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Canadian steel company says Justice-owned companies are all one

CHARLESTON — A Canadian steel manufacturer suing several companies owned by Gov. Jim Justice said an effort to remove some of those companies from the suit should not be granted.

Attorneys for Essar Steel Algoma Inc. filed a response Friday to a motion to dismiss 12 companies owned by Justice and managed by son Jay Justice from a lawsuit against Southern Coal Sales Corp.

Algoma, the second largest steel manufacturer in Canada, alleges that Southern Coal Sales violated an agreement to supply 780,000 tons of coal, amounting to more than half of Algoma’s annual needs. Instead, Algoma claims that Southern Coal Sales only supplied 31 percent of the coal agreed to in the 2015 contract.

The suit, previously filed in U.S. Bankruptcy Court for the District of Vermont, was transferred to the U.S. District Court for the Southern District of New York in 2017. Algoma amended the complaint in 2018 to go after Southern Coal Sales and other Justice-owned companies. Algoma is asking for a judgment of $6.7 million.

Twelve of Justice’s companies filed a motion June 24 to dismiss the lawsuit, claiming that they had not no responsibility for the deal between Algoma and Southern Coal Sales and that they were not alter egos for Southern Coal Sales.

The companies seeking dismissal are: James C. Justice Companies Inc.; James C. Justice LLC; Bluestone Industries Inc.; Bluestone Coal Corp.; Bluestone Mineral Inc.; Bluestone Energy Sales Corp.; A & G Coal Corp.; Tams Management Inc.; Encore Leasing LLC; Bluestone Resources Inc.; Justice Family Farms LLC; and Southern Coal Corp.

In Friday’s response, attorneys for Algoma argue that Southern Coal Sales and the 12 other Justice-owned companies didn’t act like separate entities, but functioned as one company, sharing assets, resources, employees, email addresses, and moving money from one company to another. That makes the 12 Justice-owned companies alter egos of Southern Coal Sales, Algoma alleges.

“The first prong of the alter-ego analysis is satisfied as it requires those in control of the company treat it as a separate economic entity,” according to Algoma’s filing. “The (complaint) alleges that the Alter Ego Defendants had overlapping officers, directors, office locations, and employees.”

“Employees of (Southern Coal Sales) and the Alter Ego Defendants say they worked ‘for all of the companies’ and received paychecks from ‘Bluestone,’ which they regarded as the ‘same thing’ as (Southern Coal Sales), and Jay Justice, who owns ‘the family business,’ could not remember which entity paid him,” the filing continued.

This interconnectivity, Algoma alleges, was evident in its dealings with Southern Coal Sales. The company claims that interactions with Southern Coal Sales by email came through Bluestone Resources email addresses and electronic signatures. Some invoices sent to Algoma came through Bluestone instead of Southern Coal Sales, with payments sent to a different Justice entity, Bluestone Coal Sales.

According to the filing, a payment by Algoma to Southern Coal Sales for $54 million in 2016, the payment was reported on a different Justice company’s tax return. Algoma claims that its payments to Southern Coal Sales were immediately distributed to other Justice-owned companies.

“Millions of dollars paid by Algoma to (Southern Coal Sales) was immediately transferred to the Alter Ego Defendants,” Algoma’s attorneys wrote. “All of this siphoning was done at the behest of Jay Justice, who told Bluestone Industries, Inc.’s treasury department, which also handled (Southern Coal Sale’s) money, ‘what they are supposed to do’ with the money. (Southern Coal Sales’s) undercapitalization resulted in its inability to satisfy its contractual obligations and rendered it purposely judgment-proof.”

Algoma’s attorneys pushed back against a defense by the 12 Justice-owned companies that claimed that their corporate structure is not uncommon among coal companies in the U.S.

“Notably, the Alter Ego Defendants offer no legal authority for this new ‘everyone is doing it’ defense to alter ego liability,” Algoma’s attorneys wrote. “Just because other entities in the coal industry allegedly intertwine corporate structures does not mean that the intertwined entities are not also alter egos. Put another way, all the Alter Ego Defendants have managed to establish is that other unidentified entities in the coal industry may also be subject to alter ego liability.”

Companies owned by Gov. Justice and managed by his son have had to fight back several attempts in the federal courts recently to pierce the corporate veil and either sue other Justice-owned companies or go directly after the Justice family.

In May, Justice Energy came to a deal with U.S. District Court Judge Irene Berger on a civil contempt penalty after the U.S. Attorney’s Office for the Southern District of West Virginia filed a motion to pierce the corporate veil. Last week, several Justice-owned companies filed a motion to be dismissed from a complaint filed by a U.S. Attorney’s Office in Virginia over millions of dollars in unpaid mine safety penalties.

Steven Allen Adams can be reached at sadams@newsandsentinel.com

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