Shareholder Derivative Action Against Massey Energy Dismissed

On September 30, 2009, the United States District Court for the Southern District of West Virginia dismissed the complaint in Mercier, et al. v. Blankenship, et al., a shareholder derivative action. Cravath is representing the current and certain outside directors of Massey Energy Company and the Company as the nominal defendant in connection with this suit.

Plaintiff Vernon Mercier, a purported shareholder of the Company, primarily alleged that the directors consciously refused to exercise their fiduciary duties to oversee the affairs of the Company and its subsidiaries, resulting in violations of environmental and safety laws and regulations. In addition, Mr. Mercier alleged that the directors violated their fiduciary duties by approving a settlement in a parallel state court derivative action and further breached their fiduciary duties by failing to comply with the terms of that settlement. Finally, Mr. Mercier alleged that the directors breached their fiduciary duties by approving excessive compensation for the Company’s Chairman and CEO, Don L. Blankenship.

Judge David A. Faber granted defendants’ motion to dismiss, holding that Mr. Mercier’s claims were precluded by the terms of the settlement of the parallel state court action and that, to the extent his claims were not precluded, Mr. Mercier had failed to demonstrate that a demand on the Board would have been futile. Judge Faber also stated that he was withholding issuance of his Judgment Order so that he could consider defendants’ motion for sanctions against Mr. Mercier and his attorneys under Federal Rule of Civil Procedure 11. The Cravath team included partner Ronald S. Rolfe and associate Sean K. Thompson.