SPENCER -- It has been six months since a Roane County jury awarded a class of 10,440 plaintiffs about $404 million in damages stemming from natural gas royalty arrangements between landowners and oil and gas companies.

And in a 101-page opinion released at 11 a.m. June 28, Roane County Judge Thomas C. Evans upheld the entire $270 million punitive damage award that was part of the overall jury decision.

"The evidence, and other relevant circumstances to be considered by the court, are sufficient to sustain the verdict of jury for punitive damages in the sum of $270 million," Evans said in his opinion. "The court has reviewed this evidence in light of (case law) ... and precedent of the United States Supreme Court, and in the opinion of this court ... a downward adjustment in punitive damages is not warranted under the evidence and the law and would amount to a denial of the plaintiffs'/lessors’ right to due process of the law (their right to trial by jury)."

Charleston lawyer Marvin Masters was one of the lead plaintiffs’ attorneys who represented the thousands of private and commercial landowners in the case.

Masters said the punitive damage award, while large on its face, actually was reasonable considering the jury awarded the plaintiffs $134 million in compensatory damages.

The plaintiffs accused the defendants of “fraudulently, intentionally and knowingly” underpaying royalties owed to them over several years and of deliberately concealing those actions.

The jury agreed with them and decided NiSource and Columbia Natural Resources shortchanged landowners out of $134 million in royalty payments. Jurors imposed a $270 million punitive damage award to punish the companies for their behavior.

Oklahoma City-based Chesapeake Energy purchased CNR in November 2005 and inherited that lawsuit, which was filed in 2003.

Spokesmen for Chesapeake and NiSource said their companies' attorneys were reviewing the decision. A copy of the statement from NiSource is listed below.

Evans’ decision focused on the punitive damages, Masters said.

“This was an examination of the punitive damage award and whether it was justified,” he said. “It’s important to remember this case represented more than 10,000 (plaintiffs). This punitive damage award was only two times what the (compensatory) award was, which is well within the Supreme Court’s guidelines. It’s actually on the conservative side of punitive damages when you consider the number of people involved.”

Masters said he would not be surprised if the defendant companies appealed Evans’ ruling to the West Virginia Supreme Court of Appeals.

Nicholas “Corky” DeMarco, executive director of the West Virginia Oil and Natural Gas Association, said his members were “stunned by the judge upholding the verdict.”

“We think it will have long-term effects on the industry,” DeMarco said. “Based on this interpretation, anything that was a contract between parties is now open to reinterpretation. … This could affect the coal industry too, because they enter into long-term contracts.”

DeMarco said he hopes legislative leaders step and fix the judge’s interpretation on how contracts for natural gas royalty payments should be handled. If not, West Virginia could miss out on a boom in natural gas production.

“Without this ruling, the potential for investment in West Virginia is limitless. But drilling capital is mobile. The people who make the decisions about where to drill may start deciding to take their investment elsewhere.”

DeMarco added that the Roane County decision was against major companies, but future litigation could target small natural gas producers.

“This could completely destroy the small, West Virginia-based companies,” he said. “People will look at this decision and say this is why we’re 49th or 50th.”

NiSource still is reviewing the decision but issued the following statement: “We are reviewing the order issued today by Judge Evans regarding the punitive damages portion of the Tawney verdict. We continue to believe CNR acted reasonably and in good faith, and that punitive damages are not justified in this case. We have said we are prepared to appeal this matter if the punitive amages portion of the verdict is not set aside, and that remains our position. We believe a review of the verdict by the West Virginia Supreme Court will show that CNR acted reasonably and in good faith.”