Caperton seeks court order to resume litigation against Alpha/Massey

Companies associated with coal investor Hugh Caperton on July 7 asked the bankruptcy court for Alpha Natural Resources to lift a stay on court proceedings against Alpha so it can potentially collect on a lawsuit award against an Alpha subsidiary formerly known as Massey Energy.

Alpha in 2011 bought Massey Energy, Central Appalachia’s largest coal producer. In that deal, Alpha took on long-running litigation that Caperton’s Harman Mining Corp., Harman Development Corp. and Sovereign Coal Sales had against Massey over accusations that Massey deliberately drove mining operations in Virginia associated with these companies out of business.

In August 2015, Alpha sought Chapter 11 protection at the U.S. Bankruptcy Court for the Eastern District of Virginia. The court at that point froze all outside litigation against Alpha and its in-bankruptcy subsidiaries under a stay order. Notable is that Alpha at this point is looking to reorganize around some of its coal mines, and to sell off other mines to certain creditors who will operate under the name Contura Energy.

The Caperton companies asked the bankruptcy court to lift the stay so they can liquidate their claims against Alpha in a proceeding pending in the Circuit Court of Buchanan County, Virginia, against Alpha’s Appalachia Holding Co. f/k/a A.T. Massey Coal.

That “State Court Case” involves claims of tortious interference with existing and prospective contractual relations, fraudulent misrepresentation, and other state law claims. This case is the current iteration of litigation pending between Caperton and Massey that has spanned the better part of 20 years and numerous federal and state courts.

“There is, however, finally a light at the end of the litigation tunnel, which shines in the form of one final trial: a trial on damages,” said the July 7 motion. “Massey is liable to the Movants, but the State Court must still conduct a trial to determine the amount of damages owed to Movants. That trial was halted when Massey filed the instant chapter 11 case on August 3, 2015 (the ‘Petition Date’) in the United States Bankruptcy Court for the Eastern District of Virginia (the ‘Bankruptcy Court’). Movants file this Motion to end the final chapter of the contentious State Court Case and move beyond the devastating impact that Massey’s bad acts had on the Movants’ businesses. Movants strongly believe that Massey will not present any compelling reason requiring the Bankruptcy Court to expend significant time and energy learning nearly twenty years’ worth of history simply to determine the amount of Movants’ damage claim. Indeed, in the interest of judicial economy and to preserve Massey’s limited estate resources, the parties and the Bankruptcy Court should support the lifting of the automatic stay.”

The State Court Case is a product of almost 20 years of litigation between Caperton and Massey’s former Chief Executive Officer, Donald Blankenship, and his companies. This litigation included suits in circuit courts in both Virginia and West Virginia, proceedings in the U.S. District Court for the Southern District of West Virginia, and appeals to the Virginia Supreme Court, the Supreme Court of Appeals of West Virginia, and the U.S. Supreme Court.

The State Court Case was tried by a jury for five weeks in April and May 2014. On May 23, 2014, the jury found on behalf of both Caperton and the Harman companies and awarded damages in the total amount of $5 million, without interest, including the sum of $1,000,000 to Caperton. In response to the verdict, both Caperton and the Harman companies filed post-trial motions, seeking, among other things, a new trial on damages. On Jan. 7, 2015, the judge granted the new trial on damages only, finding among other things that the jury verdict was “clearly inadequate and unjust” and was tainted by improper conduct by Massey’s counsel. It was after that point that Alpha filed for bankruptcy, putting that state case into limbo.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.