“Ratification of these agreements provides labor stability and ensures cost savings essential to Patriot’s plan of reorganization,” said Patriot President and CEO Ben Hatfield. “These agreements should set Patriot on a path to emerge from bankruptcy by the end of 2013.

A motion seeking authorization to enter into these agreements was filed with the bankruptcy court in St. Louis. Judge Kathy Surratt-States granted Patriot’s request to enact the collective bargaining deal.

Terms of the agreement

“This is a bright ray of good news in what has been a long, dreary period for the retirees, their dependents and widows who have been desperately worried about what’s going to happen to their health care,” UMWA President Cecil Roberts said.

In Judge Surratt-States ruling, she allowed Patriot to abandon its current labor and retiree obligations and modify them, and while doing so also voided Peabody’s commitment to fund benefits of some 3,100 retirees from the Heritage unit. She stated that since the collective bargaining agreements had been rejected, Heritage was no longer obligated to provide the benefits, and therefore, Peabody was not required to fund them.

However, on August 21, an appellate panel disagreed and reversed her ruling. The panel said, “Whether Heritage’s obligation is contractual or statutory in nature is of no consequence—Heritage is still obligated to provide benefits under the terms of the individual employer plan. This is precisely what Peabody Holding agreed to assume and pay.”

The panel also said that both Patriot and Heritage were adamant that the Heritage group not be included in the request to annul retirees’ benefits. “With such a request in motion, those benefits remain undisturbed by the court’s order granting Heritage permission to modify the rest of its retirees’ benefits,” the panel said in its decision.

Patriot President and CEO Bennett Hatfield released a statement calling the decision a “welcomed development” on the way to Patriot’s reorganization.

“We are pleased that the Bankruptcy Appellate Panel has found Peabody Energy Corporation responsible for health care benefits it assumed at the time of the spin-off of Patriot,” Hatfield said. “The appellate court adopted the position that Patriot has advocated all along—Peabody should not be permitted to use Patriot’s bankruptcy to escape its health care obligations to thousands of retirees.”

Peabody also released a statement saying it was pleased with the decision. “The court said that Peabody was obligated to make payments (that have been consistently paid) until such time as a new labor agreement was approved between Patriot and the UMWA,” Peabody said.

Peabody also pointed out that the panel made no ruling on the level of funding or how this would be affected by the new labor agreement that was signed by Patriot and UMWA. “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,” Peabody said.