Companies tied to W.Va. Gov. Jim Justice face $35 million judgment in KY coal case

LONDON – Companies tied to West Virginia Gov. Jim Justice have been ordered to pay $35 million in damages over a coal deal in Eastern Kentucky that went sour.

That amount includes $16.9 million to cover unpaid royalties for not making good on a mining contract, plus interest on that amount since 2012, which would add millions more.

It also includes $17 million to punish the companies for abuses, such as failing to turn over information as required during the lawsuit.

The Justice companies “obstructed the search for truth in this case by withholding information ordered to be produced,” U.S. Magistrate Judge Hanly A. Ingram said in one ruling.

U.S. District Judge Gregory F. Van Tatenhove also ordered the Justice companies to pay attorney fees and costs of the companies that won the lawsuit.

The attorneys filed a request this week for a total of a little more than $1 million.

The order on damages may not be the final word in the court fight, which has been going on for more than seven years.

Attorneys for the Justice companies filed a motion this week asking Van Tatenhove to reconsider how much they’ll have to pay, arguing that the figure for lost royalties was based on an unreliable assessment and that $17 million in punitive damages was excessive.

There has been no ruling on that motion.

The lawsuit resulted from a deal signed in 2005 for coal in Breathitt County. New London Tobacco Market and its agent, Fivemile Energy LLC, assigned Kentucky Fuel the right to mine in return for royalties and retainer payments.

New London and Fivemile sued Kentucky Fuel and the James C. Justice Companies Inc., in 2012, charging that Kentucky Fuel had failed to mine the coal as required.

Jim Justice was the operator of Kentucky Fuel at the time, but his son, Jay Justice, is now company president, according to a court record.

Jim Justice was elected governor in 2016 as a Democrat but announced at a rally with President Donald Trump that he had switched to a Republican.

The Justice companies argued that after signing the lease for the coal in Breathitt County, they learned that the quality of the coal was poor, meaning it couldn’t be mined profitably.

Justice company officials testified they believed the contract only required Kentucky Fuel to mine the coal if it was commercially feasible. The coal industry has taken a beating in Eastern Kentucky and Central Appalachia, shedding thousands of jobs since 2011.

Trump has rolled back environmental rules to try to help the industry, but there were fewer jobs in Kentucky in the most recent quarterly report than when Trump took office in early 2017.

Van Tatenhove said the issue of whether difficult economic conditions excused Kentucky Fuel from mining the coal was moot because he had approved a default judgment against the company based on the abuses Ingram had cited.

However, Van Tatenhove also said evidence suggested that the view that Kentucky Fuel didn’t have to carry out the contract under certain economic conditions was wrong.

The president of New London Tobacco Market testified that the purpose of one amendment was to “guarantee that the Fivemile Coal would get mined no matter what,” Van Tatehove said in a September decision.

The decision also noted that one draft of a contract revision included language tying mining to economic conditions, but that language was dropped in the final version.

The ruling also said that the claim by Justice company officials, including Jay Justice, that it would be hard to mine and sell the coal at issue in the case was “undercut” by other statements they made.

For example, Ingram said in a decision that at the same time Justice company officials were arguing the coal could not be profitably mined, they were telling potential buyers that it could be.

The Justice companies ultimately received at least $8.8 million for the Fivemile assets, according to a motion from attorneys for Fivemile Energy and New London Tobacco Market.

Justice officials said that deal included property other than the coal.

The initial order for damages against the Justice companies after the 2014 default judgment totaled $60 million. Van Tatenhove put that on hold and ordered a hearing on additional evidence, resulting in the recent order for $35 million in damages.

In a separate case, New London Tobacco Market and Fivemile Energy have charged that Justice companies transferred millions of dollars worth of property after the default judgment to try to avoid paying them.

Gov. Justice is a member or officer in companies named in that complaint, according to the lawsuit.

An attorney for Justice-family companies denied wrongdoing.

That case is on hold pending a resolution in the case over damages.

By Bill Estep
Lexington Herald-Leader