In the midst of the criminal trial of Don Blankenship, Alpha Natural Resources is using its bankruptcy proceedings to again try to avoid paying legal fees for the former Massey Energy CEO.
According to a motion filed in the Eastern District of Virginia's bankruptcy court on Nov. 3, Alpha - which bought Massey in 2011 - is seeking to shed its obligation by calling Blankenship's legal service contract, which he entered in June 2010, an executory contract.
"It is a prepetition obligation that we cannot and do not intend to pay," Alpha said in a statement provided to the Gazette-Mail on Tuesday. "We are rejecting any agreements related to the indemnification of attorney fees incurred by Mr. Blankenship."
According to the U.S. Department of Justice, contracts where performance remains due on both sides are considered executory.
Alpha noted the 11 executory contracts and unexpired leases included in the motion "are not necessary to their ongoing business operations or restructuring efforts."
In bankruptcy court, a debtor has the ability to assume or reject executory contracts. If a contract is beneficial to the debtor, they would assume them. Conversely, if a contract is not beneficial to the debtor, they have the ability to reject them.
When asked about the filing, Blankenship's lead defense attorney, Bill Taylor, deferred questions to others at his Washington, D.C.-based law firm, Zuckerman Spaeder. As of Tuesday evening, a spokesperson for the firm had not returned requests for comment.
Blankenship's attorneys could argue the agreement Blankenship had with Massey is not an executory contract.
Alpha also identified an employment agreement with Sandra Davis, Blankenship's former executive assistant, who testified in his ongoing trial, as another executory contract they would like to reject.
Blankenship's attorneys have until Friday to respond to Alpha's motion.
The issue of Blankenship's legal fees initially arose following Alpha's 2011 purchase of Massey. The acquisition included taking on obligations as a result of a 2010 agreement Blankenship entered with the company to cover any costs associated with investigations associated with the April 5, 2010, mine explosion at the Upper Big Branch Mine, which killed 29 miners.
Earlier this year, Alpha told Blankenship they would no longer pay for his legal fees. Alpha argued they should not have to pay for Blankenship's defense because Alpha had "determined that Mr. Blankenship had reasonable cause to believe that his conduct was unlawful."
Blankenship then sued Alpha. His lawyers, including Graeme W. Bush and Andrew N. Goldfarb, both of Zuckerman Spaeder, argued that Alpha was obligated to cover the former CEO's legal fees.
In the course of the trial, new documents outlining concerns identified by former federal Mine Safety and Health Administration and Massey ventilation expert Bill Ross emerged. The documents would later play a large role in the government's criminal case against Blankenship.
In May, Delaware Chancery Court Judge Andre Bouchard noted that Alpha failed to identify any specific law or regulation that Blankenship violated. He ultimately ruled in favor of Blankenship, forcing Alpha to pay for his legal fees. As of April 1, those fees were estimated at $5.8 million.
"We are pleased but not surprised," Taylor said at the time.
In a press release issued on June 9, Zuckerman Spaeder applauded the ruling.
"The Judge's ruling is significant not only for Mr. Blankenship but for the white-collar defense bar generally," said Bush, the firm's chairman. "The court's ruling limits the extent to which a company can condition its advancement obligation in ways that are not outlined in its charter, and interprets indemnification language commonly contained in merger agreements to provide significant advancement protections to officer and directors of the merged corporation."
According to a list of creditors holding the 50 largest unsecured claims that Alpha submitted in bankruptcy court on August 3, the company identified Blankenship as having the eighth-largest total claim. Alpha estimated that it owed $3.5 million for Blankenship's legal fees.
Reach Joel Ebert at 304-348-4843, joel.ebert@wvgazettemail.com, or follow @joelebert29 on Twitter.