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Judge rejects Justice defense on $300 million liabilities

CHARLESTON — A judge has rejected an argument that claims on $300 million in personally guaranteed liabilities should be set aside for Gov. Jim Justice and his family’s companies.

In a filing, the judge has invited a lawyer representing Justice’s longtime lender Carter Bank & Trust to prepare an order that would be a major milestone in collecting the debt.

The debts were personally guaranteed by Jim Justice, his wife Cathy and their son Jay, who runs the family’s coal operations. The debts applied to several branches of the family’s business network, but the most prominent may be Greenbrier Hotel Corp., referring to the historic resort that generated waves of goodwill for Justice when he bought it out of bankruptcy.

Judge Carter Greer, of Martinsville, Va., circulated a memo this week that stated multiple times his conclusion that the Justices had not laid out an adequately factual defense that could have been persuasive to set aside the debt claims.

“Here, defendants allege no facts to support their legal conclusions,” Greer wrote.

Carter Bank wants to cash in roughly $300 million in defaulted loans, holding out signed guarantees to say the Justices should pay up.

Following the judge’s filing, bank officials filed an official statement to shareholders through the Securities and Exchange Commission.

“Carter Bank anticipates that in the near future the Circuit Court will enter Orders effectuating its ruling and finalizing these confessions of judgments,” wrote bank officials.

“Carter Bank further anticipates that subsequent creditor process will be issued to collect on these claims from the judgment debtors, including Governor Justice.”

The statement continued by saying banks have an obligation to their shareholders and the financial system to collect in full all amounts that are due and owing to them. Carter Bank stated that it would aggressively pursue all remedies to collect what is owed.

“As with all its customers, Carter Bank expects to be repaid by the Justice Entities in full all amounts due and owing although the timing of such payment in full in these matters is presently indeterminate,” bank officials stated.

Carter Bank in April filed to collect on confessed judgments adding up to $302 million, plus interest and attorneys fees, in
Martinsville Circuit Court in Virginia. The claims cited the personal guarantees by the Justices.

The confessions of judgment are written and signed agreements accepting liability in instances of default. In such circumstances, the note may be presented to the court without even notifying the debtor or having a hearing. By signing, borrowers may sacrifice their right to be heard in court.

The confessed judgments filed by Carter Bank apply to loans on James C. Justice Companies, Justice Family Group, Greenbrier Hotel Corp., Greenbrier Golf and Tennis Club, Greenbrier Sporting Club, Players Club LLC, Oakhurst Club, Greenbrier Medical Institute, Justice Low Seam Mining, Twin Fir Estates and Wilcox Industries.

Those loans had come due April 15.

Lawyers for Justice’s companies responded by filing motions to set aside the confessed judgments in the 11 cases.

The filings contended that enforcing the judged confessions is a radical step and that the Justice
companies deserve a chance to offer a more detailed defense.

The Justice legal team contended that Carter Bank violated the Bank Holding Company Act of 1956 and engaged in a scheme to do so, that Carter breached its contractual and fiduciary obligations to Justice and the family companies, that Carter interfered with Justice’s business expectancies and relationships with other lenders, that the confessions of judgment violated due process and that the personal guarantees are null and void.

Finally, the Justice team claimed Carter Bank’s conduct was so bad that the Justice companies would be entitled to damages of even greater value than the original debt claim.

Greer’s conclusion: “The defendants offer sparse analysis as to how these defenses are either adequate or dispositive.”

In a hearing last month in Greer’s courtroom, lawyers representing Justice pointed toward their separate federal lawsuit that contends Carter has engaged in unfair business practices.

The legal team for Justice handed the judge a printout of the heavily redacted complaint in the federal case.

The federal case is still active in the Southern District of West Virginia, with Carter arguing that the venue is inappropriate because the bank, its board and the Justice business operations are mostly in Virginia.

In the Martinsville, Va., courtroom, Judge Greer concluded the facts were not apparent to support the Justice defense against the claims.

Carter Bank’s statement to shareholders made reference to the distinction between the judgment in local court and the federal dispute.

“This Circuit Court proceeding predates and is separate and apart from the Complaint filed by the Justice Entities against Carter Bank in federal district court in West Virginia on November 10, 2023,” bank officials wrote.

“That Complaint contains false and misleading claims that Carter Bank will vigorously defend in due course.”