Patriot Coal seeks to break contract with UMWA
CHARLESTON, W.Va. -- Patriot Coal Corp. on Thursday asked a U.S. bankruptcy judge to throw out the terms of the company's contract with the United Mine Workers union and modify the health-care plan covering thousands of retired miners.
Lawyers for Patriot Coal did not publicly disclose the exact terms of the proposal, but indicated in a news release that the company wants to cut wages, reduce benefits and adjust work rules for its unionized employees "to a level consistent with the regional labor market."
UMW President Cecil Roberts said the company's proposals are "totally unacceptable, unnecessary and put thousands of retired coal miners, their dependents or their widows, on the path to financial ruin, worsening health conditions or even death."
"This is the path we have been saying Patriot would take from the very beginning of this bankruptcy last July," Roberts said. "They're demanding massive changes to the collective-bargaining agreement, and they want to scrap the health-care benefits our retirees earned through decades of blood and toil."
St. Louis-based Patriot has filed for bankruptcy protection while it tries to reorganize its finances and operations, including "unsustainable labor-related legacy liabilities," such as retiree health-care liabilities of $1.6 billion.
"Our labor and retiree benefits costs have risen to levels that simply cannot be sustained, given the challenges facing the company and our industry," said Patriot President and CEO Ben Hatfield. "All of our employees and retirees are being asked to make sacrifices to help Patriot emerge from bankruptcy. These sacrifices include reductions in compensation and benefits for salaried, union and nonunion employees."
Neither Patriot nor the UMW revealed complete specifics of the company's proposals, and Patriot lawyers asked Judge Kathy A. Surratt-States in a separate court document to allow that information to be filed under seal.
In a motion filed Thursday evening, Patriot lawyer Elliott Moskowitz said the company's proposals "contain certain highly confidential and sensitive information." Disclosure of the information "would cause significant harm to the debtors' commercial relationships and competitive position," the lawyers said.
Phil Smith, a spokesman for the UMW, questioned why Patriot doesn't want the public to see the full details of its proposals.
"We're curious what it is they want to hide," Smith said. "Their proposals are what they are. It's going to come out sooner or later."
UMW lawyers previously disclosed in a separate court case that Patriot wants to set up a separate trust, called a voluntary employee beneficiary association, or VEBA, to fund health-care benefits for retirees. However, the union says, that Patriot proposal would provide funding equal to a fraction of the UMW health plan's current costs.
The union says it has been unable to provide complete details to the public, though, because Patriot's proposals were provided to UMW officials during confidential contract negotiations.
A hearing was set for April 10-11 on Patriot's contract and health-care benefit proposals.
"The approval of this motion will be the single most important action necessary to ensure Patriot's financial viability and successful reorganization," Hatfield said.
Patriot's bankruptcy has jeopardized the pension and health-care benefits for about 10,000 retirees and another 10,000 dependents. About half of the retirees live in the Illinois coal basin in Illinois, Indiana and Kentucky. Nearly 40 percent more live in West Virginia, according to court records.
About 1,700 union miners work for Patriot operations, including about 1,250 at mine sites in West Virginia.
Last July, Patriot filed for Chapter 11 bankruptcy, seeking to reorganize amid what the company called "unsustainable labor-related legacy liabilities" that include pension and health-care payments and strip-mine reclamation costs.
Negotiators from Patriot and the UMW have been meeting privately over the past few months "in an attempt to reach a fair agreement that would keep the draconian cuts Patriot is seeking from being imposed by the bankruptcy court," Roberts said.
At the same time, the union has engaged in a series of peaceful civil-disobedience protests in St. Louis as part of a campaign against Peabody Energy and Arch Coal, two coal giants that formerly owned the operations now under the control of Patriot.
Peabody formed Patriot as a spin-off company where Peabody tucked union mines in West Virginia and the Midwest, along with pension and health-care obligations for union retirees. Patriot later bought another company, Magnum Coal, which had been similarly spun off by Arch Coal when it got rid of most of its Appalachian operations and their related pension and health-care liabilities.
UMW officials say Patriot was essentially a "company created to fail," to give Peabody Energy and Arch Coal a way to shed obligations to fund union pensions and health-care benefits in the nation's Eastern coalfields, while profiting from their giant, nonunion surface mines out West.
"Lawyers will do what lawyers do, courts will do what courts do," Roberts said. "What working families do when they fight for justice is get out, get loud and demand to be heard. We will continue to do that.
"And as we do, more and more of our members are wondering which side national, state and local politicians, community leaders and religious leaders are on," he said. "For those who haven't already answered that question, the time is now. Get off the fence and choose."
Also Thursday, Patriot said it had filed a lawsuit against Peabody, seeking a ruling that any relief Patriot receives from the bankruptcy court would not "relieve Peabody of its own obligations to certain retirees."
"In connection with Patriot's 2007 spin-off, Peabody agreed to pay the health-care costs for thousands of retirees who were employed by Peabody entities that were transferred to Patriot in the spin-off," Patriot said. "Patriot believes that Peabody might argue that Patriot's financial condition and unavoidable actions in the Bankruptcy Court will allow Peabody to stop paying for or cut the health-care of more than 3,000 individuals."
Patriot's new court filings come just days before it goes into the bankruptcy court on Monday to seek approval for nearly $7 million in bonuses to corporate executives and salaried employees.
"That $7 million would pay for a lot of oxygen bottles for the black lung sufferers," Roberts said.
Reach Ken Ward Jr. at email@example.com or 304-348-1702.