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In late July at his company’s summer picnic at a park in Charleston, W.Va., the chairman and CEO of Massey Energy Co. told thousands of employees that Massey was being criticized, but that they should not lament. “Remember, too, that the enemies of prosperity and goodness can assassinate our reputation but they can never assassinate our character,” Don L. Blankenship told a crowd estimated at 15,000, counting employees and their family members. He appeared to be referring to negative media coverage, but he may as well have been addressing what was to come a few days later. On Aug. 1, in a courtroom in Madison, W.Va., in Appalachian coal country, a jury of six found Massey liable for $50 million to Harman Mining Corp. and related companies and owner Hugh Caperton. The jury found that Richmond, Va.-based Massey, the nation’s fifth-largest coal mining company, had acted fraudulently and tortiously interfered with the business of Harman by declaring “force majeure” to escape from a subsidiaries’ contract with Harman. The result was that Harman Mining had to declare bankruptcy and went out of business. A further result, explained Caperton’s lawyer, Bruce E. Stanley of Reed Smith, is that Caperton was essentially blacklisted from the coal business because his company’s bankruptcy led to violations of federal mining laws. “They caused Hugh Caperton to lose his mining permit and he can’t even mine coal anymore,” said Jimmy Berry, a member of the jury, who needed only five hours after a seven-week trial to find Massey liable. He said Blankenship did not help his case when he testified about the millions in salary and bonuses he was paid and about Massey’s $1.2 billion in sales in 2001. “Some people thought it was arrogance,” said Berry, a 51-year-old coal mine electrical inspector who makes $23 an hour. THE DISPUTE The underlying dispute in the case is complex, having arisen from Massey’s purchase of Wellmore Coal Corp. and its parent, United Coal Co. Inc., in 1997. At the time, Harman had an exclusive, long-term contract to sell all of its coal to Wellmore. Harman’s coal was sold by Wellmore to LTV Steel Co., which used it to make steel. After LTV announced plans to cut back production, the plaintiffs contended at trial, Blankenship decided to declare force majeure on Dec. 1, 1997. This was to allow Wellmore to limit severely its purchase of coal from Harman — and in turn, benefit Massey’s own coal business, the plaintiffs claimed. Before and after this declaration, Caperton and Blankenship negotiated the possible sale of Harman to Massey, but the deal never happened. In court papers, the plaintiffs claimed “Massey exercised extreme bad faith in its dealing with Caperton and acted at all times in a manner consistent with its corporate policy of eliminating competitors and with the hope of driving Caperton and Harman out of business.” The jury — in awarding $34.7 million in damages, including $2 million in punitives, to Harman, and $15.3 million, including $4 million in punitives, to Caperton — made it clear it believed Harman’s argument. “We thought Mr. Caperton should be reimbursed for what he had lost,” Berry said. Stanley said he and his co-lead counsels — Reed Smith partner Tarek F. Abdalla and David B. Fawcett of Pitsburgh’s Buchanan Ingersoll — called about 15 witnesses to the stand to make their case. Stanley said Caperton was the key witness, explaining, “The case is as good as Hugh Caperton’s credibility.” He said Caperton laid out the story in which he believed Blankenship deceived him during negotiations about the possibility of Massey buying Harman. He said Caperton testified that he was the sole owner of Harman and that he had personally guaranteed $4.5 million in bank loans and equipment for Harman. Because of this, Stanley said, his client’s net worth went from more than $6 million to “essentially nothing.” Stanley also said he believed Blankenship’s testimony helped his case. “I’ve never heard answers come out of the mouth of a chief executive officer like the answers I heard come out of his mouth,” Stanley said. He said Blankenship acknowledged on the stand that if Massey’s coal sales were cut by 64 percent — the percent Harman’s sales were cut by the force majeure — it would destroy the company. “Surprise, surprise,” Stanley said. “My client had two-thirds of his contract cancelled … and my client had to go out of business. He knew it would force Harman out of business.” MASSEY’S RESPONSE In a statement on Massey’s Web site, Blankenship said, “We are shocked and discouraged by the jury’s decision. We continue to believe that Massey’s actions were an appropriate exercise of our legal rights. We find especially discouraging a damage award so clearly excessive and we intend to vigorously appeal.” Blankenship did not return a call seeking further comment. Massey’s lead counsel, Jeff. A. Woods of Louisville, Ky.’s Wyatt, Tarrant & Combs, was on vacation and could not be reached. James Gardner, Massey’s executive vice president and chief administrative officer and the company’s former general counsel, said Massey believes that Judge Jay Hoke, who presided over the case, never should have let it be tried. “We took the position and still believe it would have been appropriate for these claims to have been dismissed,” said Gardner, who attended part of the trial. He said Massey exercised its valid rights under the contract by declaring force majeure, adding that he believed Harman was attempting to turn a simple commercial dispute into a claim for tortious interference and fraud. In an earlier trial between Harman and Massey, a jury in Buchanan County, Va., in August 2000, found that Massey had breached its contract with Harman by declaring force majeure. The jury awarded Harman $6 million. Gardner said that Massey has appealed that verdict to the Virginia Supreme Court and that it is awaiting a decision. In the West Virginia case, Massey will seek a new trial before Hoke. If Massey is denied, it will file an appeal with the West Virginia Supreme Court, but there is no guarantee the appeal will be heard. There is no intermediate appellate court in West Virginia and the state supreme court accepts appeals on a discretionary basis.

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