In the world of commercial real estate litigation, we deal frequently with agreements — leases, licenses, reciprocal easement agreements — made decades ago that may not correspond to contemporary practices. With the passage of time, parties may come to see compliance with longstanding agreements as burdensome and detrimental in ways that the original signatories did not predict. Courts are called upon to decide whether old contracts should be enforced in accordance with the intent of signatories from generations ago.

The Court of Appeals for the Fourth Circuit (which covers Maryland, Virginia, West Virginia, North Carolina, and South Carolina) this month issued a notable ruling on a rather colorful scenario of this type, holding for the party seeking to enforce the agreement as written. The court held that a mining company, the tenant and operator of a property in West Virginia, could continue to pay a landowner just 10 cents per ton of coal mined, even though that initially reasonable royalty "doesn’t even cover the current lessor’s overhead today."

The original mining lease was executed in 1937 by the Loup Creek Colliery Company, as owner, and the Koppers Coal Company, as tenant.

Koppers was controlled by Pittsburgh industrialist Andrew Mellon, a controversial, larger-than-life figure who built Mellon Bank into a finance behemoth and presided over the 1929 stock-market crash as secretary of the Treasury. Mellon, as it happens, had interests on both sides of the West Virginia coal-mining lease: He controlled the tenant mining company, and his company owned a 40% interest in the Virginia Railway, which was the parent of the landlord.

The lease contained a combination of provisions that may have seemed reasonable in 1937, but would become extremely detrimental to the landowner over time: First, that the mining company would pay the landowner just 10 cents per ton of coal mined; second, that the mining company would have a unilateral right to renew its lease every 20 years until no coal remained in the ground.

The current-day successor parties to the lease are Pocahontas Land LLC, as landlord, and Rockwell Mining LLC, as tenant. After Rockwell engaged in certain mortgage and merger activity in 2020, Pocahontas claimed that its consent to this activity had been required and had not been granted. Rockwell filed suit in the United States District Court for the Southern District of West Virginia seeking a declaratory judgment that Pocahontas’s consent was not required. Pocahontas responded with counterclaims asking the court, among other things, to find the 10-cent royalty provision in the lease unconscionable and unenforceable.

The district court ruled that the 1937 provision for a 10-cent royalty was not unconscionable, even in 2025. The Fourth Circuit affirmed this ruling in a decision handed down on December 5, 2025, focusing — as the law requires — solely on the circumstances at the time the lease was signed, in 1937. Under West Virginia law, the court explained, there was no "procedural unconscionability," since an arm’s-length bargain between sophisticated parties had occurred in 1937, even taking account of Andrew Mellon’s 40% interest in the landlord at the time (which was not, after all, a controlling interest). Further, there was no "substantive unconscionability," since 10 cents per ton was "fairly representative of coal leases in Southern West Virginia at the time," as Pocahontas’s own expert had opined.

The court added: "While the royalty rate and unilateral perpetual renewal terms are fair in isolation, the combination is more troubling. But West Virginia courts haven’t declared that such a combination makes for a substantively unconscionable lease. And we won’t either. Pocahontas Land might be stuck in a disadvantageous deal today. But when sophisticated parties enter a fair contract, West Virginia law won’t disturb its terms."

One wonders why, in 1937, the landowner agreed to a royalty defined as a specific dollar (cent?) figure, with no provision for adjustment based on inflation or other changes in circumstances over the years — particularly given that the landowner was simultaneously agreeing to a virtually perpetual, unilateral renewal right for the tenant.

In any event, this ruling will send chills down the spines of some commercial real estate industry participants operating under leases and other contracts that were signed decades ago in vastly different circumstances.

Putting aside coal-mining leases, a similar scenario that has arisen often in recent years involves reciprocal easement agreements from the 1960s and 70s that govern the operation of enclosed shopping malls. As shoppers' habits change, department store companies close, and mall owners seek to reorient and repurpose their properties, these half-century-old agreements are frequently challenged based on claims of unconscionability and similar grounds. And, if you happen to own an old mall in West Virginia and seek relief from what you see as outdated constraints in the governing contracts, you are probably out of luck.

For more information, please contact me or your regular Parker Poe contact. Click here to subscribe to our latest alerts and insights.