Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Energy producer Chesapeake charged with leasehold interest bid rigging conspiracy, (Mar 4, 2016)
Law Firms Mentioned:Burns Charest LLP | Mitchell DeClerck | Sharp McQuenn PA | Susman Godrey LLP | Wilguess & Garrett, PLLC
Organizations Mentioned:Burns Charest, LLP | Chesapeake Energy Corp. | Chesapeake Energy Corporation | Chesapeake Exploration, L.L.C. | Chesapeake Exploration, LLC | SandRidge Energy Corporation | Susman Godfrey, LLP
By Linda O’Brien, J.D., LL.M.
In the wake of a grand jury indictment of the former chief executive officer of Chesapeake Energy for conspiring to rig bids and depress the prices for the sale mineral leasehold interests, a royalty owner has filed a putative class action against Chesapeake and competitor SandRidge Energy in the federal district court in Oklahoma City (Thieme v. Chesapeake Energy Corporation, March 3, 2016).
Chesapeake Energy Corporation and SandRidge Energy Corporation are oil and natural gas exploration and production companies. Brian Thieme owns mineral interests in Alfalfa County, Oklahoma and entered into an oil and gas lease with Chesapeake in 2011.
The complaint states that a leasehold interest in an oil and gas lease grants the lessee the right to develop the mineral interest to explore for and extract oil, natural gas, and natural gas liquids for a specified time period. Producing properties are tracts of land with existing wells that are actively producing oil, natural gas, or natural gas liquids.
On March 1, 2016, a grand jury in Oklahoma City indicted Aubrey McClendon, founder and former chief executive officer of Chesapeake, on charges of conspiring to rig bids for oil and natural gas leases in northwest Oklahoma. According to the indictment, McClendon, SandRidge Energy, and SandRidge former chief executive officer Tom Ward engaged in communications regarding certain leasehold interests and producing properties, agreed not to compete against one another for those interests, submitted bids to owners of those interests in accordance with the agreement, acquired those interests at noncompetitive prices, and employed measures to keep their conduct secret.
According to the private lawsuit, McClendon derived considerable personal benefit from the conspiracy through Chesapeake’s “Founder Well Participation Program” (FWPP), which allowed McClendon to continue to participate as working interest owners in new oil and natural gas wells drilled by Chesapeake. Ward participated in a similar program at SandRidge called “SandRidge Executive Well Participation Program.”
The plaintiff alleges that the conspiracy commenced in December 2007 and continued until March 2012; the prices paid for leasehold interests and producing properties were artificially depressed as a result of the conspiracy; and the plaintiff was deprived of free and open competition in the sales of his leasehold interests and producing properties. Thieme also asserts that he had no actual or constructive knowledge of the conspiracy, and could not have discovered its existence until March 1, 2016, when the indictment of McClendon and Ward became public.
Thieme asserts claims for conspiracy to engage in bid rigging in violation of Section 1 of the Sherman Act. The action seeks declaratory and injunctive relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.
The case is No. 5:16-cv-00209-M.
Attorneys: Douglas D. Wilguess (Wilguess & Garrett, PLLC), Warren T. Burns (Burns Charest LLP), Isaac Diel (Sharp McQuenn PA), Terrell W. Oxford and William C. Carmody (Susman Godrey LLP), and Larry D. Lahman (Mitchell DeClerck) for Brian Thieme.
Companies: Chesapeake Energy Corporation; Chesapeake Exploration, L.L.C.; SandRidge Energy Corporation
News: Antitrust OklahomaNews