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Texas jury hears anti-trust claim

A federal jury in Texas has heard opening arguments from a defunct steel distributor claiming that it was run out of business by a group of suppliers and manufacturers, including Nucor Corp. and Reliance Steel & Aluminum Co.

During opening arguments of the antitrust lawsuit, MM Steel LP’s attorney said that the larger companies had organized a boycott that cut off MM Steel’s access to supplies, locking it out of the steel distribution market.

Matt Schultz and Mike Hume founded MM Steel after decades working for American Alloy Steel Inc. and for Reliance. Now, they claim that the two companies asked steel manufacturers JSW Steel (USA) Inc. and Nucor Corp. to refrain from doing business with them. That action stands in violation of federal antitrust statutes, MM Steel’s attorney argued.

MM Steel claims lost future profits as high as $80 million from the point when its supply of steel was cut off by the alleged boycott. The company is also seeking exemplary and treble damages under antitrust law.

An attorney for Reliance said the company had the right to refuse to do business with anyone associated with Schultz and Hume, who committed a “betrayal” by raiding key employees and clients from their former employers.

Attorneys for the defendants added that MM Steel’s failure was due in part to undercapitalization and the fact that it began operating at a time when steel supplies were low.

Lawsuit Against Chesapeake Over Reduced Royalties Seeks Class Action Status

Texas landowners have filed a lawsuit against Chesapeake Energy over reduced royalty payments; unlike similar lawsuits, this one is seeking class action status. Charles and Robert Warren joined with a Johnson County couple to file the lawsuit in U.S. District Court in Dallas.

Beginning in August 2011, Chesapeake began deducting “post-production costs” from the prices for natural gas used to determine payments to royalty owners. These costs include expenses such as compressing and treating natural gas to prepare it for sale. According to Chesapeake, the company previously had the legal right to charge for those costs but had chosen not to do so. At the time, the company stated that the costs would not be deducted if a royalty owner’s lease prohibited such charges. The Warrens claim that although their lease did prohibit charging for post-production costs, they were charged anyway.

Post production costs can be about 80 cents to $1 per 1,000 cubic feet (mcf) depending on what must be done to the gas, which is significant when natural gas prices drop to around $2 per mcf, as they did in 2012. According to the Warrens, by March 2012 they were being paid as low as 42.4 cents per mcf for the natural gas Chesapeake extracted from their eight wells, and the difference in payments ran to six figures.

Several other lawsuits have been filed by Texas landowners against Chesapeake over the reduced royalty payments. The Warrens’ suit seeks class action status, a rarity for this type of lawsuit.

Chesapeake has scrambled to adjust to falling gas prices, which reached $1.90 per mcf by April 2012, a 10-year low.

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