UMW sues to keep benefits as Patriot shakes up management
CHARLESTON, W.Va. -- As bankrupt Patriot Coal announced another major management shakeup Wednesday, the United Mine Workers union filed suit to try to preserve pension and health-care benefits for 10,000 active and retired miners and their families.
Patriot said that longtime coal industry executive Ben Hatfield was taking over the company's CEO post from Irl F. Engelhardt, who had moved into the position only five months ago.
The UMW's lawsuit, meanwhile, raises the union's accusation that Peabody Energy and Arch Coal formed Patriot in an effort to get out of their obligation to fund retiree pension and health-care benefits.
"Peabody and Arch established separate spin-off companies, which have become today's Patriot Coal, with the publicly stated intention of getting rid of their obligations to the retirees who gave a lifetime of service to those companies," said union President Cecil Roberts. "The companies bragged about getting those liabilities off their balance sheets.
"And as people with long experience in the coal industry, they knew that the cyclical nature of the industry would inevitably lead to Patriot's inability to pay for those liabilities," Roberts said. "It was a company set up to fail. But under the law, that does not relieve Peabody and Arch of their obligation to these retirees, their spouses and their widows."
The class-action lawsuit in U.S. District Court in Charleston was filed on behalf of the UMW and 10 active and retired miners. Peabody and Arch, both based in St. Louis, were named as defendants.
The suit alleges that Peabody and Arch planned to transfer employees and benefit plan obligations to Patriot "for the purposes of depriving" the employees and retirees of their benefits. The suit alleges such a move is illegal under federal law.
Arch Coal did not respond to a request for comment.
Vic Svec, a spokesman for Peabody, said, "Patriot was a completely viable company when it was spun off in 2007.
"Substantial events after that time, both inside and outside Patriot, significantly affected its future, from Patriot's transformational acquisition of Magnum Coal Company to Patriot's decisions to make significant changes in its capital structure," he said "Other factors were decreased demand for U.S. coal due to sharp declines in natural gas prices; the softening of the global steel markets; and more burdensome regulations. Patriot notes many of these same factors in its filings with the bankruptcy court."
In July, Patriot filed for Chapter 11 bankruptcy, seeking to reorganize. Court filings said that what the company calls "unsustainable labor-related legacy liabilities" related to UMW pension and health-care programs are among Patriot's biggest financial problems.
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.
Patriot has yet to submit its proposed reorganization plan. But UMW officials fear the company will seek a judge's approval to weaken the union's contract for active miners and stop paying into pension and health-care plans for retirees.
In its management matters, Hatfield had been promoted to president of Patriot in May, after serving as the company's chief operating officer. Patriot said Hatfield's leadership "will be invaluable as we undertake changes necessary to position the company for future success."
Hatfield is a former Massey Energy official who was CEO of International Coal Group when the Sago Mine Disaster occurred in January 2006. Arch Coal has since acquired ICG.
"It is a privilege to be entrusted by the board to lead this Company," Hatfield said. "My goal is to take the actions necessary to restore Patriot's viability and keep our nearly 4,000 employees working. We want to complete the reorganization of Patriot as swiftly and effectively as possible."
Reach Ken Ward Jr. at email@example.com or 304-348-1702.