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By Verna Gates

BIRMINGHAM, Ala., July 26 (Reuters) - U.S. coal company Drummond was acquitted in a landmark case on Thursday of liability in the 2001 killings of three union leaders at its northern Colombian mine.

The jury in the civil trial in Alabama rejected the plaintiffs' accusation that privately held Drummond Company Inc. gave financial and other support to right-wing paramilitaries who carried out the killings and was thus liable for the deaths.

The families' lawyers said Drummond hired the masked gunmen who killed Drummond employees Valmore Locarno and Victor Orcasita near its open-cast La Loma mine in March 2001 and Gustavo Soler seven months later.

But the jury ruled only on the liability issue among several accusations made by the plaintiffs.

Locarno was shot in the head and Orcasita was tortured and killed. The three men represented a union in a dispute with the mining company over wage and safety issues.

Drummond said during the trial it gave no support to paramilitaries and was not involved in the killings.

"We will be swiftly appealing," said Terry Collingsworth, executive director of the International Labor Rights Fund, which filed the suit in March 2002 along with the Pittsburgh-based United Steelworkers union. The suit sought unspecified damages on behalf of the dead union leaders' families.

SHADOW OF VIOLENCE

The case was based on a 1789 law that has been revived to sue transnational companies for rights abuses. If Drummond had been found liable, it could have set a precedent for U.S. companies accused of human rights violations abroad.

"This was the first Alien Tort Statute against a corporation. However, there have been a number of cases against individuals that have achieved jury verdicts in favor of the plaintiff," said Rusty Johnson, attorney for the plaintiffs.

A lawyer for Drummond criticized the use of the law to bring the case in the United States.

"The allegations against Drummond were just not true. I question the wisdom of the U.S. judicial system allowing these cases to be brought to trial in the U.S.," said William Jeffress, an attorney for Drummond.

"I am disturbed by the way groups are using this law. It gives residents of foreign countries more rights than U.S. citizens," Jeffress said in an interview.

University of Richmond law professor Carl Tobias said it was always going to be difficult for the plaintiffs to prove their case.

"If other people believe that American companies have had illegal dealing with militias in Colombia they may also go to the U.S. courts. But the Drummond case shows they are not going to have an easy time of it," said Tobias, an expert in federal courts.

The paramilitary death squads were formed in the 1980s by cattle ranchers, drug lords and other wealthy residents of the Andean nation looking for protection from leftist rebels.

They were believed responsible for killing most of the more than 4,000 Colombian union leaders and activists gunned down since 1986.

Drummond employees say they continue working under the shadow of paramilitary violence.

"We still have a lot of concerns regarding our security," said Raul Sosa, president of the Drummond branch of the National Union of Mining and Energy Workers of Colombia. "This decision is a hard blow for us."

More than 31,000 paramilitaries turned in their guns in the past three years as part of a deal with the government.

Earlier this year, U.S. banana giant Chiquita Brands International Inc. <CQB.N> pleaded guilty to paying $1.7 million in protection money to Colombian paramilitaries between 1997 and 2004. That case never went to trial. (Additional reporting by Hugh Bronstein in Bogota)

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