Court Delays Investigation Decision Into Former Blackjewel CEO Jeff Hoops

Jan 22, 2020

Blackjewel's Eagle Butte mine shipments in 2017
Credit U.S. Energy Information Administration

Judge Frank W. Volk of the U.S. Bankruptcy Court for the Southern District of West Virginia delayed a decision over records access into the former President and CEO of Blackjewel LLC Jeff Hoops and affiliated parties.

On January 9, the bankrupt coal company requested access to a wide variety of material pertaining to Hoops, his family and related entities to be used as evidence. Those materials include pre-bankruptcy cash and property transfers

"Some of these transfers relate, among other things, to potentially below-market transfers of assets to Hoops Parties, above-market invoicing for mining-related services, such as trucking," the filing reads.

Today, Blackjewel attorney Stephen Lerner argued the broad discovery request was necessary and should be uncontroversial based on Bankruptcy Rule 2004.

"We don't have an obligation to prove that there are causes of action or wrongdoing in order to obtain this discovery. In fact, the courts that address Rule 2004 specifically state the purpose of rule 2004 is to determine whether grounds exist to commence an action or to determine whether wrongdoing has occurred," Lerner said to Judge Volk.

He added the magnitude of potential wrongdoing adds to the seriousness of the discovery request.

"These are quite substantial claims here. We're talking about tens of millions of dollars of potential recovery for the estates. And we believe that we've more than satisficatorily met the standards," said Lerner, referring to rule 2004.

John Mahaney, lawyer for 15 of the 20 entities Blackjewel is requesting records and documents from including Jeff Hoops, argued the requests are far too broad.

"They actually do two things in their motion. They paint with a lot of hyperbole in their motion, 'We think bad things happened.' But they have worked on this for 6 months more. At least on their bills that I've looked at have spent a lot of money looking at these emails. They have the financial records, they have the entire server of Blackjewel," Mahaney said.

And individually, he added each entity is facing 62 requests for records access, plus deposition categories, amounting to 3000 discovery requests.

"There is no limit to the information they ask for," Mahaney said.

Judge Volk agreed calling Rule 2004 a legalized fishing expedition. He requested both parties confer over the next two weeks with an eye towards limiting requests.

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