| Gas royalty case
nears conclusion
By David Hedges, Publisher
Times Record-Roane County Reporter
By the end of this week, a three-man, three-woman jury in Roane Circuit Court may be asked to decide a case that could involve hundreds of millions of dollars.
The three-week trial in a class action lawsuit involving payments from Columbia Natural Resources to natural gas well royalty owners was expected to wrap up and go to the jury by Friday.
If not, Judge Tom Evans said he would hold court Saturday and, if necessary, postpone his docket in Mason County Circuit Court next week.
"This case is going to be concluded," Evans said Tuesday.
In addition to the six-member jury, there are four alternates. One of those will take the place of a male juror who dropped out of the case last Thursday after reportedly contracting the stomach flu.
The plaintiffs finished their case Monday after calling 15 witnesses during seven days of testimony that focused on how royalty owners were paid and other inner workings of the company that has since been purchased by Chesapeake Energy.
The case primarily involves post-production expenses deducted from payments due royalty owners. The plaintiffs have argued that the deductions were improper, and that the charges were hidden from royalty owners.
Part of the testimony also revolved around two "forward" contracts in which Columbia was paid $400 million in advance for gas to be delivered over a five-year period.
The plaintiffs' attorneys argued that the advance sale was done to satisfy the company's need for additional cash to pay down debt from a merger, and that royalty owners otherwise would have received more because the price went higher during the term of the contracts.
The defense countered that the contracts locked in what were then historically high prices and allowed the company to use the upfront cash to expand its drilling program.
In addition to the 15 witnesses, the jury also heard a deposition from Garrison Tawney, the retired schoolteacher from Looneyville who first raised questions about royalty payments he was receiving. Tawney died after the suit was filed in 2003. The case titled Garrison Tawney et al vs. Columbia Natural Resources et al still bears his name.
Tawney's deposition was read to the jury from the witness stand.
The defense started its case Monday and had called five witnesses by the conclusion of proceedings Tuesday. The defense was expected to call four or five more witnesses before their case was wrapped up.
A host of attorneys is involved on both sides of the case. The plaintiffs are led by Marvin Masters and Scott Segal, two of the state's most well known trial lawyers, and former federal prosecutor and gubernatorial candidate Michael Carey.
The other side includes two of the state's largest defense firms, Robinson & McElwee and Steptoe & Johnson. There have been as many as 20 or more lawyers in the courtroom at one time.
In their opening remarks on Jan. 9, the attorneys representing the royalty owners claimed that the compensatory damages and interest alone would be in the neighborhood of $150 million. Punitive damages, if awarded by the jury, could be several times the amount of the compensatory damages.
Pre-trial rulings in the case have already been appealed to the state supreme court several times.
The high court upheld a ruling by Evans that Columbia acted improperly by charging royalty owners a portion of the cost of gathering and processing of gas. The company also had 651 flat well leases that paid royalty owners a few hundred dollars a year, a practice that had been banned by the Legislature in the 1980s...
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