Justices hear appeal of Massey shareholders

CHARLESTON – Former shareholders of Massey Energy argued to the state Supreme Court on Sept. 4 that the former members of the company’s board of directors should be held in contempt of a 2008 settlement.

The justices – minus Chief Justice Brent Benjamin, who recused himself, heard the appeal of three former Massey shareholders that sued the company after the 2010 Upper Big Branch explosion that killed 29 miners.

In September 2011, Kanawha County Circuit Court Judge James C. Stucky ruled that the defendants no longer had the ability to cause Massey to comply with a 2008 settlement that created a corporate governance agreement.

The CGA settled claims first made in July 2007 that the company’s board of directors and some officers breached their fiduciary duties by consciously failing to enforce certain environmental and worker-safety laws and regulations.

Eleven days after the UBB explosion, the shareholders claimed the defendants were in violation of the CGA because Massey’s 2008 Corporate Social Responsibility Report “contains no report on the Company’s… worker safety compliance,” as required by the CGA.

Massey was sold to Alpha Natural Resources in 2011. Massey’s entire board of directors was replaced, and Stucky ruled the CGA was rendered inoperative.

Manville Personal Injury Settlement Trust, Amalgamated Bank and California State Teachers’ Retirement System are the former shareholders appealing Stucky’s ruling. They are represented by attorneys from Motley Rice, and Badge Humphries handled oral arguments.

“(A)t the heart of the 2008 Order is a reporting and disclosure obligation from Respondents to Massey Energy’s shareholders,” the petitioners’ brief says.

“The ultimate purpose of Massey’s company-wide mine-safety compliance reporting system, which was fundamental to the 2008 Order, is that obligation for the Massey Board to disclose the company’s mine-safety compliance to Massey’s shareholders.

“As such, the Board’s disclosure obligation under the 2008 Order is a duty owed directly to shareholders, and the Board’s failure to make this report has been a focus of the instant civil contempt proceeding since it was initiated on April 16, 2010. Accordingly, the gravamen of these claims are direct.”

The brief continues that the best remedy in similar cases is to force disclosure of the information, but if the passage of time would make that remedy inadequate, then monetary damages can be granted directly to shareholders.

Those sued include Don Blankenship, the former chairman and CEO of Massey; several former members of the board of directors; J. Christopher Adkins, the former senior vice president and chief operating officer; and M. Shane Harvey, the former vice president and general counsel.

Their brief says the court must not focus on the explosion, as the petitioners’ brief does, and decide two questions: Whether the petitioners lost their standing when they voluntarily relinquished their Massey shares and whether the respondents are no longer in a position to cause Massey to comply with the 2008 order.

“Massey is a Delaware corporation; thus, any right of Petitioners to bring suit on behalf of Massey is governed by Delaware law,” the brief says.

“Under well-settled Delaware law, to have standing to maintain a derivative action, a plaintiff must maintain shareholder status throughout the entirety of the litigation.”

Former Supreme Court Justice Thomas McHugh took Benjamin’s place on the bench. The U.S. Supreme Court ruled in 2009 that Benjamin should have recused himself in a case against Massey because Blankenship spent several million dollars supporting his 2004 campaign.

McHugh was the most inquisitive justice during oral arguments, asking Humphries, among other things, where any damages should be distributed, what case law supports damages to shareholders and if Alpha, which says it became the sole shareholder of Massey when it bought the company, would be left out.

Other cases that scheduled for oral argument were:

-The appeal of a McDowell County Circuit Court decision in favor of Cabot Oil and Gas Corporation in a dispute with land owners;

-A Mason County dispute over which of Bright McCausland’s two wills is valid;

-Beckley ARH Hospital’s appeal of a Kanawha County decision that it says allowed the state Department of Health and Human Resources to failed to administer the West Virginia Medicaid Program in accordance with both state and federal law;

-A Marion County decision that said certain claims against National Union Fire Insurance Company by its insured (Dan Cava’s Toyota World had been charged with racial discrimination by a former employee and the Equal Employment Opportunity Commission) were barred by the statute of limitations;

-A Mingo County decision that said a former CSX Transportation employee filed his Federal Employers’ Liability Act lawsuit too late (the decision was made by Judge Michael Thornsbury, who has been suspended indefinitely after being indicted on charges that he conspired to violate a romantic rival’s civil rights);

-A Monroe County decision in favor of the County Commission and one of its employees that said they were immune from claims made by the estate of a man who died as a result of injuries from an attack by several dogs; and

-A company’s appeal of a Berkeley County decision that found its challenge of a tax assessment was not timely.

From the West Virginia Record: Reach John O’Brien at jobrienwv@gmail.com.