UPDATE 3-U.S. courts will not block Massey-Alpha deal
* West Virginia, Delaware court refuse to block merger
* Shareholders to vote Wednesday to approve deal
* Merger creates second-largest U.S. coal company (Updates with Delaware court refusing to block deal, details from Delaware ruling in paragraphs 7-9, 18-19, adds WILMINGTON to dateline)
By Tom Hals and Steven Allen Adams
WILMINGTON, Del./CHARLESTON, W.Va, May 31 (Reuters) - Coal miners Massey Energy Co MEE.N and Alpha Natural Resources Inc (ANR.N) cleared legal hurdles to their $7 billion merger on Tuesday after courts in West Virginia and Delaware refused to block the deal.
The rulings by West Virginia's Supreme Court of Appeals and Delaware's Chancery Court cleared the way for shareholders to vote to approve the deal on Wednesday.
The merger would create the second-largest U.S. coal miner by market value, and will bring to a close Massey's recent history marked by piles of citations for safety violations.
An accident at Massey's Upper Big Branch mine in West Virginia last year killed 29 people and sent the company's stock tumbling from $54 per share to below $30 per share.
Several large pension funds asked the courts to block the merger, arguing that the deal could bar them from suing the Massey board over allegations that directors damaged the company by tolerating dangerous mining conditions.
The shareholder "derivative" lawsuits also contend that the company is being sold for far less than it is actually worth.
Delaware judge Leo Strine wrote in an 81-page opinion it was not necessary to determine whether shareholders would lose the right to sue Massey's board before the closing of the deal.
He agreed with the plaintiffs that Massey's directors failed to grasp the value of the shareholders' claims, which he wrote was regrettable.
However, Strine went on to say he did not think the claims were material in value compared with Massey's overall value.
Stuart Grant, an attorney with law firm Grant & Eisenhofer which represented a pension fund in the Delaware case, estimated those claims could be worth $400 million.
The Supreme Court of Appeals ruled early on Tuesday that it did not have jurisdiction to consider the case.
Massey and Alpha did not immediately return calls for comment.
The combined company will operate approximately 150 mines and the be the largest U.S. supplier of metallurgical coal, which is used in steelmaking.
"SECRET PACT" DOCUMENT UNSEALED
The West Virginia high court did rule that documents in the case should be unsealed, as requested by broadcaster National Public Radio and The Daily Gazette newspaper.
The unsealed documents allege Massey's executives issued "a misleading proxy statement" by hiding a secret pact between Massey's chairman, Bobby Inman, and Alpha CEO Kevin Crutchfield over the hiring of certain executives.
Crutchfield told Inman it would not be a problem to hire executives who are defendants in the two cases or officials who were operating the Upper Big Branch mine at the time of the accident.
"Shareholders (and the public) are currently unaware of this fact or the fact that these two operators' hiring was part of a broader secret pact between Inman and Crutchfield through which Alpha would hire the Massey Energy executives most culpable for participating in (or covering up) illegal conduct implicated in the UBB disaster," one of the documents said.
Strine rejected the claim that the merger was struck largely to end the lawsuits against the management.
"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 derivative claims or to insulate themselves from liability," he wrote.
Shares of Massey closed 3.1 percent higher at $66.00 and Alpha shares ended up 3.2 percent at $54.79. Both trade on the New York Stock Exchange.
The Delaware case is: In re Massey Energy Co. derivative and class action litigation, Delaware Chancery Court, No. 5430.
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