Court ruling potentially forgives Blackjewel some cleanup obligations

EASTERN KENTUCKY (Law360) – A West Virginia bankruptcy judge has approved an amended Chapter 11 liquidation plan for coal mining company Blackjewel LLC after allowing it to abandon mine cleanup obligations.

According to a report by Rick Archer with Law360, U.S. Bankruptcy Judge Benjamin A. Kahn approved Blackjewel’s liquidation plan Monday, clearing the way to wind down the West Virginia-based company after 18 months in Chapter 11.

West Virginia-based Blackjewel filed for Chapter 11 in July 2019, saying it had been dealing with years of market pressure and increased costs before hitting a severe liquidity crisis sparked by a senior lender’s refusal to extend a $28 million term.

Blackjewel’s initial plan contained provisions for a trust to fund mine reclamation efforts, but on Friday Judge Kahn gave Blackjewel the go-ahead to abandon cleanup obligations at 33 coal mines in Kentucky.

Judge Khan also set a timer on its obligations for 171 further mine cleanups in Kentucky, Tennessee, Virginia and West Virginia. If ownership of those mines isn’t transferred to new owners within six months, the judge indicated those cleanup obligations can be abandoned as well.

The plan would pay remaining creditors with the remaining estate assets and any proceeds from ongoing litigation, including an adversary action against United Bank claiming the bank improperly interfered with its post-petition financing and an action against former CEO Jeff Hoops Sr. alleging he engaged in a “years-long” effort to transfer cash and assets to himself and his relatives as the company went under.

The company is seeking to claw back funds transferred to Hoops, his family members and associated entities via below-market asset sales, above-market invoices for services, grants and payments of royalties, and purported loans and advances.

Blackjewel claimed in 2019 that it made $41 million worth of alleged loans and advances to Hoops and an associated corporation without documentation or the approval of the board of directors. In just the three months before the Chapter 11 filing, $7 million in cash and property were transferred to “Hoops-related entities,” they said.

The plan documents also note that in September 2019 the company reached a $19.4 million settlement of claims it fired 1,000 employees without warning in violation of the federal Worker Adjustment and Retraining Notification Act.

Counsel for Blackjewel declined to comment Tuesday.

Blackjewel is represented by Scott A. Kane, Stephen D. Lerner, Maura P. McIntyre and Travis A. McRoberts of Squire Patton Boggs LLP and Joe M. Supple of the Supple Law Office PLLC.

The case is In re: Blackjewel LLC et al., case number 3:19-bk-30289, in the U.S. Bankruptcy Court for the Southern District of West Virginia.

–Additional reporting by Mike Curley and Clark Mindock. Editing by Ellen Johnson.