* 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
By Tom Hals and Steven Allen Adams
WILMINGTON, Del./CHARLESTON, W.Va, May 31 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
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
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
"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.
The West Virginia case is California State Retirement
System et al v Don L. Blankenship et al, No. 11-0839.
(Writing by Tom Hals and Steve James, editing by Dave
Zimmerman and Matthew Lewis)