By Nick Brown
Aug 21 A federal appeals court on Wednesday said
Peabody Energy Co must remain on the hook for retiree
benefit costs for 3,100 retired workers at a unit of Patriot
Coal Corp, its former subsidiary now in bankruptcy.
The decision, handed down by the Eighth Circuit Bankruptcy
Appellate Panel, reverses an earlier ruling that abrogated
Peabody's agreement to fund those costs.
The reversal is a small victory for workers in their fight
against Peabody, which they allege knowingly bankrupted Patriot
by spinning it off in 2007 with heavy debts and few strong
Overall, though, coal miners are still expected to sustain
major cuts to benefits as a result of Patriot's collapse.
"This is a bright ray of good news in what has been a long,
dreary period for the retirees," Cecil Roberts, president of the
United Mine Workers of America, said in a statement on
Peabody created Patriot through a 2007 spin-off, agreeing to
continue funding benefits for a group of 3,100 retirees at
Patriot's Heritage unit.
In a statement, Patriot Chief Executive Bennett Hatfield
said he was "pleased" with the ruling. "Peabody should not be
permitted to use Patriot's bankruptcy to escape its healthcare
obligations to thousands of retirees," Hatfield said.
Patriot declared bankruptcy in 2012, saying it needed $150
million in annual labor cost savings to regain profitability.
In May, it got permission from bankruptcy Judge Kathy
Surratt-States to abandon its current labor and retiree
obligations with an eye toward implementing more affordable
ones. In granting that request, Judge Surratt-States also
abrogated Peabody's commitment to fund the Heritage group
She said that while the funding for the benefits was coming
from Peabody, the responsibility to pay remained with Heritage,
and that Patriot's request to abandon that responsibility could
not be parsed out to include some retiree groups and not others.
The appellate panel disagreed, saying Heritage and Patriot
expressly exempted the Heritage group from their efforts to
"Not only did Heritage's motion not request approval to
modify the assumed retirees' benefits, it specifically requested
that the court not grant it such approval," the panel said.
The details of the Heritage group's benefits remained
unclear. Under a new labor deal between Patriot and the United
Mine Workers, retiree benefits are transferred to an outside
trust. But due to the panel's ruling, the Heritage group would
not be a part of the trust. Instead, the agreement requiring
Peabody to fund the group's benefits would remain in place,
meaning the sides may have to negotiate details of benefits
under the new plan.
Peabody in a statement acknowledged the uncertainty, but
said it was "pleased" with the panel's ruling.
"The panel did not rule on how Peabody's level of funding
would be determined with this new labor agreement in place," the
company 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."
The new deal will give the United Mine Workers an equity
stake in post-bankruptcy Patriot, which it could sell to help
fund healthcare benefits under the trust.
The United Mine Workers, which represent 1,700 current
Patriot workers and 13,000 retirees and their relatives, have
fought tooth and nail to salvage benefits during Patriot's
collapse. In a separate lawsuit, it has said Peabody should
remain on the hook for all labor and benefit costs that Patriot