IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA ROANOKE DIVISION UNITED STATES OF AMERICA, Plaintiff, v. SOUTHERN COAL CORPORATION; A & G COAL CORPORATION; JUSTICE COAL OF ALABAMA LLC; BLACK RIVER COAL LLC; CHESTNUT LAND HOLDINGS LLC; DOUBLE BONUS COAL COMPANY; DYNAMIC ENERGY INC.; FOUR STAR RESOURCES LLC; FRONTIER COAL COMPANY, INC.; INFINITY ENERGY INC.; JUSTICE ENERGY COMPANY, INC.; JUSTICE HIGHWALL MINING, INC.; KENTUCKY FUEL CORP., KEYSTONE SERVICES INDUSTRIES INC.; M & P SERVICES, INC.; NINE MILE MINING COMPANY, INC.; NUFAC MINING COMPANY, INC.; PAY CAR MINING INC.; PREMIUM COAL COMPANY, INC.; S AND H MINING, INC.; SEQUOIA ENERGY, LLC; TAMS MANAGEMENT, INC.; VIRGINIA FUEL CORP., ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) Case No. 7:19-cv-00354 Defendants. UNITED STATES’ RESPONSE IN OPPOSITION TO DEFENDANTS’ MOTION TO DISMISS The United States of America brought this action against 23 mine operating companies— Southern Coal Corporation, A&G Coal Corporation, Justice Coal of Alabama LLC, Black River Coal LLC, Chestnut Land Holdings LLC, Double Bonus Coal Company, Dynamic Energy Inc., Four Star Resources LLC, Frontier Coal Company, Inc., Infinity Energy Inc., Justice Energy 1 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 1 of 18 Pageid#: 108 Company, Inc., Justice Highwall Mining, Inc., Kentucky Fuel Corp., Keystone Services Industries Inc., M & P Services, Inc., Nine Mile Mining Company, Inc., Nufac Mining Company, Inc., Pay Car Mining Inc., Premium Coal Company, Inc., Premium Coal Company, Inc., S and H Mining, Inc., Sequoia Energy, LLC, TAMS Management, Inc., and Virginia Fuel Corp. (collectively, “Defendants”)—to collect unpaid civil monetary penalties assessed under the Mine Safety and Health Act of 1977, as amended, 30 U.S.C. § 901, et seq. (“Mine Act”), and the Federal Debt Collection Procedures Act (“FDCPA”), 28 U.S.C. § 3001, et seq. In response to the Complaint, nine of the defendant companies filed a Motion to Dismiss for Lack of Personal Jurisdiction. ECF No. 4. The Court should deny the Motion to Dismiss because the FDCPA creates nationwide jurisdiction to enforce debts owed to the United States. Moreover, the Court should deny the Motion for the independent reason that it has both general and specific personal jurisdiction over the companies. INTRODUCTION On May 7, 2019, the United States filed this action against 23 mine operators for their failure to pay penalties for violations of the Mine Act at 51 mines across five different states. Fourteen of the defendants answered the Complaint. The following nine defendants moved to dismiss for lack of personal jurisdiction: Double Bonus Coal Company, Dynamic Energy, Inc., Frontier Coal Company, Justice Energy Company, Justice Highwall Mining, Inc., Keystone Services Industries, Inc., M&P Services, Inc., Nufac Mining Company, Inc., and Pay Car Mining Company, Inc. (collectively, “Movants”). See ECF No. 4. Each Movant argues—some in flat contradiction to their own court filings in other cases in this district—that the Court lacks general personal jurisdiction because the company is not incorporated in Virginia and allegedly does not maintain its principal place of business in Virginia. See Mem. in Supp. at 1–3, ECF No. 5. Each 2 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 2 of 18 Pageid#: 109 Movant also argues the Court lacks specific personal jurisdiction because the company has not allegedly availed itself of Virginia and because the mines operated by the company are outside Virginia. Id. at 9–15. The Movants filed a sworn affidavit by their parent company’s (Bluestone Resources, Inc.) Chief Operating Officer (“COO”) in support of these arguments. Lusk Aff. ¶¶ 1, 3, ECF No. 5-1. COO Lusk swears that each Movant is a subsidiary of Bluestone and purportedly has its principal place of business in Daniels, West Virginia. Id. He also swears that the accounting functions for the Movants are performed in Daniels, West Virginia. Id. 3 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 3 of 18 Pageid#: 110 Id. Movants’ expedient assertions are belied by their sworn statements in other cases, as detailed below. First, four of the Movant companies stated to this Court in May 2019 that they have their principal places of business in Roanoke, Virginia, not in Daniels, West Virginia. On May 17, 2019, four of the nine Movants—Dynamic Energy, Frontier Coal, Justice Energy, and Pay Car Mining—explicitly invoked this Court’s jurisdiction in a complaint for declaratory judgment against the United States Office of Surface Mining Reclamation Enforcement, Department of Interior (“OSMRE”). See Complaint, James C. Justice III v. OSMRE, No. 7:19cv381 (W.D. Va. May 17, 2019), attached as Exhibit A (hereinafter “OSMRE complaint”). Legal counsel for the mine operating companies in the case against OSMRE is the same legal counsel for the companies in the present case. Indeed, the OSMRE complaint was signed by that same attorney who signed the present Motion to Dismiss. As shown below, in the OSMRE complaint, the Movants state that Dynamic Energy, Frontier Coal, Justice Energy, and Pay Car Mining each have their principal places of business in Roanoke, Virginia. Id. ¶¶ 5, 6, 7, 10. 4 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 4 of 18 Pageid#: 111 Ex. A at 2–3. Second, two of those same companies, along with two other Movants, availed themselves of this Court’s jurisdiction just a few years ago. On September 30, 2016, Dynamic Energy, 5 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 5 of 18 Pageid#: 112 Justice Highwall, Nufac Mining, and Pay Car Mining filed a consent decree in this Court regarding Clean Water Act violations explicitly accepting this Court’s jurisdiction because many of the defendants “are located, reside, and/or are doing business” here. Consent Decree ¶¶ 1, 3, United States v. Southern Coal Corp., No. 7:16-cv-00462-GEC (W.D. Va. Sept. 30, 2016), attached as Exhibit B. Lastly, these Court filings showing proper jurisdiction in this district are further supported by the sworn testimony of Justice Energy’s and Bluestone’s officers. In a deposition on March 14, 2019, James Justice III testified under oath that Stephen Ball was the “best to ask” and “would have the most knowledge” about the structure of Bluestone and how the subsidiaries are interrelated. Justice Dep. 15:2–4, attached as Exhibit C. On that same day, Ball, who is the Vice President and General Counsel of Defendant Justice Energy Company, testified that the business address of Justice Energy was 302 South Jefferson Street, Roanoke, Virginia, and that Bluestone Resources is also operated out of 302 South Jefferson Street, Roanoke, Virginia. See Ball Dep. 22:5–23:23, attached as Exhibit D. Contrary to the Lusk affidavit submitted by Movants in this case, Ball testified under oath that “to the extent, Justice Energy has any accounting or anything like that, that’s all done out of the 302 South Jefferson location. And Blue Stone Resources as the ultimate parent company provides those services to their subsidiaries.” Id. 22:11–22:16. Moreover, Ball’s deposition highlights the intimate nature of the parent-subsidiary relationship between Bluestone and Movants. In addition to accounting services, Bluestone supplies the administrative and financial services for Movants, maintains a group insurance policy for its subsidiaries, files a consolidated tax return for all its subsidiaries, and supplies the funds to pay the limited employees of Justice Energy. Id. 22:5–25:15. Movants’ stunning 6 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 6 of 18 Pageid#: 113 assertion now that they have no ties to the Western District of Virginia is negated by the ample evidence to the contrary. STANDARD OF REVIEW Although personal jurisdiction is an affirmative defense, “the plaintiff bears the burden of demonstrating personal jurisdiction at every stage following such a challenge.” Grayson v. Anderson, 816 F.3d 262, 267 (4th Cir. 2016) (citing Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)). This burden, however, “varies according to the posture of a case and the evidence that has been presented to the court.” Id. at 268. “[T]he court must take the allegations and available evidence relating to personal jurisdiction in the light most favorable to the plaintiff,” and a plaintiff need only make a prima facie showing of personal jurisdiction for the litigation to proceed. Id.; see also Sneha Media & Entm’t, LLC v. Assoc. Broad. Co. P Ltd., 911 F.3d 192, 196 (4th Cir. 2018) (“To be sure, when the parties have not yet had a fair opportunity to develop and present the relevant jurisdictional evidence, we have treated the disposition of Rule 12(b)(2) motions to dismiss for a lack of personal jurisdiction in conceptually the same manner as we treat the disposition of motions to dismiss under Rule 12(b)(6) . . . .”); Gilmore v. Jones, 370 F. Supp. 3d 630, 650 (W.D. Va. 2019) (Moon, J.) (“In conducting its analysis, the court ‘must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.’” (quoting Universal Leather, LLC v. Koro AR, S.A., 773 F.3d 553, 558 (4th Cir. 2014))). ARGUMENT I. The Federal Debt Collection Procedures Act creates nationwide jurisdiction for actions to collect debts owed to the United States. The purpose of the FDCPA was “to create a comprehensive statutory framework for the collection of debts owed to the United States government,’ in order ‘to improve the efficiency 7 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 7 of 18 Pageid#: 114 and speed in collecting those debts.’” Nat’l Labor Relations Bd. v. E.D.P. Med. Comput. Sys., Inc., 6 F.3d 951, 954 (2d Cir. 1993) (quoting H.R. Rep. No. 736 (1990), reprinted in, 1990 U.S.C.C.A.N. 6472, 6630, 6631). The FDCPA “provides exclusive civil procedures for the United States to recover a judgment on a debt.” 28 U.S.C. § 3001(a) (emphasis added); ExportImport Bank of U.S. v. Asia Pulp & Paper Co., Ltd., No. 03-8554 (DCP), 2008 WL 465169, at *1 (S.D.N.Y. Feb. 6, 2008). To allow the government to enforce its collection rights, the FDCPA explicitly provides for “nationwide enforcement” of federal debts by providing that “any . . . complaint, filed under this chapter may be served in any state and . . . may be enforced by the court.” 28 U.S.C. § 3004(b). The numerous district courts that have considered the issue of personal jurisdiction under the FDCPA have uniformly held that the FDCPA creates national jurisdiction such that the government “need only show that Defendant has sufficient minimum contacts with the United States so as not to violate the traditional notions of fair play and substantial justice.” United States v. Coker, No. 2:09-02012, 2010 WL 4286380, at *2 (E.D. Cal. Oct. 22, 2010); see also United States v. Hurry, No. 2:15CV106–WHA, 2015 WL 1897182, at *1–2 (M.D. Ala. Apr. 27, 2015) (finding that “the FDCPA provides for nationwide service of process” and therefore, personal jurisdiction exists “over any defendant that has minimum contacts with the United States” (citation omitted)); United States v. Preston, 961 F. Supp. 2d 133, 136 (D.D.C. 2013) (noting nationwide jurisdiction in finding nationwide venue); United States v. Rogan, No. 02 C 3310, 2008 WL 4853478, at *2 (N.D. Ill. Nov. 3, 2008) (considering the defendant’s minimum contacts with the United States to find nationwide jurisdiction under FDCPA); Reese Bros., Inc. v. U.S. Postal Serv., 477 F. Supp. 2d 31, 39 (D.D.C. 2007) (same); United States v. Sutton, No. 8 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 8 of 18 Pageid#: 115 3:04-cv-00596(EBB), 2005 WL 281162, at *1 (D. Conn. Jan. 10, 2005) (same); United States v. Famous Artists Corp., No. 95-5240, 1996 WL 114932, at *4 (E.D. Pa. Mar. 14, 1996) (same). In other words, nationwide jurisdiction is proper when “the defendant has acted within any district of the United States or sufficiently caused foreseeable consequences in this country.” Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174, 2280 (9th Cir. 2004) (quoting Sec. Inv. Prot. Corp. v. Vigman, 764 F.2d 1309, 1316 (9th Cir. 1985)); Bally Gaming, Inc. v. Kappos, 789 F. Supp. 2d 41, 45 (D.D.C. 2011) (“Prior opinions of the D.C. Circuit make clear that, when this Court derives its personal jurisdiction over a defendant from a federal statute’s nationwide-service-of-process provision, the Due Process Clause of the Fifth Amendment does not require that the defendant also have minimum contacts with this district.”); see also Fed. R. Civ. P. 4(k)(1)(C) (“Serving a summons or filing a waiver of service establishes personal jurisdiction over a defendant . . . when authorized by a federal statute.”); Coker, 2010 WL 4286380, at *2 (discussing Action Embroidery Corp.). Because the FDCPA allows for nationwide service of process and in turn, nationwide personal jurisdiction, the United States is the relevant forum for the personal jurisdiction analysis, not the individual district court. Here, there is no dispute the Movants have substantial contacts with the United States; indeed, they are incorporated in the United States, operate mines in the United States, and are extensively regulated by numerous federal agencies. Accordingly, the Court should deny the Motion to Dismiss for lack of personal jurisdiction. II. Aside from the FDCPA’s nationwide jurisdictional reach, the Court has personal jurisdiction over Movants. Even if the FDCPA did not provide the Court personal jurisdiction over Movants, the Court has both general and specific personal jurisdiction, either of which is alone sufficient. 9 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 9 of 18 Pageid#: 116 When a federal statute does not otherwise establish personal jurisdiction, courts employ a two-part inquiry: (1) whether the forum state’s long-arm statute provides jurisdiction, and (2) whether exercising jurisdiction would violate defendant’s due process. Wolf v. Richmond Cty. Hosp. Auth., 745 F.2d 904, 909 (4th Cir. 1984). “Because Virginia’s long-arm statute extends personal jurisdiction to the extent permitted by the Due Process Clause, ‘the statutory inquiry necessarily merges with the constitutional inquiry, and the two inquiries essentially become one.’” Young v. New Haven Advocate, 315 F.3d 256, 261 (4th Cir. 2002) (citation omitted) (quoting Stover v. O’Connell Assocs., Inc., 84 F.3d 132, 135–36 (4th Cir. 1996)). Whether personal jurisdiction comports with due process is governed by the minimum contacts test. The canonical opinion remains International Shoe v. Washington, 326 U.S. 310 (1945), in which the Supreme Court held that courts may exercise personal jurisdiction over a defendant if the defendant has “certain minimum contacts with [the state] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’” Int’l Shoe, 326 U.S. at 316 (citation omitted). The minimum contacts test is satisfied and a Court will have general jurisdiction over the defendant when a defendant company is incorporated in the state or maintains its principal place of business in the state, or if it has such ongoing systematic dealings within the state as to render it essentially at home in the forum state. Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011); Daimler AG v. Bauman, 571 U.S. 117, 138 (2014). If the Court does not have general jurisdiction over a defendant company, the minimum contacts test may still be satisfied and give rise to specific jurisdiction over the defendant “based on conduct connected to the suit.” ALS Scan, Inc. v. Dig. Serv. Consultants, Inc., 293 F.3d 707, 711 (4th Cir. 2002). Here, the Court has both general and specific personal jurisdiction over Movants. 10 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 10 of 18 Pageid#: 117 A. Movants have sufficient minimum contacts for general jurisdiction in Virginia because they operate their businesses out of Roanoke, Virginia. For corporate defendants, general jurisdiction exists in the place of incorporation or its principal place of business. Goodyear Dunlop Tires Operations, S.A., 564 U.S. at 735. If the corporation does not “reside” in the forum state, general personal jurisdiction exists when the “corporation’s ‘affiliations with the State are so “continuous and systematic” as to render [it] essentially at home in the forum [s]tate.’” Daimler AG, 571 U.S. at 138 (citing Goodyear, 564 U.S. at 919). Movants assert through the Lusk Affidavit that they have no ties to Virginia, but this is directly contrary to Movants’ sworn testimony and recently filed statements with this Court. First, four of the Movants, Dynamic Energy, Frontier Coal, Justice Energy, and Pay Car Mining, stated in a recent filing with this Court that their principal places of business are in Roanoke, Virginia. See Compl. ¶¶ 5, 6, 7, 10, Justice v. Office of Surface Mining Reclamation & Enforcement, No. 7:19-cv-00381 (W.D. Va. May 17, 2019). The government filed the Complaint in this case against the four Movants on May 7, 2019. Only ten days later, on May 17, 2019, in an unrelated matter, the same four Movants filed a complaint in this district. In that complaint, the four Movants stated that their principal places of business are in Roanoke, Virginia. Then on July 9, 2019, the same four Movants, represented by the same counsel, filed a Motion to Dismiss the government’s Complaint in this case, claiming that the four companies do not have their principal places of business in Roanoke, Virginia. These statements are flatly contradictory. The government endeavored to confirm which of Movants’ characterizations of their principal places of business was accurate. In so doing, the government learned that in other recent litigation, the Vice President and General Counsel of Justice Energy Company, Inc.—one 11 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 11 of 18 Pageid#: 118 of the four Movants—testified under oath that Justice Energy’s address is indeed 302 South Jefferson Street, Roanoke, Virginia. See Ex. D, Ball Dep. 22:5–21 (“[I]n terms of the business address for Justice Energy is 302 South Jefferson Street in Roanoke, Virginia”). The representations made by Dynamic Energy, Frontier Coal, Justice Energy, and Pay Car Mining in support of their Motion to Dismiss that they do not have their principal places of business or operate in this district are frivolous. Moreover, these representations violate Federal Rule of Civil Procedure 11 in light of the fact that these same companies stated that they do have their principal places of business in Roanoke only ten days after receiving the present Complaint, while represented by the same counsel. In short, the Court need go no further than Movants’ own statements to determine it has personal jurisdiction here. 1 Second, all nine Movants have the same parent company, Bluestone, and that company also is based in Roanoke, Virginia. See Lusk Aff. ¶ 1, ECF No. 5-1. James Justice III testified that Stephen Ball was the “best to ask” and “would have the most knowledge” about the structure of Bluestone and its subsidiaries. Ex. C., Justice Dep. 15:2–4. Stephen Ball, the Vice President and General Counsel of Justice Energy Company testified, under oath, that the business operations for Bluestone are performed from 302 South Jefferson Street, Roanoke, Virginia. See Ex. D, Ball Dep. 22:5–21 (“Who else is located at that particular address? A. That’s the address where Blue Stone Resources is operated out of. And so to the extent, Justice Energy has any accounting or anything like that, that’s all done out of the 302 South Jefferson location. And Blue Stone Resources as the ultimate parent company provides those services to their subsidiaries.”). Justice Energy Company does not have its own employees who supply or 1 The government respectfully reserves the right to seek sanctions against Movants under Federal Rule of Civil Procedure 11(c)(2) for violations of Rule 11(b) arising from their apparent misrepresentations regarding the principal places of business and locations of operations of four of the named defendants, if the Court does not otherwise order a motion to show cause. 