CASPER, Wyo. — A federal judge ordered bankrupt coal firm Blackjewel to provide additional details on the $73,583 of expenses that company attorneys accumulated over three months while coal miners awaited back pay. In total, legal and consulting firms charged Blackjewel $5.4 million for services during the bankruptcy proceedings.
Counsel for the company applied for compensation for a range of expenses incurred over the course of a bankruptcy proceeding that rattled Wyoming's coal communities — from meals and transportation to hotel stays.
But U.S. District Judge Frank Volk has demanded the company itemize about 75 of the requests, going so far as to question the company's decision to stay at high-end hotels or eat exorbitant meals.
Because of the nature of bankruptcy law, a company's spending on legal representation is often prioritized over debts owed to less senior creditors, including workers and local communities.
The court requested additional information on several single-night hotel stays, one of which reached $982.32.
"Was this hotel room for one person for one night?" court documents asked. "Was it necessary to stay at the Westin?"
The company also requested $378.24 in reimbursement for a lunch at Jimmy John's on Aug. 5.
"How many individuals were involved in this Jimmy Johns lunch?" the judge wrote in a court filing. "Also, this appears to have occurred on the same day as the below Jimmy Johns lunch expense. For the days of the Auction, the Court would like a full list of all food and drink provided to the Auction attendees on each day, for each meal."
Attorneys also requested over $22,000 in reimbursement for "telephone" expenses. No additional details were provided in the court filing.
The court questioned why an individual expensed two separate hotels, both on Aug. 7 — a charge totaling $1,972.73.
"The Court understands that expenses naturally occur during a bankruptcy case, especially during the pendency of a case as frantic and time-consuming as the above-captioned matter," the judge concluded. "However, it is the Court’s duty to the Estate and Unsecured Creditors to question the propriety and necessity for some of these expenses."
Blackjewel and the law firms did not immediately respond to requests for comment.
The contested expenses are just a portion of the legal fees amassed by Blackjewel during the bankruptcy process. In addition to the nearly $74,000 in question, legal and consulting firms charged a whopping $5.29 million for fees and expenses extended to Blackjewel during the proceedings, with some firms charging over $1,000 per hour.
"The fundamental point here is that the $74,000 in disputed expenses is just a drop in the bucket of the fees these professionals are getting for being involved in the bankruptcy process," said Clark Williams-Derry, energy finance analyst at Institute for Energy Economics and Financial Analysis, an energy transition think tank. "This is a process that is fundamentally designed to benefit the well-off.”
“We should also be outraged that the bankruptcy process makes sure that highly paid professionals get paid a lot of money even though mom and pop creditors are left out," he added.
The unprecedented closure of two Wyoming mines began when Blackjewel filed for bankruptcy and lost a crucial creditor on July 1.
At the time of filing for bankruptcy, Blackjewel owed over $146 million in unpaid taxes. It also owed Wyoming workers over $700,000 in unpaid wages and $900,000 in retirement funds.
The company’s meltdown resulted in the closure of Campbell County’s Eagle Butte and Belle Ayr mines that same day. The company called back a limited crew on July 5 to maintain security and make limited shipments of coal.
After weeks of uncertainty, Blackjewel decided to try to sell its 32 mines speckled throughout the country, including its Wyoming mines.
Meanwhile, hundreds of Blackjewel’s former coal miners awaited additional information on their job prospects. Several moved on to find alternate work. The company terminated their employment-based health care plan and retirement benefits.
Bankruptcy law often subordinates debt owed to workers and local government over more senior creditors, such as legal representation. Even though Blackjewel sold the mines to a new coal company, Eagle Specialty Materials, the estate cash remains limited to repay the millions of dollars owed to the company’s creditors.
According to the sales agreement reached for Wyoming's mines, Eagle Specialty Materials set aside up to $1.8 million for worker compensation. Workers also won a lawsuit against the company for outstanding back pay in October.
The judge ordered Blackjewel to respond no later than Dec. 13.