By David Hedges, Publisher
www.thetimesrecord.net
A $404 million verdict for natural gas royalty owners in a Roane County lawsuit may have been the shot heard round the world.
But the noise is far from over.
Similar lawsuits filed here against four other companies are pending, including three moved to federal court. Preliminary trial dates of October 2008 have been set for those cases, if they are not dismissed or settled prior to trial.
Retired Roane Circuit Judge George Scott, one of the attorneys for the royalty owners, refused to speculate on whether the large verdict in the case known as Tawney vs. Columbia Natural Resources has had an impact on the other cases.
But there would seem to be little doubt the verdict, considered the largest of its kind in state history, would grab some attention.
The defendants in the first case could have saved themselves more than $100 million by accepting a pre-trial settlement offer, according to information made public after Spencer Newspapers intervened in the case to prevent a hearing from being held behind closed doors.
The verdict handed down following a three-week trial in January included $134.3 million in compensatory damages and $270 million in punitive damages, for a total award of $404.3 million.
The attorneys who filed the suit had made a pre-trial settlement offer that was $131 million less than the jury's eventual verdict.
The jury found defendants Columbia Natural Resources (now owned by Chesapeake Energy) and NiSource committed fraud against royalty owners after they began deducting expenses from royalty payments in 1993. The companies also underreported the value of the gas and hid their actions from the royalty owners, the suit alleges.
After Roane Circuit Judge Tom Evans upheld the punitive damages in a recent 101-page ruling, the defendants will have four months to request a new trial.
The companies have denied any wrongdoing. NiSource, responsible for the largest part of the verdict, has said it plans to appeal. Chesapeake has said only that it is reviewing the judge's ruling.
The Columbia suit was filed in 2003. The other four, all filed last year, are against Dominion Resources, Equitable Production, East Resources and North Coast Energy.
The cases against Dominion, Equitable and North Coast were all moved to federal court at the request of the companies. They are pending before U.S. District Judge Joseph R. Goodwin in the Southern District of West Virginia.
Scott said Dominion and Equitable have both filed motions for dismissal.
While awaiting rulings on the motions, Scott said both sides in the cases are proceeding with pre-mediation discussions.
If those discussions are successful, he said a mediator â an independent third party â could be brought in to help negotiate a settlement.
"That doesn't mean there will be a settlement," Scott said. "It just means that both parties are making an effort."
The case against North Coast is also pending in federal court and, like the others, is in the early stages of discovery, where lawyers are exchanging information.
Scott said none of the cases has been certified as a class action yet.
"Right now we're getting information to certify a class and determine a rough estimate of the extent of damages," he said. "It's a huge undertaking.
"We know how many leases there are, but we don't now how many royalty owners there are," he said.
Once a case is established as a class action, Scott said royalty owners would be notified by mail. At that point, they can decide whether to join the suit as part of the class. In the Columbia case, some 10,440 royalty owners signed on to be part of the suit.
One of the four more recent cases was not transferred to federal court. East Resources did not ask to have its case moved, Scott said, so it remains in Roane Circuit Court.
Scott said the two sides were engaged in informal discussions.
"The odds of a settlement in that case are much higher," Scott said.
Most of the same plaintiffs' attorneys involved in the Columbia case, are in the other cases, including Marvin Masters and Scott Segal, two of the state's most prominent trial lawyers, and the firm of Carey, Scott and Douglass, which includes Scott, who also served an unexpired term on the state supreme court, and former federal prosecutor and gubernatorial candidate Mike Carey.
Some additional attorneys, including Thomas Pettit of Barboursville, are involved with the plaintiffs in the newer cases.
The firm of Bowles, Rice, McDavid, Graff and Love, which represented a group of large landowner plaintiffs in the Columbia case, is not involved in the other cases to date.
As the newer cases wind their way through the courts, mostly in the federal system, the first case remains in Roane Circuit Court.
If the motion for a new trial is denied, Scott said the case then would be ready for appeal to the state supreme court.
"My prediction is that by this time next year, the state supreme court will have acted on it and we will know where we stand," Scott said.
He said some parts of the case could even end up before the U.S. Supreme Court.
"It's a possibility, not a probability," Scott said. "It depends on how the state supreme court rules."
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