Vernon and Lela Ann Goff, plaintiffs in the Roane County
gas-rights lawsuit, exit the courtroom after Monday's hearing.
The judge in the case put off a final ruling for at least one week
By Joe Morris
Staff writer
www.wvgazette.com
Judge says jury inflated damages by at least 30%
SPENCER â The judge in a landmark natural-gas royalties lawsuit appears likely at least to trim the jury-awarded punitive damages, but he put off a final ruling for at least a week.
More than 8,000 gas-rights owners filed the class action in Roane Circuit Court, charging drillers Chesapeake Energy Corp. and NiSource Inc. with underpaying them by wrongly deducting post-production and processing costs, making volume deductions and by not paying for gas that the companies' lines lost.
A jury ruled in late January that the plaintiffs were due $134.3 million in compensation, plus $271 million more in punitive damages for fraudulently shortchanging rights owners.
At a hearing Monday, Circuit Judge Tom Evans said he agreed with the defendants' contention that the jury's formula for calculating punitive damages wrongly inflated the figure at least by about 30 percent.
Yet Evans reacted skeptically to the gas companies' arguments for further reductions to the damages.
"I'm not sure I'm going to change the rulings I made throughout the case," the judge said. "I had concluded as a matter of law that the evidence supported a finding of willful, wanton misconduct and criminal indifference to a civil obligation."
Evans signaled he was willing to reduce the punitive damages to the extent that they were based on the wrongful payment of "flat-rate" royalties to the rights owners.
Flat-rate royalties are set-amount payments to royalty owners that, unlike most royalty payments, aren't tied to well production. A 1982 state law banned them, and Evans earlier ruled that the defendants were wrong to continue honoring flat-rate-royalty agreements that predated 1982.
NiSource lawyer Ancil Ramey argued that the part of the jury's compensatory damages award stemming from the flat-rate payments wasn't relevant for calculating punitive damages, because the court did not find that the flat-rate payments were made for fraudulent reasons, but rather as an honest disagreement over legal interpretations.
"I think you're right about that," Evans replied.
With flat-rate royalties subtracted, compensatory damages would fall to $92 million, Ramey said. According to the 2-to-1 ratio of punitive-to-compensatory damages used by the jury in calculating punitive damages, that reduction would push down punitive damages to $188 million, about 30 percent lower.
Ramey went on to argue for additional reductions that would bring punitive damages down to $43 million.
Officials from NiSource, based in Merrillville, Ind., and Oklahoma City-based Chesapeake have promised that they'll appeal the verdict if Evans doesn't make significant changes to it.
When Evans finally rules on the posttrial motions, he has the power to change the damage awards and even set aside the verdict. But before he does, there will be at least two more hearings.
In one, he will consider how hard each side tried to resolve the dispute in mediation sessions before the case went to trial. There were three failed attempts at mediation, and Evans said that evidence of good faith on both sides during these attempts would prove "a very important factor" in his ruling.
Before Evans hears each side's version of the mediation attempts, he will hold a hearing to determine whether those arguments can be heard in public. Both sides had agreed to have the hearing in private, but David Hedges, publisher of Spencer's Times Record newspaper, requested a chance to argue in court for holding the hearing in public.
Such hearings can be held in private only for "compelling reasons," Evans said in granting Hedges' request. That hearing takes place Monday at 3 p.m.
To contact staff writer Joe Morris, call 304-348-5179.
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