June 26, 2008
Judge OKs Massey Safety Settlement
By Ken Ward Jr.
Beefed-up compliance Massey has agreed to: * More thoroughly monitor safety violations and accidents * More closely examine environmental problems * Mandate reforms * Create positions of vice presidents for best environmental practices and best safety practices n Issue an annual report to shareholders about environmental and worker safety compliance
A Kanawha County judge on Wednesday approved the latest lawsuit settlement aimed at improving the environmental and mine safety performance at Massey Energy operations across the Appalachian coalfields.
Under the deal, Massey's management will beef up its oversight of safety and environmental compliance to settle one of two pending lawsuits filed against company President Don Blankenship and other board members by corporate shareholders.
A Massey board committee will begin more thorough monitoring of safety violations and accidents, more closely examine environmental problems, and mandate reforms in both areas, according to the settlement approved by Circuit Judge Irene Berger.
Massey will also create new corporate vice presidents for best environmental practices and best safety practices, and issue a new annual "Corporate Social Responsibility Report" to inform shareholders about environmental and worker safety compliance.
The changes build on other environmental compliance reforms Massey is mandated to institute as the result of a landmark Clean Water Act settlement reached earlier this year with the U.S. Environmental Protection Agency.
"In a large number of ways, it changes things at Massey," said former Kanawha circuit judge Andrew MacQueen, who represented the Manville Personal Injury Trust, an institutional shareholder that filed the case.
The settlement comes after not only the EPA settlement, but also a previous shareholder lawsuit, numerous government enforcement actions going back many years, and promises of reform following criminal water pollution pleas by two Massey subsidiaries.
But Ronald Rolfe, a lawyer for the Massey defendants, said the settlement should not be viewed as an admission that the company or its management did anything wrong.
"Things happen," Rolfe told Berger. "Nobody is happy that things that happened with respect to Massey happened. The directors continue to assert that they did nothing wrong, and they did not fall down on the job."
The case was filed in July 2007 against Blankenship and other Massey board members on behalf of the Manville Trust, which owns about 1,000 shares of Massey stock, according to the suit. The trust was created in 1986 as part of the bankruptcy reorganization of the Johns Manville Corp. to fund asbestos settlements with former Manville workers.
Technically, shareholder derivative suits are filed on behalf of the company by shareholders against corporate managers because of alleged mismanagement of the company.
The suits alleged a "conscious failure" by Massey management "to comply with applicable environmental and worker-safety laws and regulations." It said that failure has "caused and will continue to cause severe injury to the company by consciously ignoring Massey Energy's legal obligations to comply with federal and state law, thereby exposing the company to a substantial threat of monetary liability for violations."
Among other things, the suit cited repeated violations of water pollution permit limits, hefty fines for the deaths of two miners in the Aracoma Mine fire, and a nearly $2 million verdict against Massey for firing a worker who complained about safety problems.
During an afternoon hearing, Berger approved the settlement, originally filed in May, despite complaints from one Massey stockholder that the company's other shareholders weren't properly informed of the deal.
Massey stockholder Vernon Mercier has his own shareholder suit pending in U.S. District Court in Charleston, and lawyers for Massey management argue the settlement of the Manville case would preclude Mercier continuing a separate case.
Lee Rudy, a lawyer for Massey shareholder Vernon Mercier, also told Berger that the deal did not recover for the company funds lost by the board's alleged mismanagement - such as the record $20 million EPA fine - and did not provide a strong, long-term method to end repeated mine safety and environmental problems.
"We have the clearest evidence in the world that the governance [changes] probably won't be effective," Rudy told Berger.
Rudy cited the settlement in 2005 of a previous shareholder suit, requiring changes in the size and makeup of Massey's board of directors.
Those changes "did not seem to have any effect on Massey's decision-makers," and allegations continued "regarding the rampant environmental and labor abuses being perpetrated by the company," Rudy said in court papers.
Rudy said that the new settlement contains too many loopholes. For instance, he said, term limits for members of the corporate board's safety committee could be waived at the board's discretion.
Rudy also pointed to other language that does not require environmental and safety improvements, but just mandates that the company set goals in those areas.
Manville Trust lawyers said setting goals "can have a focusing, motivational, and performance-setting effect." But Rudy said, "That's something you find inside a fortune cookie."
Berger said she was confident that the settlement's demands on Massey management "are much more substantial than the 2005 settlement.
"The settlement is fair, reasonable and adequate, and most importantly, the settlement is in the best interests of Massey," Berger said.
As part of the settlement with the Manville Trust, the defendants will pay the trust's lawyers $2.7 million in fees and expenses, according to the proposed settlement. The trust was represented in the case by the South Carolina firm of Motley Rice, whose founder, Ronald L. Motley, was among the first lawyers to take on the asbestos industry, and by the Delaware firm Rigrodsky & Long, which specializes in shareholder suits.
MacQueen was local counsel for the plaintiffs.
In the case that was settled in 2005, a separate set of plaintiffs' lawyers was paid $2.5 million by Massey defendants, court records show.
Reach Ken Ward Jr. at [email protected] or 348-1702.
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