UPDATE 2-Patriot Coal bankruptcy moved to court in Missouri

Tue Nov 27, 2012 5:12pm EST

* Judge says Patriot attempted to manufacture venue

* Union's bid to move case to West Virginia is denied

* Mine workers' union, Patriot at odds over benefits

By Nick Brown

NEW YORK, Nov 27 (Reuters) - Patriot Coal on Tuesday lost a bid to keep its bankruptcy case in New York, after the United Mine Workers of America argued that the proceedings should be transferred to a venue closer to the company's operations.

U.S. Bankruptcy Judge Shelley Chapman in Manhattan moved the case to St. Louis, Missouri, where the company is based. As part of the bankruptcy, Patriot is expected to seek significant cu ts in ret iree pen sion and health benefits.

Patriot, the judge said in her ruling , incorporated two units in New York in the weeks leading up to its bankruptcy, essentially for the purpose of establishing venue there - a move that, while technically legal, was "simply not fair."

Patriot filed for bankruptcy in July , five years after being spun off by Peabody Energy < BTU.N> and Arch Coal < ACI.N>. [I D:nL2E8I9CIE]

The union had wanted the case transferred to West Virginia, the hub of most of the company's operations but said it was satisfied with St. Louis.

"Nobody has ever mined one ounce of coal in Manhattan," the union said in a statement on Tuesday. "This decision brings the case to the heart of the Illinois coal basin, home to many of our active and retired members and their families."

Patriot had sought to keep the case in New York, a major site for corporate bankruptcies and the home of most of Patriot's lawyers and bankers. The company sa id it respected Chapman's decision.

"We remain focused on using the reorganization process to ensure the company's future viability as a competitor and employer in a challenging market environment," it said i n a statement.

Chapman also criticized the union in her 62-page ruling , which she s aid aimed to define "the meaning of justice."

The union wanted to move the case to a West Virginia court where it f elt judges would be more sympathetic to its cause, Chapman said.

"It is not in the interest of justice merely to swap one party's perceived home field advantage for another," the judge said, citing court hearings in which union lawyers expressed a desire for judges who "understand" and "worship" coal miners.

In court papers, Patriot has said its current labor obligations are " unsustainable" w ithout c utt ing s ome benefits as it re structures .

The Mine Workers union has more than 10,000 retiree members whose pension and health obligations a re a d ministered by Patriot, though many never worked for Patriot and retired be fore th e Peabody spin-of f .

The union has vowed to protect its benefits through the b ankruptcy, and has also sued Peabody Energy, saying it should cover benefits if Patriot cannot [ID :nL 1E8LOOXT].

Chapman chose St. Louis, she said, because Patriot and many of its officers are based there. She added that she was influenced by hundreds of "compelling" letters from retirees, widows and families who wish to participate in the case.

"While St. Louis may not be as convenient as Charleston for some employees and retirees, it is by no means remote from coal country," the judge said.

The case is In Re Patriot Coal Corp et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-12900.