West Virginia business news outlet the State Journal reported Wednesday that the producer filed a complaint in US District Court for the Southern District of West Virginia against Keystone Industries, which it claimed did not pick up or pay for “hundreds of thousands of tons” contracted for purchase on December 7, 2011.
“It is Patriot's understanding that Keystone intended to resell the Patriot coal to its own buyer," the company said in the complaint,
“Keystone's obligations under the coal confirmation were not contingent, however, upon Keystone identifying or contacting with a buyer nor are Keystone's obligations contingent upon the performance of its buyer.”
Patriot reportedly notified the customer of the breach of the “take and pay” contract, which was initially entered into in WV, on May 11. According to the documentation, Keystone has not taken “a single ton of coal” to date.
It is now seeking to recover the loss of the sales volume.
In late May, a Texas legal firm announced that it was investigating Patriot Coal’s board of directors for a possible breach of its fiduciary duty, and claimed there were concerns over the producer’s financial position.
Dallas-based Branham Law said that it was looking into “mismanagement” which it said resulted on a 35% drop in Patriot stock from concern the company could be seeking bankruptcy production.
“The concerns are centered around the company's inability to meet its financing needs,” firm officials said, adding that Standard & Poor's – apparently on account of the concerns – reduced its rating to junk status.
"We are very concerned about how this company's finances have gotten to this point," managing partner Trey Branham added.
St Louis-based Patriot reported a net loss of $US38.3 million in March for the fourth quarter, and $115.5 million for whole-year 2011.
In April, it announced the idling of one of its Kentucky mines, and during the first quarter it cut about 1.2 million tons from its production through the suspension of three Appalachian thermal operations.
