NISOURCE APPEALING $270 MIL PUNITIVE DAMAGE AWARD

(06/30/2007)

NiSource Inc. will appeal the $270 million punitive damage award certified Thursday by Judge Thomas Evans III in Spencer. They will ask the West Virginia Supreme Court to overturn the award. Judge Evans ruled that the evidence and the law did not warrant overturning either the jury's finding of fraud or the size of the award. "The jury's verdict ... is sustained as being fully supported by the law and the facts," he said. Roane County jurors awarded a total $404 million in January following a class-action lawsuit brought by gas rights owners, alleging they were underpaid by Columbia Natural Resources LLC, which NiSource formerly owned. Another defendant, Oklahoma City-based Chesapeake Energy, acquired CNR in November 2005 from Triana Energy Holdings LLC. The suit focused on post-production expenses deducted from payments due royalty owners. The deductions were improper and the charges were concealed from the plaintiffs, the lawsuit said. Evans states in a 101-page document that the punitive damages are not excessive because thousands of plaintiffs will have a claim to a portion of the award. The judge rejected the companies' arguments that they acted in good faith when they deducted post-production and marketing costs from the royalties. "No one testified that CNR thought it had the right to take these deductions based on the royalty clauses of the leases," Evans wrote.

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