W.Va. Supreme Court to hear Massey investors' case
MORGANTOWN, W.Va. -- Institutional shareholders in the former Massey Energy Co. want the state Supreme Court to revive a lawsuit they filed two weeks after the Upper Big Branch mine disaster.
Lawyers for the California State Teachers' Retirement System, Amalgamated Bank and Manville Trust are asking the justices to overturn a 2011 dismissal order and send their case back to Kanawha County Circuit Court. Oral arguments are set for Wednesday morning in Charleston.
The lawsuit accused Massey of violating a 2008 settlement agreement aimed at making its operations safer. The shareholders had originally sued Virginia-based Massey in 2007, saying it routinely failed to comply with environmental and worker safety laws.
Under the settlement, Massey said it would embrace a new corporate governance agreement and make safety a priority. Then the mine near Montcoal exploded in April 2010, killing 29 men in the worst U.S. mining disaster in four decades.
Two men are already behind bars for their actions at the mine, and the disaster is the focus of a continuing criminal investigation by the Justice Department.
The shareholders renewed their lawsuit 11 days after the blast and demanded that Kanawha County Circuit Judge James C. Stucky hold Massey in contempt of the 2008 settlement. The shareholders argued they were entitled to pursue damages from more than a dozen Massey officials, including former CEO Don Blankenship and members of the board of directors.
Massey's market value fell by $975 million within two days of the explosion.
But Stucky dismissed the shareholders' claim, ruling that the settlement agreement was invalidated the day Alpha Natural Resources bought Massey for $7.1 billion in June 2011. Thousands of shareholders, he said, overwhelmingly approved the sale, effectively giving up their rights to control Massey going forward.
"Plaintiffs are now FORMER shareholders," the judge wrote. "<t40>...<t$> The legal effect of the merger is no different than if, for example, plaintiffs had sold their Massey shares in the market, not in connection with the merger."
Alpha is now the sole shareholder in Massey, which is now known as Alpha Appalachia Holdings Inc. for legal purposes. Its former mines and related operations function as Alpha ventures.
In all, Alpha runs 55 mines and 18 preparation plants in West Virginia, and about 45 mines and seven loadout facilities in Virginia, Kentucky, Pennsylvania and Wyoming.
Stucky said he could not find the defendants in contempt because Massey no longer exists and its former officials could not possibly comply with the settlement agreement because they have no control over Alpha Appalachia.
On appeal, the shareholders argued that Stucky misinterpreted state law on the matter of their legal standing and the issue of contempt. They also argue that in other aspects of the case, he wrongly applied the laws of Delaware, where Alpha Appalachia is incorporated, over the laws of West Virginia.
The defendants support the judge's ruling and say that Alpha has replaced the old corporate governance agreement with its "Running Right" safety program.
This shareholder case is separate from a pending federal lawsuit by the Massachusetts Pension Reserves Investment Trust and Macomb County (Mich.) Employees Retirement System.
Last month, U.S. District Judge Irene Berger ordered that case into mediation, giving the parties six months to negotiate a settlement.
Those shareholders say Massey repeatedly lied about its record, artificially inflating stock prices between 2008 and 2010. They say they had no idea how bad the company's safety record was before Upper Big Branch blew up.
That case has been on hold because the judge is shielding evidence the plaintiffs want to use from the criminal probe.
Four investigations found that the blast was sparked by worn and broken equipment, fueled by accumulations of methane gas and coal dust, and allowed to spread because of clogged and broken water sprayers.
Investigators also found "systematic, intentional and aggressive efforts" -- including the falsification of safety records to hide problems.
Former superintendent Gary May and security chief Hughie Elbert Stover are behind bars for their actions at the mine.
A former president of another Massey subsidiary, meanwhile, awaits sentencing for conspiracy. David Hughart is cooperating with prosecutors and is set to appear Sept. 10 in Beckley.