In re Massey Energy Company Derivative Litigation
|Court:||Court of Chancery of the State of Delaware|
|Judge:||Chancellor William B. Chandler III|
|Case Contacts:||Mark Lebovitch, David Wales, Edward G. Timlin|
On April 23, 2010, BLB&G filed a shareholder derivative complaint (the "Complaint") on behalf of the Louisiana Municipal Police Employees Retirement System ("LMPERS"), in the name and for the benefit of Massey Energy Company ("Massey" or the "Company"), against Massey's Board of Directors (the "Board") and certain executive officers of the Company (collectively, the "Defendants").
The Complaint alleges that the Defendants breached their fiduciary duties by: (1) chronically disregarding mining safety regulations and incurring nearly $27 million in fines by the Mine Safety Health Administration and (2) consistently failing to adequately address poor safety conditions in its mines, culminating in, among other things, an explosion on April 5, 2010, that tragically killed 29 miners at the Company's Upper Big Branch mine (“UBB Mine”) in West Virginia. Massey's decision to myopically focus on production and ignore worker safety regulations led to government investigations, severe reputational harm and the destruction of hundreds of millions of dollars of shareholder value as Massey's stock price has plummeted in the wake of the disaster.
On June 29, 2010, LMPERS voluntarily dismissed its action which had been filed in West Virginia state court. On July 8, 2010, LMPERS joined the New Jersey Building Laborers Pension Fund and the International Union of Operating Engineers Pension Fund of Eastern Pennsylvania and Delaware in filing an amended derivative complaint on behalf of Massey against the Defendants in Delaware Chancery Court. On October 21, 2010, the Court consolidated the derivative actions and appointed LMPERS as Co-Lead Plaintiff and BLB&G as Co-Lead Counsel.
As the facts unfolded from the investigations after the tragic explosion at the UBB Mine, it was learned that the senior management of Massey, with the knowledge of the Board, had long accepted rampant violations of regulatory and safety rules, as well as an openly hostile relationship with its regulators. The investigative reports put the blame for the explosion on Massey. There is a wide ranging criminal investigation of Massey, resulting in multiple criminal convictions. In addition, more than 18 directors, officers and employees of Massey asserted their constitutional rights under the Fifth Amendment and refused to testify. In 2011, Massey was sold to Alpha Natural Resources, Inc. (“Alpha”).
The case had been stayed for approximately three years as a result of the criminal investigation. The stay was partially lifted, and on October 17, 2014, a Fourth Amended Class Action and Derivative Complaint was served and filed (the “Complaint”). The Complaint describes that as a result of the serious and rampant regulatory violations, the explosion at the UBB Mine caused by those violations, and the terrible relationship with its regulators’, Massey suffered substantial losses and ultimately had to be sold Alpha. The sale price reflected the harm that the defendants had caused Massey and the low sales price reflects the harm caused to the former stockholders of Massey. This action seeks to hold the defendants responsible for that harm. The defendants filed motions to dismiss the complaint, the plaintiffs filed briefs opposing the motion to dismiss, and the motions are currently pending.
The Complaint has been unsealed and is publicly filed.