Duke seeks delay in suit over North Carolina coal ash spill
May. 06, 2015
DOVER, Del. (AP) — A Delaware judge is considering Duke Energy's request for a six-month halt of a shareholder lawsuit prompted by a massive coal ash spill in North Carolina while the company tries to resolve related lawsuits and finalize a $102 million settlement of a federal criminal investigation.
After hearing arguments Tuesday, Vice Chancellor John Noble of Delaware's chancery court, which specializes in business disputes, declined to rule immediately. He said he would await the outcome of a hearing in North Carolina next week in the U.S. Department of Justice criminal case, which involves nine alleged misdemeanor violations of the Clean Water Act from the 2014 spill.
"We hope and expect that the DOJ matter will be resolved soon," said Kenneth Nachbar, an attorney for Duke Energy.
Duke Energy agreed in February to settle the criminal case for $68 million in fines and restitution and $34 million in community services and mitigation, paid by shareholders.
Noble also said that before deciding whether to halt the shareholder case, he'll await the results of a status hearing next week involving several enforcement actions brought by North Carolina environmental regulators.
The shareholder plaintiffs accuse current and former Duke Energy officers and directors of breaching their fiduciary duties. Specifically, they claim Duke Energy officials knowingly allowed the company to repeatedly violate state and federal environmental laws, exposing it to hundreds of millions of dollars in fines, penalties and cleanup costs.
Plaintiffs attorney Robert Hoffman argued that the case should proceed with document exchange and with briefing on Duke Energy's motion to dismiss, and that no delay was warranted.
"It will delay a recovery for Duke and its stockholders," he said.
As shareholders, the plaintiffs filed a "derivative" action on behalf of the company, seeking restitution from the individual defendants.
Nachbar argued that if the plaintiffs were truly acting in the company's best interests, it made no sense for them to pursue allegations that Duke Energy officials willfully violated environmental laws when the company was trying to defend itself from similar allegations in other lawsuits.
"It doesn't do the company any good to have purported champions of the company arguing in court that the company committed intentional violations of the law," Nachbar said.
In a similar vein, Noble stopped Hoffman in mid-sentence as he rattled off a list of alleged violations by Duke Energy.
"How does reciting these facts benefit Duke Energy shareholders?" asked the judge, who also wondered whether it made more sense for the case to proceed once the cost from related lawsuits is known.
"Doesn't it make sense to know what the total bill is?" he asked.
Hoffman noted that the company already has incurred concrete and actual damages, including the proposed $102 million DOJ settlement and $24 million to date in cleanup costs, and that there's little dispute that it is responsible for the coal ash spill.
"We're not rooting for some major liability to be incurred by Duke," he added.
The lawsuits by regulators and environmentalists were prompted by a spill in February 2014 at a Duke Energy power plant near Eden, North Carolina, when a corrugated metal pipe below a containment pond failed. The spill coated 70 miles of the Dan River in toxic sludge and prompted concerns about the safety of more than 60 other Duke Energy coal ash dumps in five states, including 32 in North Carolina.
A Duke Energy spokesman, Dave Scanzoni in Charlotte, North Carolina, said in an email Tuesday evening that many of the issues raised by the suit were being litigated in other court cases. "Duke Energy believes that it's important to resolve those other cases before proceeding with the shareholders suit," he wrote.