UMW sues Arch, Peabody over Patriot benefits

CHARLESTON, W.Va. -- The United Mine Workers of America is suing Arch Coal Inc. and Peabody Energy Corp. in southern West Virginia over pension and health-care benefits for bankrupt Patriot Coal Corp.'s active and retired miners.

Peabody spun off Patriot in November 2007, and Patriot later acquired mines that Arch spun off into Magnum Coal.

The lawsuit filed this week in U.S. District Court in Charleston says Arch and Peabody set up spinoff companies to rid themselves of their benefits obligations. But it argues they are still responsible for those benefits under the federal Employee Retirement and Income Securities Act.

"The companies bragged about getting those liabilities off their balance sheets," said union President Cecil Roberts. "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.

"It was a company set up to fail," he said.

Some 10,000 miners and another 10,000 dependents in West Virginia, Indiana, Illinois, Kentucky and Ohio are affected.

Arch declined comment, but Peabody insists that Patriot was a viable company when it was spun off.

All three companies are based in St. Louis.

In a statement, Peabody said that changed because of plummeting demand for U.S. coal, softening steel markets and the slowing of the global economy, and sharp declines in price for a competing fuel, natural gas.

It also cited the impact of "more burdensome regulations."

Patriot, which employs about 2,000 union workers at mines in West Virginia and Kentucky, filed for Chapter 11 bankruptcy in July.

When it filed for bankruptcy, Patriot called the pension and health care programs "unsustainable labor-related legacy liabilities."

It has yet to submit its proposed reorganization plan but did report an 84 percent decline in net income for the third quarter this week.