The United Mine Workers 1974 Pension Plan & Trust attempted unsuccessfully to end the coal industry’s string of victories allowing the termination of labor contracts and cutting off purchasers’ exposure to legacy health care obligations under the federal Coal Act.
United in opposition, both the mine workers’ union and the union’s pension plan were defeated when coal producer Walter Energy Inc. persuaded the bankruptcy court to reject the collective bargaining agreement and insulate the buyer from the company’s Coal Act obligations for retirees’ health benefits. Meanwhile, the bankruptcy court also approved the sale of assets to secured lenders in a credit bid. The purchase agreement requires insulating the lenders, as the new owners, from obligations under the labor contract and Coal Act liabilities.
While an appeal was pending, the union settled and withdrew its appeal, leaving only the union pension fund as an appellant attempting to overturn termination of the contract under Section 1113 and the termination of retiree benefits under Section 1114.
District Judge R. David Proctor of Birmingham, Ala., had no difficulty dismissing the pension plan’s appeal from the Section 1113 labor contract rejection. In contrast to the union, which settled and withdrew its appeal, the pension plan lacked standing because it was not a “person aggrieved” since it had no financial stake in the union contract. The fact that the union contract required retiree benefits did not save the day.
Alternatively, the Section 1113 appeal was moot because the union, as the authorized representative, had settled and withdrawn its appeal.
Insulating the buyers from Coal Act liability was more complex because Section 1114 provides that the court can modify retiree benefits if “such modification is necessary to permit the reorganization of the debtor.”
The pension plan had argued that the company could not use Section 1114 because the Walter Energy chapter 11 case was a liquidation, not a reorganization.
Judge Proctor was able to avoid the seemingly plain language of the Section 1114 by invoking the principle under the Supreme Court’s Bob Jones University opinion, which says that a court can go beyond literal language if it “would defeat the plain purpose of the statute.”
Citing numerous other lower courts reaching the same conclusion, the judge noted that liquidation is expressly contemplated in chapter 11.
Although the pension plans were established by the Coal Act, they were maintained by the debtor. That was enough, Judge Proctor said, to fit within the rubric of Section 1114(a), which restricts the termination of retiree benefits to plans that are “maintained or established in whole or in part by the debtor.” He also said that the Coal Act and Section 1114 do not “expressly contradict” one another and thus can coexist.