Chesapeake Energy 2010 Annual Report Download - page 78

Consolidated Derivative Shareholder Petition was filed on June 23, 2009. Chesapeake is named as a nominal
defendant. Chesapeake’s motion to dismiss was granted on February 28, 2010, and plaintiffs were given leave
to amend. Plaintiffs chose not to amend and on April 9, 2010, at plaintiffs’ request, the court entered an order
certifying that the February 28, 2010 dismissal was a final, appealable order. Plaintiffs are appealing the
dismissal in the Oklahoma Court of Civil Appeals.
We are currently unable to assess the probability of loss or estimate a range of potential loss associated
with the foregoing cases. It is inherently difficult to predict the outcome of any litigation, and these proceedings
are at an early stage.
Chesapeake is also involved in various other lawsuits and disputes incidental to its business operations,
including commercial disputes, personal injury claims, claims for underpayment of royalties, property damage
claims and contract actions. With regard to the latter, several mineral or leasehold owners have filed lawsuits
against us seeking specific performance to require us to acquire their oil and natural gas interests and pay
acreage bonus payments, damages based on breach of contract and/or, in certain cases, punitive damages
based on alleged fraud. The company believes that it has substantial defenses to the claims made in these
purchase and sale cases. The company records an associated liability when a loss is probable and the amount
is reasonably estimable. Although the outcome of litigation cannot be predicted with certainty, management is
of the opinion that no pending or threatened lawsuit or dispute incidental to its business operations is likely to
have a material adverse effect on the company’s consolidated financial position, results of operations or cash
flows. The final resolution of such matters could exceed amounts accrued, however, and actual results could
differ materially from management’s estimates.
There are pending against us enforcement actions initiated in the 2010 fourth quarter and 2011 first
quarter by the Pennsylvania Department of Environmental Protection related to alleged methane migration into
the groundwater and residential water wells and by the U.S. Environmental Protection Agency related to our
compliance with Clean Water Act permitting requirements in West Virginia. We have responded to all pending
orders and are actively cooperating with the relevant agencies. While we cannot predict with certainty whether
these actions will result in fines or penalties, if fines or penalties are imposed, we reasonably believe that each
of these actions would result in monetary sanctions exceeding $100,000.
ITEM 4. Reserved
32