Patriot miners sue Peabody, Arch over retiree benefits

Thu Oct 25, 2012 7:48am EDT

(Reuters) - Peabody Energy Corp and Arch Coal Inc are being sued by mine workers who contend that the companies have an obligation to pay pension and health care benefits that were transferred to Patriot Coal in a 2007 spinoff.

Eight mine workers and their union, the United Mine Workers of America, are seeking class action status in a lawsuit filed on Wednesday in federal court in West Virginia.

The roughly 10,000 union members whose benefits were transferred in the spinoff are worried that Patriot, in Chapter 11 bankruptcy, will try to take advantage of laws allowing bankrupt companies to cut retiree health care and pensions. Some of the workers whose benefits were transferred retired before the spinoff and never actually worked for Patriot.

In court papers related to its bankruptcy filing, Patriot said its current retiree obligations are untenable.

The union is determined to salvage benefits by going after Peabody and Arch, which it accuses of dumping costly obligations onto Patriot.

In an interview last week, Arthur Traynor, a lawyer for the union, said the goal "is not to get money out of Patriot.

"We're going to go back and talk to the people who are responsible, who made these gentlemen the promise of health care, and that's Peabody and Arch.

"(But) Peabody and Arch, apparently, don't want to pay that," he said.

A spokesman for Peabody said on Wednesday that Patriot was a "completely viable" company when it was spun off and that its downfall resulted from other forces.

"Patriot's decisions to make significant changes in its capital structure (and) decreased demand for U.S. coal due to sharp declines in natural gas prices" contributed to Patriot's decline, spokesman Vic Svec said.

Last week, Svec said that a Peabody subsidiary still pays about $600 million in Patriot retiree health care obligations that it retained at the time of the spinoff.

A spokeswoman for Arch declined to comment on Wednesday.

The lawsuit was filed in West Virginia, home to most of Patriot's operations. The union has said it wants Patriot's bankruptcy to play out in West Virginia where its members would have more of a voice.

Patriot filed for Chapter 11 bankruptcy protection in New York despite not having operations there. The union has said that constitutes unfair forum-shopping and has asked that the case be moved to West Virginia. Its request is still pending in bankruptcy court in Manhattan.

The bankruptcy is In re Patriot Coal Corp, U.S. Bankruptcy Court, Southern District of New York, No. 12-12900.

The lawsuit is Howe et al v. Peabody Holding Co LLC et al, U.S. District Court, Southern District of West Virginia, case number unavailable.

(This sotry is corrected to fix typo in first paragraph)

(Reporting By Nick Brown; Editing by Andrew Hay)

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