Peabody Energy (NYSE: BTU) said in its Aug. 8 Form 10-Q report that a dispute with a coal mining company has moved from arbitration into a federal court in West Virginia.
In May 2013, Eagle Mining LLC filed an arbitration demand against a Peabody subsidiary under a contract mining agreement, asserting various claims for damages. An arbitration hearing was held in January 2014 before a single arbitrator. On March 18, the arbitrator awarded Eagle damages on some of its claims of $23.4m.
The contract mining deal covered coal reserves on the Cook Mountain property in Boone County, W.Va.
In December 2013, prior to the arbitration hearing, the Peabody subsidiary established a reserve in the amount of $7.8m, which represented the low end of the company’s previous estimated range of loss associated with the matter. The difference between the company’s reserve amount and the amount of the award was primarily due to damages that were awarded on one of the claims at the high end of the company’s previous estimated range of loss, and that were awarded on another claim for which the company initially determined the probability of loss to be remote. As a result of the damages awarded to Eagle in arbitration, Peabody recorded an additional charge of $15.6m in “Operating costs and expenses” in the unaudited condensed consolidated statement of operations for the six months ended June 30, 2014.
On April 18, Peabody’s Elkland Holdings LLC subsidiary filed a petition to partially vacate and modify the arbitration award in the U.S. District Court for the Southern District of West Virginia, Charleston Division, where it is still pending.
Said Eagle Mining in its June 2 response to the Elkland filing: “Eagle and Elkland have a five year business history dominated by Elkland’s unilateral directives and heavy handed business practices, some of which are summarized in the March 18, 2014 Arbitration Award at issue in this case.”
Eagle Mining said that “starved for operating capital,” it on March 19, the day after the arbitration award, filed a complaint to confirm the award at the U.S. District Court for the Eastern District of Kentucky. It said that since that case was filed ahead of the Peabody case in West Virginia, the Kentucky court is the proper venue for this matter.