12 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 12 of 18 Pageid#: 119 perform financial services for the company, and thus, it relies on its parent company to provide all of those services. Id. 22:22–24:23. Bluestone also “files a consolidated tax return for itself and all of its subsidiaries.” Id. 24:5–18. And Bluestone puts funds into the Justice Energy account to make payroll. Id. 25:8–12. Third, in sworn testimony, James Justice III stated that he “ha[s] the ultimate decision making authority” for “major financial decision[s]” of Justice Energy Company and all of the other mine-operator subsidiaries of Bluestone and Southern Coal, which he and his father own, which includes Movants. Ex. C, Justice Dep. 13:2–14:1. James Justice III is also the Controller of each Movant company, as defined in the Mine Act and disclosed to the Mine Safety and Health Administration (“MSHA”). Most importantly for this inquiry, Justice operates his business out of the offices at 302 South Jefferson Street, Roanoke, Virginia. See Complaint ¶ 1, James C. Justice III v. Office of Surface Mining Reclamation & Enf’t, No. 7:19cv381 (W.D. Va. May 17, 2019). It is clear that all nine Movants reside in Virginia and/or have continuous and systematic ties to Virginia, and therefore, the Court has general personal jurisdiction over them. See Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 448 (1952) (finding general personal jurisdiction existed because the defendant company’s president maintained an office within the state where he maintained the company’s files and oversaw the company’s activities). B. The Court separately has specific jurisdiction over Movants because they have purposefully availed themselves of Virginia by conducting their business from Roanoke, Virginia. The Court also has specific jurisdiction over Movants. Specific jurisdiction exists when (1) the defendant “purposefully availed itself of the privileges of conducting activities in the forum state,” (2) “the plaintiff’s claim arises out of the defendant’s forum-related activities,” and 13 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 13 of 18 Pageid#: 120 (3) exercise of personal jurisdiction would be constitutionally reasonable. Young v. New Haven Advocate, 315 F.3d 256, 261 (4th Cir. 2002) (citations omitted). First, to determine whether a defendant has “purposefully availed itself” of the forum, courts look at whether “the defendant’s conduct and connection with the forum [s]tate are such that he should reasonably anticipate being haled into court there.” Fed. Ins. Co. v. Lake Shore Inc., 886 F.2d 654, 658 (4th Cir. 1989). Because the parent company of Movants operates all of the financial aspects of Movants from Roanoke, Virginia, it is entirely reasonable that Movants could expect to be sued in Virginia for failure to pay a debt, particularly in light of the fact that four of Movants initiated suit against the government on May 17, 2019, in this Court, regarding a separate debt owed to the United States, asserting that Roanoke is their principal place of business. Movants claim otherwise in their Motion, but at this stage and in light of the contradictory statements filed by Movants within weeks of each other, the Court should weigh the evidence in favor of finding jurisdiction. Grayson v. Anderson, 816 F.3d 262, 268 (4th Cir. 2016). Second, Movants assert that the acts or omissions giving rise to the cause of action are their mining activities in West Virginia. See Mem. in Supp. at 13–14, ECF No. 5. That argument, however, misses the point. This case is a debt collection action pursuant to the FDCPA. The underlying Mine Act violations and the appropriateness of the civil penalties assessed by MSHA are not at issue because the time in which to challenge those assessments has long since passed. See 30 U.S.C. § 815(a) (“If . . . the operator fails to notify the Secretary that he intends to contest the citation or the proposed assessment of penalty . . . the citation and the proposed assessment of penalty shall be deemed a final order of the Commission and not subject to review by any court or agency.”). 14 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 14 of 18 Pageid#: 121 The only issues in this case are (1) the existence of a debt as defined by the FDCPA, (2) whether Defendants owe the debt, and (3) whether the debt is owed to the United States. The relevant act or omission giving rise to this cause of action is Movants’ willful failure to pay the assessed civil penalties, and the accounting operations for Movants are conducted from 302 South Jefferson Street, Roanoke, Virginia. See Ex. D, Ball Dep. 22–23. The relevant conduct or omission giving rise to this action thus occurred in the Western District of Virginia, and the second prong for specific personal jurisdiction is met. Third, exercise of jurisdiction in Virginia is constitutionally reasonable. In determining whether personal jurisdiction is constitutionally reasonable, courts consider five factors: (1) the burden on Defendant of litigating in the forum; (2) the forum state’s interest in adjudicating the dispute; (3) Plaintiff’s interest in obtaining convenient and effective relief; (4) “the interstate judicial system’s interest in obtaining the most efficient resolution of controversies; and (5) the shared interest of the several states in furthering fundamental substantive social policies.” Asahi Metal Indus. Co. v. Superior Court of Cal., 480 U.S. 102, 113 (1987) (quoting World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292 (1980)). Here, the United States as the plaintiff has an interest in obtaining convenient and effective relief in one case against all the defendants instead of litigating the same issues in two different courts. The United States would have to put on the same witnesses twice in two different states, and those witnesses are local to neither Virginia nor West Virginia. To force the United States to expend resources to litigate this case in two separate courts when it has already spent tremendous resources to collect these unpaid civil penalties is against the interests of justice. See United States v. Sutton, No. 3:04CV-00596(EBB), 2005 WL 281162, at *3 (D. Conn. Jan. 10, 2005) (“To expect an Assistant U.S. Attorney from the District of New Hampshire to become as intimately familiar with these 15 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 15 of 18 Pageid#: 122 cases as the two Assistants from Connecticut already are is to request unreasonable, unnecessary duplication of effort, time, and expense to the Government.”). Moreover, it is not unreasonably burdensome on Movants to litigate here. Movants have hired counsel in Virginia, and their operations are all overseen by James Justice III, who lives and conducts his business in Roanoke, Virginia. Ex. C, Justice Dep. 13:20–14:1. In sum, it is constitutionally reasonable for this Court to exercise personal jurisdiction over Movants, and the Court should deny their Motion to Dismiss. CONCLUSION Based on the foregoing, the United States respectfully requests that the Court deny Defendants’ Motion to Dismiss for Lack of Personal Jurisdiction. In the alternative, the United States requests that the Court stay Defendants’ Motion and allow the United States to conduct jurisdictional discovery. If the Court finds that it lacks personal jurisdiction over Defendants, the United States respectfully requests that the Court transfer the case against Movants to the U.S. District Court for the Southern District of West Virginia. Respectfully submitted, THOMAS T. CULLEN United States Attorney Date: July 23, 2019 /s/ Laura Day Rottenborn Laura Day Rottenborn Assistant United States Attorney Virginia State Bar No. 94021 Illinois State Bar No. 6289334 United States Attorney’s Office P. O. Box 1709 Roanoke, VA 24008-1709 Telephone: (540) 857-2250 Facsimile: (540) 857-2283 E-mail: Laura.Rottenborn@usdoj.gov 16 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 16 of 18 Pageid#: 123 /s/ Krista Consiglio Frith Assistant United States Attorney Virginia Bar No. 89088 United States Attorney’s Office P. O. Box 1709 Roanoke, VA 24008-1709 Telephone: (540) 857-2250 Facsimile: (540) 857-2283 E-mail: Krista.Frith@usdoj.gov /s/ Jason S. Grover Special Assistant United States Attorney Illinois Bar No. 6256032 Counsel for Trial Litigation Mine Safety and Health Division Office of the Solicitor U.S. Department of Labor 201 12th Street South Suite 401 Arlington, VA 22202 Telephone: (202) 693-9326 Facsimile: (202) 693-9392 Email: grover.jason@dol.gov 17 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 17 of 18 Pageid#: 124 CERTIFICATE OF SERVICE I hereby certify that on July 23, 2019, I caused a true copy of the foregoing United States’ Response in Opposition to Defendants’ Motion to Dismiss to be electronically filed with the Clerk of the Court using the CM/ECF system, which will send notification of such filing to the parties. /s/ Krista Consiglio Frith Krista Consiglio Frith Assistant United States Attorney 18 Case 7:19-cv-00354-GEC Document 33 Filed 07/23/19 Page 18 of 18 Pageid#: 125 EXHIBIT A Case Document 33-1 Filed 07/23/19 Page 1 of 26 Pageid#: 126 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF VIRGINIA ROANOKE DIVISION JAMES C. JUSTICE III; A & G COAL CORP.; CHESTNUT LAND HOLDINGS, LLC; BLUESTONE COAL CORPORATION; DYNAMIC ENERGY, INC.; FRONTIER COAL COMPANY; JUSTICE ENERGY COMPANY, INC.; KENTUCKY FUEL CORPORATION; NATIONAL COAL, LLC; PAY CAR MINING, INC.; PREMIUM COAL COMPANY, INCORPORATED; S AND H MINING, INC.; and TAMS MANAGEMENT, INC., 7:19cv381 Case No. ______________________ COMPLAINT FOR DECLARATORY JUDGMENT Plaintiffs, v. OFFICE OF SURFACE MINING RECLAMATION AND ENFORCEMENT, UNITED STATES DEPARTMENT OF THE INTERIOR, Defendant. Plaintiffs, A & G Coal Corp., Bluestone Coal Corporation, Chestnut Land Holdings, LLC, Dynamic Energy, Inc., Frontier Coal Company, Justice Energy Company, Inc., Kentucky Fuel Corporation, National Coal, LLC, Pay Car Mining, Inc., Premium Coal Company, Incorporated, S and H Mining, Inc., Tams Management, Inc. and James C. Justice III, by counsel, and for their Complaint for Declaratory Judgment, respectfully state as follows: 1 Case Case 7:19-cv-00354-GEC 7:19-cv-00381-GECDocument Document 33-1 1 Filed Filed 05/17/19 07/23/19 Page Page 12 of of 12 26 Pageid#: Pageid#: 1127 I. THE PARTIES, JURISDICTION AND VENUE A. The Parties 1. Plaintiff James C. Justice III (“Jay Justice”) is an individual residing in Roanoke, Roanoke County, Virginia. Jay Justice is the “Controller” of the “Justice Mining Entities” (as that phrase is defined below) for purposes of enforcement of surface mining reclamation and enforcement laws and regulations by the Defendant. 2. Plaintiff A & G Coal Corp. (“A & G”) is a Virginia corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in Wise and Dickenson Counties, Virginia that was the subject of various assessments by the Defendant. 3. Plaintiff Chestnut Land Holdings, LLC (“Chestnut”) is a Delaware limited liability company with its principal place of business in Roanoke, Virginia and doing business or having done business in Tazewell County in Virginia that was the subject of various assessments by the Defendant. 4. Plaintiff Bluestone Coal Corporation (“Bluestone”) is a West Virginia corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in West Virginia that was the subject of various assessments by the Defendant. 5. Plaintiff Dynamic Energy, Inc. (“Dynamic”) is a West Virginia corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in West Virginia that was the subject of various assessments by the Defendant. 6. Plaintiff Frontier Coal Company (“Frontier”) is a Delaware corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in West Virginia that was the subject of various assessments by the Defendant. 2 Case 7:19-cv-00381-GECDocument Document 1 Filed Case 7:19-cv-00354-GEC 33-1 Filed 05/17/19 07/23/19 Page Page 23 of of 12 26 Pageid#: Pageid#: 2128 7. Plaintiff Justice Energy Company, Inc. (“Justice Energy”) is a West Virginia corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in West Virginia that was the subject of various assessments by the Defendant. 8. Plaintiff Kentucky Fuel Corporation (“Kentucky Fuel”) is a Delaware corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in Kentucky that was the subject of various assessments by the Defendant. 9. Plaintiff National Coal, LLC (“National Coal”) is a Tennessee limited liability company with its principal place of business in Roanoke, Virginia and doing business or having done business in Tennessee that was the subject of various assessments by the Defendant. 10. Plaintiff Pay Car Mining, Inc. (“Pay Car”) is a West Virginia corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in West Virginia that was the subject of various assessments by the Defendant. 11. Plaintiff Premium Coal Company, Incorporated (“Premium”) is a Tennessee corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in Tennessee that was the subject of various assessments by the Defendant. 12. Plaintiff S and H Mining, Inc. (“S & H”) is a Tennessee corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in Tennessee that was the subject of various assessments by the Defendant. 13. Plaintiff Tams Management, Inc. (“Tams”) is a West Virginia corporation with its principal place of business in Roanoke, Virginia and doing business or having done business in West Virginia that was the subject of various assessments by the Defendant. (The Plaintiffs in 3 Case 7:19-cv-00354-GEC 33-1 Filed 05/17/19 07/23/19 Page Page 34 of of 12 26 Pageid#: Pageid#: 3129 Case 7:19-cv-00381-GECDocument Document 1 Filed this action other than James C. Justice III are sometimes referred to as the “Justice Mining Entities.”) 14. Defendant, Office of Surface Mining Reclamation And Enforcement (“OSMRE”), is an administrative agency within the United States Department Of The Interior tasked with enforcement of surface mining reclamation and enforcement laws and regulations. B. Jurisdiction And Venue 15. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C. §1346 in that this is a civil action against the United States. 16. This Court has personal jurisdiction over OSMRE because the Defendant is an agency of the United States. 17. Venue is appropriate in this Court pursuant to 28 U.S.C. §1391(e)(1) because the Defendant is an agency of the United States and a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, in this District—in particular the mining or related activities of several of the Justice Mining Entities of the companies which are located in this District including, but not limited to, A & G and Chestnut, and Jay Justice individually, in this District were subject to enforcement decisions that are part of the parties’ overall settlement agreement this action seeks to enforce. II. FACTUAL ALLEGATIONS 18. In the months and years leading up to April 2019, the OSMRE assessed various fines, special reclamation fees, penalties, and issued other notices and orders against the Justice Mining Entities. 4 Case 7:19-cv-00354-GEC 33-1 Filed 05/17/19 07/23/19 Page Page 45 of of 12 26 Pageid#: Pageid#: 4130 Case 7:19-cv-00381-GECDocument Document 1 Filed 19. For what is believed to be the first time ever, the OSMRE also wrongfully assessed a series of individual assessments against Jay Justice personally, allegedly relating to activities of the Justice Mining Entities. 20. By April 2019, OSMRE had asserted fines, penalties and assessments against each of the Justice Mining Entities and against Jay Justice personally. (See Exhibit A, partially redacted chart of underlying fines, penalties and assessments, attached and incorporated here by reference.) 21. In an effort to resolve the charges listed in Exhibit A in a manner that would ensure that the needed mine reclamation work was performed, while keeping the Justice Mining Entities solvent and actively in business, and while also generating and/or preserving hundreds of jobs associated with the reclamation work and the other ongoing business of the Justice Mining Entities, representatives of the parties agreed to hold a meeting in early April, 2019. 22. On April 8, 2019, Jay Justice and Tom Lusk, COO of the Justice Mining Entities, met with Michael Castle, the Field Office Director of the Knoxville and Lexington Field Offices of OSMRE, and Mark Snyder, also with OSMRE, in Knoxville. The discussions during that meeting were recounted in later correspondence from counsel for the Justice Mining Entities (attached as Exhibit B and incorporated by reference), as follows: Jay Justice and Tom Lusk met with Mike Castle and Mark Snyder without counsel. They discussed the penalties against the companies and the individual penalties against [Jay] Justice. They also discussed the abatement of cited conditions and reclamation work. Mr. Castle emphatically emphasized that he is focused on completing the field work. Mr. Castle then explained that, because there is no ongoing operation and the companies are not obtaining any financial benefit through non-compliance, he believes he has the authority to compromise the penalty assessments. [Jay] Justice then proposed that the companies work to complete the reclamation work in lieu of the penalty assessments and that the penalty assessments be reduced by the cost of the reclamation 5 Case 7:19-cv-00354-GEC 33-1 Filed 05/17/19 07/23/19 Page Page 56 of of 12 26 Pageid#: Pageid#: 5131 Case 7:19-cv-00381-GECDocument Document 1 Filed work. If the total penalties are not reduced below $250,000.00 [two hundred fifty thousand dollars] by the cost of the reclamation work, [Jay] Justice proposed that the companies pay $250,000.00 [two hundred fifty thousand dollars] over twelve months to satisfy the remaining penalty assessments. This meeting concluded with [Jay] Justice agreeing to pay the AML and special reclamation fees over twelve months. (Exhibit B, p. 1.) Mr. Castle and Jay Justice both agreed to the foregoing terms. 23. After lunch on the same day, the four initial conferees were joined by their respective attorneys. The following discussions were held in the presence of attorneys: Mr. Castle indicated that the OSM wanted the penalties to be reduced by the cost of the reclamation on a dollar for dollar basis. You [John Austin, Field Solicitor in the Knoxville Field Office of the Department of the Interior] mentioned during this meeting that you [Mr. Austin] would like to have some form of collateral, or some type of guarantee, that the companies would satisfy their obligations under any agreement. We [the Justice Mining Entities] agreed to provide you with the financial documents upon your request. (Exhibit B, p. 2.) 24. Jay Justice and Mr. Lusk met again with Mr. Castle and Mr. Snyder after the meeting with their respective attorneys, and discussed as follows: [Jay] Justice and Mr. Castle discussed whether collateral would ultimately be necessary. Mr. Castle indicated that he would discuss this issue with [Mr. Austin] and that he did not believe collateral would be required to resolve the matter. During this meeting, it was agreed that Mr. Lusk would work with Mr. Snyder to prioritize the work in the field. [Jay] Justice agreed that he would place equipment in the field by May 1, 2019 to complete the work and he met this deadline. He also agreed to complete the work by October 31, 2019 weather permitting. (Exhibit B, p. 2.) Mr. Castle and Jay Justice again both agreed to the foregoing terms. 6 Case 7:19-cv-00354-GEC 33-1 Filed 05/17/19 07/23/19 Page Page 67 of of 12 26 Pageid#: Pageid#: 6132 Case 7:19-cv-00381-GECDocument Document 1 Filed 25. OSMRE consistently and clearly held out Mr. Castle as the agency’s agent and representative for purposes of negotiating a settlement of the parties’ disputes regarding payment of the assessments and fines levied against the Justice Mining Entities. Mr. Castle, in turn, consistently and clearly maintained that he, not the attorneys for OSMRE or the Department of the Interior, was empowered to negotiate agreements such as the one referenced above and in the attached correspondence. 26. Mr. Castle’s predecessor, Earl Bandy (retired) was also always held out by OSMRE to be the authoritative and binding voice of OSMRE as it related to that agency’s oversight of the Justice Mining Entities. Mr. Castle’s position has always been held out as one having actual authority when it comes to the Justice Mining Entities’ dealings with OSMRE. 27. Mr. Castle also expressed to Jay Justice that Mr. Castle’s supervisor, Thomas Shope, Regional Manager of the Appalachian Region of OSMRE, approved the parties’ agreement. The Appalachian Region of OSMRE encompasses all the states where the Plaintiffs had operations that are the subject of the parties’ agreement. 28. Mr. Austin merely suggested alternative or supplemental terms to the parties. Mr. Austin’s suggestions or requests were not held out by OSMRE or Mr. Castle to be essential to the parties’ final agreement. Mr. Castle instead told Jay Justice not to worry about Mr. Austin’s requests for information or collateral. 29. Jay Justice and the Justice Mining Entities left the three meetings held on April 8, 2019 believing an agreement had been reached as to all material terms. Mr. Lusk thereafter spent time in the field on April 15 – 18, 2019 with Mr. Snyder and agreed on the reclamation work that would be completed and a timeframe. 7 Case 7:19-cv-00354-GEC 33-1 Filed 05/17/19 07/23/19 Page Page 78 of of 12 26 Pageid#: Pageid#: 7133 Case 7:19-cv-00381-GECDocument Document 1 Filed 30. Counsel for the Justice Mining Entities wrote Mr. Austin on April 26, 2019 and invited him to request any additional financial information necessary to effectuate the parties’ agreement. Following that correspondence, Mr. Austin went two weeks without requesting any financial information or requesting collateral in any form or amount. 31. In the meantime, and in reliance upon the terms of the parties’ agreement reached April 8, 2019 (the “Settlement Agreement”), the Justice Mining Entities had already begun to incur significant expense in mobilizing equipment and commencing the reclamation work OSMRE had requested. Before the end of April 2019, the Plaintiff’s had already commenced their performance under the Settlement Agreement, and have continued performing in accordance with that Agreement to this day. 32. Between April 8, 2019 and early May, 2019, Mr. Castle and Mr. Shope, among others with OSMRE, were copied on emails and correspondence between counsel for the parties discussing the implantation of the parties’ Settlement Agreement, and at no time did any officers or representatives of OSMRE express any reservations about the finality and enforceability of the Settlement Agreement. 33. In the week of May 6, 2019, the government’s attitude toward the Justice Mining Entities noticeably soured. The Mine Health and Safety Administration (“MSHA”), even though it was party to a tolling agreement with the Justice Mining Entities, brought suit against some of those entities in apparent violation of the tolling agreement, early in the week of May 6, 2019. 34. This event led to Mr. Austin contacting counsel for the Justice Mining Entities to relay his assumption that the filing of the MSHA suit meant that the Justice Mining Entities would be unable to perform their duties under the Settlement Agreement. When told that his assumption was totally unfounded and that the Justice Mining Entities still intended to abide by 8 Case 7:19-cv-00354-GEC 33-1 Filed 05/17/19 07/23/19 Page Page 89 of of 12 26 Pageid#: Pageid#: 8134 Case 7:19-cv-00381-GECDocument Document 1 Filed the Settlement Agreement, Mr. Austin suddenly renewed his requests for collateral and financial information. 35. On or about May 12, 2019, less than one business day after the foregoing request, the Justice Mining Entities agreed to provide the requested collateral and financial information, even though they did not believe it was a prerequisite to OSMRE’s performance under the terms of the Settlement Agreement. 36. On May 15, 2019, Mr. Austin wrote counsel for the Justice Mining Entities and denied the existence of any agreement to abate or otherwise reduce the fines and assessments reference in Exhibit A—a complete and unforeseeable reversal of the OSMRE’s position. Instead, Mr. Austin claimed, for the very first time in the parties’ discussions, that Mr. Castle had never had authority to bind OMSRE to the terms of the Settlement Agreement. (See Exhibit C, attached and incorporated here by reference.) Instead of abiding by the Settlement Agreement, Mr. Austin announced he was proceeding to instruct the Department of Justice to sue to collect the fines and assessments referenced in Exhibit A. 37. By virtue of the May 13, 2019 letter from Mr. Austin, OSMRE has entirely reneged on the Settlement Agreement. This, despite the fact that OSMRE held out Mr. Castle as having apparent and actual authority, despite the fact that the Justice Mining Entities relied to their detriment on the position adopted by Mr. Castle that there was a binding Settlement Agreement, and despite the Justice Mining Entities’ partial and continuing performance of their duties and responsibilities pursuant to the Settlement Agreement, which without a doubt had to be politically driven. 38. As the Plaintiffs previously made OMSRE and its attorneys aware, preceding litigiously instead of in accordance with the Settlement Agreement harms the operations of a 9 Case 7:19-cv-00354-GEC Document 33-11 Filed 26 Pageid#: Pageid#:9135 Case 7:19-cv-00381-GEC Document Filed 07/23/19 05/17/19 Page Page 10 9 ofof12 dozen or so mining companies, and risks the jobs of hundreds of workers on the pending reclamation projects. 39. The abrupt turnaround by the government in its attitude toward this matter is inexplicable and raises the question whether untoward political or other pressure from sources presently unknown has been brought to bear on OMSRE, perhaps from other federal agencies or political adversaries of the Justice family. The repudiation of the Settlement Agreement may have resulted from inappropriate inter-agency influence between MSHA and OSMRE. Discovery will be necessary to establish why OMSRE so rapidly changed its position. 40. In any event, OMSRE’s conduct in reneging on the Settlement Agreement creates a legitimate dispute and justiciable controversy that requires the intervention of the Court to resolve. COUNT I (Declaratory Judgment) 41. Plaintiffs repeat and reallege each and every allegation set forth in the preceding Paragraphs of this Complaint as if fully set forth herein. 42. A real and justiciable controversy exists between the Plaintiffs and the Defendant regarding whether those parties entered into an enforceable Settlement Agreement. 43. Because OSMRE has stated that it intends to disregard the parties’ Settlement Agreement and initiate litigation against the Plaintiffs on the underlying assessments, fees and penalties that are the subject of the Settlement Agreement, there also exists an immediacy to the need for an adjudication and declaratory judgment regarding the enforceability of the Settlement Agreement. 44. If OSMRE is permitted to litigate and otherwise pursue the underlying assessments, fees and penalties without there first being an adjudication and declaratory 10 Case 7:19-cv-00354-GEC 33-1 Filed05/17/19 07/23/19 Page Page10 11ofof12 26 Pageid#: Pageid#:10 136 Case 7:19-cv-00381-GECDocument Document 1 Filed judgment regarding the enforceability of the Settlement Agreement, the Plaintiffs will suffer economic and other real damages. Any suit filed by the government in contravention of the Settlement Agreement would create a false impression and arguably be defamatory in that it would cause harm to the business and personal reputations of the Plaintiffs. 45. The Plaintiffs are therefore entitled to a declaratory judgment pursuant to 28 U.S.C. 2201 that the Settlement Agreement is valid and enforceable against OSMRE and that OSMRE should take no further steps regarding the underlying assessments, fees and penalties. WHEREFORE, the Plaintiffs respectfully request Judgment on their Complaint herein as follows: A. A Judgment on Count I for a declaratory judgment as outlined herein; B. Trial by jury on all counts so triable; and C. Such further relief as Plaintiffs appear entitled, in addition to the costs and disbursements of this action. Respectfully submitted, /s/ Aaron B. Houchens AARON B. HOUCHENS (VSB #80489) AARON B. HOUCHENS, P.C. 111 East Main Street P.O. Box 1250 Salem, Virginia 24153 Telephone: (540) 389-4498 Facsimile: (540) 339-3903 aaron@houchenslaw.com And 11 Case 7:19-cv-00354-GEC 33-1 Filed05/17/19 07/23/19 Page Page11 12ofof12 26 Pageid#: Pageid#:11 137 Case 7:19-cv-00381-GECDocument Document 1 Filed RICHARD A. GETTY (Pro Hac Vice Admission pending) C. THOMAS EZZELL (Pro Hac Vice Admission pending) and MARCEL RADOMILE (Pro Hac Vice Admission pending) THE GETTY LAW GROUP, PLLC 1900 Lexington Financial Center 250 West Main Street Lexington, Kentucky 40507 Telephone: (859) 259-1900 Facsimile: (859) 259-1909 Email: rgetty@gettylawgroup.com Email: tezzell@gettylawgroup.com Email: mradomile@gettylawgroup.com COUNSEL FOR PLAINTIFFS ctepld0571 12 Case 7:19-cv-00354-GEC 33-1 Filed05/17/19 07/23/19 Page Page12 13ofof12 26 Pageid#: Pageid#:12 138 Case 7:19-cv-00381-GECDocument Document 1 Filed EXHIBIT A Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:13 139 Case 7:19-cv-00381-GECDocument Document 1-1 Filed Filed07/23/19 05/17/19 Page Page14 1 of 4 Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:14 140 Case 7:19-cv-00381-GECDocument Document 1-1 Filed Filed07/23/19 05/17/19 Page Page15 2 of 4 O-2017400239 898-0775 KY 156503 2017 4 O-2018100234 898-0775 KY 156503 2018 1 O-2018200233 898-0775 KY 156503 2018 2 A-20170241076 KY 156503 2018 1 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CO INC 2/15/2018 5/15/2018 8/15/2018 5/15/2018 5/15/2018 9/30/2018 9/30/2018 8/31/2018 9/30/2018 10/15/2018 7/15/2018 9/30/2018 11/15/2018 6/30/2018 10/15/2018 11/30/2017 8/31/2018 8/31/2018 6/30/2018 8/31/2018 7/15/2018 10/15/2018 6/15/2018 7/15/2018 11/15/2018 2/28/2019 2/15/2019 11/15/2017 2/15/2018 5/15/2018 8/15/2018 2/15/2019 2/15/2019 9/30/2018 4/15/2018 6/30/2018 7/15/2018 8/31/2018 8/31/2018 9/30/2018 11/30/2018 Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:15 141 Case 7:19-cv-00381-GECDocument Document 1-1 Filed Filed07/23/19 05/17/19 Page Page16 3 of 4 C-C18090546001 3237 TN 036315 C-C18090534002 3046 TN 039561 PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM COAL CO INC PREMIUM 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8/15/2017 MANAGEMENT INC O-2017200338 S-3018-09 WV 250162 2017 2 TAMS 8/15/2017 MANAGEMENT INC O-2017300331 S-3009-98 WV 250162 2017 3 TAMS 11/15/2017 MANAGEMENT INC O-2017300331 S-4013-01 WV 250162 2017 3 TAMS 11/15/2017 MANAGEMENT INC O-2017400316 S-3009-98 WV 250162 2017 4 TAMS 2/15/2018 MANAGEMENT INC WV 250162 2018 2 TAMS 7/31/2018 MANAGEMENT INC A-20170241077 Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:16 142 Case 7:19-cv-00381-GECDocument Document 1-1 Filed Filed07/23/19 05/17/19 Page Page17 4 of 4 EXHIBIT B Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:17 143 Case 7:19-cv-00381-GECDocument Document 1-2 Filed Filed07/23/19 05/17/19 Page Page18 1 of 4 LAW OFFICES CAREY, SCOTT, DOUglAS & Kessler, PLLC 901 CHASE TOWER 707 VIRGINIA STREET, EAST P. O. BOX 913 CHARLESTON, WV 25323 MICHAEL W. CAREY ROBERT E. DOUGLAS JOHN A. KESSLER S. BENJAMIN BRYANT DAVID R. POGUE TELEPHONE (304) 345-1234 TELEPHONE (304) 342-1111 FACSIMILE (304) 342-1105 May 13, 2019 John Austin, Esquire United States Department of the Interior – Office of the Solicitor 800 S. Gay Street, Suite 800 Knoxville, TN 37929 Re: Justice Companies Outstanding OSM Assessments Dear Mr. Austin: I am writing to follow up on our conversation from Friday May 10, 2019 and to confirm our agreement to all material terms of a settlement of outstanding OSM liabilities as set forth in my letter of April 26, 2019. This agreement follows meetings which occurred on April 8, 2019 in Knoxville. Prior to our meeting, Jay Justice and Tom Lusk met with Mike Castle and Mark Snyder without counsel. They discussed the penalties against the companies and the individual penalties against Mr. Justice. They also discussed the abatement of cited conditions and reclamation work. Mr. Castle emphatically emphasized that he is focused on completing the field work. Mr. Castle then explained that, because there is no ongoing operation and the companies are not obtaining any financial benefit through non-compliance, he believes he has the authority to compromise the penalty assessments. Mr. Justice then proposed that the companies work to complete the reclamation work in lieu of the penalty assessments and that the penalty assessments be reduced by the cost of the reclamation work. If the total penalties are not reduced below $250,000.00 by the cost of the reclamation work, Mr. Justice proposed that the companies pay $250,000.00 over twelve months to satisfy the remaining penalty assessments. This meeting concluded with Mr. Justice agreeing to pay the AML and special reclamation fees over twelve months. Mr. Castle then indicated he would discuss this proposal with you and Mr. Henson and we would reconvene after lunch. After lunch, we met with our respective clients present and I conveyed to you the offer that was memorialized in writing on April 26, 2019. During this meeting, Mr. Castle indicated that the OSM wanted the penalties to be reduced by the cost of the reclamation on a dollar for dollar basis. You mentioned during this meeting that you would like to have some form of collateral, or some type of guarantee, that the companies would satisfy their obligations under any agreement. We agreed to provide you with the financial documents upon your request. Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:18 144 Case 7:19-cv-00381-GECDocument Document 1-2 Filed Filed07/23/19 05/17/19 Page Page19 2 of 4 Mr. John Austin May 13, 2019 Page 2 After our meeting concluded, Mr. Justice and Mr. Lusk met again with Mr. Castle and Mr. Snyder. I understand that Mr. Justice and Mr. Castle discussed whether collateral would ultimately be necessary. Mr. Castle indicated that he would discuss this issue with you and that he did not believe collateral would be required to resolve the matter. During this meeting, it was agreed that Mr. Lusk would work with Mr. Snyder to prioritize the work in the field. Mr. Justice agreed that he would place equipment in the field by May 1, 2019 to complete the work and he met this deadline. He also agreed to complete the work by October 31, 2019 weather permitting. At this point, my clients believed an agreement had been reached as to all material terms. Mr. Lusk thereafter spent time in the field on April 15-18, 2019 with Mr. Snyder and they agreed on the work that would be completed and a timeframe. My letter of April 26, 2019 followed and concluded by inviting you to request any additional information necessary. Following my April 26, 2019, correspondence, you never requested any specific financial information and never requested collateral in any specific form or any specific amount. We next discussed this matter on May 10, 2019, at which time I asked what was necessary to finalize the agreement. In response, you said that the companies must provide financial statements and collateral to secure payment of the penalty assessments (or reclamation with costs up to the amount of the penalty assessments). The timing of this request is surprising considering my April 26, 2019 correspondence offered to provide additional information upon request. We did not hear anything from you in this regard until May 10, 2019. Now it is our understanding that the Department of Justice is involved and is preparing litigation against the companies and individuals. The timing of the involvement of the Department of Justice in this matter is likely no coincidence considering the action filed last week to collect allegedly delinquent mine safety and health assessments. This is particularly surprising considering that my clients left Knoxville on April 8 with an agreement as to all material terms and Mr. Castle and Mr. Snyder were satisfied with both the terms and the plans for the work in the field after Mr. Snyder’s meeting with Mr. Lusk. After you stated on May 10, 2019 that financial statements and collateral would be required, we worked through the weekend to meet these requests and now specifically agree to provide financial statements and collateral to secure the payment of the cost of reclamation up to the amount of the penalty assessments. The companies have recently obtained a verbal commitment from a lender that will allow the companies to provide a letter of credit in the amount of the outstanding penalties. This letter of credit will be used to secure payment of the penalty assessments (or reclamation with costs up to the amount of the penalty assessments) and will secure the payment of the $250,000.00 penalty if the penalty assessments are not reduced to less than $250,000.00 by the reclamation cost. We can immediately move forward with the letter of credit as soon as we have an executed agreement we can share with our lender. Additionally, I will need you to provide me all of the counterpart information from OSM so that it can be listed on the letter of credit. If still necessary, we will provide you with the most recent financial statements for the companies which the OSM contends owe penalty assessments. The Justice family appreciates Mr. Castle’s willingness to meet and work through these issues and his professionalism throughout this process. We believe this agreement will accomplish the primary goal of ensuring that the conditions on the ground comply with the law. As previously Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:19 145 Case 7:19-cv-00381-GECDocument Document 1-2 Filed Filed07/23/19 05/17/19 Page Page20 3 of 4 Mr. John Austin May 13, 2019 Page 3 mentioned, this agreement will allow the companies to complete the reclamation while at the same time continuing to operate and saving approximately 450 jobs. I understand from discussions with your office last week that the filing of one or more complaints is imminent. This is of grave concern and bewilderment to my clients. We believe it is unnecessary, as we have now met every term you requested to settle this matter. If this file has been forwarded to the Department of Justice, I request that this correspondence be immediately provided to the individuals working on this matter and that they be notified we have agreed to all of the OSM’s settlement demands. Additionally, please immediately provide me with their names and contact information. Sincerely, /s/ Michael W. Carey Michael W. Carey cc: Mike Castle John Henson, Esquire Tom Lusk James C. Justice, III Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:20 146 Case 7:19-cv-00381-GECDocument Document 1-2 Filed Filed07/23/19 05/17/19 Page Page21 4 of 4 EXHIBIT C Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:21 147 Case 7:19-cv-00381-GECDocument Document 1-3 Filed Filed07/23/19 05/17/19 Page Page22 1 of 3 Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:22 148 Case 7:19-cv-00381-GECDocument Document 1-3 Filed Filed07/23/19 05/17/19 Page Page23 2 of 3 Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:23 149 Case 7:19-cv-00381-GECDocument Document 1-3 Filed Filed07/23/19 05/17/19 Page Page24 3 of 3 JS 44 (Rev. 0 7:19cv381 CIVIL COVER SHEET ) The JS 44 civil cover sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by law, except as provided by local rules of court. This form, approved by the Judicial Conference of the United States in September 1974, is required for the use of the Clerk of Court for the purpose of initiating the civil docket sheet. (SEE INSTRUCTIONS ON NEXT PAGE OF THIS FORM.) I. (a) PLAINTIFFS DEFENDANTS James C. Justice III, A & G Coal Corp., Chestnut Land Holdings, LLC; Bluestone Coal Corp., Dynamic Energy, Inc., see attached sheet (b) County of Residence of First Listed Plaintiff Roanoke City Office of Surface Mining, Reclamation and Enforcement, United States Department of the Interior County of Residence of First Listed Defendant (EXCEPT IN U.S. PLAINTIFF CASES) NOTE: (c) Attorneys (Firm Name, Address, and Telephone Number) Attorneys (If Known) Aaron B. Houchens, Aaron B. Houchens, P.C., 111 East Main Street, P.O. Box 1250, Salem, Virginia 24163, (540) 389-4498, see attached sheet II. BASIS OF JURISDICTION (Place an “X” in One Box Only) 1 2 U.S. Government Plaintiff 3 U.S. Government Defendant 4 (IN U.S. PLAINTIFF CASES ONLY) IN LAND CONDEMNATION CASES, USE THE LOCATION OF THE TRACT OF LAND INVOLVED. III. CITIZENSHIP OF PRINCIPAL PARTIES (Place an “X” in One Box for Plaintiff (For Diversity Cases Only) PTF 1 Citizen of This State Federal Question (U.S. Government Not a Party) Diversity (Indicate Citizenship of Parties in Item III) 2 2 Incorporated and Principal Place of Business In Another State 5 5 Citizen or Subject of a Foreign Country 3 3 Foreign Nation 6 6 Click here for: Nature of Suit Code Descriptions. TORTS 110 Insurance 120 Marine 130 Miller Act 140 Negotiable Instrument 150 Recovery of Overpayment & Enforcement of Judgment 151 Medicare Act 152 Recovery of Defaulted Student Loans (Excludes Veterans) 153 Recovery of Overpayment of Veteran’s Benefits 160 Stockholders’ Suits 190 Other Contract 195 Contract Product Liability 196 Franchise REAL PROPERTY 210 Land Condemnation 220 Foreclosure 230 Rent Lease & Ejectment 240 Torts to Land 245 Tort Product Liability 290 All Other Real Property PERSONAL INJURY 310 Airplane 315 Airplane Product Liability 320 Assault, Libel & Slander 330 Federal Employers’ Liability 340 Marine 345 Marine Product Liability 350 Motor Vehicle 355 Motor Vehicle Product Liability 360 Other Personal Injury 362 Personal Injury Medical Malpractice CIVIL RIGHTS 440 Other Civil Rights 441 Voting 442 Employment 443 Housing/ Accommodations 445 Amer. w/Disabilities Employment 446 Amer. w/Disabilities Other 448 Education 1 and One Box for Defendant) PTF DEF Incorporated or Principal Place 4 4 of Business In This State Citizen of Another State IV. NATURE OF SUIT (Place an “X” in One Box Only) CONTRACT DEF FORFEITURE/PENALTY PERSONAL INJURY 365 Personal Injury Product Liability 367 Health Care/ Pharmaceutical Personal Injury Product Liability 368 Asbestos Personal Injury Product Liability PERSONAL PROPERTY 370 Other Fraud 371 Truth in Lending 380 Other Personal Property Damage 385 Property Damage Product Liability PRISONER PETITIONS Habeas Corpus: 463 Alien Detainee 510 Motions to Vacate Sentence 530 General 535 Death Penalty Other: 540 Mandamus & Other 550 Civil Rights 555 Prison Condition 560 Civil Detainee Conditions of Confinement 625 Drug Related Seizure of Property 21 USC 881 690 Other LABOR 710 Fair Labor Standards Act 720 Labor/Management Relations 740 Railway Labor Act 751 Family and Medical Leave Act 790 Other Labor Litigation 791 Employee Retirement Income Security Act BANKRUPTCY 422 Appeal 28 USC 158 423 Withdrawal 28 USC 157 PROPERTY RIGHTS 820 Copyrights 830 Patent 835 Patent - Abbreviated New Drug Application 840 Trademark SOCIAL SECURITY 861 HIA (1395ff) 862 Black Lung (923) 863 DIWC/DIWW (405(g)) 864 SSID Title XVI 865 RSI (405(g)) FEDERAL TAX SUITS 870 Taxes (U.S. Plaintiff or Defendant) 871 IRS—Third Party 26 USC 7609 IMMIGRATION 462 Naturalization Application 465 Other Immigration Actions OTHER STATUTES 375 False Claims Act 376 Qui Tam (31 USC 3729(a)) 400 State Reapportionment 410 Antitrust 430 Banks and Banking 450 Commerce 460 Deportation 470 Racketeer Influenced and Corrupt Organizations 480 Consumer Credit 485 Telephone Consumer Protection Act 490 Cable/Sat TV 850 Securities/Commodities/ Exchange 890 Other Statutory Actions 891 Agricultural Acts 893 Environmental Matters 895 Freedom of Information Act 896 Arbitration 899 Administrative Procedure Act/Review or Appeal of Agency Decision 950 Constitutionality of State Statutes V. ORIGIN (Place an “X” in One Box Only) 1 Original Proceeding 2 Removed from State Court 3 Remanded from Appellate Court 4 Reinstated or Reopened 5 Transferred from Another District 6 Multidistrict Litigation Transfer (specify) Cite the U.S. Civil Statute under which you are filing (Do not cite jurisdictional statutes unless diversity): 8 Multidistrict Litigation Direct File 28 U.S.C. Section 1346, 2201 VI. CAUSE OF ACTION Brief description of cause: Declaratory Judgment to enforce Settlement Agreement VII. REQUESTED IN COMPLAINT: VIII. RELATED CASE(S) IF ANY DATE CHECK IF THIS IS A CLASS ACTION UNDER RULE 23, F.R.Cv.P. (See instructions): DEMAND $ JUDGE N/A CHECK YES only if demanded in complaint: Yes No JURY DEMAND: DOCKET NUMBER SIGNATURE OF ATTORNEY OF RECORD /s/ Aaron B. Houchens, Esq. 05/17/2019 FOR OFFICE USE ONLY RECEIPT # AMOUNT $400.00 APPLYING IFP 0423Case 7:19-cv-00354-GEC Document 33-1 Case 7:19-cv-00381-GEC Document 1-4 3145327 JUDGE Conrad MAG. JUDGE Filed Page 26 Pageid#: 150 Filed07/23/19 05/17/19 Page25 1 of 1 Pageid#: 24 7:19cv381 Continuation of Civil Cover Sheet, 1. (a) Plaintiffs James C. Justice III, A&G Coal Corporation., Chestnut Land Holdings LLC, Bluestone Coal Corp., Dynamic Energy, Inc., Frontier Coal Company., Justice Energy Co., Inc., Kentucky Fuel Corporation, National Coal, LLC, Pay Car Mining, Inc., Premium Coal Company., Inc., S & H Mining, Inc., and TAMS Management, Inc. Continuation of Civil Cover Sheet, 1. (c) Attorneys AARON B. HOUCHENS AARON B. HOUCHENS, P.C. 111 East Main Street P.O. Box 1250 Salem, Virginia 24153 Telephone: (540) 389-4498 Facsimile: (540) 339-3903 Email: aaron@houchenslaw.com and RICHARD A. GETTY (Pro Hac Vice Admission pending) C. THOMAS EZZELL (Pro Hac Vice Admission pending) MARCEL RADOMILE (Pro Hac Vice Admission pending) THE GETTY LAW GROUP, PLLC 1900 Lexington Financial Center 250 West Main Street Lexington, Kentucky 40507 Telephone: (859) 259-1900 Email: rgetty@gettylawgroup.com Email: tezzell@gettylawgroup.com Email: mradomile@gettylawgroup.com Case 7:19-cv-00354-GEC 33-1 26 Pageid#: Pageid#:25 151 Case 7:19-cv-00381-GECDocument Document 1-5 Filed Filed07/23/19 05/17/19 Page Page26 1 of 1 EXHIBIT Case Document 33-2 Filed 07/23/19 Page 1 of 8 Pageid#: 152 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF VIRGINIA (ROANOKE DIVISION) THE UNITED STATES OF AMERICA; THE STATE OF ALABAMA, EX REL. LUTHER STRANGE, in his official capacity as the Attorney General of Alabama; ALABAMA DEPARTMENT OF ENVIRONMENTAL MANAGEMENT; THE COMMONWEALTH OF KENTUCKY, ENERGY AND ENVIRONMENT CABINET; THE STATE OF TENNESSEE, EX REL. HERBERT H. SLATERY III, in his official capacity as the Attorney General and Reporter of Tennessee; and THE COMMONWEALTH OF VIRGINIA, ) ) ) ) ) ) ) ) ) ) ) ) ) Plaintiffs, ) v. ) ) SOUTHERN COAL CORPORATION; JUSTICE ) COAL OF ALABAMA, LLC; A & G COAL CORPORATION; FOUR STAR RESOURCES LLC; ) ) INFINITY ENERGY, INC.; KENTUCKY FUEL ) CORPORATION; SEQUOIA ENERGY, LLC; ) VIRGINIA FUEL CORPORATION; NATIONAL ) COAL, LLC; PREMIUM COAL COMPANY, ) INCORPORATED; S AND H MINING INC.; ) AIRWAY RESOURCES, L.L.C.; BADEN ) RECLAMATION COMPANY; BLACK RIVER ) COAL, LLC; CHESTNUT LAND HOLDINGS, LLC; MEG-LYNN LAND COMPANY, INC.; NINE ) MILE MINING, INC.; CANE PATCH MINING CO., ) ) INC.; BLUESTONE RESOURCES, INC.; DYNAMIC ENERGY, INC.; GREENTHORN, LLC; ) JUSTICE HIGHWALL MINING, INC.; NATIONAL ) RESOURCES, INC.; NUFAC MINING COMPANY, ) ) INC.; PAY CAR MINING, INC.; SECOND STERLING CORP.; AND NEWGATE ) ) DEVELOPMENT OF BECKLEY LLC ) ) Defendants. ) ) 7:16-cv-00462-GEC Civil Action No. _____ CONSENT DECREE Case Case7:19-cv-00354-GEC 7:16-cv-00462-GEC Document Document33-2 2-1 Filed Filed09/30/16 07/23/19 Page Page12of of86 8 Pageid#: Pageid#:153 92 TABLE OF CONTENTS I. BACKGROUND ................................................................................................................1 II. JURISDICTION AND VENUE ........................................................................................3 III. APPLICABILITY ..............................................................................................................5 IV. DEFINITIONS ...................................................................................................................8 V. CIVIL PENALTY ............................................................................................................16 VI. GENERAL COMPLIANCE REQUIREMENTS .........................................................18 VII. INJUNCTIVE RELIEF ...................................................................................................25 VIII. FINANCIAL ASSURANCE ...........................................................................................40 IX. REPORTING AND CERTIFICATION REQUIREMENTS ......................................42 X. STIPULATED PENALTIES ..........................................................................................46 XI. FORCE MAJEURE .........................................................................................................51 XII. DISPUTE RESOLUTION ..............................................................................................54 XIII. INFORMATION COLLECTION AND RETENTION ...............................................57 XIV. EFFECT OF SETTLEMENT/RESERVATION OF RIGHTS ...................................59 XV. COSTS ..............................................................................................................................61 XVI. NOTICES .........................................................................................................................61 XVII. RETENTION OF JURISDICTION ...............................................................................66 XVIII. MODIFICATION ............................................................................................................66 XIX. TERMINATION ..............................................................................................................67 XX. PUBLIC PARTICIPATION ...........................................................................................68 XXI. SIGNATORIES/SERVICE .............................................................................................68 XXII. INTEGRATION...............................................................................................................69 XXIII. FINAL JUDGMENT .......................................................................................................69 XXIV. APPENDICES ..................................................................................................................69 ii Case Case7:19-cv-00354-GEC 7:16-cv-00462-GEC Document Document33-2 2-1 Filed Filed09/30/16 07/23/19 Page Page23of of86 8 Pageid#: Pageid#:154 93 I. BACKGROUND A. Concurrent with the Date of Lodging of this Consent Decree, Plaintiffs, the United States of America, on behalf of the United States Environmental Protection Agency (“EPA”); the State of Alabama, ex rel. Luther Strange, in his official capacity as the Attorney General of Alabama and the Alabama Department of Environmental Management (“ADEM”); the Commonwealth of Kentucky, Kentucky Energy and Environment Cabinet; the State of Tennessee, ex. rel. Herbert H. Slatery III, Attorney General and Reporter of Tennessee, at the request and on behalf of the Tennessee Department of Environment and Conservation; and the Commonwealth of Virginia, by and through the Department of Mines, Minerals and Energy (collectively, “States”) have filed a Complaint in this action against Southern Coal Corporation; Justice Coal of Alabama, LLC; A & G Coal Corporation; Four Star Resources LLC; Infinity Energy, Inc.; Kentucky Fuel Corporation; Sequoia Energy, LLC; Virginia Fuel Corporation; National Coal, LLC; Premium Coal Company, Incorporated; S and H Mining Inc.; Airway Resources, L.L.C.; Baden Reclamation Company; Black River Coal, LLC; Chestnut Land Holdings, LLC; Meg-Lynn Land Company, Inc.; Nine Mile Mining, Inc.; Cane Patch Mining Co., Inc.; Bluestone Resources, Inc.; Dynamic Energy, Inc.; Greenthorn, LLC; Justice Highwall Mining, Inc.; National Resources, Inc.; Nufac Mining Company, Inc.; Pay Car Mining, Inc.; Second Sterling Corp.; and Newgate Development of Beckley LLC (collectively, “Defendants”) pursuant to the following statutes: (1) Sections 309(b) and (d) of the Federal Water Pollution Control Act (“Clean Water Act” or “CWA”), 33 U.S.C. §§ 1319(b), (d); and the relevant state statutes: the Alabama Water Pollution Control Act (“AWPCA”), Code of Alabama, 1975 Ala. Code § 22-22-9(m), and the Alabama Environmental Management Act, Code of Alabama, 1975, 1 Case Case7:19-cv-00354-GEC 7:16-cv-00462-GEC Document Document33-2 2-1 Filed Filed09/30/16 07/23/19 Page Page34of of86 8 Pageid#: Pageid#:155 94 Ala. Code § 22-22A-5(18); Kentucky Revised Statutes (“KRS”) §§ 224.99-010, 224.99-020 ; the Tennessee Water Quality Control Act (“TWQCA”), Tenn. Code Ann. §§ 69-3-101 to -148; and the Virginia State Water Control Law (“SWCL”), Va. Code §§ 62.1-44.2 to -44.34:28. The Complaint alleges that the Defendants have violated the conditions and limitations of National Pollutant Discharge Elimination System (“NPDES”) permits issued to them by the relevant State of Alabama, Commonwealth of Kentucky, State of Tennessee, Commonwealth of Virginia, and State of West Virginia pursuant to the EPA-approved permit program under Section 402 of the CWA, 33 U.S.C. § 1342(a), and the relevant AWPCA, Ala. Code § 22-22-9; KRS § 224.16-050; TWQCA, Tenn. Code Ann. § 69-3-105(h); Va. Code § 45.1-254 and/or W. Va. Code § 22-114(a)(16). The Complaint also alleges that Defendants, National Coal, LLC, and/or Premium Coal Company, Incorporated, discharged pollutants to waters of Tennessee and waters of the United States from point sources without NPDES permits in violations of Section 301(a) of the CWA, 33 U.S.C. § 1311(a) and TWQCA, Tenn. Code Ann § 69-3-108. B. The Complaint further alleges that Defendants National Coal, LLC and Premium Coal Company, Incorporated failed to comply with EPA’s requests for information in violation of Section 308(a) of the CWA, 33 U.S.C. § 1318(a). C. The United States has reviewed Financial Information submitted by Defendants to determine Defendants’ financial ability to pay a civil penalty in this action and to finance the requirements of this Consent Decree. The United States has determined that Defendants have limited financial ability to pay. D. Section VIII of this Decree requires Defendants to provide financial assurance for the Work if Defendants default on their obligation to perform such Work. Defendants are 2 Case Case7:19-cv-00354-GEC 7:16-cv-00462-GEC Document Document33-2 2-1 Filed Filed09/30/16 07/23/19 Page Page45of of86 8 Pageid#: Pageid#:156 95 providing financial assurance by means of an Irrevocable Letter of Credit and a Standby Trust. The Applicant for the Letter of Credit is the Environmental Fund, LLC, which is also the Grantor for the Standby Trust. The Environmental Fund, LLC is not named in the Complaint, but rather is joined to this Decree as described in Section II (Jurisdiction and Venue). The Trustee of the Standby Trust and the bank that issues the Letter of Credit are also joined to this Decree as described in Section II (Jurisdiction and Venue). E. Defendants do not admit any liability to the United States, the States, any governmental body, or any other organization or person arising out of the transactions or occurrences alleged in the Complaint nor do Defendants admit any fact or legal conclusion alleged in the Complaint. F. The Parties recognize, and the Court by entering this Consent Decree finds, that this Consent Decree has been negotiated by the Parties in good faith and will avoid litigation among the Parties, and that this Consent Decree is fair, reasonable, and in the public interest. NOW, THEREFORE, with the consent of the Parties, IT IS HEREBY ADJUDGED, ORDERED, AND DECREED as follows: II. JURISDICTION AND VENUE 1. This Court has jurisdiction over the Parties and over the subject matter of this action, pursuant to 28 U.S.C. §§ 1331, 1345, 1355, and 1367, and Section 309(b) of the CWA, 33 U.S.C. § 1319(b). This Court has jurisdiction over Environmental Fund, LLC as Grantor, United Bank, Inc. as Trustee of the Standby Trust, and Carter Bank and Trust as the issuing bank for the Letter of Credit, pursuant to the All Writs Act, 28 U.S.C. § 165, and Fed. R. Civ. P. 19(a). 2. The United States has authority to bring this action on behalf of the Administrator 3 Case Case7:19-cv-00354-GEC 7:16-cv-00462-GEC Document Document33-2 2-1 Filed Filed09/30/16 07/23/19 Page Page56of of86 8 Pageid#: Pageid#:157 96 of EPA under Section 506 of the CWA, 33 U.S.C. § 1366. The Attorney General of the State of Alabama and ADEM are authorized to enforce the provisions of the AWPCA by the Alabama Environmental Management Act, Ala. Code § 22-22A-5(12), (18). The Commonwealth of Kentucky’s Office of General Counsel of the Energy and Environment Cabinet has the authority to bring this action pursuant to KRS Section 224.99-020. The Tennessee Attorney General has the authority to bring this suit on behalf of the State of Tennessee in accordance with Tenn. Code Ann. § 8-6-109 and the common law of Tennessee. The VA DMME is authorized under Va. Code §§ 62.1-44.15(8c) and 45.1-254 to file suit against violators. 3. Venue lies in the Western District of Virginia pursuant to 28 U.S.C. §§ 1391(b) and (c) and 1395(a), as well as Section 309(b) of the CWA, 33 U.S.C. § 1319(b), because it is the judicial district in which many of the Defendants are located, reside, and/or are doing business, conducting surface coal mining operations, and/or in which many of the surface coal mining operations are located and the significant number of the violations alleged in the Complaint occurred. 4. For purposes of this Decree, or any action to enforce this Decree, Defendants consent to the Court’s jurisdiction over this Decree and any such action and over Defendants, and consent to venue in this judicial district. Environmental Fund, LLC, United Bank, Inc., and Carter Bank & Trust do not object to the Court’s exercise of subject matter or personal jurisdiction or to venue for purposes of enforcing the applicable Consent Decree obligations of Grantor, Trustee, and the issuing bank for the LOC, respectively. 5. For purposes of this Decree, Defendants agree that the Complaint states claims upon which relief may be granted pursuant to Sections 309(b) and (d) of the CWA, 33 U.S.C. §§ 4 Case Case7:19-cv-00354-GEC 7:16-cv-00462-GEC Document Document33-2 2-1 Filed Filed09/30/16 07/23/19 Page Page67of of86 8 Pageid#: Pageid#:158 97 1319(b) and (d); and the relevant provisions of AWPCA at Ala. Code § 22-22-9; the Alabama Environmental Management Act at Ala. Code § 22-22A-5(18); KRS § 224.99-020; TWQCA, Tenn. Code Ann. §§ 69-3-115 and 69-3-117; and Va. Code §§ 62.1-44.21, 44.23, and 44.32. III. APPLICABILITY 6. The obligations of this Consent Decree apply to and are binding upon the United States and the States, and upon Defendants, the Grantor, the Trustee, the issuing bank for the Letter of Credit, and any successors, assigns, or other entities, or persons otherwise bound by law. 7. The provisions of this Consent Decree apply to Facilities and Future Facilities located in Alabama, Kentucky, Tennessee, Virginia, and West Virginia. 8. Defendants hereby agree that they are bound to perform duties scheduled to occur by this Consent Decree before the Effective Date. In the event the United States withdraws from or withholds consent to this Consent Decree in accordance with Paragraph 140, or the Court declines to enter this Consent Decree, then the preceding requirement to perform duties scheduled to occur before the Effective Date shall terminate. 9. No transfer of ownership or operation of any Facility shall relieve Defendants of their obligations to ensure that the terms of the Decree are implemented at that Facility, except as provided in Paragraphs 10-11 below. At least 60 Days prior to any proposed transfer of ownership or operation of a Facility, Defendants shall provide to the United States: (a) written notice of the prospective transfer; (b) the certification required by Paragraph 10.c; (c) a copy of all Database entries for the past 6 months of audits and inspections conducted at the Facility under Paragraphs 42 (Environmental Audits), 43 (Treatment System Audits), and 45 (Outlet 5 Case Case7:19-cv-00354-GEC 7:16-cv-00462-GEC Document Document33-2 2-1 Filed Filed09/30/16 07/23/19 Page Page78of of86 8 Pageid#: Pageid#:159 98 EXHIBIT Case Document 33-3 Filed 07/23/19 Page 1 of 17 Pageid#: 160 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA AT BECKLEY * * * * * * * * JAMES RIVER EQUIPMENT * VIRGINIA, LLC, * Plaintiff * Case No. vs. * 5:13-cv-28160 JUSTICE ENERGY * COMPANY, INC., * Defendant * * * * * * * * * DEPOSITION OF JAMES JUSTICE, III March 14, 2019 Any reproduction of this transcript is prohibited without authorization by the certifying agency. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 2 of 17 Pageid#: 161 2 1 DEPOSITION 2 OF 3 JAMES JUSTICE, III, taken on behalf of the Defendant 4 herein, pursuant to the Rules of Civil Procedure, taken 5 before me, the undersigned, Bradley Scott, a Court 6 Reporter and Notary Public in and for the State of West 7 Virginia, at the law offices of Carey, Scott, Douglas & 8 Kessler, PLLC, 707 Virginia Street, East 901 Chase Tower, 9 Charleston, West Virginia on Thursday, March 14, 2019 10 beginning at 12:10 p.m. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 3 of 17 Pageid#: 162 3 1 A P P E A R A N C E S 2 3 FRED B. WESTFALL, JR., ESQUIRE 4 Assistant United States Attorney 5 300 Virginia Street East 6 Room 4000 7 Charleston, WV 8 25301 COUNSEL FOR UNITED STATES 9 10 MICHAEL W. CAREY, ESQUIRE 11 Carey, Scott, Douglas & Kessler, PLLC 12 901 Chase Tower 13 707 Virginia Street East 14 Charleston, WV 15 25301 COUNSEL FOR DEFENDANT 16 17 JOHN F. HUSSELL, IV, ESQUIRE 18 Wooton, Davis, Hussell & Ellis 19 300 Summers Street 20 Suite 1230 21 Charleston, WV 22 25301 COUNSEL FOR DEFENDANT 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 4 of 17 Pageid#: 163 4 1 I N D E X 2 3 WITNESS: JAMES JUSTICE, III 4 EXAMINATION 5 6 By Attorney Westfall 7 - 15 CERTIFICATE 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 5 of 17 Pageid#: 164 16 5 1 EXHIBIT PAGE 2 3 4 5 PAGE NUMBER DESCRIPTION IDENTIFIED NONE OFFERED 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 6 of 17 Pageid#: 165 6 1 OBJECTION PAGE 2 3 4 ATTORNEY PAGE NONE MADE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 7 of 17 Pageid#: 166 7 1 S T I P U L A T I O N 2 ---------------------------------------------------------- 3 (It is hereby stipulated and agreed by and between counsel 4 for the respective parties that reading, signing, sealing, 5 certification and filing are not waived.) 6 ---------------------------------------------------------- 7 P R O C E E D I N G S 8 ---------------------------------------------------------- 9 JAMES JUSTICE, III, 10 CALLED AS A WITNESS IN THE FOLLOWING PROCEEDING, AND 11 HAVING FIRST BEEN DULY SWORN, TESTIFIED AND SAID AS 12 FOLLOWS: 13 --- 14 EXAMINATION 15 --- 16 BY ATTORNEY WESTFALL: 17 Q. What's your name please? 18 A. James C. Justice, III. 19 Q. Mr. Justice, my name is Fred Westfall. I'm 20 with the U.S. Attorney's Office. 21 going to be asking you questions in connection with a 22 civil penalty part of the case dealing with the James 23 River Equipment Company case that was pending. 24 I'm asking today, I'm And if at any time you do not hear or Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 8 of 17 Pageid#: 167 8 1 understand a question I've asked if you'll let me know, 2 I'll be happy to repeat or rephrase the question for you. 3 Have you ever been deposed before? 4 A. I have. 5 Q. Basic ground rules are you need to give verbal 6 responses to the questions. 7 can't record gestures or nods of the head. 8 time you need to take a break, if you'll let me know we 9 can take a break. 10 Because the court reporter And at any It's not a problem. This will be fairly short so I don't think 11 we'll have --- probably won't take more than just a few 12 more minutes so. 13 Mr. Ball previously testified about the 14 financial aspects of Justice Energy in some detail prior 15 to you arriving here for your deposition today. 16 tell what involvement you normally have in Justice Energy 17 as far as the day-to-day operations of the company? 18 A. 19 high level. 20 people in place. 21 involvement with it just being very high level. 22 23 24 Q. Can you I would characterize my day to day at a pretty You know, we have accounting people or legal Operations people in place. Have some Okay. And so when you're talking about high, we're not talking about quantum or quantity. We're talking Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 9 of 17 Pageid#: 168 9 1 about supervisor. You're going to be far up the 2 supervisory chain over the Justice Energy? 3 A. Yes, sir. 4 Q. You're probably not going out to the mine site 5 every day to take a look at what's going on. 6 Is that correct? 7 A. I go some but not every day. 8 Q. I want to go back through the business 9 structure for just a minute. Just to ask you some 10 questions along that line. 11 Mr. Ball's testimony, you and your father own a group of 12 companies that deal with mining and mining operations and 13 I guess probably you have some other non-mining operation 14 companies as well. 15 through this. 16 It's my understanding, from So let me just kind of go back Blue Stone Resources, Incorporated. Do you 17 know which companies are under Blue Stone Resources, 18 Incorporated? 19 20 21 A. It would probably be better if Steve would go through the list but generally I know most of them. Q. Let me ask the question this way, do you sit on 22 the boards of directors of any of these others --- of 23 these various companies Blue Stone Resources, Blue Stone 24 Mineral, JCJ Coal Room, Justice Energy Company, Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 10 of 17 Pageid#: 169 10 1 Incorporated. 2 companies? 3 A. I do. 4 Q. Okay. 5 Do you serve on any of the Boards of these And in terms as I understand it from what Mr. 6 Ball testified earlier, you guys normally do not have 7 real board meetings but you do everything by agreement. 8 You have agreement documents you sign in lieu of board 9 meetings. 10 11 Is that correct? A. Yes, your --- that's correct. And at the end 12 of 2018, we actually did have a board meeting for another 13 matter. 14 meeting. 15 Q. But generally, we do agreements in lieu of the And in terms of the shareholders of --- well 16 let me go back and rephrase this. 17 companies whether it's Blue Stone Mineral, Blue Stone 18 Resources, Blue Stone Coal, and Blue Stone Industries, 19 the ultimate control over these companies rest with you 20 and your father. 21 These various coal Is that correct? 22 A. Well, we're the shareholders. 23 Q. Okay. 24 And what about your sister? What involvement Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 11 of 17 Pageid#: 170 11 1 is the --- Jillean, what involvement does she have with 2 the companies? 3 A. She's not a shareholder of those companies you 4 referenced but she is a director. 5 the only directors at this time. 6 Q. Jill and myself are Now, I understand from Mr. Ball that there is a 7 collective bargaining agreement in place between the UMWA 8 and Justice Energy Company, Incorporated, dealing with 9 the miners that are currently onsite. Did you have any 10 involvement in the negotiations of the collective 11 bargaining agreement? 12 A. Not really. We're a very small player in the 13 union. 14 so for good or for bad, we just kind of have to tag along 15 to whatever, you know, the bigger companies agree to. 16 17 18 19 20 21 Collective bargaining agreement is nationwide and Q. Did you have to sign the collective bargaining agreement? A. Not to my knowledge. ATTORNEY CAREY: No. Let me clarify. When you said him signing personally or any of the companies? ATTORNEY WESTFALL: Well, I understand if 22 there's no --- let me go back and maybe I should ask the 23 question this way. 24 BY ATTORNEY WESTFALL: Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 12 of 17 Pageid#: 171 12 1 Q. Are there any other --- other than what Justice 2 Energy Company, Incorporated, are there any collective 3 bargaining agreements involving the UMWA and any other, 4 we'll call them Justice Companies? 5 A. There are. Some of the other Blue Stone 6 subsidiaries --- and I don't really want to tell you the 7 exact ones because I mean, we got a few. 8 was one, Keystone Services is one, Justice Energy is one. 9 They're all covered under a master collective bargaining 10 11 Blue Stone Coal agreement. Q. Did you have to --- did you and your --- in 12 your corporate capacity or as a shareholder in any 13 capacity have to sign any of these collective bargaining 14 agreements or any of the documents when it relates to the 15 master collective bargaining agreement on behalf of any 16 of these companies? 17 A. I wouldn't have signed as a --- or wouldn't be 18 asked to sign as a shareholder or any personal liability 19 but I really can't tell you if I signed it in a corporate 20 capacity. 21 Q. I may have, I may not have, I just don't know. Okay. 22 The decision making on --- for the over 23 operation of Justice Energy Company, who has that 24 ultimate decision making authority? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 13 of 17 Pageid#: 172 13 1 A. Could you be a little more specific? 2 Q. Sure. 3 Sure. If a decision had to be made about the future 4 direction of the company or a major financial decision 5 had to be made about Justice Energy Company, 6 Incorporated, who would have the ultimate decision making 7 authority over such decisions? 8 9 A. I guess I would have the ultimate decision making authority and I would certainly consult with the 10 other people on our team, accountants, attorneys, our 11 operations people. 12 13 14 Q. Would that be the same for any of the Blue Stone companies as well? A. Generally speaking yes, but you know we have, 15 you know, there's kind of different players in the game. 16 You know, maybe, maybe at Blue Stone Coal they're 17 different operations folks or different accounting 18 people. 19 those on each specific operation. 20 Q. But you know, I would certainly consult with But if there was a major financial decision or 21 some sort of a major direction for the company that is 22 particular --- the ultimate decision making authority 23 would rest with you. 24 Is that correct? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 14 of 17 Pageid#: 173 14 1 A. I think so, yes. 2 Q. I'd like for you to take a look, just briefly. 3 We have some exhibits from Mr. Ball's deposition in front 4 of me, Exhibits 1 through 7. 5 you a general question after you've had a chance to take 6 a look at those. 7 documents and so on. 8 you, I'll just go ahead and ask you. 9 involvement with the preparation of any of these 10 exhibits? I mean most of them are just financial But the question I'm going to ask Did you have any Exhibits 1 through 7? 11 A. I did not, no. 12 Q. Okay. 13 And I'm just going to ask Now I'm going try and I might be a little 14 inarticulate but I'm going to try see through this the 15 best way I can. 16 some of the corporate structure and the business 17 structure involved with Justice Energy Company, 18 Incorporated. 19 Company, Incorporated, the parent company is JCJ Coal 20 Group, LLC. 21 As I understand, we kind of went through As I understand it, Justice Energy Is that your understanding? 22 A. That's my understanding, yes, sir. 23 Q. And in that particular company, the JCJ Coal 24 Group is owned by Blue Stone Mineral, Incorporated. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 15 of 17 Pageid#: 174 15 1 2 Is that correct? A. Yeah, I better not delve into this because I 3 don't know exactly. 4 structure would be the best to ask. 5 Q. But, you know, Steve as far as the So in terms of the corporate and business 6 structure of the various companies of which you and your 7 father are the shareholders or the ultimate shareholders 8 of, that Steve would be the person who would have the 9 most knowledge about how those companies are structured 10 and how they're interrelated? 11 A. Yes, sir. 12 Q. Okay. 13 14 15 16 That's all that I have. Thank you very much. A. Thank you. ATTORNEY CAREY: We don't have any questions but we will read. 17 * * * * * * * * 18 DEPOSITION CONCLUDED AT 12:20 P.M. 19 * * * * * * * * 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 16 of 17 Pageid#: 175 16 1 STATE OF WEST VIRGINIA) 2 CERTIFICATE 3 4 I, Bradley Scott, a Notary Public in and for the State of West Virginia, do hereby certify: 5 That the witness whose testimony appears in the 6 foregoing deposition, was duly sworn by me on said date, 7 and that the transcribed deposition of said witness is a 8 true record of the testimony given by said witness; 9 10 That the proceeding is herein recorded fully and accurately; 11 That I am neither attorney nor counsel for, nor 12 related to any of the parties to the action in which 13 these depositions were taken, and further that I am not 14 a relative of any attorney or counsel employed by the 15 parties hereto, or financially interested in this 16 action. 17 I certify that the attached transcript meets the 18 requirements set forth within article twenty-seven, 19 chapter forty-seven of the West Virginia Code. 20 21 Bradley Scott 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-3 Filed 07/23/19 Page 17 of 17 Pageid#: 176 EXHIBIT Case Document 33-4 Filed 07/23/19 Page 1 of 83 Pageid#: 177 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA AT BECKLEY * * * * * * * * JAMES RIVER EQUIPMENT * VIRGINIA, LLC, * Plaintiff * Civil Action No. vs. * 5:13-cv-28160 JUSTICE ENERGY * COMPANY, INC., * Defendant * * * * * * * * * DEPOSITION OF STEPHEN W. BALL March 14, 2019 Any reproduction of this transcript is prohibited without authorization by the certifying agency. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 2 of 83 Pageid#: 178 2 1 DEPOSITION 2 OF 3 STEPHEN W. BALL, taken on behalf of the Defendant 4 herein, pursuant to the Rules of Civil Procedure, 5 taken before me, the undersigned, Bradley Scott, a 6 Court Reporter and Notary Public in and for the State 7 of West Virginia, at the law offices of Carey, Scott, 8 Douglas & Kessler, PLLC, 707 Virginia Street, East 901 9 Chase Tower, Charleston, West Virginia on Thursday, 10 March 14, 2019 beginning at 10:07 a.m. 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 3 of 83 Pageid#: 179 3 1 A P P E A R A N C E S 2 3 FRED B. WESTFALL, JR., ESQUIRE 4 Assistant United States Attorney 5 300 Virginia Street East 6 Room 4000 7 Charleston, WV 8 25301 COUNSEL FOR UNITED STATES 9 10 MICHAEL W. CAREY, ESQUIRE 11 Carey, Scott, Douglas & Kessler, PLLC 12 901 Chase Tower 13 707 Virginia Street East 14 Charleston, WV 15 25301 COUNSEL FOR DEFENDANT 16 17 JOHN F. HUSSELL, IV, ESQUIRE 18 Wooton, Davis, Hussell & Ellis 19 300 Summers Street 20 Suite 1230 21 Charleston, WV 22 25301 COUNSEL FOR DEFENDANT 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 4 of 83 Pageid#: 180 4 1 I N D E X 2 3 WITNESS: STEPHEN BALL 4 EXAMINATION 5 6 7 By Attorney Westfall 7 - 76 EXAMINATION By Attorney Carey 8 DISCUSSION AMONG PARTIES 9 CERTIFICATE 76 - 77 77 - 78 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 5 of 83 Pageid#: 181 79 5 1 EXHIBIT PAGE 2 3 PAGE 4 NUMBER DESCRIPTION 5 1 Financial Statement of Debtor 6 2 Balance Sheet 12/31/16 42 7 3 Balance Sheet 12/31/17 42 8 4 Property Return for Justice/ 9 IDENTIFIED 8 Bluestone 52 10 5 Equipment list as of 1/21/15 60 11 6 Depreciation lists 2014-2017 61 12 7 Revised property list March 2019 72 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 6 of 83 Pageid#: 182 6 1 OBJECTION PAGE 2 3 4 ATTORNEY PAGE NONE MADE 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 7 of 83 Pageid#: 183 7 1 S T I P U L A T I O N 2 ------------------------------------------------------ 3 (It is hereby stipulated and agreed by and between 4 counsel for the respective parties that reading, 5 signing, sealing, certification and filing are not 6 waived.) 7 ------------------------------------------------------- 8 P R O C E E D I N G S 9 ------------------------------------------------------- 10 STEPHEN BALL, 11 CALLED AS A WITNESS IN THE FOLLOWING PROCEEDING, AND 12 HAVING FIRST BEEN DULY SWORN, TESTIFIED AND SAID AS 13 FOLLOWS: 14 --- 15 EXAMINATION 16 --- 17 BY ATTORNEY WESTFALL: 18 Q. Would you state your name, please? 19 A. Stephen Ball. 20 Q. Mr. Ball, my name is Fred Westfall. And I 21 represent the United States in this case. Anytime if 22 you do not hear or understand a question that I ask of 23 you, let me know. 24 the question for you. I'll be happy to repeat or rephrase Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 8 of 83 Pageid#: 184 8 1 2 We're taking your deposition. Have you ever been deposed before? 3 A. Yes, sir. 4 Q. So the general rules are you have to give 5 verbal responses to the questions because the court 6 reporter can't record gestures or nods of the head. 7 And if you, at any time, you need to take a break. 8 you let me know, we'll be happy to take a break. 9 Do you understand that? 10 A. I do. 11 Q. Okay. 12 If Can you --- you've been furnished as a 13 witness in our --- in the James River Equipment 14 Virginia, LLC versus Justice Energy Company, 15 Incorporated case in connection with our United States 16 inquiring on the certain financial information. 17 want to show you what's been marked as Exhibit Number 18 1 and have you just take a look at that for just a 19 moment, if you would, please. 20 --- And I 21 (Whereupon, United States Exhibit 1, 22 Financial Statement of Debtor, was 23 marked for identification.) 24 --- Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 9 of 83 Pageid#: 185 9 1 THE WITNESS: 2 ATTORNEY WESTFALL: 3 THE WITNESS: 4 hall. We'll just take a break. --(WHEREUPON, A PAUSE IN THE RECORD WAS HELD.) 9 10 They're just down the ATTORNEY WESTFALL: 7 8 Be my guest. I'm sorry. 5 6 I forgot my glasses. --BY ATTORNEY WESTFALL: 11 Q. Would you take a look at page six of Exhibit 12 1, please? 13 A. Okay. 14 Q. Is that your signature on page number six? 15 A. It is. 16 Q. And I notice in looking at your title, Yes, sir. 17 you're listed as Vice President and then General 18 Counsel of Justice Energy Company, Incorporated. 19 that your position? Is 20 A. Yes, sir. 21 Q. Let me just ask you just a couple questions 22 about your educational background. 23 to undergraduate school? 24 A. Where did you go I graduated from Marshville University in Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 10 of 83 Pageid#: 186 10 1 1997 with a degree in finance. 2 Q. And where did you attend law school? 3 A. I graduated from West Virginia University 4 College of Law in 2001. 5 6 Q. Have you ever been engaged in the private practice of law outside of a corporate setting? 7 A. No, sir. 8 Q. And when --- I take it you're licensed to 9 practice law. 10 Is that correct? 11 A. Yes. 12 Q. And when were you first licensed? 13 A. 2001. 14 Q. And have you always been engaged in the 15 corporate practice of law so to speak since your 16 graduation from law school? 17 A. Yes. 18 Q. And where were you employed after law 19 school? 20 A. My first job was with Blue Stone Industries, 21 Inc., which is also owned by the same owners of 22 Justice Energy. 23 counsel. 24 Q. Started as assistant CFO and general Do you have a --- are you a CPA by chance? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 11 of 83 Pageid#: 187 11 1 A. No, sir. 2 Q. Let's take a look at Exhibit 1. I want to 3 just ask some general questions first. In section one 4 on page one of Exhibit Number 1, it indicates that 5 Justice Energy Company Incorporated is a coal mining 6 business. 7 mining? Is Justice Energy still involved in coal 8 A. Yes. 9 Q. And can you tell me what mines that it 10 11 currently mine coal in? A. It currently operates what is known as the 12 Red Fox Surface Mine. 13 McDowell County, West Virginia. 14 is Bishop, Virginia. 15 16 Q. It's actually located in But the closest town It's right on the state line. Does Justice Energy have any other coal mines other than Red Fox? 17 A. No. 18 Q. Does Justice Energy actually own Red Fox? 19 A. No. 20 Q. Who owns Red Fox? 21 A. The Red Fox mine has a few different 22 components to it. Typically with a coal mine, you 23 have the mining permit. 24 and then you have equipment associated with that. You have the coal reserves Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 12 of 83 Pageid#: 188 The 12 1 mining permit is in the name of Blue Stone Coal 2 Corporation. 3 company that's unrelated, it's called Rowland Land 4 Company. 5 The reserves are owned by separate And it's leased to an affiliate of Justice 6 Energy called James C. Justice Companies, LLC. And 7 Justice Energy operates the coal mine. 8 some of its own equipment but a lot of that equipment 9 is provided to it by affiliate entities. It does own 10 Q. And who are those affiliate entities? 11 A. The primarily --- and in fact I think it's 12 the only other entity, Blue Stone Resources, Inc. 13 provides most of the equipment to Justice Energy 14 Company. 15 Q. Let me kind of --- we talked about a lot of 16 different companies and I want to try and understand 17 the relationships that exist with the companies. 18 when we talk about Justice Energy, who owns Justice 19 Energy. So 20 A. Its parent company is JCJ Coal Group, LLC. 21 Q. And who owns JCJ Coal Group, LLC? 22 A. Blue Stone Mineral, Inc. 23 Q. And who owns Blue Stone Mineral, Inc. 24 A. Blue Stone Resources, Inc. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 13 of 83 Pageid#: 189 13 1 Q. And who owns Blue Stone Resources, Inc. 2 A. James C. Justice, II and James C. Justice, 4 Q. And they own them in their individual 5 capacities. 3 III. 6 Is that correct? 7 A. Yes, sir. 8 Q. Now going backwards for just a moment to Red 9 10 11 12 Fox. I just want to make sure I understand. The mine you said was actually owned by one entity or person. A. The mining permit is in the name of Blue Stone Coal Corporation. 13 Q. Who owns Blue Stone Coal, Corp.? 14 A. Blue Stone Industries, Inc. 15 Q. And who owns Blue Stone Industries, Inc.? 16 A. Blue Stone Mineral. 17 Q. Okay. 18 19 And you said the reserves are owned by ---? A. James C. --- I'm sorry. I'm sorry. James C. Justice 20 Companies, LLC. They're leased. The 21 leasee is James C. Justice Companies, LLC. 22 owner is, we refer to them as Rowland Land Company. 23 think they formed a special purpose entity for 24 purposes of owning those reserves. The actual That its title is Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 14 of 83 Pageid#: 190 I 14 1 2 RLC, TN, LLC. Q. And Rowland Land Company and R --- let me 3 just make sure I get the initial right, R --- I think 4 you said was RLC, TN? 5 A. Yes, sir. 6 Q. Are they related in any way to any of the 7 other companies either Blue Stone Mineral, Blue Stone 8 Resources, James C. Justice, JCJ Coal Group, anything 9 like that? 10 A. No, sir. 11 Q. Okay. 12 13 So we talked about the reserves in the permit. Who actually owns the mine? 14 A. Just so we're on the same page ---? 15 Q. The real estate for the mine. 16 A. So the surface ---. 17 Q. I tell you ---. 18 A. I'm just --- I'm just trying to ---. 19 Q. Yeah, let me try to clarify this. 20 Fox a surface mine or a deep mine? 21 A. It is a surface mine. 22 Q. Okay. 23 24 Is Red All right. And so we talk about the reserves. Are those the surface rights or are they separate from Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 15 of 83 Pageid#: 191 15 1 2 being reserves? A. Can I give you a background on how we view 3 it and --- ‘cause I just don't want us to talk past 4 one another? 5 Q. That's perfectly fine. 6 A. Typically when we receive a lease to mine 7 coal with it comes the rights to use the surface to 8 remove that coal. 9 who owns those surface. And so I don't know specifically But it is my understanding 10 that RLC, TN owns the surface and then provides us the 11 right to use the surface through our coal lease. 12 Q. 13 Okay. And you said the equipment that's used to 14 mine the coal, some is actually owned by Justice 15 Energy and some is owned by other entities? 16 A. Yes. 17 Q. And who was the other entities that furnish 18 equipment to the Red Fox mine? 19 A. Blue Stone Resources, Inc. 20 Q. Anybody else? 21 A. That's it. 22 Q. Okay. 23 24 And at this time does Justice Energy have either made leases, rights, or any other ownership of Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 16 of 83 Pageid#: 192 16 1 any kind on any mines other than Red Fox? 2 A. No. 3 Q. Okay. 4 Let's take a look at section two on page 5 one, of Exhibit 1 for just a moment. 6 Exhibit Number 1, it looks like that, well we already 7 discussed that, but Justice Energy is a wholly owned 8 subsidiary of JCJ Coal Group, LLC. 9 According to Is that correct? 10 A. Yes, sir. 11 Q. And looking at 5b on Exhibit 1, it says that 12 James C. Justice, III is the President. 13 Is that correct? 14 A. Yes, sir. 15 Q. And under 5c, you're listed next. 16 And what is your position with Justice Energy? 17 A. Vice President and General Counsel. 18 Q. And the third person listed is James T. 19 Miller. And it looks like he's listed as the 20 Treasurer. 21 Is that correct? Secretary and Treasurer. 22 A. That's correct, yes. 23 Q. Are there any other officers, corporate 24 officers, for Justice Energy? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 17 of 83 Pageid#: 193 17 1 A. No. 2 Q. Let's talk a little bit about Mr. Justice, 3 III, and his role in the company. What is his role? 4 I mean, as President, what does he do? 5 A. He oversees the operations of the company. 6 Q. And is he also an officer of any of the 7 other companies in this chain that goes up through to 8 himself as being a part owner? 9 A. He is, yes. 10 Q. What other companies is he an officer of? 11 A. He generally serves as the President of all 12 of the companies so for Blue Stone Resources and Blue 13 Stone Mineral, Inc. 14 the president. 15 agreements provide the ability to nominate officers. 16 So we also have traditional officer names in our LLCs. 17 So he's also the President of James C. Justice 18 Company, LLC and JCJ Coal Group, LLC. 19 Q. Both corporations he serves as Even our LLC, we --- and our operating And I take --- I know we talked about the 20 owner being his father, James C. Justice, II. 21 assuming he's been owner. 22 of these companies at the moment. 23 24 I'm He's not an officer at any Is that correct? A. That's correct. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 18 of 83 Pageid#: 194 18 1 Q. Let's talk about Mr. Miller for just a 2 moment. Is he an officer at any of the other 3 companies? 4 A. He is, yes. 5 Q. And what other companies? 6 A. Generally speaking, we have the same 7 officers in these companies. For Mr. Miller, it does 8 vary occasionally that he's either secretary or 9 treasurer. He's not always both. Without having that 10 in front of me, I don't want to misspeak but he 11 generally will be either secretary or treasurer or 12 both in all of the --- the same entities. 13 Q. Let's confine it for just a moment to 14 Justice Energy, what does Mr. Miller do as Secretary 15 and Treasurer of Justice Energy? 16 A. Mr. Miller is currently not engaged in any 17 day to day activities with Justice Energy. 18 long time employee for the Justice family and all of 19 their other operations. 20 been listed as either secretary or treasurer. 21 accountant by trade. 22 He's a And he traditionally, has He's an Today, most of his activities either relate 23 to the Greenbrier Hotel or there are a few coal 24 businesses in Kentucky and Virginia that he's Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 19 of 83 Pageid#: 195 19 1 overseeing the accounting on. 2 anything with Justice Energy on a day to day basis. 3 Q. 4 But he's not engaged in Okay. And I don't mean to make light of this but 5 basically I take it that his role as secretary and 6 treasurer of Justice Energy is basically more or less 7 ceremonial. 8 A. That's correct. 9 Q. Let go to page 7c for just a moment. Excuse 10 me section 7c on page three of Exhibit Number 1 for 11 just a moment. 12 million. 13 involved in this case. 14 You have it listed there as $1.23 And I'm taking that's the civil penalty Is that correct? 15 A. Yes, sir. 16 Q. Are there any other judgements or liens 17 18 against Justice Energy other than the civil penalty? A. There are --- there are no other judgements 19 that I'm aware of. 20 subsidiary, Blue Stone Resources, there are some liens 21 with Blue Stone Resources credit facilities that could 22 apply to Justice Energy. 23 24 Q. As a subsidiary --- indirect And when you say credit facilities, I take it these are entities that make loans to Blue Stone Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 20 of 83 Pageid#: 196 20 1 Resources. 2 A. Correct. 3 Q. And when you talk about the type of credit 4 for Blue Stone Resources, just generally, what kinds 5 of credit was extended that might potentially relate 6 to or pertain to Justice Energy? 7 A. So the equipment that Blue Stone Resources 8 owns that's used at the Justice Energy facility, all 9 of that equipment has been financed by various 10 equipment financing companies. 11 --- and I think most of those are purchase mining type 12 liens. 13 term debt where there's just a security agreement. 14 And there's a pledge of collateral that has a blanket 15 that applies to equipment and fixtures. 16 And so they would have Some of the other ones are kind of traditional That would be --- Blue Stone Resources has, 17 I think there's two term loans that have those type of 18 security agreements associated with them. 19 Q. Kind of a cross collateral type arrangement? 20 A. No ---. 21 Q. Maybe that's too simplistic, I'm sorry. 22 23 24 I don’t mean to be ---. A. No, no, no. It's not too simplistic. It's just that, it's a real general --- it's a real broad Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 21 of 83 Pageid#: 197 21 1 security agreement that did not attempt to 2 specifically list items of machinery or equipment or 3 fixtures. 4 fixtures and equipment and inventory associated 5 therewith. 6 It's just one of those that says in all And so, I mean, I think it can be opened to 7 interpretation, whether it's specific or not. 8 there's definitely some Blue Stone Resources 9 collateral agreements out there that have that type of 10 11 But language in it. Q. 12 Okay. Let's take a look at page ten or excuse me, 13 page four of Exhibit Number 1, section five item 14 number ten. 15 think we already gone through this but does Justice 16 Energy actually own any true real estate? Under real estate it says none. And I 17 A. No. 18 Q. Does Justice Energy have its own office 19 20 located somewhere? A. No. 21 the mine site. 22 trailer. 23 company. 24 Q. There's a little mine office that's at It's equivalent of a single wide But typically we lease those from a leasing So, just so I make sure, Justice Energy does Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 22 of 83 Pageid#: 198 22 1 not have its own corporate headquarters anywhere. 2 3 Is that correct? Physically, physical corporate headquarters. 4 A. No. 5 Q. Now, I notice, also is going back to page 6 one of Exhibit Number 1, that in terms of the business 7 address for Justice Energy is 302 South Jefferson 8 Street in Roanoke, Virginia. 9 that particular address? 10 A. Who else is located at That's the address where Blue Stone 11 Resources is operated out of. 12 Justice Energy has any accounting or anything like 13 that, that's all done out of the 302 South Jefferson 14 location. 15 parent company provides those services to their 16 subsidiaries. 17 And so to the extent, And Blue Stone Resources as the ultimate There are other --- other coal companies own 18 by the Justice family that operates out of there. 19 There's several of them. 20 Kentucky Fuel Corporation, A&G Coal Corporation, 21 Virginia Fuel Corporation. 22 Q. Southern Coal Corporation, So Blue Stone Resources supplies, for 23 example I'm going to assume. 24 assume. Well maybe I won't Does Blue Stone Resources supply like all of Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 23 of 83 Pageid#: 199 23 1 the administrative payroll and financial services 2 needed by Justice Energy Company? 3 A. Yes, they do. 4 Q. And Justice Energy Company does not have any 5 of its own employees who supply or perform those 6 services. 7 A. It does not. 8 Q. Does Justice Energy Company have any actual 9 employees? 10 A. 11 mine site. 12 Q. 13 14 Yes. That's correct. It has some employees that work at the And what types of employees at the mine site does Justice Energy have? A. It would be the equipment operators for the, 15 you know, the trucks, the bulldozers, the coal 16 loaders, mechanics associated with those machines. 17 would be hourly labor type employees. 18 Q. It In terms of the supervisory personnel at 19 just --- at the Red Fox, I guess it’s the Red Fox mine 20 is what we talked about. 21 employees employed by Justice Energy Company? 22 23 24 A. Are there any supervisory The foremen are employed by Blue Stone Industries, Inc. Q. Okay. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 24 of 83 Pageid#: 200 24 1 Are there any professional like engineers or 2 any other professional people employed by Justice 3 Energy Company? 4 A. No. 5 Q. Who actually prepares --- well let me go 6 back and ask the question this way, are there any 7 state or federal tax returns prepared for Justice 8 Energy Company? 9 A. They are part of the consolidated tax 10 returns. So there are no standalone tax returns for 11 Justice Energy Company. 12 13 14 Q. And when you say consolidated, how are they consolidated? A. Blue Stone Resources, Inc. files a 15 consolidated tax return for itself and all of its 16 subsidiaries. 17 Justice Energy, is included in the Blue Stone 18 Resources tax return. 19 20 21 Q. And so they are included, they being And is Blue Stone Resources, is it --- is its tax return part of any other consolidated returns? A. No. It is a C corporation and it files --- 22 other than for its subsidiaries, it files as a 23 standalone. 24 Q. Let's go to page five, Exhibit Number 1, Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 25 of 83 Pageid#: 201 25 1 section 6, item number 13 on bank accounts. I'm 2 looking at this Exhibit Number 1 at that particular 3 location. 4 with BB&T. 5 A. There's only one bank account listed. It's Is this a payroll account? I think that's its primary purposes. I 6 don’t think that it's limited to only being a payroll 7 account but that is its primary purpose. 8 9 10 11 12 13 14 Q. And when the actual amount of funds put into account to make payroll for the employees, who furnishes those funds? A. Typically those would come from Blue Stone Resources, Inc. Q. Does Justice Energy put any of its own funds into the account? 15 A. No. 16 Q. Does Justice Energy have any --- does it 17 18 ever generates its own revenues? A. The coal that Justice Energy mine is sold 19 through an affiliate, Blue Stone Coal Sells 20 Corporation. And Blue Stone Coal Sells Corporation, 21 when they receive the revenues from the coals sold, 22 that would be provided by Justice Energy either 23 directly or through Blue Stone Resources to help 24 Justice Energy fund their operations. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 26 of 83 Pageid#: 202 26 1 Currently, Justice Energy operates at a 2 deficit. 3 shortfall is made up by Blue Stone Resources. 4 It's losing money each month. So I guess in a way, it does put money in 5 its accounts by the coal that it sells. 6 currently, it's operating as a deficit. 7 8 9 10 11 12 So its Q. But What type of coals do you mine at the Red Fox mine? A. It's what's known as midvol or medium volatile coking coal, metallurgical coal. Q. That's still a pretty good market for metallurgical coal compared to the others. 13 Is that correct? 14 A. Yes. 15 Q. I don't know much about the coal business 16 but I do know a little bit. 17 to be doing pretty well. 18 Metallurgical coal seems Let's take a look at page six of Exhibit 19 Number 1 for just a moment. 20 the right hand column there where it says expense 21 items and ask some questions about that. 22 30 shows a rent paid by Justice Energy of $118,187.45. 23 What's the rent for? 24 A. I'd like to go over, on Item number It's for a rail siding where coal is loaded Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 27 of 83 Pageid#: 203 27 1 on the Norfolk Southern Railway. 2 rental that's due with that. There's an annual 3 Q. And is that paid to Norfolk Southern? 4 A. Yes. 5 Q. And let's look at item number 37 insurance. 6 7 What --- for $217,202.80. A. What's that insurance for? The Blue Stone Resources group of companies 8 has a group insurance policy for general liability, 9 property, Workers' Comp. It's a group policy and that 10 total amount is allocated out to the various operating 11 subsidiaries. 12 Ideally, you know, should be proportionate 13 to the amount of coal they're producing is how we 14 typically try to do that. 15 Energy's allocation of that insurance expense. 16 Q. 17 number 38. 18 idea of what that covers? 19 A. And so that is Justice And the miscellaneous expenses on item Can you just kind of give me a general For it to fall in to a miscellaneous 20 category, and I can't remember this specifically off 21 the top of my head, but that generally is just 22 something that is small that doesn't fall into one of 23 these categories above. 24 --- one of the categories of our internal financial Or into the categories of our Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 28 of 83 Pageid#: 204 28 1 statement. 2 But if it--- even if it doesn't fit in to 3 one of those categories, if it would exceed say 4 $25,000 or $50,000, we would create a name for that so 5 we would know what it is. 6 nominal things. 7 Q. 8 9 This is for very small Okay. Let's go to the last page of Exhibit Number 1. It's an attachment that deal with question 11 and 10 it talks about some equipment. 11 equipment that was apparently financed through 12 Caterpillar Financial Services. 13 sure I understand, is this when the company was 14 acquired from and I don't know how to pronounce that, 15 it looks like Mechel, M-E-C-H-E-L O-A-O. 16 held certain mining equipment that was collateral for 17 loans to Caterpillar Financial Services. 18 And it deals with And just so I make The company After Justice Energy was acquired from 19 Mechel, did it have the Caterpillar equipment or I 20 should say the equipment that was financed by 21 Caterpillar for any period of time? 22 A. I --- yes. 23 Q. Okay. 24 Yes. How long --- well let me ask the question Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 29 of 83 Pageid#: 205 29 1 this way. 2 Caterpillar Finance to satisfy the loan obligations? 3 A. When were the items surrendered to I can't recall the exact date but it was 4 very soon after the reacquisition. And no one can 5 pronounce that name by the way so it gets pronounced 6 five different ways. 7 ways while we're talking about. So, I'll say it three different 8 Q. Okay. 9 A. At the time of the reacquisition, Mechel had 10 fallen behind with all of their creditors. 11 two big ones, financially speaking, were Caterpillar 12 Financial and Komatsu Financial. 13 the Justice organization does a lot of business with 14 and other areas of business as well. 15 And the Two of which that And so there was some interest in getting 16 those two accounts cleared up so we could move forward 17 from a business standpoint. 18 And the equipment, it was easier to 19 surrender the equipment than try to figure out a way 20 to pay off the loans. 21 under water and if it weren't for our overall 22 relationship with Caterpillar Financial and Komatsu, 23 probably would not have been able to get those deals 24 done. Because they were severely But they were somewhat --- they were somewhat Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 30 of 83 Pageid#: 206 30 1 of an accommodation with us because of the ongoing 2 business. 3 Q. So when was Justice Energy acquired from 4 Mechel or however you pronounce the name of the 5 company? 6 A. Yeah. February of 2015. 7 Q. And looking at again on the last page of 8 Exhibit Number 1, at the end it says currently the 9 equipment used as the Company's Red Fox site is owned 10 by related parties that are rented to the company on 11 an intercompany basis. 12 about the companies that are furnishing the equipment 13 to Red Fox. 14 And I think we already talked Is that correct? 15 A. Yes. 16 Q. And does Justice Energy actually pay any 17 rental user fees or any other kind of --- or provide 18 any other compensation to the companies that are 19 basically renting the equipment to Justice Energy? 20 A. Not currently. In the ordinary course or in 21 a typical situation, we would do that. 22 the mine is not generating excess cash flow currently, 23 that's not being done. 24 Q. But because How long has Justice Energy been running at Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 31 of 83 Pageid#: 207 31 1 2 a loss? A. Justice Energy was idle at the time of the 3 reacquisition in 2015. 4 were some --- there were some coal stockpiles there. 5 The coal, the quality was really bad because it had 6 set there for a very long time. 7 some of that coal out in 2016 but didn't really 8 operate the mine. 9 We briefly operated it. 2018. 11 about ten months now. 12 have been at a deficit. 13 what we expected it to be. 15 16 But we --- we loaded And then the mine was completely idle until 10 14 There Q. And so it's only been operating in total for And all of those months now The production hasn't been And for the ten months, are we talking about ten months since what period of time? A. So they --- the Justice Energy mine started 17 around --- I think we started hiring men back in late 18 February of 2018. 19 to eight weeks to get a mine started up. 20 that it started production probably late April 2018. 21 22 23 24 Q. And the mine --- normally takes six So I think So from January of 2016 up until February of 2018, was the mine, the Red Fox mine, operational? A. No, other than selling some of those coal stockpiles that I mentioned. And so there were some Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 32 of 83 Pageid#: 208 32 1 people there doing that. 2 operational. It was not otherwise 3 Q. 4 questions. 5 So the accountants for Justice Energy, those are 6 actually supplied by the Blue Stone group. 7 Again, I'm going to ask some additional If I seem to be repetitive, I apologize. Is that correct? 8 A. Yes. 9 Q. Okay. 10 11 12 13 14 And who are on the Board of Directors for Justice Energy? A. James C. Justice, III and Jillean, that's spelled J-I-L-L-E-A-N, Justice. Q. And we're talked a little bit about the 15 employees of Justice Energy. The employees that are 16 currently working for Justice Energy had been there 17 roughly since February of 2018. 18 A. Yes. 19 Q. Do you know how many employees that are 20 21 22 23 24 actually employed there now? A. Just roughly. Yeah, the last time I checked it was approximately 30. Q. Does Justice Energy have any pension plans of any kind? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 33 of 83 Pageid#: 209 33 1 A. The employees of Justice Energy are part of 2 the United Mine Workers bargaining unit. 3 there, there is some legacy liability owed to the 4 United Mine Workers' pension plan. 5 governed by their CBA. 6 distinction if employees start after a certain date. 7 They are not eligible for the pension plan but they 8 have a 401(k) available to them. 9 dictated by the collective bargaining agreement. 10 Q. And so So that's all Some of the --- there's a But that's all And is there a collective bargaining 11 agreement between the UMWA and Justice Energy or is 12 between the UMWA and another entity? 13 A. It's directly with Justice Energy. To be 14 honest with you, that the real reason why Justice 15 Energy continues to operate. 16 Q. At a deficit? 17 A. There would be a larger deficit if they 18 19 20 stopped operating. Q. Okay. Do any of the insurance policies of Justice 21 Energy --- well I think you said the insurance is 22 actually provided through one of the Blue Stone 23 companies to Justice Energy. 24 Is that correct? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 34 of 83 Pageid#: 210 34 1 A. Blue Stone Resources, Inc. is the primary 2 insured. 3 insureds. And Justice Energy is one of those 4 additional insureds. 5 Q. But there's a schedule of additional Does Justice Energy have any insurance 6 policies or have any ownership rights in any insurance 7 policies that have a cash value? 8 A. No. 9 Q. Does Justice Energy ever have any 10 11 stockholder meetings or Board of Director meetings? A. We do --- we do agreements in lieu of 12 meetings. Where it's a closely held business. 13 is James C. Justice, III's sister. 14 together in a lot of the family's businesses. 15 mean we have had not necessarily Justice Energy but 16 the family occasionally will have a board meeting but 17 it's not common. 18 annual requirements via agreement in lieu of meeting. 19 20 Q. So I Typically, we dispense with the says more or less we had a meeting on paper? A. Yes. 22 Q. Okay. 24 There they work So they just basically sign a document that 21 23 Jillean And in terms, of corporate minutes, just Justice Energy have any separate corporate minutes of Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 35 of 83 Pageid#: 211 35 1 2 3 4 any kind? A. No, just those agreements in lieu of meetings that we just discussed. Q. And other than the BB&T account, are you 5 aware of any other bank accounts that's owned by 6 Justice Energy? 7 A. No. 8 Q. Does Justice Energy have any ownership 9 10 interest in any kind of foreign bank accounts or foreign investment accounts of any kind? 11 A. No. 12 Q. In fact, does Justice Energy have any 13 investment accounts of any kind? 14 A. No. 15 Q. Does Justice Energy own any stocks or bonds? 16 A. No. 17 Q. And what about reclamation bonds? 18 19 Does Justice Energy have any reclamation bonds? A. The bonds are in --- the bonds are in the 20 name of Blue Stone Coal Corporation, the permittee. 21 And it's part of what I'll describe as a broader or 22 global bonding program for all of the Blue Stone 23 mining companies. 24 Q. Are those cash bonds or are they surety Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 36 of 83 Pageid#: 212 36 1 bonds? 2 A. They're surety bonds. 3 Q. And who is the surety involved or are there 4 5 --- was there more than one? A. There it's primarily a group called Lexon. 6 My only hesitation is I know globally, we have a 7 couple other smaller bonding companies. 8 they related to Justice Energy though. 9 10 Q. I don't think Does Justice Energy have any certificates or deposits of any kind? 11 A. No. 12 Q. Does it have any safety deposit boxes? 13 A. No. 14 Q. I may have asked this and forgive me but 15 does Justice Energy own any real estate? 16 A. No. 17 Q. And does Justice Energy have any leases of 18 any kind? Either real estate or coal? 19 A. No. 20 Q. Does Justice Energy have any credit cards? 21 A. No. 22 Q. And does Justice Energy have any letters of 23 24 credit? A. No. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 37 of 83 Pageid#: 213 37 1 Q. Does Justice Energy have any accounts 2 receivable? 3 A. No. 4 Q. And does anyone owe debts to Justice Energy? 5 A. No. 6 Q. Now we talked about on the mine site that 7 there's like a one of these portable office buildings, 8 I believe. 9 any office equipment or anything like that in that Or something like that. Is there really 10 particular mobile office site or that office site 11 that's on the coal --- 12 A. No. 13 Q. --- on the mine, I'm sorry. 14 A. I'm sorry for talking over you. 15 Q. That's all right. 16 A. No. Typically we have a mine site to 17 satisfy regulatory. 18 place to have meetings if a safety meeting is 19 required. 20 a typical office in the sense of, you know, like a 21 bunch of computer equipment and office, you know, 22 office furniture, things like that. 23 24 Q. Have to have a phone line and a So it's more for that purpose but it's not And I know this is going to sound kind of weird but I need to ask you this question so forgive Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 38 of 83 Pageid#: 214 38 1 me. Does Justice Energy have like any personal 2 property like antiques, jewelry, watches, coins, you 3 know, gold, diamonds, or anything like that? 4 A. No. 5 Q. Okay. 6 And I think we might have covered this but 7 Justice Energy doesn't have any bonds of any kind. 8 Does it? 9 A. No. 10 Q. Does Justice Energy have any lawsuits that 11 are pending against anybody? 12 A. No. 13 Q. And is Justice Energy other than in this 14 particular case, does it have any lawsuits against it? 15 A. I don't believe so. 16 Q. Does Justice Energy have any contracts to 17 either sell coal or produce coal with anyone? 18 A. No. 19 Q. And I take it Justice Energy doesn't have 20 any contracts with either the federal or state 21 government? 22 A. No. Just with the caveat of --- well no 23 it's not the permittee. Sometimes people view mining 24 permits but it doesn't have a mining permits so no. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 39 of 83 Pageid#: 215 39 1 Q. Because Justice Energy is not the permittee 2 that --- for mining the coal there at the Red Fox 3 site. 4 A. Correct. 5 Q. Does Justice Energy have any rental income? 6 A. No. 7 Q. And I think we may have already covered 8 9 this, does Justice Energy have any liens against it? A. Just what we discussed. This particular 10 matter and then to the extent, it's subject to any of 11 Blue Stone's resources, like it's security agreements 12 as its parent company. 13 liens. 14 Q. 15 But short of that, no other And does Justice Energy have any trust accounts of any kind? 16 A. No. 17 Q. Do you know if there's a separate Dun and 18 Bradstreet report for Justice Energy? 19 A. Not that I'm aware of. 20 Q. Does Justice Energy ever pay any dividends 21 to anybody? 22 A. No. 23 Q. So as we sit here today, what is the capital 24 of Justice Energy? Does it have any capital assets? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 40 of 83 Pageid#: 216 40 1 A. In the --- just so I understand the 2 question, in the form of like stockholder equity 3 capital? 4 Q. Yes. 5 A. I would have to look at the financial 6 7 statement to answer that for sure. Q. 8 9 Okay. We're going to talk about a couple that I received --- 10 A. Okay. 11 Q. --- in just a minute so. I'm not sure how 12 to phrase this but I'll do the best I can. 13 Justice Energy exist if it's really not owning 14 anything? 15 A. Why does What's the purpose of Justice Energy? Justice Energy when it was first formed was 16 formed to do exactly what it's doing today. 17 operate the Red Fox surface mine. 18 for operations to be siloed, for lack of a better 19 description, when collective bargaining agreements are 20 involved. 21 Which was It's not uncommon And so, its purpose was and is to operate 22 the Red Fox surface mine. For a long time, in the 23 early 2000s and even, you know, approaching 2010, that 24 mine was an extremely profitable mine. It's in latter Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 41 of 83 Pageid#: 217 41 1 stages. What's left is difficult to mine from a mining 2 stand point. 3 still good but this is --- this is not the easiest to 4 mine coal for that particular mine. 5 a little higher and then what coal is encountered, the 6 quality can be a little more erratic than what was 7 experienced the first 10 or 12 years of the mine. 8 9 10 11 So the metallurgical coal market is So the costs are So, you know, it's doing what it was created to do. It's just that what it's doing is more difficult than it was historically. Q. So basically Justice Energy is kind of a --- 12 and I don't want to make light of this but, it's kind 13 of a shell company whose purpose is really just to 14 operate the Red Fox mine. 15 A. Its purpose is to operate the Red Fox mine. 16 I don't know that I agree with the shell company 17 description but that is its purpose. 18 Q. 19 All right. And in terms of the reserves that are still 20 left of the Red Fox mine site, has there been an 21 estimate recently or within the last few years of how 22 much is still left there at the Red Fox mine site? 23 A. Yes. 24 Q. And what is that? What's been the estimate? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 42 of 83 Pageid#: 218 42 1 A. I think the total tonnage number is in the 2 four million ton range. 3 some those tons is questionable. 4 been, mining studies to determine the best way to try 5 and maximize the recovery of that coal. 6 I think the minability of And that there have And I think that under some of those 7 scenarios that the recoverable amount, you know, is 8 about 30 or 40 percent of that four million. 9 of it is recoverable. 10 11 ATTORNEY CAREY: To clarify, was that within the permit or on the property? 12 13 Not all THE WITNESS: That's the property. BY ATTORNEY WESTFALL: 14 Q. In terms of the permit, how much is left? 15 A. I don't know that distinction. 16 I just know that that study was done for the whole property. 17 Q. And who did the study? 18 A. It was done in conjunction with, I can't 19 remember if we technically did it. 20 Energy or Rowland Land Company did it. 21 part of that lease process. 22 Q. We being Justice But it was Was there an outside group like an 23 individual group or some sort of professional coal 24 group that came in to do the estimate? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 43 of 83 Pageid#: 219 43 1 A. The principal person that I deal with at 2 Rowland Land Company, his name is Andy Fox. 3 professional engineer by trade. 4 he outsourced that or if he just did that himself. 5 can't recall. 6 Q. 7 8 He's a And I don't know if Okay. Let's take a look at Exhibit 2 and 3 for the ---. 9 --- 10 (Whereupon, United States Exhibit 2, 11 Balance Sheet 12/31/16, was marked 12 for identification.) 13 (Whereupon, United States Exhibit 3, 14 Balance Sheet 12/31/17, was marked 15 for identification.) 16 --- 17 ATTORNEY CAREY: 18 Fred, are those the balance sheets? 19 ATTORNEY WESTFALL: 20 balance sheets for 2016 and 2017. 21 BY ATTORNEY WESTFALL: 22 Q. Yes, they're the Now I believe you mentioned before that 23 during this period, basically in 2016 and 2017, 24 Justice Energy was not really doing any operations Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 44 of 83 Pageid#: 220 I 44 1 other than selling these stockpiles that were at the 2 site. 3 Is that correct? 4 A. Correct. 5 Q. Okay. 6 They weren't actively mining at that time? 7 A. No. 8 Q. Okay. 9 Let's take a look at Exhibit 2 which is the 10 unaudited balance sheet for the period ending December 11 31, 2016. 12 under accounts receivable there was $18,000. 13 know what that was for? 14 A. Just looking at the first page, it says Do you When we looked at this, it was a carryover 15 from the prior year. 16 think it's a mistake. 17 is going on, we'd not attempted to make any changes to 18 our book. 19 year. 20 21 Q. And to be honest with you, I But we --- while this process But it was just a carryover from the prior Okay. And let's take a look at the next item, it 22 says under inventory and its produced coal, that’s 23 listed at $905,164.20. 24 was on the site? Was this the stockpile that Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 45 of 83 Pageid#: 221 45 1 A. Yes. 2 Q. And had --- was that sold? 3 A. Yes. 4 Q. And so there's no more left really of that 5 stockpile. 6 Is that correct? 7 A. That's correct. 8 Q. And looks like under the next section, where 9 it says non-current assets, fixed assets. 10 fixed assets of $42,771,527.55. 11 assets? 12 A. And it had What were those fixed So when I looked at this number, the first 13 thing I did is to look at the depreciation schedule. 14 Because typically, on our financial statements, fixed 15 assets is just everything that's on the depreciation 16 schedule. 17 That number seemed incorrect to me. It 18 seemed way too high for what Justice Energy does and 19 was doing at the time. 20 depreciation schedule, it included a significant 21 amount of underground mining equipment that was 22 actually owned by an affiliate of Justice Energy. 23 it also included a preparation plant that's in 24 Keystone, West Virginia that's not owned by Justice And when I reviewed the Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 46 of 83 Pageid#: 222 And 46 1 Energy Company. 2 So that number is incorrect. But what that 3 number reflects is everything that was on the 4 depreciation schedule, under Justice Energy's name as 5 of 12/31/2016. 6 Q. Did Justice Energy own these fixed assets? 7 A. No. 8 Q. Who prepared Exhibit Number 2? 9 A. Exhibit Number 2 is generated from the 10 accounting system, which is called MAS 200. 11 Q. And who has responsibility over that system? 12 A. That has changed. You know, prior to the 13 end of 2016 our senior accountant, her name was Amanda 14 Bulggs. 15 to take another job to be closer to where her family 16 lives. 17 generated, I asked Amanda to generate these. 18 generated them for me. She's a CPA. She left at the end of the year But at the time, these statements were 19 Q. When did you say that she left? 20 A. It was right at the end of 2018. And she There may 21 have been like a week carry over in to this year but 22 it was right at the end of the year. 23 Q. And do you know where she resides? 24 A. She currently, at least she told me, she was Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 47 of 83 Pageid#: 223 47 1 moving Bristol. 2 Tennessee. 3 Q. 4 I don't know if that's Virginia or But I know it's right on the state line. Okay. And under other assets, there's like some 5 pre-paid expenses and pre-paid insurance. 6 the insurance is what we talked about earlier as going 7 through the --- that's the share that Justice Energy 8 has to pay over at the group policy. 9 I take it Is that correct? 10 A. Yes. 11 Q. And the pre-paid expenses, do you know what 12 those are? 13 A. That, I can't tell just by looking at this 14 but typically for Justice Energy is would be, you pay 15 the railroad rent in advance. 16 know, they'll prepay for fuel and things like that. 17 But it would fall in to a category similar to that. 18 Q. And then sometimes you Let's take a look under the liabilities and 19 stockholders' equity on Exhibit Number 2 for just a 20 moment. 21 payable of over $900,000. 22 for? 23 24 A. Under the current liabilities has accounts Do you know what that was Just general operating expense for operating the mine. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 48 of 83 Pageid#: 224 48 1 2 Q. And at this time, as I understand, the mine was not operational. 3 Is that correct? 4 A. That's correct. 5 Q. So why would there by an accounts payable 6 7 Yes. for that? A. It could have been carryover. So, it --- I 8 can't tell just by looking at this particular 9 financial statement. But that would have been the 10 total amount outstanding at the time. 11 could be really old and some of that would be just 12 general upkeep. 13 So some of that I mean, in 2016 it was the time that we were 14 selling the stockpiles that you would have a coal 15 loader. 16 comply with. 17 Q. You would have some ongoing reclamation to Regulatory law, things like that. And under the accrued expense, it looks like 18 it's about almost $7.4 million. 19 of what that is? Do you have any idea Or what that's for? 20 A. I can't tell just by looking this. 21 Q. And the accrued coal taxes, I take it that 22 would be on the stockpile. 23 24 No, sir. Maybe some carryover. Is that correct? A. Yeah. Typically those don't drag out too Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 49 of 83 Pageid#: 225 49 1 long so I think it would be associated with the 2 stockpile. 3 Q. Take a look at the second page of Exhibit 4 Number 2 for just a moment please. 5 income statement is unaudited for the 12 months ending 6 December 31, 2016. 7 That's from the stockpile that was on the property. 8 Consolidated We talked about the coal sales. Is that correct? 9 A. Yes. 10 Q. And then it has general revenue of $1.6 11 million. 12 that represents? 13 A. Do you know where that came from? Or what I can just tell you typically on our 14 financial statements what that would represent. 15 can't tell specifically on this one. 16 be the sale of something that is not coal or --- and I 17 don't know why our accounting system does this, but if 18 there were an inventory adjustment. 19 there were more coal there than they realized, it 20 shows up as a general revenue adjustment. 21 book the additional inventory. 22 Q. I It would either So they found out When they And Amanda would have been the person that 23 would be able to tell us where they came from, I take 24 it. Is that correct? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 50 of 83 Pageid#: 226 50 1 A. Yes. 2 Q. Okay. 3 As we go to cost of revenue, the employee 4 expenses are the employees that were working there at 5 the mine. 6 Is that correct? 7 A. Yes. 8 Q. Blasting expense, I take it somebody had to 9 10 11 do some blasting work at the mine during that 12 month period. A. Probably related to some reclamation work. 12 A lot of the time with reclamation they need 13 additional material to reclaim high walls. 14 will require a little bit of blasting. 15 16 17 Q. And then there's a contract labor item. What is that for? A. We were using a third party to provide the 18 laborer. 19 a union job. 20 be somewhat problematic. 21 providing the labor. 22 And it Q. Some of that relates to the fact that it was And starting and stopping union jobs can And so, a third party was And under legal settlements it says $1.23 23 million. 24 this case? What is that? Is that the civil penalty in Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 51 of 83 Pageid#: 227 51 1 2 3 A. That's the civil penalty. The accountants recorded that. Q. And the rest of these expenses other than 4 depreciation basically are all expenses for activity 5 on the mine site. 6 Is that correct? 7 A. Yes. 8 Q. Let's look at Exhibit Number 3 for just a 9 moment. This is the consolidated balance sheet for 10 the period ending December 31, 2017. 11 Exhibit Number 3, that $18,000 receivable item still 12 appears to be there. 13 In looking over Is that correct? 14 A. Yes. 15 Q. And then under the --- there's no --- 16 there's a list for marketable securities just like in 17 the previous Exhibit 2 and that's zero. 18 Is that correct? 19 A. Correct. Yes. 20 Q. And then under inventory, it looks like you 21 must have sold all of the stockpile because it says 22 there's no further inventory. 23 24 Is that correct? A. Yes. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 52 of 83 Pageid#: 228 52 1 Q. And again on the fixed assets, this is what 2 we discussed earlier, you're not sure where that came 3 from. Other than it's for equipment perhaps from other 4 sources other than Justice Energy. 5 A. Yes. 6 Q. Okay. 7 ATTORNEY CAREY: 8 prep plant too. 9 BY ATTORNEY WESTFALL: 10 11 Q. And you mentioned the And the prep plant, which is over in Kentucky somewhere, I believe you said. 12 Right? 13 A. It's in Keystone. 14 Q. Keystone. 15 A. Yes. 16 Q. Okay. 17 And in terms of looking at this other items 18 on the liability stockholder equity, it pretty much is 19 similar to what we talked about in Exhibit Number 2. 20 The same basic sources. 21 Is that correct? 22 A. Yes. 23 Q. Looking at the second page of Exhibit Number 24 3. It looks like there's an item for bank fees of Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 53 of 83 Pageid#: 229 53 1 $732.38. Do you have any idea what that was for? 2 A. Not specifically. 3 Q. Okay. 4 5 6 7 8 And the fines and penalty, what was --- I take it did MSHA cite you for something or ---? A. Either MSHA or DEP. Q. 9 10 That's what the category represents. Okay. Let's take a look at Exhibit 4 for just a moment. I received this yesterday. 11 A. Yes. 12 Q. And I kind of wanted to ask you a couple 13 general questions on ---. 14 15 ATTORNEY CAREY: numbers on ---? 16 17 Can you put the Bates ATTORNEY WESTFALL: It's the property tax. 18 ATTORNEY CAREY: 19 ATTORNEY WESTFALL: 20 It's 179. Okay. The return? Yeah. --- 21 (Whereupon, United States Exhibit 4, 22 Property Return for Justice/Bluestone, 23 was marked for identification.) 24 --- Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 54 of 83 Pageid#: 230 54 1 2 BY ATTORNEY WESTFALL: Q. Let me just ask you some questions here. 3 Just kind of going through this. 4 equipment, it looks like this return goes from --- I 5 don't know if it really technically goes from 1997 6 forward to 2016 for this first part of it. 7 Under machinery and But it looks like in 2011, there was $5.9 8 million in equipment. And then in 2012, I'm assuming 9 that that's $2.4 million. Was this part of the --- 10 the equipment that's listed here, was this part of the 11 --- did this equipment include the Caterpillar 12 equipment that was eventually returned to Caterpillar 13 Financial? 14 A. Some of it, yes. 15 Q. Okay. 16 And in 2016, it shows that there's machinery 17 and equipment of $1.63 million. 18 find out is why did that number decrease from 2011 to 19 2016 other than the Caterpillar situation? 20 A. What I'm trying to In my understanding of how this form works 21 is you have to look at this columns cumulatively. 22 so it's not necessarily a decrease. Those are 23 additions for that particular year. And then they, 24 you know, like for example if you look at the 2004, Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 55 of 83 Pageid#: 231 And 55 1 which for us that would have just been a carryover of 2 what Mechel, the prior owner was doing. 3 know, that's only getting valued at 20 percent because 4 it's so heavily depreciated. 5 But, you Whereas the equipment that was added in 6 2016, they're valuing at 92 percent. So this is a 7 cumulative list of --- of everything that was at the 8 mine. 9 been a carryover of what had been previously But everything 2012 and forward would have just 10 submitted. 11 Q. And just so I make sure that I understand, 12 that the amount that's listed for 2016, is that actual 13 physical equipment owned by Justice Energy? 14 A. Yes. That was added in 2016 and it could 15 have been equipment that --- the way that our folks do 16 this and the person at the time, her name --- she no 17 longer works for the company either, but her name was 18 Jaime Fulcher. 19 there at the mine site. 20 submitted in a prior year, she was adding it to the 21 return to make sure that it accurately reflected what 22 was there. 23 24 She was looking at what was actually And if it was not already I think the problem she was having on this particular return is that it was being submitted Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 56 of 83 Pageid#: 232 56 1 jointly for Blue Stone Resources and Justice Energy 2 Company. 3 previously submitted by Mechel OAO. 4 Q. And it had a lot of old information that was And so really, some of this equipment that 5 we're talking about contained in this tax pay --- or 6 this return for 2017 personal property, you know, 7 excuse me, industrial property return for 2017, is 8 most likely equipment that's owned by Blue Stone 9 Resources. 10 A. Correct. 11 Q. Okay. 12 Let's take a look at page 184 or at least 13 it's page stamp is 184 on Exhibit Number 4 for just a 14 moment. 15 There's a listing of equipment and it looks 16 like over on the left hand --- on that particular page 17 says dispose. 18 disposed of? 19 A. Yes. 20 Q. Okay. 21 I take it, is this equipment that was And I'm going through this. So it looks 22 like on pages 184 and 185, that this is equipment that 23 somehow either Blue Stone or Justice Energy disposed 24 of. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 57 of 83 Pageid#: 233 57 1 2 Is that correct? A. If you can tell. I can't tell for sure but I can tell you 3 what the intent here is because certain machines were 4 included in those prior years on the cover page. 5 Q. Uh-huh (yes). 6 A. Was to go through and try to clear up things 7 that were no longer there. Which was somewhat 8 difficult because many of these items had been 9 disposed of previously by Mechel when they owned it. 10 But it was an effort to try to get a, for 11 lack of a better description, a baseline since our 12 ownership in 2015. 13 things that were still on the return that just weren't 14 there anymore. 15 Q. Because there were a lot of old And so, when I look at pages 186 and 187 of 16 Exhibit Number 4, again this is the continuation. 17 This is still dealing with some of these issues in 18 terms of what equipment is still there and what's not 19 that. 20 Is that correct? 21 A. Yes. 22 Q. Okay. 23 24 If like I'm looking at the bottom of page 187 and I see a lot of Caterpillar equipment listed. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 58 of 83 Pageid#: 234 58 1 And I'm assuming that Caterpillar equipment is no 2 longer there because it was returned back to 3 Caterpillar. 4 Is that right? 5 A. Most of it was, yes. 6 Q. All right. 7 A. On that page 187, for example, the one 8 reason I hesitate to say that all of this was disposed 9 of is and now they're complete junk but those 793s 10 that are handwritten. 11 Q. Yes. 12 A. Some of those Caterpillar rock trucks that 13 are really nothing more than the frame are still on 14 the site up there. 15 Q. So they're ---? 16 A. And so I can't tell if she was intending to 17 dispose of them from a value standpoint because it was 18 no longer an operating piece of equipment. 19 it's truly just a frame but ---. 20 Q. Basically scrap. 21 A. Correct. Because That was my only hesitation in 22 saying that all of them were disposed of per se. 23 Because those 793s were not transferred to a third 24 party but they have become scrap. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 59 of 83 Pageid#: 235 59 1 Q. 2 Okay. Let's look at page 188 for a moment. This 3 is the industrial property return for 2018. 4 again, looking at this, I see it's going back again 5 for prior years and so on. 6 been some updating of the numbers. 7 thing, first listing under machinery and equipment on 8 page 188. 9 greater than what they showed up on page 179. 10 11 And And it looks like there's In that first Because some of those numbers are much Do you know why the difference is there? A. I think this is a continuation of the effort 12 to get the baseline right. 13 been working with a lot of numbers provided by the 14 prior owner. 15 worked on this one. 16 recall Jaime spent a tremendous amount of time working 17 with the counties, trying to get these number right. 18 Because previously we had And this is --- I'm trying to see who This is Jaime Fulcher. I just Because she felt like a lot of the numbers 19 that had been submitted by Mechel were not accurate. 20 And so she was trying to get them right. 21 will tell you when I first saw that, it jumped out at 22 me because the old numbers in theory shouldn't change. 23 24 It --- I Because whatever it was for that year, you know, that's what it was. But we were trying to get this Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 60 of 83 Pageid#: 236 60 1 2 cleaned up so it was more accurate going forward. Q. And again, as we discussed before, this 3 equipment we're talking about listed on the property 4 tax or excuse me industrial property tax return for 5 2018 that starts on page 188, is really equipment 6 largely owned by Blue Stone Resources. 7 A. Correct. 8 Q. Let's take a look at industrial property tax 9 return for 2019 that starts on page 192. Because when 10 I look at that, I see a lot of those areas we talk 11 about it forward had been large numbers on the 12 previous return for 2018 like in, like for the year 13 2013 on page 192 are now left blank. 14 But it looks like there was some property 15 listed here as being acquired in 2018. 16 or if I read that correctly, about $2.2 million. 17 you know what that equipment was? 18 A. Yes. About $2 --Do If you look at page 196, those top 19 one, two --- four machines. 20 acquired --- when the job restarted in 2018, Blue 21 Stone Resources acquired those machines to help with 22 the restart of the Justice Energy operation. 23 24 Q. Blue Stone Resources And as I look at page 196, Blue Stone Resources owns the equipment but shows that the Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 61 of 83 Pageid#: 237 61 1 location for all of the equipment is at Justice 2 Energy. 3 Is that correct? 4 A. Yes. 5 Q. Okay. 6 7 ATTORNEY CAREY: Just for clarification, please. 8 ATTORNEY WESTFALL: Sure. 9 ATTORNEY CAREY: 10 is actually owned by Justice Energy though. Some of that equipment 11 Correct? 12 ATTORNEY WESTFALL: 13 THE WITNESS: At the bottom. So if you look there's 14 really two different categories. 15 after about the fourth of fifth line. 16 machines at the top were added in 2018. 17 2018 line item that you and I just discussed. 18 Everything below that are items that were at Justice 19 Energy when it was reacquired in 2015. 20 BY ATTORNEY WESTFALL: 21 Q. 22 There's a separation All those Which is the Okay. Let me ask you this question and to kind of 23 clear this up. 24 4. I look at page 196 on Exhibit Number The top item on it has an acquisition cost of Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 62 of 83 Pageid#: 238 62 1 $2.247 million with an owner's value of $2.022 2 million. 3 Is that correct? 4 A. Yes. 5 Q. And those particular items are owned by Blue 6 Stone Resources. 7 Is that right? 8 A. Correct. 9 Q. Then underneath that, I see a listing of 10 several items. Which it looks like the owner's value 11 is totaled to be $2.5 million. 12 that are owned by Justice Energy? Are those the ones 13 A. Yes. 14 Q. And all of those items are owned by Justice 15 Energy? 16 A. I believe so. 17 Q. All right. Yes. Let's look at Exhibit 5. And 18 this is an equipment list. 19 5 and 6. 20 two separate documents but then they run together 21 actually. 22 I don't know. And it actually looks like When I got them, they were Let me ask you that question first. If you 23 look at Exhibits 5 and 6, is this kind of a running 24 list that runs together or are they actually separate Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 63 of 83 Pageid#: 239 63 1 documents? 2 --- 3 (Whereupon, United States Exhibit 5, 4 Equipment list as of 1/21/15, was marked 5 for identification.) 6 (Whereupon, United States Exhibit 6, 7 Depreciation lists 2014-2017, was marked 8 for identification.) 9 10 --BY ATTORNEY WESTFALL: 11 A. They run together. 12 Q. Okay. 13 14 ATTORNEY CAREY: And can you give me the Bates numbers for that? 15 ATTORNEY WESTFALL: 16 ATTORNEY CAREY: 17 ATTORNEY WESTFALL: 18 ATTORNEY CAREY: And it looks like it 178. Okay. And you made all that five? 21 ATTORNEY WESTFALL: 22 through 100. 23 Number 6. 24 Okay. goes through 178. 19 20 Starts with 001. No. Five is 1 And then 101 through 178 is Exhibit ATTORNEY CAREY: Okay. Thank you. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 64 of 83 Pageid#: 240 64 1 2 3 4 BY ATTORNEY WESTFALL: Q. So just generally tell me what 5 and 6 are please. A. Okay. So 5, if you see on the top left hand 5 corner of page --- Bates stamp 001 equipment list as 6 of January 21st, 2015. 7 Mechel. 8 12, 2015 when it was reacquired. 9 they generated that was intended to represent all the This was a list generated from The transaction ultimately closed on February And this was a list 10 equipment that they valued at greater than $450,000. 11 And that list goes over to Bates number 003. 12 Q. Okay. 13 A. And that's for all companies. 14 15 16 Justice Energy. Q. Not just All of the Blue Stone companies. And then we start with 004. This is a depreciation expense report. 17 Is that correct? 18 A. Correct. 19 Q. And how far does that carry over, to what 20 21 page? A. 22 23 24 I think it's 53. Yeah 53. Yes, so this is the full depreciation report as of 12/31/14. Q. Okay. Let me stop you. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 65 of 83 Pageid#: 241 65 1 A. I'm sorry. 2 Q. Okay, pages 1 through 53 represents the list 3 of equipment over $450,000. 4 almost at the time you were closing the deal to 5 reacquire the group. 6 Basically at the time --- Is that correct? 7 A. Only pages 1 through 3 for that- -- 8 Q. I'm sorry. 9 A. --- for that description. 10 Q. Okay. 11 12 13 And then you have a depreciation list dealing with that equipment going from 4 through 53. A. Correct. That was the 12/31/15 year end 14 depreciation report for all of Blue Stone that Mechel 15 provided to us. 16 Q. 17 Okay. Now --- starting at page 54 which is part of 18 Exhibit Number 5, it still says depreciation expense 19 report. 20 A. Correct. And this is --- this ties back to 21 pages --- Bates stamped pages 1, 2, and 3. This is 22 the depreciation report as of 12/31. 23 and 3, they were attempting to roll it forward to a 24 date closer to the closing date. And pages 1, 2, Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 66 of 83 Pageid#: 242 66 1 Q. 2 3 Okay. Let's take a look at page 56 for just a moment. 4 A. Okay. 5 Q. This is again in Exhibit Number 5. There's 6 some equipment there listed for Justice --- as Justice 7 Energy being the owner. 8 January 21, 2015. 9 owned by Justice Energy? And it's equipment list as of Is this equipment that was actually 10 A. Yes. 11 Q. And where is that equipment now, if you 12 13 know? A. Some of that Caterpillar equipment was the 14 equipment that was turned in. 15 check but I think a couple of these items are still 16 there. 17 tax return. 18 Q. 19 20 And I'll have to double They're on the most recent industrial property Okay. So like the Hitachi hydraulic excavator may still be there? 21 A. The Hitachi excavator is not there. 22 Q. Where --- I'm sorry. 23 A. I believe it has been sold. 24 Q. Do you know when it was sold? It ---. Where is it now? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 67 of 83 Pageid#: 243 67 1 A. Not specifically. 2 Q. Was it sold after 2016? 3 January 1 of 2016? 4 A. I don't know the date. 5 Q. Okay. 6 7 ATTORNEY CAREY: 10 11 We can find that out for you, Fred. 8 9 I mean, after ATTORNEY WESTFALL: Yeah, I need to know that. BY ATTORNEY WESTFALL: Q. Right. Starting with page 57. Looks like 12 another depreciation expense report as of December 31, 13 2014. 14 of Exhibit 5, if I'm not mistaken. 15 what that is please? And it looks like that carries through the end Can you tell me 16 A. It's the same report that started at Bates 17 number 004. 18 Mechel. I am not sure what the difference is. 19 bottom line numbers are different. 20 the two, I couldn't --- eyeballing it, I couldn't find 21 the difference other than to say that the numbers were 22 different. 23 Q. 24 page four. Both of these were provided to us by The Just by looking at Again, looking at Exhibit 5, starting with Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 68 of 83 Pageid#: 244 68 1 A. Okay. 2 Q. On these depreciation expense forms not only 3 this one but the one we were just referencing that 4 started on page 57. 5 just a moment. 6 it says location on these reports --- Let's take a look at those for There's some --- if you look at where 7 A. Yes. 8 Q. --- and there's some like initials, like 9 BCC. Now BCC is Blue Stone Coal Group. 10 Is that correct? 11 A. Blue Stone Coal Corporation. 12 Q. Corporation. 13 A. Yeah. 14 Q. And then there's some others as we go down I'm sorry. 15 through here. 16 places so those initials are the listings there for 17 location will tell us the natural location of the 18 equipment. 19 20 21 There might be some other listing of Is that correct? At the time of the report is prepared. A. So the BCC would be intended --- yes. 22 There's some companies, like Blue Stone Coal 23 Corporation, at the time they were operating had 24 multiple sites. And so, they could have a separate Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 69 of 83 Pageid#: 245 69 1 code for some of those different sites. 2 Energy is just a single site though. 3 Justice Energy you know that that's only Justice 4 Energy. 5 6 Like Justice So when you see I'm trying to find an example of that. Q. No, let's take a look at page 42 of the 7 Exhibit Number 5 for just a moment. As I look here, 8 for example, it says location equal JHMI. 9 A. Yes. 10 Q. And what is this JHMI. 11 A. Justice Highwall Mining, Inc. 12 Q. So that would tell us, in that particular 13 category, would list like whatever number in it. 14 they're all located at JHMI. 15 And Is that correct? 16 A. Yes. 17 Q. And like on page 43, it says location equal 18 Justice Energy. 19 many items. 20 continues over to, it looks like page 44 of Exhibit 5. 21 Those are particular pieces of equipment at that time 22 that were located at Justice Energy. 23 24 And it looks like, I'm not sure how I didn't count them up. But that Is that correct? A. Yes. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 70 of 83 Pageid#: 246 70 1 Q. Now let's take a look at page 54, Exhibit 2 Number 5 for just a moment. 3 here. 4 it's got location and it has the initials. 5 tell us basically the companies were these particular 6 items of equipment were located. 7 There's another listing It's depreciation expense report. And again, That would Is that correct? 8 A. Yes. 9 Q. Back on page 55, there's six items listed 10 for Justice Energy and I think as we already discussed 11 some of those Caterpillar equipment that eventually 12 was turned back over to Caterpillar. 13 A. Correct. 14 Q. So really, looking at Exhibits Number 5 and 15 Number 6, we talked about the depreciation expense 16 report but the kind of --- again, these locations are, 17 if you look here where it says like just on page, 18 excuse me, page 101 on Exhibit Number 6 on the first 19 page. 20 for example. 21 associated with Justice Energy. 22 It lists some equipment and has Justice Energy Those would be the pieces of equipment Is that correct? 23 A. Yes. 24 Q. And others may have different --- like Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 71 of 83 Pageid#: 247 71 1 there's one here, it looks like --- I'm assuming is 2 Keystone Services or something, like on page 102. 3 example would have equipment associated with that 4 particular site or location. 5 A. Yeah. Keystone Services is an old 6 preparation plant in Keystone, West Virginia. 7 yes, that's correct. 8 9 Q. For But And all of these, maybe I should --- I don’t want to read to, do it too summarily, but all of these 10 locations listed in Exhibit Number 5 and Number 6 are 11 part of the overall companies that are owned by 12 Justice II and Justice III. 13 Is that correct? 14 A. Yes. So each one of these would be a 15 different company. 16 chain we discussed earlier where the corporate parent 17 ultimately would be Blue Stone Resources. 18 the individual shareholders would be JCJ II and JCJ 19 III. 20 Q. 21 And they would be owned by the And then All right. Is there some way through the accounting 22 system of these various groups, that we can determine 23 what equipment was disposed of after January 5, 2016? 24 A. I believe so, yes. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 72 of 83 Pageid#: 248 72 1 Q. Okay. 2 A. If I'm wrong about that, I'll let you know. 3 4 But I think there's a disposal report that can be ran. Q. Okay. 5 6 ATTORNEY CAREY: disposal equipment after January 5, 2016? 7 8 ATTORNEY WESTFALL: January 5, 2016 really. 9 10 So you want all the Well starting with From there going forward. THE WITNESS: With respect to Justice Energy? 11 ATTORNEY WESTFALL: Probably for all the 12 different companies. I mean, I don't know how detail 13 or how involved that would be but probably for all the 14 companies. 15 ATTORNEY CAREY: 16 all the Blue Stone companies. You're talking about 17 ATTORNEY WESTFALL: 18 ATTORNEY CAREY: 19 20 Yes. Okay. BY ATTORNEY WESTFALL: Q. If an ultimate decision of some sort had to 21 be made about Justice Energy as far as its future or 22 some sort of business decision of where to go in terms 23 of what direction and a future, who would ultimately 24 have the overall authority to make that decision? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 73 of 83 Pageid#: 249 73 1 A. I'm just trying to think of what ---. 2 Q. Let me rephrase the question. 3 A. Yeah, sorry. 4 Q. That's a poorly worded question and I 5 apologize for that. Let me be straightforward. 6 A. Sure. 7 Q. Justice III and Justice III. If there's 8 going to be some decision about what's going to happen 9 with Justice Energy, would they be the ones that would 10 ultimately either approve or disapprove a decision of 11 what's going to happen with that particular company? 12 Since they're the owners through all the various 13 umbrellas. 14 corporate structures and so on. 15 ones that would have to make --- have the ultimate 16 authority to make a decision on the company? 17 A. Or not the umbrellas, through the various Would they be the And just so I understand the question, do 18 you mean if the company would wind down or something 19 like that? 20 Q. If the company was wind down, if it was a 21 major operational decision that had to be made about 22 the future of the company. 23 24 A. To my knowledge, any operational decisions today would solely be made by James C. Justice, III. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 74 of 83 Pageid#: 250 74 1 Q. Okay. 2 A. The reason I ask for that distinction is I'm 3 sure James C. Justice, II if it were a winding down 4 type question as a shareholder would have some say. 5 But all operational big picture decisions would be 6 made by James C. Justice, III. 7 8 Q. And has that been the same since January of 2016? 9 A. '17. 10 Q. '17. 11 12 If I can have a couple minutes, I think I'm about finished. 13 14 ATTORNEY CAREY: page for you. If it came in. We may have one more That might help --- 15 ATTORNEY WESTFALL: 16 ATTORNEY CAREY: 17 --(WHEREUPON, A PAUSE IN THE RECORD WAS HELD.) 20 21 22 --- focus things for you. 18 19 Okay. --BY ATTORNEY WESTFALL: Q. I'm going to show you what's been marked as 23 Exhibit 7 to assist the interview. 24 what that is please? Can you tell me Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 75 of 83 Pageid#: 251 75 1 A. Yes. I had asked David Stoneburner who 2 oversees the equipment for our companies to do a 3 physical inspection and inventory of what is actually 4 at the Justice Energy Red Fox mine. 5 he provided me. 6 And this is what --- 7 (Whereupon, United States Exhibit 7, 8 Revised Property list as of March 2019, 9 was marked for identification.) 10 11 12 --BY ATTORNEY WESTFALL: Q. 13 14 Okay. So this Exhibit 7 is a list of the equipment that's actually located at the Red Fox mine. 15 Is that correct? 16 A. Correct. 17 Q. Who owns that equipment? 18 A. So we added a column to this exhibit and the 19 items in yellow identify equipment that's owned by 20 someone other than Justice Energy. 21 column that says owner, and most of it is Blue Stone 22 Resources. 23 Coal. 24 Q. And you'll see a There is one item that's owned by Southern So the items that are not highlighted in Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 76 of 83 Pageid#: 252 76 1 yellow are actually owned by Justice Energy. 2 Is that correct? 3 A. Yes. 4 Q. And do you know if --- has the company 5 assessed any value to any of this equipment that's 6 actually owned by Justice Energy? 7 A. Not recently. Some of these and in fact, 8 most of those items appear on the June 2018 industrial 9 property tax return. 10 11 And so there was a value associated at that time. Q. But nothing since then. I see on Exhibit Number 7, and I'll hand 12 this back to you but there's two items that are listed 13 as scrap. 14 International Lube Truck. 15 items, are the other items on Exhibit Number 7 owned 16 by Justice Energy, are they actually used in the day 17 to day operation of the mine? 18 A. A Caterpillar 773 Lube Truck and an No. Other than those two scrap And I'm not sure why he did that 19 distinction only for those two because I know that the 20 793s, the Caterpillar 793C Mining Trucks they at least 21 several of them are scrap as well. 22 23 24 Q. I think you mentioned earlier that they're basically down to the frame. A. Several of them are, yes. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 77 of 83 Pageid#: 253 77 1 Q. Now, we had an off the record conversation 2 concerning differences between Exhibit Number 1 and 3 the other exhibits that were produced. 4 differences obviously between Exhibit Number 1 and the 5 other exhibits. 6 to explain why there's a difference. 7 why there's a difference between exhibit --- what's 8 listed on Exhibit 1 and these other exhibits? 9 A. Yes. And there's And this is the opportunity for you Can you tell me When I was preparing Exhibit Number 1, 10 I was collecting the financial statement form Amanda 11 Boggs, and when I received those financial statements 12 I noticed the large equipment number that was on the 13 balance sheet. And undertook to take a review of the 14 depreciation schedule. 15 obviously to me that there was an error on the 16 depreciation schedule. 17 And when I did that, it became And that it included several items that were 18 not at Justice Energy or owned by Justice Energy. And 19 so at that point, I, for lack of a better 20 description, interviewed David Stoneburner and a 21 couple people that worked for him. 22 name is Whitt Broce. To ask them to provide me 23 with the equipment that is actually owned by Justice 24 Energy. One gentlemen's Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 78 of 83 Pageid#: 254 78 1 And at that point, they advised me that 2 they believed all of that equipment was owned by 3 Blue Stone Resources that was at the Red Fox mine. 4 And so, I did a little bit further research to see 5 if Justice Energy had paid any property taxes or 6 anything like that. 7 had. 8 9 And I could not find that they So we submit --- we were up against a deadline so we submitted the form which is 10 Exhibit 1. 11 approached me and said I had found that the 12 information I gave you last week was inaccurate. 13 And he provided me with the 2019 personal property 14 tax return. 15 County to get a copy of that. 16 in house. 17 That following week, Mr. Stoneburner He actually had to reach out to McDowell We did not have it And at that point, we immediately started 18 trying to put the pieces together. 19 2015 to figure out exactly what equipment originated 20 at Justice Energy. 21 the two together. 22 Q. Going back to What was there today and piece Looking at Exhibit 7 for just a moment, is 23 that the only --- is that a list of the only 24 equipment that remains owned by Justice Energy? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 79 of 83 Pageid#: 255 79 1 Or is there other potential equipment owned by 2 Justice Energy that's not on Exhibit Number 7? 3 A. This is the complete list. 4 Q. Okay. 5 And so, if we want to determine --- let 6 me ask the question this way, is it possible for 7 your company records to determine what equipment 8 existed as of January 5, 2016 owned by Justice Energy 9 and what's been disposed of between that date up to 10 11 12 13 the present day? A. possible. Q. 14 15 I can't say for sure but I think that is If I had to guess. All right. ATTORNEY WESTFALL: have. Thank you very much. 16 --- 17 EXAMINATION 18 --- 19 20 That's all that I BY ATTORNEY CAREY: Q. Steve, just in term of Exhibit 1, you 21 can testify on that. At the time you submitted 22 did you believe at the time that the information 23 was true and accurate based on the inquiry that you 24 had done at that point? Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 80 of 83 Pageid#: 256 80 1 A. Yes, I did. 2 Q. And it was subsequent to submitting 3 that you realized that based on your discussion with 4 Mr. who? 5 A. Stoneburner. 6 Q. That is may not be accurate. 7 Is that correct? 8 A. Yes. 9 Q. And at that time did you advise both John 10 and I that it needed to be, further inquiry need 11 to be made to make sure the information that was 12 being provided pursuant to this proceeding was 13 accurate? 14 15 A. Yes. I reached out to counsel to let them know. 16 Q. Okay. 17 18 As soon as I became aware of that. ATTORNEY WESTFALL: led to the generation of the Exhibits 2 through 7. 19 Is that correct? 20 THE WITNESS: 21 24 That's correct. Yes, sir. 22 23 And that inquiry ATTORNEY WESTFALL: Thank you. That's all I've got. You want him to ---? ATTORNEY CAREY: Read and sign it. Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 81 of 83 Pageid#: 257 81 1 * * * * * * * * 2 DEPOSITION CONCLUDED AT 11:58 A.M. 3 * * * * * * * * 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 82 of 83 Pageid#: 258 82 1 STATE OF WEST VIRGINIA) 2 CERTIFICATE 3 4 I, Bradley Scott, a Notary Public in and for the State of West Virginia, do hereby certify: 5 That the witness whose testimony appears in the 6 foregoing deposition, was duly sworn by me on said date, 7 and that the transcribed deposition of said witness is a 8 true record of the testimony given by said witness; 9 10 That the proceeding is herein recorded fully and accurately; 11 That I am neither attorney nor counsel for, nor 12 related to any of the parties to the action in which 13 these depositions were taken, and further that I am not 14 a relative of any attorney or counsel employed by the 15 parties hereto, or financially interested in this 16 action. 17 I certify that the attached transcript meets the 18 requirements set forth within article twenty-seven, 19 chapter forty-seven of the West Virginia Code. 20 21 Bradley Scott 22 23 24 Sargent’s Court Reporting Service, Inc. 1-800-727-4349 Case 7:19-cv-00354-GEC Document 33-4 Filed 07/23/19 Page 83 of 83 Pageid#: 259