Chesapeake Energy 2013 Annual Report Download - page 39

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of operations. Nevertheless, unauthorized access to our seismic data, reserves information or other proprietary or
commercially sensitive information could lead to data corruption, communication interruption, or other disruptions in
our exploration or production operations or planned business transactions, any of which could have a material adverse
impact on our results of operations. Further, as cyber attacks continue to evolve, we may be required to expend
significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate
any vulnerabilities to cyber attacks.
An interruption in operations at our headquarters could adversely affect our business.
Our headquarters are located in Oklahoma City, Oklahoma, an area that experiences severe weather events,
including tornadoes. Our information systems and administrative and management process are primarily provided to
our various drilling projects throughout the United States from this location, which could be disrupted if a catastrophic
event, such as a tornado, power outage or act of terror, destroyed or severely damaged our headquarters. Any such
catastrophic event could harm our ability to conduct normal operations and could adversely affect our business.
ITEM 1B. Unresolved Staff Comments
Not applicable.
ITEM 2. Properties
Information regarding our properties is included in Item 1 and in the Supplementary Information included in Item
8 of this report.
ITEM 3. Legal Proceedings
Litigation and Regulatory Proceedings
The Company is involved in a number of litigation and regulatory proceedings (including those described below).
Many of these proceedings are in early stages, and many of them seek an indeterminate amount of damages. See
Note 4 of the notes to our consolidated financial statements included in Item 8 of this report for information regarding
our estimation and provision for potential losses related to litigation and regulatory proceedings.
July 2008 Common Stock Offering. On February 25, 2009, a putative class action was filed in the U.S. District
Court for the Southern District of New York against the Company and certain of its officers and directors along with
certain underwriters of the Company’s July 2008 common stock offering. The plaintiff filed an amended complaint on
September 11, 2009 alleging that the registration statement for the offering contained material misstatements and
omissions and seeking damages under Sections 11, 12 and 15 of the Securities Act of 1933 of an unspecified amount
and rescission. The action was transferred to the U.S. District Court for the Western District of Oklahoma on October 13,
2009. Chesapeake and the officer and director defendants moved for summary judgment on grounds of loss causation
and materiality on December 28, 2011, and the motion was granted as to all claims as a matter of law on March 29,
2013. Final judgment in favor of Chesapeake and the officer and director defendants was entered on June 21, 2013,
and the plaintiff filed a notice of appeal on July 19, 2013 in the U.S. Court of Appeals for the Tenth Circuit.
A derivative action relating to the July 2008 offering filed in the U.S. District Court for the Western District of
Oklahoma on September 6, 2011 is pending. Following the denial on September 28, 2012 of its motion to dismiss and
pursuant to court order, nominal defendant Chesapeake filed an answer in the case on October 12, 2012. By stipulation
between the parties, the case is stayed pending resolution of the Tenth Circuit appeal.
2012 Securities and Shareholder Litigation. A putative class action was filed in the U.S. District Court for the
Western District of Oklahoma on April 26, 2012 against the Company and its former Chief Executive Officer (CEO),
Aubrey K. McClendon. On July 20, 2012, the court appointed a lead plaintiff, which filed an amended complaint on
October 19, 2012 against the Company, Mr. McClendon and certain other officers. The amended complaint asserted
claims under Sections 10(b) (and Rule 10b-5 promulgated thereunder) and 20(a) of the Securities Exchange Act of
1934 based on alleged misrepresentations regarding the Company’s asset monetization strategy, including liabilities
associated with its volumetric production payment (VPP) transactions, as well as Mr. McClendon’s personal loans and
the Company’s internal controls. On December 6, 2012, the Company and other defendants filed a motion to dismiss
the action. On April 10, 2013, the Court granted the motion, and on April 16, 2013 entered judgment against the plaintiff
and dismissed the complaint with prejudice. The plaintiff filed a notice of appeal on June 14, 2013 in the U.S. Court of
Appeals for the Tenth Circuit. Briefing on the appeal was complete on August 2, 2013, and on November 18, 2013,
argument was heard.