REPORTS FROM THE COURTHOUSES IN SELECT STATES WITH RECENT ROYALTY LITIGATION ACTIVITY APPALACHIA

• Jurisdiction: United States

Private Oil & Gas Royalties: The Latest Trends in Litigation
(Dec 2008)
CHAPTER 1B
REPORTS FROM THE COURTHOUSES IN SELECT STATES WITH RECENT ROYALTY LITIGATION ACTIVITY APPALACHIA
David W. Hardymon
Vorys Sater, Seymour and Pease LLP
Columbus, Ohio

David W. Hardymon is a partner in the Vorys Columbus office and a member of the litigation group. His practice focuses on commercial litigation, particularly in energy-related fields, such as oil and gas contract disputes, royalty litigation, landfill controversies, and environmental contamination claims. He has extensive civil, criminal and appellate litigation experience and serves as lead counsel in oil and gas contract and private royalty litigation in Ohio, Pennsylvania, West Virginia and New York. He is a member of the Ohio State Bar Association, the West Virginia Bar Association, the Kentucky Bar Association, the Columbus Bar Association, and the Defense Research Institute. A Columbus Bar Foundation Fellow, David is the current editor of the Columbus Bar Association publication Lawyer's Quarterly. He is a frequent seminar speaker and has made presentations on royalty litigation to the Energy and Mineral Law Foundation and the American Association of Petroleum Landmen. He received his J.D. from Capital University Law School and his B.A. from Bowling Green State University. Before joining Vorys, he served as a Senior Assistant Prosecuting Attorney for Franklin County, Ohio from 1976 to 1981. He has published papers on commercial arbitration and legal ethics, and is listed in the Who's Who in American Law.

I. RECENT/PENDING LITIGATION

A. Kentucky

1. Thacker v. Chesapeake Appalachia LLC, Case No. 7:07cv0026

(a) Originally filed in the U.S. District Court, Eastern District of Kentucky on February 6, 2007, and assigned to Judge Gregory F. Van Tatenhove. On October 16, 2008, the case was reassigned to Judge Karen K. Caldwell.

(b) Class action complaint for breach of contract and common law fraud. Plaintiff alleges that the defendant wrongfully paid the plaintiff and the class "royalties calculated by a method other than as a fraction of the market value of the gas at the time of production multiplied by the volume of gas produced," as required by the subject lease, and failed to inform plaintiffs of the true method of calculating royalties.

(c) The parties have fully briefed the class certification issue and are awaiting a decision by the Court.

2. Appalachian Land Co. v. Equitable Production Co., Case No. 7:08cv0139

(a) Originally filed in the U.S. District Court, Eastern District of Kentucky on July 8, 2008, and assigned to Judge Karen K. Caldwell.

(b) Class action complaint for breach of contract. Plaintiff alleges that the defendant improperly deducted severance taxes and production costs from the "market value" of the gas before calculating royalties under oil and gas leases.

(c) The case is in early stages of litigation. The parties have exchanged initial disclosures and submitted their Report of Rule 26(f) Planning Meeting.

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3. Popular Creek Development Co. v. Chesapeake Appalachia, LLC, Case No. 7:08-cv-00190

(a) Originally filed in the U.S. District Court, Eastern District of Kentucky on September 19, 2008, and assigned to Judge Amul R. Thapar.

(b) Class action complaint for breach of contract and breach of implied covenant to market gas. Plaintiff alleges that the defendant improperly deducted post-production costs "from the price of gas at the wellhead" before calculating and paying royalties, claiming that the lease did not specifically allow for such deductions.

(c) The case is in the early stages of litigation. On September 22, 2008, Judge Thapar issued a Show Cause Order as to why the case should not be dismissed for lack of subject matter jurisdiction. In its Order...