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Chesapeake Beats Ohio Class Cert. as Attys Criticized

An Ohio federal judge on Friday denied a bid to certify a class action brought in pursuit of allegedly underpaid oil and gas royalties, calling into question the adequacy of the work by the attorneys pursuing the case against a Chesapeake Energy Corp. unit..

U.S. District Judge Sara Lioi questioned the quality of the plaintiffs' attorneys in the royalty case against Chesapeake Appalachia LLC, saying they seemed to assume they would prevail by blindly relying on other cases they thought would dictate the result. That was not enough, according to the order.

The court also said issues with the class counsel and who would be class representatives were barriers to certification.

“From the outset of this case, whenever a substantive motion has been filed and briefed, plaintiffs’ position has been very poorly articulated and, at times, has been a ‘moving target,’” the order said. “Perhaps this may be the result of a certain complacency regarding the need to separately establish plaintiffs’ legal theories and prove their facts before this court, but the court may only decide this case based upon the information that is properly before it.”

The order’s first page lists some of the filings that led to the current opinion and adds footnotes criticizing some of the plaintiffs' attorneys' effort.

One exhibit “consists of a list of oil and gas royalty cases certified as class actions. Plaintiffs seem to be suggesting, by way of this list, that, since other courts have certified classes in oil and gas settings, this court should, too. Of course, a long list of cases, by itself, tells this court nothing,” the footnote said.

The case was launched in 2009 with five named plaintiffs, including the company C.Y.C. LLC and four individuals. They are all lessors arguing that the royalties paid by Chesapeake, which was previously named Columbia Natural Resources Inc., were too low. The case has already been trimmed; only parts of a breach of contract claim remain.

The remaining issues are whether Chesapeake “paid royalties under all relevant leases based on an incorrect unit price and made impermissible cost deductions on royalties paid under leases that did not contain ‘at the well’ language.”

But the plaintiffs lacked commonality, according to Judge Lioi.

“Aside from failing to account for the notable variations in the language of the leases, plaintiffs also fail to refute defendant’s interrogatory answers regarding the variation in the method of calculating royalties,” the opinion said.

James A. Lowe, an attorney for the plaintiffs, declined to comment on the order. A representative for Chesapeake did not immediately return a request for comment late Friday.

Plaintiffs are represented by Robert C. Sanders of the Law Offices of Robert C. Sanders and James A. Lowe of Lowe Eklund & Wakefield Co. LPA.

Chesapeake is represented by Daniel T. Donovan, Ragan Naresh, Alexandra I. Russell and Alexia R. Brancato of Kirkland & Ellis LLP and Kevin C. Abbott, Stacy C. Williams and Nicolle R. Snyder Bagnell of Reed Smith LLP.

The case is Regis F. Lutz et al. v. Chesapeake Appalachia LLC, case number 4:09-cv-02256, in the U.S. District Court for the Northern District of Ohio, Eastern Division.