Last November, the government indicted Don Blankenship, the former CEO of Massey Energy, for conspiracy to violate the Mine Safety and Health Act at Massey’s Upper Big Branch mine, where 29 miners died in an explosion in April 2010; conspiracy to defraud the United States by concealing mine-safety violations at UBB; making a false statement to the Securities and Exchange Commission based on a company statement to shareholders; and securities fraud as a result of a company statement to shareholders and a company press release. The charges provide for a total of 31 years in prison. Blankenship is represented by William Taylor III of Zuckerman Spaeder LLP and Spilman Thomas & Battle, PLLC as local counsel.
Not surprisingly, given the stakes on both sides, the case has already generated a massive amount of activity. (Although PACER lists all the docket entries for the case, for most, you can’t get a link to read the actual document because of a gag order entered by United States District Judge Irene Berger, which several media organizations challenged. In response, the court entered an amended gag order, which the media organizations have appealed to the Fourth Circuit Court of Appeals. The Fourth Circuit has expedited the appeal and will hear arguments tomorrow.
And if Blankenship didn’t have enough to worry about, his former employer, Massey Energy, which was acquired by Alpha Appalachia Holdings in June 2011, and its parent company, Alpha Natural Resources, Inc., stopped paying his legal fees and expenses since the indictment. According to the complaint, Massey and Alpha’s lawyer told Blankenship’s lawyer on January 29, 2015 that they would not advance his attorneys’ fees and expenses, but did not explain why. Then, on February 2, their lawyer stated that Massey and Alpha had determined that Blankenship had reasonable cause to believe his conduct was unlawful, and also demanded that he repay all prior sums advanced.
In response, on February 5, Blankenship sued Massey and Alpha in Delaware, alleging that Delaware law requires the defendants to payment (or “advancement”) of his legal fees and expenses. Here is the complaint and exhibits filed in the Court of Chancery of the State of Delaware. He is represented by Zuckerman Spaeder, with Landis Rath & Cobb LLP as local counsel.
The complaint alleges that Zuckerman Spaeder has outstanding invoices for fees and expenses of at least $1,417,291.32. Considering the amount of activity in the criminal case during February, including a motion to disqualify Judge Berger and all the judges in the Southern District of West Virginia and 12 separate motions to dismiss, the fees and expenses have increased by a few hundred thousand dollars.
Blankenship bases his lawsuit under Delaware General Corporation Law § 145, which authorizes a corporation to advance fees and expenses to an officer or director defending a civil action or criminal, administrative, and investigative proceedings and also provides that the court “may summarily determine a corporation’s obligation to advance expenses (including attorney’s fees),” meaning that the court can expedite consideration of the matter.
Based only on the exhibits attached to the complaint, Blankenship appears to have a strong case for advancement of his fees and expenses. In at least three documents–Massey’s articles of incorporation filed in Delaware, Blankenship’s December 3, 2010 retirement agreement with Massey, and William Taylor’s June 1, 2010 engagement letter to Blankenship, which was also sent to and approved by Shane Harvey, Massey’s then-general counsel, who signed a copy of the letter–Massey committed to paying Blankenship’s legal fees and expenses.
But the risk for Blankenship is in a two-page document entitled “Undertaking” (Exhibit G to the complaint), that he had executed on April 12, 2011 and in which he stated that he had acted “in good faith and in a manner that [he] reasonably believed to be consistent with the best interests of Massey and its affiliates and subsidiaries” and that in performing his duties, he “had no reasonable cause to believe that [his] conduct was ever unlawful.” He also agreed to repay Massey for any sums that it had expended on his behalf if it was “ultimately determined” that he wasn’t entitled to indemnification. He also agreed that Massey wouldn’t be obligated to indemnify him or advance further fees and costs if he pleads guilty or is found guilty by a court or jury of any criminal charge related to his actions as an officer or director, or if Massey otherwise determines that he is not entitled to indemnification under governing laws. So the only sure path for Blankenship to avoid repaying his attorneys’ fees and expenses is to be acquitted, which appears to be an uphill challenge in a case in which, according to the defense, half the residents in the community where he’ll be on trial think he’s guilty.
According to an online article, the judge presiding over Blankenship’s lawsuit against Massey and Alpha said at a scheduling conference last month that he would consider Blankenship’s complaint on April 6, so Blankenship may know on that date or soon after whether Massey and Alpha are obligated to keep paying his fees and expenses. I’ll provide updates as information becomes available.