Fort Worth

Newsmaker: Dan McDonald took on Chesapeake Energy, and won

Dan McDonald speaks at the Genesis United Methodist Church about his mass lawsuit against Chesapeake Energy in August 2014.
Dan McDonald speaks at the Genesis United Methodist Church about his mass lawsuit against Chesapeake Energy in August 2014. Star-Telegram archives

One in a series of articles on Tarrant County’s top newsmakers in 2016.

Attorney Dan McDonald’s language about Chesapeake Energy was stout.

 

“I can’t tell you how dishonest these people are. The dishonesty is breathtaking. They have stolen our money. They have cheated us,” McDonald once said of the Oklahoma City energy giant during his legal crusade against it, adding words like “embezzler” and “thief.”

In his lawsuits, the Fort Worth attorney accused Chesapeake of “self-dealing” by shipping gas to market through affiliate companies and then deducting inflated costs. Chesapeake argued that it complied with lease terms and denied using “fraudulent transactions.”

But while the language may seem a bit much to some, McDonald used it to great success. Eventually he filed more than 400 lawsuits representing more than 13,000 clients, leading the company to agree to a settlement in July worth a cool $51 million.

I just said the hell with it. As Donald Trump says: ‘The system is rigged!’,

Lem Miller, a McDonald client, on the Chesapeake settlement

McDonald wouldn’t talk about the settlement with the Star-Telegram, citing an agreement with Chesapeake. While some of his clients were paid from a few hundred dollars to several thousand, McDonald and another law firm hit a big payday, getting about $20 million in legal fees.

Chesapeake and its partner in the Barnett Shale, Total E&P USA, didn’t exactly roll over. They fired back with their own high-dollar experts and won some legal victories in court, including a decision that the judge was apparently going to limit the years of natural gas production covered by the lawsuits.

“I give credit to his team,” said Ralph Duggins, another attorney who sued Chesapeake over royalty payments but wasn’t a part of McDonald’s team. “I think he did an incredible job … Good for him for hanging in there and getting a settlement most of his clients were pleased with.”

Since July, McDonald has been resolving the lawsuits involving roughly 1,100 clients. A long list of them were dismissed in November. Some of the holdouts eventually settled with Chesapeake while others simply said no or couldn’t be found. Only a handful the cases remain.

But the settlements weren’t the end of the story.

I got my money and Chesapeake was brought to bare. And McDonald got his share so I didn’t see anything we didn’t expect ... So it was worth the fun,

Gerrit Spieker, a McDonald client

First of all, McDonald and his co-counsel, Circelli, Walter & Young, parted ways in October, over how to represent the remaining clients after “stark differences” over strategy, tactics, approach and “litigation philosophy” emerged, according to court records.

Making matters worse, McDonald and Circelli were sued by Jim Ward, a lawyer who claimed McDonald cheated them out of millions in attorney fees for work he did on the case. A judge allowed Circelli to drop out of the cases, and Ward’s lawsuit was eventually dismissed.

So, was McDonald’s legal crusade and populist movement worth it?

Lem Miller, a real estate agent in Coppell with leases on an old family dairy farm near Cleburne that includes seven wells on 160 acres, is frustrated. He estimated that Chesapeake owed him about $600,000. After initially rejecting the offer, Miller decided to take about $80,000.

“I just said the hell with it. As Donald Trump says: ‘The system is rigged!’ ” Miller said. “I put it out of my mind and moved on.”

Model train enthusiast Gerrit Spieker is at peace with what he got. While he only received about $450 — after legal fees were deducted and a final royalty check issued — it helped pay for a $750, detailed, HO scale model of the Texas Pacific 610 locomotive that he wanted.

“I got my money and Chesapeake was brought to bear. And McDonald got his share so I didn’t see anything we didn’t expect,” Spieker said. “So it was worth the fun.”

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

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