On September 2, 2022, the U.S. Bankruptcy Court for the Southern District of West Virginia found that a lender’s actions to prevent one of its borrowers from extending DIP financing to another borrower (the debtor) constituted tortious interference with business relations. United Bank was a lender to both Blackjewel LLC, a mining company, and Clearwater, a separate company controlled by the wife of Blackjewel’s principal. In June 2019, after learning Blackjewel was planning to file for bankruptcy and obtain a $9 million DIP facility from Clearwater, United took control of Cleawater’s investment accounts and refused to allow funds from the accounts to be used for the financing. Faced with a liquidity crisis, Blackjewel was forced to cease operations, send employees home, and close over 30 active mines.

In an adversary proceeding, Blackjewel asserted a variety of claims against United, including for tortious interference related to the DIP loan. On cross motions for summary judgment, the court found United liable on the tortious interference claim. The court rejected United’s argument that its disruption of the DIP loan was merely “incidental” to legitimate efforts to protect collateral because the record contained evidence that United specifically wanted to prevent the DIP loan. And the court found that United acted with wrongful purpose despite knowing Blackjewel had no funds to operate its vast mining operations, which employed thousands across the country, and that United acted beyond its contractual rights, demanded payment of a debt for which Clearwater had no obligation as a condition of releasing its funds, and prevented access to amounts far in excess of those necessary to protect its legitimate and contractual economic interests. The court also denied summary judgment to United on Blackjewel’s remaining claims, including aiding and abetting breach of fiduciary duty, unjust enrichment, and equitable subordination of United’s proofs of claim.

The case is Blackjewel LLC v. United Bank (In re Blackjewel LLC), No. 20-ap-3007 (Bankr. S.D. W. Va. Sept. 2, 2022). Blackjewel is represented by Squire Patton Boggs (US) LLP. United Bank is represented by Steptoe & Johnson PLLC. The order is here.