Wheeling-Pitt writes latest chapter in WP/CWVEC saga

Wheeling-Pitt writes latest chapter in WP/CWVEC saga

A lawsuit filed Wednesday (April 27) by Wheeling-Pittsburgh Steel Corporation (WP) against Massey Energy subsidiary Central West Virginia Energy Company (CWVEC) contends that beginning in late 2003 and continuing to the present, CWVEC has been in breach of a long-term coal supply agreement. WP alleges the violations forced them seek coal on the spot market at significantly higher prices than under its agreement with CWVEC. This, WP claims, has caused them undue substantial monetary damage. Says WP Chairman and CEO, James G. Bradley, “This lawsuit is necessary to enforce a critically important contract to this company’s future, and to protect our 3,400 employees who have sacrificed to rebuild Wheeling-Pittsburgh Steel into a successful company in a very competitive steel industry.” In 2002, as WP was undergoing its bankruptcy reorganization process, WP and CWVEC entered into a bankruptcy-court-approved agreement that extended to 2010 a ten-year contract signed between the two companies in 1993. Under the terms of the new agreement, WP agreed to pay Massey’s pre-petition receivable of $7.2 million in 60 equal monthly installments. While the lawsuit may seem clear-cut, there is a pronounced history of legal wrangling between the two companies. CWVEC and WP first entered into a ten-year agreement in November 1993. Pursuant to that contract, CWVEC agreed to supply WP with high-volatile coking coal. Subsequently, the two companies negotiated to enter into a new contract. In late 2001, CWVEC made legal overtures to compel WP to make a decision to assume or reject their agreement. In a December 2000 letter of agreement signed between the two companies, CWVEC agreed to resume shipments of coal and WP agreed to pay for each shipment upon delivery. Thereafter, both companies entered into negotiations to reach a new supply agreement to replace the current contract. The result was a January 2001 letter of intent whereby CWVEC agreed to supply all of WP’s coking coal requirements from February 1, 2001, to December 2005. CWVEC continued to supply WP with coal after the letter of intent was signed; however, WP failed to finalize a new contract or otherwise honor the terms of the letter. As a Chapter 11 debtor at the time, WP had the power to assume or reject the contract at any time before confirmation of a plan of reorganization. The US Bankruptcy Code also permits parties such as CWVEC to seek a court order requiring WP to assume or reject within a shorter period of time. CWVEC sought an order compelling WP to assume or reject the contract after WP obtained three extensions on the exclusivity agreement that originally expired in March 2001. By repeatedly extending their agreement, WP also indefinitely extended the time in which it had to decide to assume or reject the contract. Consequently, CWVEC could not enter into any long or short term contracts with other companies at prevailing market prices, nor could it rely on WP’s continued purchase of coal because of WP’s right to accept or reject the contract at any time. CWVEC contended in its motion that WP enjoyed the benefits of purchasing coal at sub-market prices without being legally bound by a contract. In a December 2001 ruling, Judge William T. Bodoh issued an opinion and order on the compelling motion filed by CWVEC. In his opinion, Bodoh found that “reasonable steps have been taken by Debtor (WP) to reach a proposed plan of reorganization” and there had not been an unreasonable period of time for WP to assume or reject the agreement.