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Jury Awards Wheeling-Pittsburgh $220 Million in Lawsuit against Massey
07/04/2007 - A Brooke County, W.Va., jury unanimously awards Wheeling-Pittsburgh $219.85 million in its lawsuit against Massey Energy and subsidiary Central West Virginia Energy Co.
Wheeling-Pittsburgh Corp. confirmed that a Brooke County, W.Va., jury unanimously awarded the company $219.85 million in its lawsuit against Massey Energy Co. and its subsidiary Central West Virginia Energy Co. (CWVEC).
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Massey Energy to Appeal Verdict
Massey Energy Co. says it will appeal the jury verdict, which awarded damages of $220 million to Wheeling-Pittsburgh Steel. Massey will file an appeal to the Supreme Court of Appeals of West Virginia, which the company believes may result in a significant reduction in damages.
The contract dispute originated in 2004, when CWVE declared force majeure on portions of its coal shipment obligations due to conditions beyond its control. WPS sued CWVE and Massey seeking damages related to its cost of replacement coal and coke and repairs to its coke ovens.
"We firmly believe we operated within the terms of our coal supply contract," said Don Blankenship, Massey's Chairman and CEO. "We recognized that a trial in Wheeling Pitt's backyard would be challenging, but we were still surprised at the outcome. As one of the largest providers of coal to the U.S. steel industry, the production and transportation challenges that faced the Central Appalachian coal industry in 2004 and 2005 were magnified here at Massey. Despite the challenges, we went to great lengths to fulfill our commitments and deliver coal to our customers. We believe we can win a more appropriate and favorable decision on appeal in the higher court."
Massey says it will review the verdict, evaluate the likelihood of a successful appeal, and reassess its accrued liability for the lawsuit. As of March 31, 2007, Massey had recognized a liability of $16 million associated with the lawsuit. An increase in this liability would impact the company's earnings for the second quarter of 2007.
Under a recently enacted section of the Code of West Virginia, the maximum security that can be required during an appeal is $50 million. With over $400 million of available liquidity as of June 30, 2007, the company has the financial capacity to absorb any damages awarded in the lawsuit without impacting its normal operating activities.
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Originally filed by Wheeling-Pittsburgh in April 2005, the lawsuit arises out of CWVEC's failure to deliver significant quantities of metallurgical coal during the period from December 2003 through early 2006 as required by the long-term coal supply agreement between CWVEC and Wheeling-Pittsburgh. This non-compliance forced Wheeling-Pittsburgh to buy the metallurgical coal and coke it needed in the spot market where supply was tight and prices had dramatically escalated. This also led to production disruptions, which resulted in equipment damages to the company's coke batteries.
‘On behalf of the company, its directors and shareholders, I would like to thank everyone involved over the last several years in achieving this victory for the company, including our internal and external legal teams, management and employees,” stated James P. Bouchard, Chairman and CEO. “Moreover, we are grateful to the jury for stepping forward to correct the harm to Wheeling-Pittsburgh caused by Massey Energy Company's and CWVEC's failure to fulfill their commitments. The jury's unanimous verdict is extremely fair and reasonable, protective of the company, its employees and the United Steelworkers. We believe the verdict should withstand any appellate challenge.”
