Chesapeake sues McClendon over stolen “trade secrets”

Gavel and book
Source: DollarPhotoClub

Two years after Aubrey K. McClendon was forced to leave Chesapeake, the company has announced it is going to sue him over illegal appropriation of trade secrets.

The Oklahoma-City-based company filed a lawsuit yesterday in Oklahoma County District Court alleging that McClendon “misappropriated highly sensitive trade secrets from Chesapeake” and “subsequently used these trade secrets for the benefit of” a company he founded in 2013, American Energy Partners LP.

Chesapeake’s lawyers argue that McClendon asked his assistant to print maps and data about unleased acreage and that he also sent himself blind copies of the same documents at a personal email address during his last months at the company.

According to the suit, McClendon “used and disclosed Chesapeake’s trade secret and confidential information” to solicit investors for his new endeavour even as he served as a Chesapeake director and CEO in February and March 2013.

McClendon started his first oil and natural gas investment company, Chesapeake Investments, in 1982. He then co-founded Chesapeake with the company’s former president Tom L. Ward, the founder and former CEO of Oklahoma City-based Sandridge Energy Corporation, in 1989 with a $50,000 initial investment. They took the company public in 1993, growing Chesapeake into what is now the second-largest producer of natural gas, and the most active driller in the United States.

In 2012, McClendon was revealed to have borrowed as much as $1.1 billion against his personal stake in thousands of company wells, raising the potential for conflict of interest. This lead to McClendon having to relinquish his position as chairman of the Chesapeake Energy board – although a subsequent Chesapeake board review found no improper conduct on his part. In June the same year, Chesapeake appointed Archie W. Dunham as chairman, replacing McClendon, who retained his position as CEO – a role he relinquished when he retired from the company in 2013. Later that year, he formed American Energy Partners – an upstream oil and gas company with an office located less than a mile away from Chesapeake Energy.

Chesapeake accuses its former CEO of appropriating sensitive information – such as “open acreage reports” about the Utica Shale formation which were confidential and expensive to compile and contained information about unleased land that the company was “pursuing and seeking to acquire.” The company alleges that McClendon, while still holding the position of the company’s CEO, “used and disclosed Chesapeake’s trade secret and confidential information” while soliciting investors for his new project; American Energy Partners.

“These investors knew or should have known that McClendon owed a duty to Chesapeake to maintain the secrecy of the information,” the lawsuit claims.

Aubrey McClendon vehemently denies any wrongdoing and describes Chesapeake’s accusations as “baseless”. In a statement issued yesterday, McClendon explains that when he agreed to leave Chesapeake in January 2013, the company promised he would be provided with “an extensive array of information about the more than 16,000 wells, and the related leasehold acreage and future wells, he jointly owns with Chesapeake. That information includes land, well, title, accounting, geological, engineering, reservoir, operating, marketing, and performance data. The deal further gave Mr. McClendon the right to own and use this information for his own purposes, including sharing it with his employees, contractors, advisers, consultants and affiliated entities.”

“The information in Mr. McClendon’s possession is rightfully his under the terms of the agreements Chesapeake made with him in early 2013,” the statement says. “Indeed,” it continues, “under those agreements, he is entitled to much more information from the company, but the information is not yet in his possession because of Chesapeake’s refusal to provide it.”

Chesapeake, however, believes that McClendon strayed far beyond the bounds of the agreement. “Open acreage which has not even been acquired is, by definition, not ‘jointly owned’,” according to Chesapeake’s complaint. The company contends McClendon had no right to take that information.

According to Reuters, Chesapeake is seeking an unspecified amount of damages for alleged violations of the Oklahoma Uniform Trade Secrets Act and other state statutes. Chesapeake also is asking the Oklahoma County court to force McClendon’s company to place “all income earned from their Utica Shale play acquisitions” in a trust. Chesapeake contends that any income earned by American Energy Partners resulted from “the use of Chesapeake property and the usurpation of Chesapeake’s corporate opportunities.”

Article continues below this message

Have your opinion heard with Shale Gas International

We accept interesting, well-written opinion and analysis articles of up to 1,500 words, that offer unique insights into the shale industry. The articles cannot be overtly promotional in nature and need to fit into at least one of our content categories.

If accepted, the article must be exclusive to Shale Gas International website and cannot appear on any other websites, publications, etc. Each article may contain up to three links to external websites relevant to the content discussed in the piece.

If you would like to contribute to Shale Gas International website, please contact us at: editor[at]