State Courts Decline To Block Massey Merger
Update at 6:17 p.m. ET: Delaware's Chancery Court has just rejected an effort to block tomorrow's sale of Massey Energy to Alpha Natural Resources.
In denying a motion for a preliminary injunction, Judge Leo Strine ruled that institutional Massey shareholders suing the company failed to show that the merger would make moot their lawsuit or claims. The shareholders argue that Massey executives and board members failed to protect the company's value when they did not correct poor safety practices before the deadly coal mine explosion last year that killed 29 mine workers.
"The record does not suggest that it is likely that the Merger was inspired solely, or even in any material way, by a desire of the Massey directors to extinguish the [lawsuit's] Claims or to insulate themselves from liability," Strine wrote.
The shareholders also argued that the merger with Alpha did not adequately compensate Massey investors. "The record does not persuade me that the Merger would, after a trial, likely be found to be economically unfair to the Massey stockholders," Strine ruled. "It would threaten more harm than good for me to usurp the ability of Massey stockholders to decide this economic question themselves."
The two rulings in West Virginia and Delaware pave the way for all Massey and Alpha stockholders to vote as scheduled on the merger at 9:30 am ET Wednesday. Alpha and Massey executives are certainly confident about the outcome. They've scheduled a ceremony at Massey's West Virginia headquarters at 1 pm EST Wednesday to unveil a new "Alpha Natural Resources" sign.
Our original post:
The West Virginia Supreme Court of Appeals has declined a request to block Wednesday's expected takeover of coal mine giant Massey Energy by Alpha Natural Resources.
The court ruled that it does not have jurisdiction in the case, which was filed by the California State Teachers' Retirement System and two other large institutional investors in Massey Energy. They sought to block the merger of the two coal companies, arguing that Massey executives and board members failed to operate the company safely and caused the value of Massey to plummet.
Massey owns the Upper Big Branch coal mine in West Virginia where 29 mine workers died in a ferocious explosion last year. An independent investigative team appointed last year by then-Gov. Joe Manchin (D) concluded two weeks ago that the explosion resulted from a corporate "culture in which wrongdoing became acceptable, where deviation became the norm." The institutional investors claim that the explosion and Massey's poor safety record so devalued the company that the sale does not reap a fair price for shareholders.
The investors also contend that the merger will make moot their lawsuit against the company, which seeks to hold Massey executives and board members liable for the diminished value of the company.
In their ruling, the West Virginia justices said they reviewed the case documents during the Memorial Day weekend and met on the holiday "to extensively consider this matter." But they wrote that the case belongs back in Kanawha County Circuit Court, where a judge did not respond last week to a request for a hearing, and/or in the Delaware Chancery Court, which is already considering a similar case filed by other institutional shareholders.
"This court does not have jurisdiction to award an injunction in this matter," the justices wrote, because it is an appellate court and the case did not go through a full hearing process in a lower court.
The court also said it could not issue a ruling that would affect Alpha Natural Resources because the company was not named as a party in the West Virginia case.
The ruling also gives NPR and the Charleston Gazette a partial victory in their joint motion asking that the court release publicly sealed documents in the case. The justices unsealed the initial injunction request filed by the institutional shareholders and the response filed by some of the targeted Massey executives and board members, and former CEO Don Blankenship. But appendices that include transcripts of depositions in the case, which are believed to contain new information about the merger and Massey Energy's safety practices, were not unsealed.
"In the absence of findings of fact and conclusions of law with by the lower court," the justices wrote, "this Court is not able to determine what, if any, portion of the appendices was determined to be confidential by the lower tribunal, or any tribunal, or what if any portions of the appendices are currently subject to a protective order."
The case documents were filed with a request to keep them sealed as part of a confidentiality agreement between the institutional shareholders and the Massey executives and board members who provided depositions. Court documents filed in this way are considered sealed until the court rules on whether they should become public.
The partial unsealing of court documents "is a significant decision in favor of transparency in our courts," says Sean McGinley, who represents NPR and the Charleston Gazette in the case. "While we believe the Court should have released all of the documents and evidence in the case, and we believe the trial court should do that now that the case has been sent back to Kanawha County Circuit Court, this also is an important decision because it allows the public and the press to be informed of at least some of the evidence the shareholders have gathered from Massey concerning Massey's safety record and its management's actions in light of the Upper Big Branch tragedy, and how those facts may play into the decision of Massey to merge with Alpha Natural Resources."
We'll have more on the contents of the unsealed documents in The Two-Way after reviewing them.
The Delaware Chancery Court held a hearing in the case last week and is expected to rule as early as today. Judge Leo Strine did not seem sympathetic to the institutional shareholders in that case, which include the New Jersey Building Laborers Pension Fund:
"Any investor who invested in Massey...knew the managerial culture it was buying into," Strine said. "And knew that you had people who believed that their way of doing it was better than the people charged with enforcing the law."
Here are the injunction request, the response to that request and today's court ruling. Click on the titles in each box to enlarge them: