Opinion ID: 1231374
Heading Depth: 1
Heading Rank: 3

Heading: The Garner Williams Litigation

Text: As previously noted, SBC's clients and their two brothers each owned an undivided one-fourth interest in Boone County mineral property. Laxare Coal Company (Laxare) first leased the property in 1966; this lease was replaced by a lease dated July 1, 1968. The details of the 1968 lease, and specifically the reasons why it was later claimed to be invalid as to the two sisters, are not clear from the briefs  but it appears that the two brothers may have signed for their sisters in some fashion. In 1974, Laxare subleased the property to Cannelton Coal Company (Cannelton), and Laxare and/or Cannelton mined the Boone County mineral property beginning as early as 1974. Cannelton constructed a multi-million dollar preparation plant on the property. Beginning in 1968, Laxare paid Ms. Marks and Ms. Luther (apparently through their brothers) a portion of the royalty and other fees due under the 1968 lease. In 1988, SBC filed suit for Ms. Luther and Ms. Marks in the Circuit Court of Kanawha County against Laxare and Cannelton, claiming that the 1968 lease was invalid as to Ms. Luther and Ms. Marks. Laxare and Cannelton resisted Ms. Marks' and Ms. Luther's claims against them, primarily on the basis of laches and/or estoppel. Laxare and Cannelton argued that Ms. Marks and Ms. Luther should pursue claims against their brothers, because the brothers allegedly failed to pay them their proportionate share of the royalties and fees under the 1968 lease. Laxare and Cannelton also argued that the brothers gave written assurances that Ms. Marks and Ms. Luther consented to the 1968 lease. In 1995, Laxare filed for bankruptcy. In 1996, the bankruptcy court entered an order permitting Laxare to continue mining under the 1968 lease, on the condition that Laxare provided adequate financial protection to Ms. Marks and Ms. Luther (if it was later determined that Ms. Marks and Ms. Luther were not bound by the lease). Laxare agreed to deposit amounts over and above the royalties and fees set forth in the 1968 lease into an escrow account, pending a final determination as to whether Ms. Marks and Ms. Luther were bound by the lease. At this stage in the litigation, it became clear that Ms. Marks and Ms. Luther would be bound either under the 1968 lease or under a new lease approved by the bankruptcy court. Even though the bankruptcy court had remanded Ms. Marks' and Ms. Luther's claims against Laxare back to the Circuit Court of Kanawha County, it also became clear that any damages assessed against Laxare might be discharged in bankruptcy, and in any event would be subject to the jurisdiction of the bankruptcy court. The bankruptcy court strongly urged the parties to settle their differences, because the significant possibility existed that Ms. Marks and Ms. Luther would recover nothing from Laxare. The case was further complicated by the fact that in 1994 Cannelton had abandoned its 1974 sublease with Laxare, and terminated all mining at the Boone County mineral property. As a result, Laxare asserted a damages claim against Cannelton in the Garner Williams litigation, alleging premature termination of the 1974 sublease. The confluence of these complex facts and claims, plus the bankruptcy court's strong urging that the parties settle their differences, caused the parties in the Garner Williams litigation to begin discussing settlement in earnest. SBC, Ms. Marks, and Ms. Luther recognized that if Laxare and Cannelton prevailed on their laches and/or estoppel defenses, the possibility existed that Ms. Marks and Ms. Luther would recover nothing from Laxare, and Cannelton and could only recover from their brothers, who had no meaningful assets. In 1998, after nearly ten years of litigation, the parties reached a final settlement agreement in which Ms. Marks and Ms. Luther agreed to compromise their original claims against Laxare and Cannelton. These claims amounted to $15-50 million dollars in actual damages, and possibly $59 million to in excess of $200 million in damages  if there were a finding of intentional trespass. In exchange for Laxare and Cannelton abandoning their defenses of laches and/or estoppel and agreeing that the 1968 lease did not bind Ms. Marks and Ms. Luther, Ms. Marks and Ms. Luther agreed to accept a lump sum payment of $3.5 million, plus the execution of a new lease and side letter agreement beneficial to Ms. Marks and Ms. Luther. The new lease and side letter agreement gave Ms. Marks and Ms. Luther substantially increased royalty amounts over and above those set forth in the 1968 lease. Their two brothers and their families, however, are still bound by the 1968 lease. The new lease increased the sisters' guaranteed minimum royalty from $6,000.00 per year to $30,000.00 per year, and increased the production royalty from a flat 12.5¢ per ton to a minimum of $1.50 per ton, or a percentage of the gross sale price, whichever is higher. A side agreement provided for certain additional per-ton wheelage and preparation plant payments to the sisters. [2]