Patriot Coal tries to limit retiree health benefits-court filing

NEW YORK Mon Jan 28, 2013 10:25pm EST

NEW YORK Jan 28 (Reuters) - Patriot Coal Corp wants to limit its obligation to pay retiree health benefits to thousands of U.S. mine workers and their families as part of its plan to survive Chapter 11 bankruptcy, according to court documents filed Monday.

The company has proposed creating a trust, known as a voluntary employees' beneficiary association, to provide a maximum of $40 million annually up to a limit of $200 million.

The annual cost of providing retiree health benefits in 2012 was $71 million and is expected to rise to $73.8 million, nearly twice as much as Patriot has proposed to spend, according to the documents.

The company's proposal was detailed in an amended lawsuit filed by eight mine workers and their union, the United Mine Workers of America, against Peabody Energy Corp and Arch Coal Co.

They are seeking class-action status for more than 10,000 workers whose benefits were transferred from Peabody and Arch to Patriot in a 2007 spinoff. The lawsuit claims Peabody and Arch, rather than Patriot, should be responsible for paying the retiree health benefits for the workers, some of whom retired before 2007 and never worked for Patriot.

The union is concerned that Patriot will take advantage of bankruptcy laws allowing companies to shed much of their retiree health care and pension costs. It claims Peabody and Arch deliberately shunted their obligations onto Patriot in an effort to avoid having to pay the full amount.

Representatives for Peabody, Arch and Patriot could not be reached outside of regular business hours for comment. A spokesman for Peabody, Vic Svec, has previously said that Patriot was "completely viable" when it was spun off and that its collapse was not due to the cost of the retiree benefits.

The lawsuit is pending in federal court in West Virginia, where Patriot has most of its operations. The bankruptcy case began in New York before a judge ordered it moved to Missouri where the company is based.

The lawsuit is Lowe et al v. Peabody Holding Co LLC et al, U.S. District Court, Southern District of West Virginia, No. 12-06925. The bankruptcy case is In Re Patriot Coal Corp et al, U.S. Bankruptcy Court, Eastern District of Missouri, No. 12-51502.

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