Chesapeake Energy 2000 Annual Report Download - page 34

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The plaintiffs in these cases have claimed the leases terminated upon the cessation of production for
various periods, primarily during the 1960s. In addition, the plaintiffs have sought to recover conversion
damages, exemplary damages, attorneys' fees and interest. The defendants have asserted that any cessation of
production was excused and have pled affirmative defenses of limitations, waiver, temporary estoppel, laches
and title by adverse possession. As previously reported, four of the 13 cases have been tried, and there have
been appellate decisions in three of them.
On January 12, 2001, CP and the other defendants entered into a settlement agreement with the plaintiffs
in eight of ten cases tried or pending in the U.S. District Court of Moore County, Texas, 69th Judicial District.
The terms of the settlement are confidential but we have determined that our portion of the settlement
consideration is not material to our financial condition or results of operations. Only the claims of certain
involuntary plaintiffs joined in these settled cases remain and we do not consider these claims to be material.
Related West Panhandle cessation cases which are pending are the following:
Lois Law, et al. v. NGPL, et al., U.S. District Court of Moore County, Texas, 69th Judicial District,
No. 97-70, filed December 22, 1997, jury trial in June 1999, verdict for CP and co-defendants. The jury found
plaintiffs' claims were barred by adverse possession, laches and revivor. On January 19, 2000, the court
granted plaintiffs' motion for judgment notwithstanding verdict and entered judgment in favor of plaintiffs. In
addition to quieting title to the lease (including existing gas wells and all attached equipment) in plaintiffs, the
court awarded actual damages against CP in the amount of $716,400 and exemplary damages in the amount of
$25,000. The court further awarded, jointly and severally from all defendants, $160,000 in attorneys' fees and
interest and court costs. On March 28, 2001, the Amarillo Court of Appeals reversed and rendered the
judgement in favor of CP and the other defendants, finding that the subject leases had been revived as a
matter of law, making all other issues moot.
AC. Smith, et al. v NGPL, et al., U.S. District Court of Moore County, Texas, 69th Judicial District,
No. 98-47, first filed January 26, 1998, refiled May 29, 1998. On June 18, 1999, the court granted plaintiffs'
motion for summary judgment in part, finding that the lease had terminated due to the cessation of
production, subject to the defendants' affirmative defenses. On February 8, 2001, the court granted plaintiffs'
motion for summary judgment on defendants' affirmative defenses but reversed its ruling that the lease had
terminated as a matter of law. No trial date has been set.
Phillip Thompson, et al. v. NGPL, et al., U.S. District Court, Northern District of Texas, Amarillo
Division, Nos. 2:98-CV-012 and 2:98-CV-106, filed January 8, 1998 and March 18, 1998, respectively
(actions consolidated), jury trial in May 1999, verdict for CP and co-defendants. The jury found plaintiffs'
claims were barred by the payment of shut-in royalties, laches and revivor. Plaintiffs' motion for new trial
pending.
Craig Fuller, et al. v. NGPL, et al., U.S. District Court of Carson County, Texas, 100th Judicial District,
No. 8456, filed June 23, 1997, cross motions for summary judgment pending.
Pace v. NGPL, etal., U.S. District Court, Northern District of Texas, Amarillo Division, filed January 29,
1999. Cross motions for summary judgment pending.
We have previously established an accrued liability we believe will be sufficient to cover the estimated
costs of litigation for each of the pending cases and the settlement consideration under the terms of the
settlement agreement mentioned above. Because of the inconsistent verdicts reached by the juries in the four
cases tried to date and because the amount of damages sought is not specified in all of the pending cases, the
outcome of any future trials and the amount of damages that might ultimately be awarded could differ from
management's estimates. CP and the other defendants intend to vigorously defend against the plaintiffs'
claims.
ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
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