The U.S. Supreme Court declined to take up a case that would have challenged financially troubled coal companies’ use of bankruptcy law to end federally mandated payments to the industry’s multiemployer pension plan, WSJ Pro Bankruptcy reported. The Court said yesterday that it won’t hear a dispute arising from the 2018 bankruptcy of Westmoreland Coal Co., which used chapter 11 to sell its coal mines to its creditors. The appeal challenged a strategy used in chapter 11 by Westmoreland and other bankrupt coal companies to end payments assessed under the Coal Act, a 1992 law meant to keep the industry pension plan financially sound and guarantee retiree benefits for coal miners. Yesterday’s decision leaves in place an August ruling by the U.S. Court of Appeals for the Fifth Circuit, which held that the power of bankruptcy law to modify or eliminate retirement liability trumps obligations under the Coal Act. That decision followed a 2018 ruling by the U.S. Court of Appeals for the Eleventh Circuit in favor of a different bankrupt coal company. Those two federal appellate courts cover parts of the Southeast and Texas. The appeal the Supreme Court denied was brought by trustees who represent the interests of the coal pension plan. Trustees argued unsuccessfully in the Westmoreland case that the Coal Act assessments that companies are required to pay are a tax and therefore cannot be undone under the section of chapter 11 that allows corporate debtors to modify or end their legacy retirement obligations. But the Fifth Circuit in August agreed with Westmoreland, which said that Coal Act obligations are the codification of retirement benefits and therefore are subject to the chapter 11 provision that lets companies end retirement obligations. In its ruling, the Fifth Circuit said Congress “made no clear indication” that it intended to specifically carve out Coal Act obligations from the power of chapter 11 to cut corporate costs and liabilities.
