April 26, 2010, 5:03 PM EDT

(Adds board’s support for Blankenship starting in 11th paragraph.)

April 26 (Bloomberg) — Massey Energy co., the largest coal producer in central Appalachia, was sued by a pension fund over claims that directors’ failure to address poor safety conditions led to this month’s accident that killed 29 miners.

Massey directors breached their fiduciary duties by disregarding safety regulations and incurring more than $25 million in assessed violations by the U.S. Mine Safety and Health Administration, the new Jersey Building Laborers Pension Fund said in a complaint filed April 23 in Delaware Chancery Court. the failure to act caused the company “severe reputational harm,” the pension fund said.

“Given Massey’s chronic unwillingness and failure to adhere to mining safety regulations, this tragedy did not come as a surprise to many,” according to the fund. It asked for the removal of Massey Chief Executive Officer Don Blankenship.

Massey officials didn’t return a phone call seeking comment on the suit. Company director Bobby R. Inman said today in a news conference on benefits for the deceased miners’ families that Blankenship has the “full support” of the board.

the April 5 explosion at the company’s Upper big Branch mine near Montcoal, West Virginia, caused the highest death toll in a U.S. mining accident in 26 years. the cause hasn’t been determined. Massey said it expects a second-quarter charge of as much as $212 million as a result of the disaster.

Upper big Branch

the Upper big Branch mine, about 46 miles (76 kilometers) south of Charleston, West Virginia, is run by Massey’s Performance Coal co. unit. the nonunion mine opened in October 1994. It had two previous fatalities in the past decade, according to a state Web site.

Federal safety inspectors in the past three years cited the operation hundreds of times for violations including the buildup of explosive methane and coal dust, according to the pension fund’s complaint. Massey avoided closing the mine by “endlessly” appealing the citations and fines, according to the complaint.

Directors’ “misconduct has already severely affected Massey’s reputation and goodwill,” the pension fund said in the complaint, noting that the company has $25.6 million in unpaid fines since 2005.

the case is a so-called derivative suit, which would return any recovery to the company. the fund asked for a court order directing the board of directors to investigate and assess the safety of all Massey mines and remove Blankenship.

Blankenship’s Actions

the actions of Blankenship, who has a reputation for battling with mine regulators and unions, and his fellow directors have resulted in the company’s racking up “nearly $27 million in fines” for providing unsafe working conditions, the suit said.

Directors said last week that they support the CEO.

“During times like these, a change in senior management is not appropriate or in the best interest of our members and shareholders,” Inman, the board’s lead independent director, said April 22 in a statement.

“The board has stubbornly refused to oppose Blankenship’s policy of denial and obstruction,” the fund said in today’s filing.

Massey fell 84 cents, or 1.9 percent, to $43.61 at 4:15 p.m. in new York Stock Exchange composite trading. Shares more than tripled in the past year.

the case is new Jersey Building Laborers Pension Fund v. Blankenship, CA5430, Delaware Chancery Court (Wilmington)

–With assistance from Phil Milford and Jef Feeley in Wilmington, Delaware, Margaret Cronin Fisk in Detroit, Brian K. Sullivan in Boston, Mario Parker in Chicago and Christopher Martin in new York. Editors: Fred Strasser, Charles Carter

To contact the reporter on this story: Sophia Pearson in Wilmington at spearson3@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net

Massey Energy Sued by Pension Fund Over Mine Accident