A federal judge in Ohio has awarded Chesapeake Exploration a summary judgment win in a rare class-action-certified dispute over oil and gas royalties in Ohio’s Utica Shale.
U.S. District Judge Benita Y. Pearson determined Monday Chesapeake properly paid royalty interests to a class of 10 royalty owners consistent with the terms in the class’ leases, which involve oil and gas through approximately 411 unique wells in the Utica Shale.
In addition to being a win for Oklahoma City-based Chesapeake, Monday’s ruling provides clarity for a number of other similar actions brought by leaseholders in arbitration and state court in Ohio and beyond, according to lawyers familiar with the matter.
The plaintiffs had argued in their summary judgment motion that Chesapeake underpaid royalties due because it sold the gas to a Chesapeake affiliate, Chesapeake Operating LLC.
Chesapeake maintained that it paid the leases per the terms of the leasing agreements, that the affiliate sale was appropriate and that it also benefitted the landowners.
In a 17-page ruling, Judge Pearson sided with Chesapeake.
“The lease language is plain and unambiguous and the evidentiary record is clear: [Chesapeake] paid plaintiffs 1/8th of the proceeds it received from the sale of the oil and gas produced and marketed from the leaseholds,” Judge Pearson wrote.”
“Plaintiffs do not dispute [Chesapeake’s] lease interpretation,” she continued. “Instead, plaintiffs argue that there are facts in dispute and improperly seek to have the court interpret the class leases to main plaintiffs receive proceeds from the sale by [Chesapeake] to third-party purchasers downstream from the leasehold, rather than the proceeds to the lessee, [Chesapeake], received from the sale of the oil and gas at the leasehold.”
A group of lawyers from Kirkland & Ellis’ New York and Washington, D.C. offices are handling the case for Chesapeake, including Dan Donovan, Ragan Naresh and Alexia Brancato. Columbus, Ohio lawyer Tim McGranor of Vorys, Sater, Seymoure & Pease and Philidelphia lawyer William Connolly of Drinker Biddle & Reath are also on the case for Chesapeake.
The plaintiffs’ legal team includes Maryland attorney Rob Sanders and Ohio lawyers James Lowe and Mark Hutson.