UPDATE 2-US court: Recusal required in Massey Energy case

* Setback for Massey Energy in coal contract dispute case

* Court's four leading conservatives dissented

* Massey confident new judge will uphold verdict

* Massey stock down 6 percent (Adds Massey comment, paragraphs 6-9)

By James Vicini

WASHINGTON, June 8 (Reuters) - The U.S. Supreme Court ruled on Monday that a West Virginia judge should have disqualified himself from an appeal of a $50 million jury verdict against Massey Energy Co (MEE.N) because the coal mining company's CEO had been a major campaign donor.

By a 5-4 vote, the justices held that West Virginia Supreme Court of Appeals Justice Brent Benjamin should have removed himself from deciding the case because Massey Chief Executive Don Blankenship had spent $3 million to help him get elected to the court.

"We find that, in all the circumstances of this case, due process requires recusal," Justice Anthony Kennedy concluded for the court majority, adding that there was a serious, objective risk of bias requiring that the judge remove himself from the case.

The top U.S. court determined that the West Virginia Supreme Court revisit its 2008 ruling that reversed a 2002 verdict by the Boone County circuit court to award $50 million to Harman Mining Corp and its president, Hugh Caperton.

Massey's stock was down 6 percent at $22.40 in afternoon trading on the New York Stock Exchange on a day when other coal company stocks were down between 2 and 4 percent.

But the company, one of the "Big Four" U.S. coal producers, said it was confident a different judge would also rule in the company's favor.

"While we are disappointed in the outcome of the Court's close vote, our outlook about the ultimate resolution of this legal matter remains positive," Shane Harvey, Massey's General Counsel, said in a statement.

"We are confident that the Harman case was properly decided by the West Virginia Supreme Court initially and believe that any new examination of the same facts and same laws by new justices should yield the same result as before."

Benjamin twice was in the majority in 3-2 decisions that overturned the $50 million jury verdict against Massey in a coal contract dispute with Harman Mining.

Blankenship had earlier spent $3 million supporting Benjamin's campaign for a seat on the court while opposing the incumbent. As a judge, Benjamin refused to recuse himself from the case, saying he could be fair and impartial.

Harman Mining has said it was forced into bankruptcy by Massey's fraudulent business practices. Massey has rejected the claims, denying responsibility for the bankruptcy.

Harman Mining cited the appearance of bias by Benjamin and said its constitutional due process rights had been violated.

Richmond, Virginia-based Massey said there were no allegations that the campaign expenditures had caused any bias on Benjamin's part.

Blankenship has said he barely knows Benjamin. Benjamin's defenders have said he has voted against Massey in several other cases, including a decision not to review a $244 million judgment against the company.

Supreme Court Chief Justice John Roberts and Justices Antonin Scalia, Clarence Thomas and Samuel Alito dissented.

The decision comes amid growing concern about the role money has come to play in electing state judges, with increasingly costly campaigns.

Thirty-nine states elect at least some of their judges and have varying standards on when a judge should be be recused. Most states, like West Virginia, let the individual judge decide. (Additional reporting by Steve James in New York, Editing by Lisa Von Ahn, Leslie Gevirtz)