In a 102-page decision, Judge Kathy A. Surratt-States of the U.S. Bankruptcy Court granted Patriot’s motion to reject collective bargaining agreements with the United Mine Workers of America (UMWA) while terminating current benefits for retirees. Patriot had asserted reorganization would be impossible without the cuts—a claim the union fought in court and with frequent, sometimes boisterous, public protests.

 

Citing union requirements and “without relief from debtors’ current retiree benefit costs, debtors will be forced into liquidation,” Surratt-States wrote of a case “plagued with uncertainty,” after a week’s worth of hearings.

The ruling was a major blow to the union, which represents about 40% of Patriot’s miners. UMWA President Cecil Roberts described the outcome as wrong and unfair. “Under American bankruptcy law, the short-term interests of the company are valued more than the dedication and sacrifice of the workers who actually produce the profits that make a company successful,” Roberts said. He said the union would appeal it in federal court.

Patriot Coal CEO Ben Hatfield, however, hailed the decision. “This ruling represents a major step forward, allowing our company to achieve savings critical to reorganization and preservation of more than 4,000 jobs,” he said in a statement. “The savings contemplated, together with other cost reductions across our company, will put Patriot on course to a viable business.”

Peabody Energy spun Patriot off in 2007. The court also addressed Patriot’s request to modify its agreement with Peabody regarding retiree benefits. In its order, the court fully agreed with Peabody’s contractual position.

Accordingly, Patriot may now cease contributions to a union pension plan on behalf of unionized workers, while reducing overtime pay, planned wage increases and vacation time, among other concessions. In addition, Patriot may terminate current retiree benefits while transferring them to a trust as of Q1 2014, financed by up to $300 million in future profit-sharing contributions.

Patriot had also proposed giving UMWA a 35% stake in the restructured company, which the union could sell any time and funnel the proceeds into the retiree trust. Hatfield said Patriot management would pursue “diligent” negotiations with UMWA reps to address concerns as “a consensual resolution is the best possible outcome for all parties.”