Southern Coal Sales Corporation filed an answer May 4, denying the allegations and seeking to have the case moved from bankruptcy court in Delaware to federal district court in New York.
Gov. Jim Justice
Southern alleges that Algoma defaulted on a contract prior to November 2015 and failed to pay Southern Coal more than $6 million owed to the coal company.
The complaint for post-petition breach of contract and recovery of property was filed in the U.S. Bankruptcy Court District of Delaware on March 10 by Algoma Canada against Southern Coal Sales Corporation.
Algoma Canada claims Southern did not provide the amounts or quality of coal required by several agreements it made with the company.
Southern and Algoma had agreed to annual contracts that called for coal to be shipped from Southern’s Ohio mines across the Great Lakes, according to the suit.
Algoma Canada claims it needs to build up a sufficient inventory of coal before the winter months because then the lakes freeze over and the route is impossible.
The timely coal delivery is important to Algoma’s production of metallurgical coke, which is used in steel production. Not having the coal delivered in a timely manner could cost Algoma hundreds of millions of dollars if production is forced to stop due to lack of coal.
“If the coke batteries are forced to stop production due to lack of coal, it would cost Algoma Canada hundreds of millions of dollars to repair and restart them,” the complaint also states.
Despite agreeing to supply Algoma Canada with 780,000 tons of coal from April 1, 2016, through March 31, Southern only delivered 401,163 — forcing Algoma Canada to purchase the remaining 378,837 tons from third parties, according to the suit.
Algoma Canada claims that Southern did not comply with the delivery schedule set forth in their agreement.
“Algoma Canada repeatedly notified Southern Coal that it had failed to meet its delivery obligations pursuant to the term sheet,” the complaint states.
Algoma Canada is seeking for the court to enter judgment in favor of Algoma against Southern and order Southern to pay damages, including pre- and post-judgment interest for Southern’s breach of the agreements. It is being represented by Cory D. Kandestin, Mark D. Collins, Daniel J. DeFranceschi and Brett M. Haywood of Richards, Layton & Finger; and Kip T. Bollin, Laura L. Watson and Jeremy M. Campana of Thompson Hine.
Southern is represented by Barry D. Hunter and Medrith Lee Norman of Frost Brown Todd; and John A. Sensing of Potter, Anderson & Corroon.
U.S. Bankruptcy Court District of Delaware case number: 17-50196
