Chesapeake Energy wins dismissal of shareholder lawsuit

Reuters Business News
Posted: Apr 10, 2013 7:19 PM
Chesapeake Energy wins dismissal of shareholder lawsuit

(Reuters) - Chesapeake Energy Corp <CHK.N> has won the dismissal of a securities class action lawsuit over allegations the company misled investors about its financial condition.

The lawsuit claimed that Chesapeake had failed to disclose financial obligations by the company and its former chief executive, Aubrey McClendon.

But in an order issued on Wednesday, Chief U.S. District Judge Vicki Miles-LaGrange in Oklahoma City wrote that the allegations failed to present facts showing the company or other company officers and directors named in the complaint likely intended to mislead investors.

The decision comes at a challenging time for the natural gas giant. Last year Reuters wrote a series of stories outlining McClendon's complex financial relationship with the company. Regulatory scrutiny and lawsuits against the company ensued.

The departure of McClendon as CEO was announced by the company in late January.

The case dismissed on Wednesday was filed on behalf of investors who purchased Chesapeake shares between April 30, 2009 and May 11, 2012. It alleged that the company and its management team did not disclose more than $1 billion in personal debt accumulated by McClendon that was backed by future production of Chesapeake's wells.

When investors learned the truth of McClendon's dealings with the company, the lawsuit claimed that the price of Chesapeake's shares tumbled.

But in her opinion, Miles-LaGrange found that the complaint did not give rise to a "strong inference that McClendon knew that not disclosing his personal loans would somehow mislead investors."

Robert Varian, an attorney for Chesapeake, applauded the decision 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," he said.

An attorney for the Ontario Teachers' Pension Plan Board, the lead plaintiff in the case, did not return a message seeking comment.

The case is Dvora Weinstein v. Aubrey McClendon, U.S. District for the Western District of Oklahoma, No. 12-465.

(Reporting by Andrew Longstreth; Editing by Andre Grenon and Chris Gallagher)