Patriot Coal in controversial bankruptcy court victory

FEDERAL bankruptcy judge Kathy Surratt-States has sided with Patriot coal in its bid to reject its union contracts and convert its retiree health benefits to an outside fund as it struggles to stay afloat.
Patriot Coal in controversial bankruptcy court victory Patriot Coal in controversial bankruptcy court victory Patriot Coal in controversial bankruptcy court victory Patriot Coal in controversial bankruptcy court victory Patriot Coal in controversial bankruptcy court victory


Staff Reporter

In a 102-page ruling on the case, Surrat-States said: “The legacy of unfunded retiree medical benefits was itself the result of congressional inaction, a changing manufacturing landscape and the benign neglect, and false hopes of companies and unions alike."

Her decision follows a week-long hearing and months of mass protests sparked by Patriot’s Chapter 11 bankruptcy filing in July.

“Was debtor Patriot Coal Corporation created to fail? Maybe not. Maybe," Surratt-States found in the ruling.

“Maybe the executive team involved at debtor Patriot Coal Corporation's inception thought the liabilities were manageable and thus, the reality of debtors' bankruptcy was more attributed to unwarranted optimism about future prospects.

"Unions generally try to bargain for the best deal for their members, however, there is likely some responsibility to be absorbed for demanding benefits that the employer cannot realistically fund in perpetuity, particularly given the availability of sophisticated actuarial analysts and cost trend experts."

The United Mine Workers of America (UMWA) has led the charge against Patriot Coal and the company that spun it off in 2007, Peabody Energy.

Union president Cecil Roberts slammed the judge’s decision as "wrong, unfair and fails to fully recognize the coming wave of human suffering that will be experienced by thousands of people throughout the coalfields."

Roberts blamed the legal system for failing to protect people in the interest of saving corporations.

“Patriot can survive as a viable and profitable company well into the future without inflicting the level of pain on active and retired miners and their families it seeks,” Roberts said.

“Patriot is using a temporary liquidity problem to achieve permanent changes that will significantly reduce the living standards of thousands of active and retired miners and their families.

“We are disappointed that the Bankruptcy Court failed to see that, and we intend to appeal the ruling to the Federal District Court,” Roberts said.

The union, which had accused Peabody of intentionally setting Patriot up to fail, said it would continue to wage its legal battle against Peabody and Arch Coal.

Patriot was spun off from Peabody in 2007. Former Arch Coal properties that had been spun into a company called Magnum Coal were also later added to Patriot, adding further liabilities.

Peabody has maintained the Patriot’s downfall was due to a series of flawed management decisions and unfortunate market conditions and it should not be held responsible for its current problems.

Peabody welcomed the judge’s decision to dismiss a lawsuit by Patriot that sought to require Peabody to keep covering some retiree healthcare costs reaffirmed their position.

“In its order, the court fully agreed with Peabody's contractual position,” the statement read.

“Peabody will continue to meet its obligations, as affirmed by today's rulings.”

Surratt-State’s decision is by no means the end of the saga. Patriot is now free to proceed with its bankruptcy proceedings, but the effects of the decision on its outcome and the impact this will have on its workers remains to be seen.

Patriot CEO Bennett K. Hatfield said: "This ruling represents a major step forward for Patriot, allowing our company to achieve savings that are critical to our reorganization and the preservation of more than 4000 jobs.

"The savings contemplated by this ruling, together with other cost reductions implemented across our company, will put Patriot on course to becoming a viable business.

"For the coming days, we plan to continue operating in the normal course under our current UMWA contracts. Patriot management will continue diligent negotiations with the UMWA leadership to address their concerns about our court-approved proposals.

"While the court has given Patriot the authority to impose these critical changes to the collective bargaining agreements, and our financial needs mandate implementation by July 1, we continue to believe that a consensual resolution is the best possible outcome for all parties."

Patriot's current benefit proposal would cease pension contributions and convert healthcare to a voluntary employees' beneficiary association (VEBA) funded by $15 million in up-front cash and $300 million in profit-sharing contributions.

Patriot has said that UMWA would receive a 35% equity stake in Patriot once it has been reorganised, which it could sell to help fund the VEBA. The company's proposal would also reduce wages and decrease paid time-off.

UMWA said this was unfair and unnecessary.

"Patriot says that for it to survive, the union-represented workforce needs to be on the same scale as its non-union workers," Roberts said Wednesday.

"No, it does not need that and it never did.”

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