Class-action Lawsuit Against Chesapeake, Sandridge Started In Stephens County

By Author: Devin Herz
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A class-action lawsuit filed in Stephens County seeks restitution for oil lease holders victimized during a conspiracy to rig bids and depress prices for oil and natural gas leaseholds.

The petition filed by the Sill Law Group, an Edmond law firm, names Chesapeake Energy Corporation, Chesapeake Exploration L.L.C., Chesapeake Exploration L.P., SandRidge Energy and Tom Ward as defendants who allegedly conspired to rig bids and depress the price of their leaseholds in the Anadarko Basin.

The Anadarko Basin according to topographical maps extends through 108 counties in Oklahoma, Texas, Kansas and Colorado.

“Stephens County is one of the counties in the geographical region which was blanketed, we believe, by leases purchased at artificially low prices because of conspiracies between oil companies,” said Sill Law Group Senior Partner Jim Sill.

Several federal lawsuits have been filed against the companies, according to Sill who said more plaintiffs are expected to file if the class action is approved and heard at a state level. The class action petition currently names Wesley and Towanda Mallory as ...
... the only plaintiffs.

“While neither the outcome of the Mallory case in Stephens County, nor the outcome of federal cases, can be predicted, we think the Mallory case has unique potential,” he said. “In our view, Oklahoma antitrust laws allow for recovery based upon acts  of a single conspirator, while cases filed under federal law must generally identify and prove additional conspirators. And, in some instances, state courts are able to move more quickly than federal, which in turn may allow plaintiffs in a state class action  to resolve their cases sooner than those in a federal court action. We do have more (plaintiffs), however, the purpose of the class action is that notices will be sent out to class-action people who had leases (with Chesapeake or SandRidge).”

Court documents state the exact numbers of those affected are not known due to the information being in the exclusive control of the defendants, thus making it impractical to join all members.

“Due to the nature of the trade involved, plaintiffs believe that the class numbers are in the 100’s or 1,000’s,” stated the documents.

Sill added the class action would allow all affected to be able to seek compensation without being troubled by hefty attorney fees associated with large lawsuits on their own.

The lawsuit stems from a March 1 Department of Justice (DOJ) grand jury indictment of deceased co-founder of Chesapeake Aubrey McClendon, who allegedly engaged in conduct that was described in the indictment as “a combination and conspiracy to suppress and eliminate competition by rigging bids from certain leaseholds, interests and producing properties,” which had the effect of “keeping prices down for those leaseholds interests.”

“The indictment against Mr. McClendon by the U.S. Department of Justice, which is public, charged that the conspiracy continued  through 2012,” said Sill. “However, in our civil cases we are alleging the conspiracy continued through April 1 of 2013, the date Mr McClendon resigned from and left Chesapeake.”

CNHI State Reporter Janelle Stecklein reported on March 16, McClendon died a day after by a federal grand jury indicted him for conspiring to suppress bids on the purchase of oil and gas leases in northwest Oklahoma. He denied any wrongdoing.

McClendon was forced to resign as CEO of Chesapeake after accusations in 2013 and founded American Energy Partners in Oklahoma City.

SandRidge and Chesapeake, the petition states, were competitors for the acquisition of leases in the basin described as one of the deepest and most prolific hydrocarbon fields in the U.S.

“The 2011 U.S. Geological Survey estimated the Anadarko Basin Region to have 495 million barrels of oil, 27.5 trillion cubic feet of natural gas and 410 million barrels of natural gas liquids,” according to the petition. “Rather than competing fairly for leases and producing properties and paying prices set by market forces, defendants engaged in a conspiracy to reduce the prices they paid plaintiffs and members of the class.”

These practices, according to the petition, allowed Chesapeake to amass 2.4 million net acres and SandRidge more than 1.5 million net acres in the region, affecting the overall market.

“Sellers of leaseholds interests and producing properties to entities other than the defendants ... received less value than they would have in a competitive market, despite the fact that they did not sell to Chesapeake and SandRidge Energy,” stated the petition.

Chesapeake has stated publicly, according to the petition that it has been cooperating with DOJ under the agency’s conditional leniency program, which shields the company from criminal antitrust charges, fines and penalties.

“The (leniency) applicant must admit its participation in a criminal antitrust violation involving price fixing, bid rigging, capacity restriction, or allocation of markets, customers or sales or production volumes before it will receive a conditional leniency letter,” stated the petition describing, 2008 Deputy Assistant Attorney General for Criminal Enforcement Scott D. Hammond’s explanation of conditional leniency is obtained.

“A company that, for whatever reason is not able or willing to admit its participation in a criminal antitrust conspiracy is not eligible for leniency.”

No attorneys are listed for Chesapeake or SandRidge in the suit.

Chesapeake Energy Corporation Director - Strategic Communications Gordon Pennoyer declined to comment. Know more 

I am Devin Herz, currently associated with Fulmersill. We believe everyone is equal under the law. We take pride in providing an unparalleled commitment to our clients, most of whom are individuals, families and small businesses who have been unfairly treated or tragically harmed by large corporations.