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Judge Orders Patriot Coal Bankruptcy Case Moved From New York Court to St. Louis

Friday, December 21, 2012
By Gayle Cinquegrani

The bankruptcy proceedings of Patriot Coal Co. will be moved from New York to St. Louis, Mo., under a Nov. 27 court order responding to motions from the United Mine Workers of America and others that New York is an inappropriate venue for deciding the fate of Patriot's obligations to its creditors, workers, and retirees (In re Patriot Coal Corp., Bankr. S.D.N.Y., No. 12-12900-scc, order 11/27/12).

The transfer could be seen as a partial victory for UMWA, which in July asked the U.S. Bankruptcy Court for the Southern District of New York to transfer the case from New York to the Southern District of West Virginia in Charleston, W.Va. The union argued that Manhattan has no coal mines, while West Virginia is home to many coal mines and to many workers whose benefit plans would be affected by Patriot's bankruptcy.

Patriot asserted that it filed for bankruptcy in New York because its legal and financial advisers, as well as the advisers to its significant creditors, were located there.

UMWA contended that Patriot's parent company, Peabody Energy, set up Patriot as its failing subsidiary so Peabody could avoid paying health care benefits for retirees and their families (24 BBLR 1443, 11/8/12). The union said the Patriot bankruptcy affects more than 22,000 active and retired UMWA members and their dependents, most of whom live in West Virginia, Illinois, Indiana, Kentucky, and Ohio.

Patriot Coal Corporation and 99 affiliated debtors, including substantially all of Patriot Coal's wholly owned subsidiaries, filed for Chapter 11 protection July 9 in the U.S. Bankruptcy Court for the Southern District of New York (24 BBLR 892, 7/12/12).

“The analysis regarding the appropriate venue for these cases must focus on the interests and convenience of all parties, not just those of the UMWA,” Judge Shelley C. Chapman said in her order, noting that “only a small portion of the total anticipated claims against the Debtors are held by parties based in West Virginia.”

Chapman said that transferring the case to West Virginia could give UMWA, which represents approximately 40 percent of Patriot's workforce, “the home field advantage.”

“It is not in the interest of justice merely to swap one party's perceived home field advantage for another,” especially when “there is no evidence in the record that transferring the cases to West Virginia would meaningfully serve the convenience of the parties,” she said.


St. Louis Is Best Location for All Parties
Instead, Chapman decided that “transferring these cases to the Eastern District of Missouri will serve the interest of justice and, as among venue choices other than [New York], best serve the convenience of the parties.” Both Patriot and Peabody have their corporate headquarters in St. Louis, she pointed out.

St. Louis is also relatively close to coal country, she observed. “While St. Louis may not be as convenient as Charleston [W. Va.] for some employees and retirees, it is by no means remote from coal country,” Chapman said. “More Patriot retirees live in the Illinois Basin than in West Virginia or any other location,” she wrote.

“The U.S. Bankruptcy Court made the right call today when it moved the Patriot Coal case from New York to St. Louis,” UMWA international president Cecil Roberts said in a Nov. 27 statement. “Though we would have preferred this case to be moved to Charleston, W. Va., moving it to St. Louis puts it on the front porch of Peabody Energy and Arch Coal,” he said.

“These two companies spun off their operations to Patriot in an attempt to run away from pension and health care obligations to thousands of miners and their survivors,” Roberts said.

Charging that “Patriot Coal executives set up two dummy corporations in New York because they wanted their case heard in a forum far from the coal fields,” Roberts said the union “filed this case so that it would be moved away from a place where no coal has ever been mined to a place where people are familiar with the coal industry.”

Chapman's decision “brings the case to the heart of the Illinois coal basin, home to many of our active and retired members and their families,” Roberts said.

Michael Freitag, a spokesman for Patriot Coal, told BNA, “Patriot Coal respects the Court's decision to transfer the Company's Chapter 11 proceedings to St. Louis, where Patriot is headquartered.”

In a Nov. 27 statement, he said, “We remain focused on using the reorganization process to ensure the Company's future viability as a competitor and employer in a challenging market environment.” Patriot remains “committed to completing the reorganization as soon as possible and preserving the nearly 4,000 jobs at risk,” Freitag said.

By Gayle Cinquegrani

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