Massey contract dispute returns to Supreme Court

CHARLESTON, W.Va. (AP) _ In a case rocked by European vacation photos showing its chief executive with the chief justice, Massey Energy Co. asked West Virginia's Supreme Court on Wednesday to echo its earlier conclusion and reverse a $76 million judgment against it in a coal contract dispute.

Lawyer D.C. Offutt said that the high court got it right in November when it ruled that a clause in the underlying supply agreement should have precluded the case brought by Harman Mining Co.

In January, the court erased November's 3-2 ruling and voted to rehear the case.

Offutt also agreed with the November decision's finding that a Virginia lawsuit, filed by Harman over the contract, should have resolved all related issues.

"Virginia law is clear, that they had to bring those claims in Virginia, that they were part of the same transaction," Offutt said.

Harman's lawyer countered that the judge in the Virginia case was aware of the companion lawsuit, filed in Boone County, and that Massey and its co-defendants helped convince him to keep the two separate.

The Virginia case focused on Wellmore Coal Corp. reneging on a lucrative supply contract, lawyer David Fawcett said. The West Virginia case alleged that Richmond, Va.-based Massey had briefly acquired that company solely to cut in on Harman's deal to provide metalworking-grade coal to a steelmaker.

"They should be bound by their statements in Virginia, in their position, which was, 'you can't bring in this evidence, you can't bring in any evidence that shows wrongful intent or motive or a whole scheme,'" Fawcett said. "And of course, the judge in Virginia said, 'This a simple breach of contract case.'"

Fawcett also argued that reapplying the November findings would wrongly wipe out a verdict reached after a seven-week trial, and one that even the high court's earlier ruling conceded was warranted by Massey's conduct.

The jury had awarded Harman and Hugh Caperton, its president and co-plaintiff, $50 million after finding Massey had ruined them both. Post-judgment interest had increased the amount past $76 million by November.

"That's a very harsh result," he said.

The Supreme Court is expected to rule later this year — but without two of the justices who took part in the November outcome.

Chief Justice Elliott "Spike" Maynard disqualified himself after Harman and Caperton seized on photos showing him in Monaco with Massey President, Chairman and CEO Don Blankenship.

The pictures were taken in July 2006, while Massey was readying its appeal of the 2002 Boone County verdict and after the Supreme Court had already ruled on related issues. Acknowledging their decades-long friendship, Maynard and Blankenship said they met up after learning they would be in that part of Europe at the same time.

Maynard denied any wrongdoing when stepping aside. Appointed in his place, Hampshire County Circuit Judge Donald Cookman voted with the remaining justices in January to erase the November ruling.

Justice Larry Starcher recused himself last month. While he also rejected allegations of bias, Massey had repeatedly cited his public attacks of the company and Blankenship.

Maynard had helped form the 3-2 majority in November, while Starcher had dissented. With Cookman in for Maynard, Marion County Circuit Judge Fred Fox heard Wednesday's arguments in Starcher's stead.

Justice Robin Davis, the author of the November ruling, led the questioning by repeatedly invoking its findings regarding the underlying contract's forum selection clause.

But Justice Joseph Albright, November's other dissenting vote, asked both sides whether Virginia law allowed contract claims and tort claims, as were alleged in the West Virginia lawsuit, in the same case.

"There were activities and specific accusations of misconduct that simply did not address or involve the coal supply agreement," he said.

Offutt argued the contract served as the linchpin for all the allegations in both cases.

"If you look at the breach of the contract supply agreement, that's what triggered the economic failure of the Harman companies," Offutt said. "That's what led to the bankruptcy."

But Offutt also said that Virginia law was not entirely clear as to the question raised by Albright. Bruce Stanley, a lawyer for Caperton, had earlier argued that the November ruling ignores a Virginia Supreme Court decision on the forum issue.

Stanley also said Caperton did not benefit from the Virginia case, which yielded a $6 million verdict for Harman.

The West Virginia case had attracted headlines before the Monaco photos spurred an outcry by legal ethics experts.

Massey sued the trial stenographer, alleging she had botched the transcript, and later two law firms that defended it in both that case and the Virginia case.

Justice Brent Benjamin has rebuffed recusal requests from Harman and Caperton, who cite the estimated $3.5 million that Blankenship spent to help him defeat an incumbent justice and win his court seat in 2004.

Novelist John Grisham has said the Boone County verdict and Blankenship's 2004 campaign helped inspire his latest best-selling legal thriller, "The Appeal."

AP Photo/Bob Bird

Judges Fred Fox of the 16th Circuit, left, and Donald Cookman the 22nd Circuit listen to arguments in a rehearing of a $76 million judgment awarded to Harman Mining Co. against Massey Energy Co. before the West Virginia Supreme Court of Appeals at the West Virginia State Capitol Complex in Charleston, W.Va. Wednesday, March 12, 2008. The rehearing was granted after photos surfaced showing Chief Justice Elliott "Spike'' Maynard in Monaco with Massey chief executive Don Blankenship. Justice Larry Starcher later recused himself as well after Massey cited his public comments attacking and even insulting the coal producer. Judges Fox and Cookman replace Justices Starcher and Maynard respectively.