The disputes in the U.S. Bankruptcy Court for the Eastern District of Virginia in Richmond played out against the backdrop of efforts by Scott Depot, West Virginia-based Patriot to sell its coal assets in Central Appalachia. Patriot has agreed to sell substantially all of its operating mines to Blackhawk Mining in return for the issuance of $653 million of new debt securities to Patriot’s secured lenders while providing the lenders an ownership stake in Lexington, Kentucky-based Blackhawk.

Blackhawk also will serve as stalking horse bidder in a court-supervised asset auction this fall if more than one qualified offer is received by the court by the September 4 deadline. No arrangement has yet been made to sell Patriot’s Federal No. 2 underground mine and prep plant in Monongalia County, West Virginia. The UMWA represents Federal No. 2 miners.

Patriot, which filed for bankruptcy on May 12 — the second time in three years it has undergone the process — told the court Blackhawk would not accept the UMWA contract and likely would back away from their tentative deal if the contract was made part of a final sale agreement.

“In the face of the UMWA’s insistence on terms and conditions that Blackhawk was unwilling to agree to (and that no buyer is likely to agree to), following discussions with Blackhawk, the debtors presented a last proposal to the UMWA,” which expired on July 8, Patriot said. “Following the expiration of this proposal — in light of the fact that the UMWA was not going to agree to modifications that would be acceptable to Blackhawk — the debtors made another proposal to the UMWA” on July 10.

That proposal was simple, Patriot said: the applicable CBAs would be rejected and, following the closing of the transaction, the rights of Blackhawk and the UMWA would be subject to applicable labor law.

Patriot also proposed terminating CBAs that apply to operations not involved in the Blackhawk sale, including the Federal No. 2 mine.

But the union “has repeatedly rejected the debtors’ proposals without good cause and has offered only one counterproposal,” the company said. The union continues to insist that any asset purchaser assume payment obligations into the UMWA 1974 pension plan, something Blackhawk is unwilling to do, “nor would any potential buyer or operator of any of the debtors’ facilities likely agree to,” Patriot said.

Patriot said it has paid nearly $60 million into the union plan over the past three years.

The union denied it is unwilling to continue negotiating with Patriot. “We have never said this process is at the end or that we have reached some sort of impasse,” the UMWA said in a late July statement. “We have remained ready up to now to meet Patriot and their masters at Blackhawk halfway. But if that’s not possible, we are prepared to meet them head on.”

The UMWA and Judy Robbins, the region 4 U.S. trustee, also opposed Patriot’s application to pay more than $6 million in retention bonuses to 52 employees, including $3.5 million to its top five executives including Robert W. Bennett, its president and CEO. Bennett succeeded Bennett Hatfield earlier this year.

Patriot defended the need for the bonuses, saying it already has lost “a significant amount” of its workforce over the past several months because of the “uncertainty and challenges that Patriot is facing.” For example, it said, it now has 101 employees at its headquarters, down from 170 at the end of 2013.

Critics of the retention plan, however, noted Patriot also relocated to West Virginia from St. Louis during that time period, and that some employees obviously elected not to make the transfer.

Robbins, referring to Patriot’s reported loss of $29.2 million in May, raising year-to-date losses to $156.6 million, questioned the value Patriot was receiving from current corporate staff. Moreover, she pointed out, Patriot’s Chapter 11 goal is to divest assets, “not reorganizing” and, as such, the company’s expenses “could be decreasing as a result of preparing for the sale of the company — rather than ramping up the business for ongoing operations.”