The decision by the US Bankruptcy Appellate Panel for the Eighth Circuit overturns an earlier ruling by Bankruptcy Judge Kathy Surratt-States that abolished Peabody’s benefit responsibilities.

Peabody created Patriot in a 2007 spin-off, following which it agreed to continue funding the benefits of around 3100 retirees at Heritage, a former Peabody unit.

“This is a bright ray of good news in what has been a long, dreary period for the retirees,” United Mine Workers of America president Cecil Roberts said, adding that most of the retirees affected were from the Mid-West.

UMWA has been fighting for “fairness at Patriot and Peabody” since Patriot declared bankruptcy in July 2012, endangering thousands of members’ healthcare benefits.

Despite the decision, Patriot employees are still facing major benefit cuts as part of Patriot’s collapse.

Patriot chief executive officer Bennett Hatfield said the company was pleased the court had found Peabody responsible for the benefits.

“The appellate court adopted the position that Patriot has advocated all along – Peabody should not be permitted to use Patriot's bankruptcy to escape its healthcare obligations to thousands of retirees," Hatfield said.

“Patriot remains committed to a fair outcome for our stakeholders, while securing the necessary savings to successfully emerge as a long-term coal producer.”

Surratt-States gave Peabody permission to abandon the benefits in May when she agreed that Patriot could amend its labor and retiree obligations.

Peabody argued that since Heritage (Patriot) was relieved of its obligation to pay for retiree health care by Judge Surratt-States, Peabody should be relieved of its obligation as well.

Surratt-States agreed and issued a ruling in Peabody’s favor, which was appealed by Patriot and Heritage.

The details of Heritage’s benefits remain unclear, especially going forward as the new deal between Patriot and UMWA includes the development of a trust that excludes Heritage.

Peabody released a statement following the appellate court’s decision outlining this uncertainty but saying it was “pleased” with the decision.

“The panel did not rule on how Peabody's level of funding would be determined with this new agreement in place,” Peabody said.

“Now that a new labor agreement has been approved, the provisions of the contract with Patriot will apply and any future funding levels are yet to be determined.”