A federal judge Wednesday sided with Chesapeake Energy Corp. and dismissed a class-action lawsuit about certain financial dealings of the company and its co-founder Aubrey McClendon.
U.S. District Judge Vicki Miles-LaGrange ruled that shareholders did not provide enough evidence to support the claims.
Chesapeake praised the ruling Wednesday.
“This is the lead case against Chesapeake and the first ruling in which a court has addressed the merits of the claims that have been asserted against the company and members of its management team,” Chesapeake outside attorney Robert Varian said in a statement. “We are pleased with the court's complete rejection of the claims, which were based on unfounded accusations that were given widespread attention in the media.”
The lawsuit was filed in April 2012, days after a Reuters report detailed company financial dealings and more than $1 billion in personal loans McClendon secured from companies doing business with Chesapeake, using his stake in Chesapeake wells as collateral.
The case was later consolidated with other similar suits that together claimed Chesapeake and its management did not disclose enough information about the company's finances and McClendon's loans.
Specifically, the suit addressed claims that the Oklahoma City energy company did not tell shareholders enough about its volumetric production payment deals in which Chesapeake received cash up front for future natural gas and oil production. The company said it raised $3.6 billion with the program, but did not disclose that the deals required the company to spend $1.4 billion in future drilling, the lawsuit claimed.
The judge said the shareholders made generalized allegations “without any specific corroborating details.”
“The allegations in the complaint do not reference any meeting attended by any defendant, any internal report he received or reviewed, any internal email or any other information that would tend to show that the particular defendant knew the ‘truth' about the facts that were purportedly misstated and knew that its nondisclosure would likely mislead investors.”
Specifically to McClendon, Miles-LaGrange said the shareholders did not show the former CEO “knew that not disclosing his personal loans would somehow mislead investors.”
Other shareholder lawsuits are pending against Chesapeake, its officers and its directors. The U.S. Securities and Exchange Commission also is conducting a formal investigation.
The U.S. Justice Department and Michigan's attorney general also are investigating Chesapeake and Encana Corp. for possible antitrust violations concerning 2010 bids for Michigan natural gas leases.
CONTRIBUTING: Paul Monies, Business Writer