By Steven Allen Adams
CHARLESTON, W.Va (Reuters) - Coal miners Massey Energy Co and Alpha Natural Resources Inc cleared a hurdle to their $7 billion merger after West Virginia's high court refused to block the deal.
The Supreme Court of Appeals ruled it did not have jurisdiction to consider the request by several pension funds, including the California State Teachers' Retirement System, because a lower court had not yet ruled on the matter.
The court's five-page ruling also noted that the matter is currently pending in Delaware Chancery Court, which was expected to rule on a similar request by shareholders later on Tuesday.
The plaintiffs have asked the courts to block the merger, arguing that the deal could bar them from suing the Massey board over allegations that directors tolerated dangerous mining conditions.
An accident at Massey's Upper Big Branch mine in West Virginia last year killed 29 people and sent the company's stock tumbling from $54 per share to below $30 per share.
The lawsuits also contend that the company is being sold for far less than it is actually worth. The plaintiffs say the companies withheld information about negotiations and that Alpha was given preferential treatment. The lawsuits seek class-action status.
Massey and Alpha did not immediately return calls for comment.
If Delaware's Chancery Court does not block the merger, shareholders from both companies are expected to approve the deal on Wednesday.
The merger would create the second-largest U.S. coal miner by market value. The combined company will have 110 mines and the be the largest U.S. supplier of metallurgical coal, which is used in steelmaking.
The West Virginia high court also refused a request to establish a "litigation trust" to preserve shareholders' claims against the Massey board. That would have allowed them to pursue their lawsuit after the merger closes.
Those claims could be worth $400 million, according to Stuart Grant, an attorney with law firm Grant & Eisenhofer which represented a pension fund in the Delaware case.
Those claims will pass to Alpha. Grant told a Chancery Court hearing last week it was "fantasyland" to think Alpha would pursue Massey's board.
Shares of both Massey and Alpha were up about 1 percent on the New York Stock Exchange in midday trading. Alpha was at $53.55 while shares of Massey were at $64.65.
The Delaware case is: In re Massey Energy Co. derivative and class action litigation, Delaware Chancery Court, No. 5430.
The West Virginia case is California State Retirement System et al v Don L. Blankenship et al, No. 11-0839.
(Writing by Tom Hals and Steve James, editing by Dave Zimmerman)