Trial To Resume In Lawsuit Against Governor's Coal Companies

West Virginia Gov. Jim Justice gives a speech during a Department of Tourism conference Wednesday, Sept. 19, 2018, at the Morgantown Event Center.

DOVER, Del. (AP) — A virtual trial pitting billionaire coal magnate and West Virginia Gov. Jim Justice and two of his family-owned coal companies against a Pennsylvania coal exporter is set to resume in Delaware next week after being interrupted by an anonymous letter containing purported whistleblower allegations against the Pennsylvania company.

A federal judge on Tuesday ordered the bench trial to resume Sept. 15 and denied a request by attorneys for Gov. Justice to reopen information gathering in the case so attorneys could investigate allegations contained in the letter. The judge ordered attorneys to file short written submissions by Thursday on the admissibility of the letter if it is offered into evidence, and on any other use of the letter he should permit.

The lawsuit was filed in 2018 by Latrobe, Pennsylvania-based Xcoal Energy & Resources. The company claimed Justice and two of his companies, Roanoke, Virginia-based Bluestone Energy Sales Corp. and Southern Coal Corp., failed to meet their obligations under a 2017 agreement to deliver hundreds of thousands of tons of coal for shipment overseas.

The defendants contend Xcoal breached the agreement in several ways, including unreasonably rejecting shipments of coal and making unreasonable shipment demands that exceeded Bluestone’s capabilities. The Justice companies also argue that Xcoal has a history of being sued by other companies in the coal industry for failing to pay for or deliver shipments, then trying to blame the other party.

The trial began Aug. 25 but was quickly knocked off course when one of Justice’s attorneys informed the judge after opening statements about the letter he had received earlier that morning.

The one-page letter alleges that Xcoal founder and CEO Ernie Thrasher settled an earlier lawsuit by signing a new coal sales agreement with Bluestone with no intention of meeting Xcoal’s contractual obligations. The letter claims Thrasher’s plan was to force Bluestone to default through delayed coal shipments and withheld payments so Xcoal could collect a $10 million guarantee from Justice.

The letter also suggests that Thrasher contrived to not accept shipments from Bluestone by obtaining false lab reports about the chemical composition of the coal, that Xcoal had someone “inside” coal-testing company SGS, and that Rick Taylor, an Xcoal consultant, directed the lab to falsify results. The letter also claimed Norfolk Southern railway granted “favored treatment” and “special rates” to Xcoal.

The letter, dated Aug. 14 and bearing an Aug. 19 postmark from Pittsburgh, was signed “XCOAL WHISTLE BLOWER.”

Chief District Judge Leonard Stark directed attorneys to discuss how and whether the defendants are going to provide Xcoal access to the original letter and the envelope in which it was sent. Attorneys for the Justice companies have posted notices asking the whistleblower to come forward and have retained a security consultant who has developed a forensic plan to identify the whistleblower through fingerprint and DNA testing and other means.

Stark also ordered the unsealing of letters attorneys for Xcoal had filed with the court on Aug. 31 and Sept. 2 in response to the letter, saying Xcoal “has not even attempted” to meet its burden of showing why the letters should be withheld from public view.

An attorney for Xcoal told Stark on Aug. 25 that the circumstances surrounding the letter were “unbelievably coincidental,” and it looked like “a total setup” by people trying to falsely attribute things to Thrasher.

Attorneys for the Justice companies meanwhile sought a 45-day postponement of the trial to conduct additional discovery. Attorneys for Xcoal joined in the request with “great reluctance,” but later changed their minds.

Stark noted Tuesday that attorneys for the Justice companies already have deposed witnesses including Thrasher and Taylor and have taken other discovery involving their suspicions that Xcoal had not acted in good faith and had conspired with the testing lab. Stark said the letter contained no established facts that might merit additional information gathering, but only “unproven, anonymous allegations.” He noted that while the allegations might be “entirely true,” they could also be “entirely false” and fabricated by someone seeking to disrupt the trial.

“To the extent that reopening discovery and delaying resumption of the trial might be misunderstood as an invitation for anonymous submissions near or during the start of trials, that misinterpretation would plainly harm judicial economy and severely hamper the court’s control over its schedule,” Stark wrote.

Last month, Stark denied a request by attorneys for the Justice companies to delay the virtual non-jury trial. They argued that it was important for witnesses to testify live in the courtroom, and the trial should be postponed indefinitely until a time that it can be done safely.