Today, in a decision long dreaded by union coal miners, a bankruptcy court in St. Louis agreed that Patriot Coal has the right to void its collective bargaining agreements and cancel its pension and retirement obligations to 20,000 workers and family members.
United Mine Workers of America (UMWA) argued in court that Patriot should not be let out of its debts, charging that its parent company, Peabody Energy, had designed Patriot to fail as a ploy to get out of $1 billion in retiree obligations. According to a financial analysis by Temple University Professor of Finance Bruce Rader, Patriot Coal was spun off from Peabody Energy with 42 percent of Peabody’s liabilities, but only 11 percent of its assets.
However, Judge Kathy Surratt-States of the U.S. Bankruptcy Court of the Eastern District of Missouri ruled that Patriot can stop payments to the union pension fund as soon as July 1 and no longer has to cover the full cost of retiree healthcare plans, instead paying a fixed amount into a healthcare fund administered by the union.
In her 102-page decision, Surratt-States wrote:
Unions generally try to bargain for the best deal for their members, however, there is likely some responsibility to be absorbed for demanding benefits that the employer cannot realistically fund in perpetuity, particularly given the availability of sophisticated actuarial analysts and cost trend experts.
The company cheered the ruling, which is expected to save it $150 million a year in labor costs.
"This ruling represents a major step forward for Patriot, allowing our company to achieve savings that are critical to our reorganization and the preservation of more than 4,000 jobs," said Patriot President and Chief Executive Officer Bennett K. Hatfield in a statement released by the company. "The savings contemplated by this ruling, together with other cost reductions implemented across our company, will put Patriot on course to becoming a viable business."
The UMWA and its supporters immediately blasted the decision.
“The UMWA presented a very clear picture in court of what Patriot actually needed to come out of bankruptcy,” said UMWA President Cecil Roberts in a statement. “Patriot can survive as a viable and profitable company well into the future without inflicting the level of pain on active and retired miners and their families it seeks. Patriot is using a temporary liquidity problem to achieve permanent changes that will significantly reduce the living standards of thousands of active and retired miners and their families.”
“I join the thousands of miners in our state who are deeply disappointed with today’s ruling,” said Sen. Jay Rockefeller (D-W.Va.) in a statement. “Once again we are seeing how the bankruptcy system is stacked against the American worker. I will continue fighting to put workers and employers on a level playing field by closing the legal loopholes that allow companies to pad their profits while abusing the legal system to escape from the promises they made. It’s tragic to watch how some industries treat their workers after they’ve given much of their lives to these companies.”
The union plans to appeal the decision in Federal District Court. In the meantime, although Patriot is at liberty to leave the bargaining table, both the union and the company say they will continue negotiations...
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