CHARLESTON, W.Va. — Lawyers for companies owned by Gov. Jim Justice and his family are asking that a federal lawsuit over the company’s business practices be thrown out or at least moved to another jurisdiction.
Several Justice companies were sued in federal court in Kentucky in September, along with the governor’s son Jay, who runs the businesses.
They’re accused of fraudulently transferring property to avoid responsibilities in a business deal that was the subject of a related lawsuit a few years ago.
The original court action called for the repayment of $60 million. The new lawsuit wants punitive damages of at least $16.9 million.
Lawyers for Justice’s companies on Monday filed a motion to dismiss the case.
The motion does not address the basic claims of the lawsuit.
Instead, the defense lawyers argue the Kentucky jurisdiction is improper because the companies and Jay Justice have not conducted business there, because Jay Justice and the other defendants don’t live there and none of the property in the dispute is in Kentucky.
The filing included a declaration by Jay Justice, saying he lives in the Roanoke area of Virginia.
“I have never resided or maintained any office in the Commonwealth of Kentucky; I own no property — real or personal — in Kentucky; I have never maintained a bank or any other financial account in Kentucky,” Jay Justice states in the declaration.
That declaration goes on to say the businesses in question are not in Kentucky either, and that Jay Justice has not traveled to Kentucky for any transactions involving them.
The original lawsuit names James C. Justice Companies, Justice Farms of North Carolina, Oakhurst Club LLC, Southern Minerals LLC and James C. Justice III, usually known as Jay. The suit claims Jay Justice is personally liable.
Governor Justice is listed, not as a defendant but as a member of the limited liability companies that are defendants. His role as governor of West Virginia is spelled out clearly in the filing, though:
“James C. Justice II is a citizen of the State of West Virginia. He is the current governor of West Virginia and will be referred to herein as ‘Governor Justice.’ Governor Justice is not named as a defendant in this action, but is a member of the limited liability companies identified below that are defendants. He is the father of Jay Justice and Jill Justice.”
The lawsuit was first reported by the Lexington Herald-Leader in Kentucky.
Barry D. Hunter, a Lexington attorney who represents the Justice companies, responded to the allegations in the lawsuit to the Herald-Leader.
The Justice organization has reviewed the complaint and feels the claims are “baseless and completely false,” Hunter told the newspaper.
“They intend to vigorously defend the allegations in the latest suit” but will not comment further, Hunter said.
The lawsuit was filed by New London Tobacco Market Inc. of Tennessee and by Fivemile Energy LLC of Kentucky. The companies entered into leases for mineral rights with Justice’s companies in 2005.
One part of the agreement was $10,000 retainer fees that were to be paid to New London Tobacco Market each month starting in 2010. The lawsuit contends that the retainer fees have not been paid since 2011, resulting in $770,000 in debt.
Kentucky Fuel, one of Justice’s companies, also owes $20,000 in rent, the lawsuit alleges.
The lawsuit contends, “Kentucky Fuel’s and Justice’s Companies’ failure to honor their contractual obligations described herein was intentional and was part of their business plan and strategy, as evidenced by their course of dealings whereby they have evidenced a pattern and practice of disregarding and refusing to pay their contractual obligations.”
In 2012, a federal lawsuit over the finances was filed by New London Tobacco Market and Fivemile Energy.
In 2014, the court entered a default judgement against Justice’s companies. It also entered judgment in favor of the plaintiffs and against Justice’s companies for fraud and punitive damages. That matter isn’t fully concluded in the court proceedings.
The latest claims allege that Justice’s companies have attempted to shield themselves against the earlier decision through transferring assets.
“After the filing of the original action in May 2012, the Justice Companies in combination with other persons and companies, began to engage in a series of transactions with the intent to hinder, delay or defraud its creditors.
“Some of these transfers were transfers to real estate to Justice’s Companies’ related entities, insiders or affiliates made without valuable consideration for the real estate transferred. Others were transfers of valuable real estate in exchange for cash or other consideration that would make it more difficult for creditors, such as plaintiffs, to collect debt from Justice Companies.”
The lawsuit contends that beginning in 2013 and continuing through at least 2016, Justice companies engaged in numerous additional transfers “with the intent to hinder, delay or defraud its creditors.”
The transfers were made to affiliates and insiders of Justice companies, the lawsuit claims.
“Justice companies did not receive consideration equal to a reasonably equivalent value of properties transferred because no consideration was paid for any of these transfers.”
The lawsuit goes on to list the specifics of some of the transfers. For example, in late 2013, Justice companies transferred the mineral rights to about 929 acres in Marion County, South Carolina, to Southern Minerals LLC. “There was no reasonably equivalent value received for the transfer.”
“Plaintiffs believe and therefore allege that the intent of Justice Companies and co-conspirators has been and is to convert real property to cash or other assets that will be difficult to trace or that can be displaced or hidden, with the intent to hinder, delay or defraud plaintiffs and other creditors.”
The lawsuit takes note of cash flow problems with Justice’s companies. The companies have racked up tax liens and fines of millions of dollars in multiple states, including Kentucky and West Virginia. A National Public Broadcasting report published just before last year’s gubernatorial election detailed the debts.
Those problems played into what’s disputed in federal court, the latest lawsuit alleges.
“The transfers described above were made at a time when Justice Companies was not paying its debts as they became due,” the lawsuit contends.
“As a result, Justice Companies was presumably insolvent at the time of these transfers. In addition, upon information and belief, Justice Companies and its affiliates were not paying mine safety fines, county taxes and federal and state tax liens as these debts became due.”
The new lawsuit went on to conclude, “Justice Companies has also represented that plaintiffs would have difficulty in collecting a judgment against it. It has represented that it would have to file bankruptcy if plaintiffs were awarded a judgment in the original action in the amount recommended by the magistrate judge.”