BY KEITH BENMAN
kbenman@nwitimes.com
219.933.3326 | Saturday, May 24, 2008 |
2 comment(s)
West Virginia's highest court refused
Thursday to hear NiSource Inc.'s appeal of a $404 million civil
judgment, letting stand a jury verdict against the company.
NiSource CEO Robert Skaggs Jr. acknowledged the court's refusal was
a "setback," but said the Merrillville-based company will appeal the
case to the U.S. Supreme Court.
In January 2007, a West Virginia jury found landowners had been
shortchanged $134.3 million in natural gas royalties by Columbia
Natural Resources, which at one time was a NiSource subsidiary. The
jury also tacked on $270 million in punitive damages.
"The court's decision to not even address the substance of an appeal
in a case of this significance, particularly in light of the $270
million in punitive damages awarded at the trial court level, is
unprecedented and contrary to the most basic principles of
fairness," Skaggs said on Friday.
NiSource will seek a continuation of the stay of the judgement in
the case pending its U.S. Supreme Court appeal.
NiSource is the parent company of NIPSCO, Indiana's largest utility.
NiSource has 3.8 million energy customers in nine states.
NiSource stock closed at $17.65 per share on Friday, a drop of 51
cents on heavy trading volume of almost 4 million shares.
Moody's Investor Service said on Friday that the court's refusal to
hear the appeal will not affect its ratings of NiSource. The credit
rating agency said the West Virginia judgment was one of the risks
it considered in its most recent review of the company.
Moody's currently has an investment grade rating of Baa3 on NiSource
senior debt.
NiSource has not established a reserve for the punitive damages
portion of the verdict, according to its most recent quarterly
filing with the U.S. Securities and Exchange Commission.
The company will claim its constitutional rights were violated by
the way the trial was conducted, particularly with respect to the
punitive damages award, according to a prepared statement released
Friday. NiSource will also assert its due process rights were
violated this week when the Supreme Court of Appeals of West
Virginia refused to hear the case.
The plaintiff landowners sued Columbia Natural Resources in 2003,
alleging the company underpaid royalties on gas produced on their
land. The suit alleged the company improperly deducted
post-production costs and did not pay a fair value for the gas.
The landowners claimed the underpayments went back to 1990, when
Columbia Natural Resources was a part of Columbia Energy Group. That
company was bought by NiSource in 2000.
In 2003, NiSource sold Columbia Natural Resources to Triana Energy
Inc. for $330 million. But NiSource retained liability for the
majority of any damages ultimately awarded landowners in the case.
The Associated Press contributed to this story.