Duke Energy Granted Stay in Derivative Case

     DOVER, Del. (CN) – Investors suing the nation’s largest electric utility over a massive coal ash spill in North Carolina must wait to press their claims until related litigation by environmentalists and regulators is resolved, a chancery court ruled.
     On Feb. 2, 2014, a broken pipe at a Duke Energy facility near Eden, North Carolina caused 39,000 tons of coal ash to pour into the nearby Dan River, an environmental catastrophe that resulted in the utility being charged with multiple Clean Water Act violations.
     In May, three Duke Energy subsidiaries pleaded guilty to nine charges, and agreed to pay a total of $102 million in restitution.
     Four of the charges were the direct result of the Dan River coal ash spill. The remaining violations were discovered as the scope of the federal investigation broadened on allegations of historical violations at the companies’ other facilities.
     The plaintiffs in the derivative action sued current and former directors of the utility, claiming their fiduciary failings either caused or contributed to the disaster, exposing the company to civil, criminal and regulatory liability and potentially costing investors millions.
     The defendants moved to stay the litigation while the utility defends itself against parallel litigation filed by the North Carolina Dept. of Environment and Natural Resources and several environmental groups over the massive coal ash spill.
     Vice Chancellor John Noble granted that motion on Monday, explaining that, “[d]ealing with substantive lawsuits that expose the company to significant potential liability at the same time as a derivative action challenging the directors’ conduct will prejudice the company, and thus its shareholders, in its defense of the related litigation.” Noble wrote.
     “Moreover,” Noble said, “prior determination of the company’s liability in the related litigation will facilitate processing of the derivative action.”
     “The company, through derivative plaintiffs, will be developing evidence, including, presumably, deposing directors and seeking to demonstrate culpability for the very conduct which has precipitated the related litigation,” he explained.
     The three cases brought by conservationists in North Carolina also seek to clarify how the state’s groundwater protection laws apply to coal ash basins in light of new regulations there, according to the order.
     “This massive spill was a crime against the people and the environment of North Carolina and Virginia and it was the result of repeated failures over years by Duke Energy’s subsidiaries to exercise proper oversight and maintenance over their coal ash basins,” the Justice Department wrote.
     Duke Energy currently oversees approximately 108 million tons of coal ash in basins across the Southeastern United States.
     The utility is represented by Kenneth Nachbar and Susan Waesco of Morris, Nichols, Arsht & Tunnell. They declined to comment on the vice chancellor’s decision.

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