The Appalachian exploration company originally formed by Aubrey McClendon and the company’s major investors are suing a major law firm claiming it “mistakenly or fraudulently” acted on behalf of the former Chesapeake Energy Corp. chief.

After leaving Chesapeake in 2013, McClendon formed American Energy Partners LP (AELP) with financiers that included The Energy & Minerals Group (EMG). They subsequently created several businesses to oversee onshore exploration and production, including American Energy Appalachia Holdings LLC (AEU).

Earlier this year, Chesapeake filed a lawsuit against McClendon alleging he had “misappropriated highly sensitive trade secrets,” discovered through a forensic analysis of his former Chesapeake email account that it claimed gave him proprietary information about the Utica and Marcellus shales.

Chesapeake in April agreed to partially settle the lawsuit with AEU and EMG (see Daily GPI, April 14). The settlement gave Chesapeake about 6,000 acres of AEU’s leasehold in Harrison County, OH, as well as cash and cash payments of up to $25 million. In exchange, Chesapeake dropped from the lawsuit AEU and “John Doe investors 1-20,” which included EMG.

McClendon said at the time that he had not approved of the settlement nor had he been advised of the negotiated terms.

Two months later, AEU separated from AELP as an independent producer, Ascent Resources LLC (see Shale Daily, June 10). Major investors still include EMG.

On Monday in U.S. District Court of Harris County in Houston, Ascent and EMG businesses filed a lawsuit against Duane Morris LLP, an international law firm that has represented McClendon for a long time, including when he was sued by Chesapeake.

The plaintiffs claim that Chesapeake had sent a litigation demand letter late last year regarding the trade secrets to McClendon, but Duane Morris lawyers “instead hid the demand letter from the plaintiffs. Worse yet, the defendant pretended to represent the plaintiffs.”

Duane Morris “met with, negotiated with and even entered a tolling agreement with Chesapeake Energy, all the while never disclosing the potential dispute to the plaintiffs…”

Chesapeake in January then filed its trade secret lawsuit. Ascent and EMG claim that McClendon, without notifying AEU and EMG, acted “in his capacity as chairman of the board of AEU,” and requested that AEU’s finance committee “approve proceeding with a substantial loan for AEU.

“Additionally, on Jan. 29, 2015, plaintiffs executed a board consent letter initiated by McClendon and approved a significant capital call.

As of that time, neither McClendon, nor Duane Morris, disclosed to the plaintiffs that Chesapeake had made these serious allegations, or that a settlement demand had been made, or that litigation with Chesapeake was imminent.”

As a result of the capital call initiated by McClendon, “the investor plaintiffs took action to call significant amounts of money from their investors,” themselves included, the lawsuit claims. While the investors were providing “substantial funds to AEU, and agreeing to provide a significant amount more, they were completely unaware of Chesapeake’s threatened lawsuit.”

Chesapeake filed its lawsuit in February, naming AEU as a defendant and the John Doe investors.

“Had Duane Morris not mistakenly or fraudulently stated that it represented AEU and its investors, plaintiffs would have taken all necessary action to avoid being named in the lawsuit” and “would never have been named…”

The lawsuit claims that Duane Morris actions caused the plaintiffs to be sued by Chesapeake and interfered with their ability to represent their interests, causing “more than $150 million in damages, all of which could have been avoided.”

The plaintiffs, which collectively own more than 92% of the Appalachian business, are seeking that amount in compensatory damages.