Two weeks ago there was a great article in Law360, a paid subscription legal news service. The article, titled “3 Kinds of Legal Battles Being Fueled by Low Oil Prices,” claims that this year’s low oil prices are giving rise to three types of lawsuits. The author expects to see a sharp rise in claims between producers and oil field service vendors, operators and their financial partners and royalty claims between operators and landowners.
Add a fourth category, claims by shale bond holders against the brokers who peddled them.
While oil companies have massive cash flow problems and way too much debt, the brokers who peddled the debt can also be responsible for investor losses. When oil prices were over $100 per barrel and companies were on an equipment buying spree; everyone was happy (with the exception of the public, of course who were often paying over $3.00 per gallon for gasoline). Brokers made fat commissions and investors got impossibly high yields.
I say impossible because many of those bonds have already defaulted and many more are barely solvent. Why? Because oil prices fell as low $38 per barrel and are not expected to recover very much over the next 12 months.
Stockbrokers have a duty to only recommend suitable investments to their customers. Their employers have a duty to supervise and make sure that these suitability rules are being followed. Instead brokers often made ridiculous promises and failed to warn of the very real risks inherent in shale bonds, junk quality oil and gas debt and energy sector limited partnerships.
While litigation within the oil and gas industry is certainly heating up, so are claims against brokers.
What can you do if you lost money in a shale bond or oil and gas partnership deal? Plenty! Claims against stockbrokers are mostly handled by binding arbitration before the Financial Industry Regulatory Authority. These arbitrations move much more quickly than traditional lawsuits. There is generally no appeal, however.
Arbitration claims are typically handled on a contingent fee basis meaning you never pay costs or legal fees unless we recover money for you.
Want to learn more? Visit our shale bond / oil and gas information page or call attorney Brian Mahany at brian@mahanylaw or by telephone at (direct).
MahanyLaw – America’s Fraud Recovery Lawyers
[Our minimum loss size is generally $250,000 but call us no matter what the size of your loss, we often co-counsel other law firms and sometimes cam bundle multiple claims against a same brokerage firm.]