JUDGE EVANS UPHOLDS $404 MIL VERDICT AGAINST GAS PRODUCERS

(06/28/2007)

Judge Thomas Evans III issued a 101-page opinion today validating a Roane County jury's $404 million decision against Chesapeake Energy.

Six months have gone by since the jury awarded 10,440 plaintiffs in a class action suit, damages stemming from natural gas royalty arrangements between landowners and oil and gas companies.

Royalty owners sued over alleged cheating, the corporation was charging production costs against their royalty ownership.

Judge Evans released the 101-page opinion at 11 a.m., upholding the entire $270 million punitive damage.

"The evidence, and other relevant circumstances to be considered by the court, are sufficient to sustain the verdict of the jury for punitive damages in the sum of $270 million," Evans wrote.

"The court has reviewed this evidence in light of (case law) ... and precedent of the United States Supreme Court, and in the opinion of this court ... a downward adjustment in punitive damages is not warranted under the evidence and the law and would amount to a denial of the plaintiffs'/lessors' right to due process of the law (their right to trial by jury)."

Charleston lawyer Marvin Masters, who led the plaintiff's team, said the punitive damage award, while large on its face, actually was reasonable considering the jury awarded the plaintiffs $134 million in compensatory damages.

The royalty holders accused the defendants of "fraudulently, intentionally and knowingly" underpaying royalties owed to them over several years and of deliberately concealing those actions.

The jury decided NiSource and Columbia Natural Resources, the previous owners, shortchanged landowners out of $134 million in royalty payments.

Then they imposed a $270 million punitive damage award to punish the companies for their bad behavior.

Oklahoma City-based Chesapeake Energy purchased CNR in November 2005, inheriting that lawsuit.

Spokesmen for Chesapeake and NiSource said their companies attorneys said this afternoon they are reviewing the decision.

Attorney Masters said the award was actually on the conservative side of punitive damages when you consider the number of people involved.

Masters said it would be likely the companies would appeal the suit to the WV Supreme Court.

NiSource issued a press release: "We are reviewing the order issued today by Judge Evans regarding the punitive damages portion of the Tawney verdict.

We continue to believe CNR acted reasonably and in good faith, and that punitive damages are not justified in this case.

We have said we are prepared to appeal this matter if the punitive damages portion of the verdict is not set aside, and that remains our position.

We believe a review of the verdict by the West Virginia Supreme Court will show that CNR acted reasonably and in good faith."

Chesapeake has threatened to pull their operation from West Virginia, but local sources say the company is going full force in obtaining leases.

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