A three-judge panel of the 10th Circuit Court of Appeals on Tuesday ruled in favor of Oklahoma City-based Chesapeake Energy Corp., upholding a lower court’s dismissal of a lawsuit filed by shareholders.
Chesapeake shareholders Dvora and Steven Weinstein in 2012 sued the Chesapeake executives, saying they misled shareholders through “false statements and omissions” about two financial obligations.
The appeals court agreed with a federal judge in Oklahoma City that the shareholders did not sufficiently demonstrate that Chesapeake “intentionally withheld these facts from, or recklessly disregarded the importance of those facts” to shareholders in order to deceive, manipulate or defraud.
The lawsuit centered on Chesapeake’s Volumetric Production Payment transactions and its Founders Well Participation Program.
Under the Volumetric Production Payment program, Chesapeake received cash immediately in exchange for a promise to produce and deliver natural gas over time. Chesapeake said it raised more than $6.3 billion through the deals, but the shareholders said the company failed to disclose that the arrangements would require Chesapeake to spend about $1.4 billion in future production costs.
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