Judge threatens to throw out lawsuit seeking $8M+ from Justice coal companies

Vyskocil said Federal Insurance, which claimed the U.S. Court for the Southern District of New York had jurisdiction in part because the dispute was between parties from different states, did not properly submit the states where each defendant has its principal place of business. Vyskocil noted that if one of the defendants had its principal place of business in Indiana — like Federal Insurance — federal jurisdiction would be destroyed.

The defendants, in addition to Justice, include:

• Bluestone Resources Inc., registered with the West Virginia Secretary of State’s Office as having a Daniels, West Virginia, principal office address
• Bluestone Energy Sales Corp., listed in Justice’s 2024 West Virginia Ethics Commission financial statement as having a Roanoke, Virginia, principal office address
• Southern Coal Corp., registered with the Secretary of State’s Office as also having a Roanoke principal office address
• Beech Creek Coal Corp., also listed in Justice’s 2023 Ethics Commission financial statement as having a Roanoke principal office address

The lawsuitFederal Insurance said in its lawsuit filed in June 2023 it lost $8.1 million because the governor and his companies violated an indemnity agreement.

The company’s lawsuit is connected to another in which a Pennsylvania coal marketing company says Justice’s business empire has failed to abide by a seven-figure court judgment against it.

The coal marketing company, XCoal Energy & Resources, told another federal court that Justice and two of his family coal companies haven’t indicated that $1.9 million was forthcoming following a 2021 court finding that a Justice coal company violated a coal supply agreement.

In March 2021, the U.S. Court for the District of Delaware ruled Latrobe, Pennsylvania-based Xcoal was entitled to $6.8 million and later increased that amount to just over $10 million after accounting for interest and attorney’s fees and costs.

Xcoal later collected $8.1 million from a bond issued as Justice and Bluestone Energy Sales and Southern Coal unsuccessfully appealed the judgment.

In its June 2023 complaint, Federal Insurance said Justice, Bluestone Energy Sales and Southern Coal are liable for the $8.1 million after Federal named them as principals and Xcoal the obligee in a May 2021 indemnity agreement.

Federal said that Justice and the coal companies agreed to indemnify Federal against all liability and expenses incurred by Federal as a result of having issued the bond, citing the indemnity agreement included as a court exhibit. The agreement includes signatures from Justice and his son James C. “Jay” Justice III, president of the coal companies.

Other recent legal matters

Justice’s business and personal finances have been imperiled in recent months by long-lingering liabilities playing out in legal challenges.

On June 20, a Delaware federal court order put wide-ranging Justice energy business assets on a fast track toward receiver control to satisfy debt in another federal case. The order approved the sale of shares of a key holding company in Justice’s business empire to satisfy what has been an eight-figure debt owed by a Justice coal company to Caroleng Investments Ltd., a British Virgin Islands firm the Delaware court in June 2021 ordered Bluestone Resources to immediately pay $10.1 million plus 9% interest from May 2020 until the sum is paid.

In May, a Virginia federal court approved the sale of a helicopter Bluestone Resources had owned for $1.4 million to go toward satisfying the Bluestone debt to Caroleng.

Last week, a Kentucky tobacco warehouse company pressed a federal court for relief at the expense of two of Justice’s companies in a 12-year-old lawsuit in which the companies have been found to owe over $18 million plus interest and attorney fees.

Also last week, the Justice family and a Virginia bank announced the settlement of a dispute in which the bank, Carter Bank & Trust, has sought more than $300 million in debt from the Justices.

Both sides cited a “pathway of curtailment” in a planned payoff of the debt, with the bank reporting the Justices had paid off roughly $7.8 million of a $301.9 million debt as of the end of the first quarter, with $294.1 million remaining.

In January, a Virginia circuit court judge formally denied attempts by Justice, his family and businesses to set aside documents admitting over $300 million of debt owed to the bank. Terms of the Justices’ settlement with Carter Bank are confidential “per mutual agreement,” the Justice family and companies said in their statement.