-7714, @MaxbakerBB

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