Alpha opposes paying merger foes' $900K legal fees

By Steve Korris | Aug 5, 2011

RICHMOND, Va. – Alpha Natural Resources pleads that it shouldn't have to pay a $900,000 bill from lawyers who sued to block its acquisition of Massey Energy.

"Litigation is not supposed to be a lottery," Robert Rolfe of Richmond wrote to U.S. District Judge John Gibney on July 27.

Rolfe opposed a fee application from lawyers for former Massey shareholder Benjamin Mostaed, who sued Massey, Alpha, and individual Massey directors in February.

"One is tempted to use blunt language when considering how to characterize an application for fees and expenses approaching $1 million in a case in which plaintiff Mostaed not only achieved no judicial victory, but did not even attempt to achieve one," Rolfe wrote. "Despite racing to file pleadings asserting that a class of shareholders would suffer irreparable harm absent immediate relief, Mostaed's counsel never filed a motion for affirmative relief of any kind.

"This refrain from traditional litigation presumably reflected plaintiff's own assessment of the merits of the claims asserted in his name. At most, plaintiffs are entitled to a small fraction of the fees they request."

Mostaed sued four days after Alpha and Massey announced the merger. He claimed Massey directors breached fiduciary duties by failing to negotiate for the highest reasonable price.

He added claims under securities law in April, after Massey filed a preliminary proxy statement with the Securities Exchange Commission.

Massey amended the proxy on April 29.

Shareholders approved the merger on June 1.

On June 23, Mostaed's lead lawyer, Robert Wilson of Washington, notified Gibney that he would dismiss his claims.

Wilson applied for a fee on July 14, claiming Mostaed obtained information shareholders needed in order to approve the merger.

"As a result of plaintiff's prosecution of the action, defendants made nearly all of the requested disclosures, thus resulting in a substantial benefit for the class," he wrote. "Through skillful and aggressive litigation, plaintiff was able to achieve virtually all of the benefits sought in this action early on in the legal process, and without the necessity of court intervention."

His application included Frank Johnson and Shawn Fields of San Diego, and Willie Briscoe and Patrick Powers of Dallas.

In response, Rolfe called the application grossly unreasonable.

"Compensation is demanded for time spent on events that never happened – like 'confirmatory discovery,' the 'conduct of depositions,' and preparing for and attending a 'preliminary approval hearing,'" he wrote. "Similarly, counsel seeks compensation for over 52 hours spent in connection with the pretrial conference this court conducted on June 2, 2011, which lasted less than an hour."

He wrote that after Mostaed stated he would dismiss the case, he asked for appointment as class representative.

He asked how Mostaed and his counsel intended to represent a class "when the only thing further they will do is prosecute their request for personal compensation."

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