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Court cool to moving Patriot Coal case

CHARLESTON, W.Va. -- Hundreds of United Mine Workers members rallied in downtown Charleston Tuesday in the latest move in their campaign to preserve a contract, pensions and retiree health-care benefits at bankrupt Patriot Coal.

Camouflage-clad miners packed the amphitheater at Haddad Riverfront Park and then marched to the Robert C. Byrd U.S. Courthouse in an effort to convince a federal judge in New York City to move Patriot's bankruptcy case to Southern West Virginia.

"We want this heard here in the coalfields -- not in New York, but here in the coalfields where we work and live," Joe Carter, an international vice president from Charleston-based UMW District 17, said to a standing ovation.

Inside the federal courthouse, though, UMW lawyers were getting a pretty cool reception as they presented legal arguments for moving the case.

U.S. Bankruptcy Judge Shelley C. Chapman held a hearing on the matter in her courtroom in Manhattan. In an unusual move, the court provided video feeds to West Virginia, where Patriot has most of its operations, and to St. Louis, where the company is based.

Dozens of UMW members filled two courtrooms in Charleston to watch on large-screen televisions. They were joined by a healthy contingent of local lawyers whose roles in the case could grow if it's moved here.

But Chapman wasn't receptive to the union's arguments from the start. She interrupted when UMW lawyer Susan Jennik tried to explain how many miners and union pensioners were watching the hearing from Charleston or gathered outside the courthouse for the rally.

The judge said she didn't want to hear crowd estimates unless all sides in the case had agreed on some scientific method for calculating those estimates. She said she didn't want such unconfirmed information creeping into the case record disguised as facts.

"It may sound like I'm being nitpicky, but as a trial lawyer I'm sure you can understand where I'm coming from," Chapman told Jennik.

Seeking to move the case to Charleston is part of the UMW's campaign to avoid having Patriot shed liabilities for retiree pensions and health-care benefits -- not to mention its union contract at several large active mines -- as part of its Chapter 11 bankruptcy reorganization. Patriot filed the case in July in New York, citing the location there of two subsidiaries that were formed only weeks before the filing.

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, non-union surface mines out west.

Five years ago, 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 spin-off by Arch Coal when it got rid of most of its Appalachian operations and their related pension and health-care liabilities.

Patriot employs about 2,000 active union members in West Virginia and Kentucky, and the company is currently responsible for more than 10,000 retirees and another 10,000 dependents, most of them in West Virginia, Indiana, Illinois, Kentucky and Ohio.

"Setting up dummy corporations to cherry-pick a legal venue, like Patriot did, is morally wrong," said UMW President Cecil Roberts. "This case belongs in Charleston, not in Manhattan."

To win its motion to move the case, the UMW is required to show that the change of venue is "in the interest of justice or for the convenience of the parties."

Jennik said that the court system in West Virginia understands the coal industry better than judges in New York and Patriot's $1.3 billion in "legacy liabilities" to miners and pensioners are the biggest financial issue being decided in the case.

"It is the workers who stand the most to lose in this case and what is convenient to them should carry great weight," Jennik said.

But Jennik was unable to answer several questions from the judge about the number and location of Patriot workers and retirees, their union status, and the comparative pay and benefits at union and non-union operations.

Chapman repeatedly questioned the notion that justice would be best served by the bankruptcy case being heard in West Virginia, where people may know more about the coal industry, but also where "there are political campaigns" about the industry's positive and negative impacts, and debates among constituencies in the bankruptcy, including workers and environmental regulators.

"The fact that you want to move the case to a place you believe -- it sounds like you believe -- is more sympathetic to your constituency gives me some pause," the judge said. "I'm struggling with the very strong part of your argument that says, 'Send this to West Virginia. They know us. They know coal.'"

Citing one example, Jennik said that federal courts in West Virginia are more familiar with complicated questions about mine reclamation and long-term environmental liabilities related to coal company bankruptcies.

"This industry is very specialized, particularly in the environmental damage that can be done in coal mining," Jennik said.

Along with its union pension and health-care liabilities, Patriot cited environmental costs in its bankruptcy filing, specifically noting that the costs of treating selenium pollution could run into "hundreds of millions of dollars."

Last month, lawyers for Patriot and various citizen groups told U.S. District Judge Robert C. Chambers they had reached an "agreement in principle" that would help the company manage its selenium costs. Details have not been made public.

The hearing, and the video feed from New York, is scheduled to continue Wednesday.

Reach Ken Ward Jr. at kward@wvgazette.com or 304-348-1702.


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