A federal bankruptcy judge on December 28 ruled that Walter Energy can stop making pension and retiree health care contributions, leaving 2,800 retired coal miners and their dependents in peril.
Walter Energy, which operates coal mines near Birmingham, Alabama, filed for bankruptcy in July.
A group of Walter’s creditors led by some of the nation’s largest private equity firms such as Apollo Group Management, Blackstone, and KKR is negotiating to buy Walter.
The potential purchasers demanded that Walter cut wages and substantially reduce its pension and retiree health care contributions.
Federal bankruptcy judge Tamara Mitchell’s ruling allows Walter to terminate its collective bargaining agreement with the United Mine Workers of America (UMWA), which in turn allows Walter to discontinue its pension and retiree health care contributions.
“The decision announced today by Judge Mitchell . . . rejecting our collective bargaining agreement with Walter Energy and wiping out Walter’s obligation to pay retiree health care and pension benefits is extremely disappointing but not surprising,” said Cecil Roberts, UMWA international president. “The law is stacked against workers in American bankruptcy courts. A lifetime of hard work and dedication means nothing to the courts.”
Walter Energy retirees, who made the coal company a thriving enterprise in its heyday, will now have to worry about the status of their pensions.
Because they receive their pension from a defined benefit pension fund established for all UMWA members, they will continue to receive their monthly pension for the time being.
But their pension fund will be weakened because Walter will no longer be making pension contributions.
To make matters worse, their pension fund is already in critical status because the number of union coal mines has been on the decline for two decades, which means that pension contributions have been declining as well.
While the judge ruled that Walter can stop making pension and retiree health care contributions, she also ruled that Walter can pay $2 million in retention bonuses to 26 executives and managers at Walter’s two Alabama coal mines.
“The life or death decisions vulnerable senior citizens will now be forced to make mean nothing to the courts,” said Roberts. “Apparently all that matters is that executives get bonuses and Wall Street raiders get paid. If this is justice in America, then something is very, very wrong.”
Walter, which produces metallurgical coal for steel and coke production, has been hit hard by the economic downturn in the steel industry.
It has failed to turn a profit since 2011.
Despite its poor performance Walter executives continued to receive performance bonuses during this period.
AL.com reports that in 2014, three Walter executives received bonuses that amounted to 80 percent of their total compensation for 2013.
The president of Jim Walter Resources, Walter’s largest division, received a $400,000 bonus in 2014.
From 2011 to 2014, Walter CEO Walt Scheller saw his annual compensation increase by 140 percent to $6.3 million.
Roberts said that the judge’s ruling was “especially galling” in light of the fact that the interests of management and creditors have been protected while miners and retirees have “been stripped of everything.”
Despite the setback, Roberts said that the union is continuing to negotiate for a collective bargaining agreement that protects active and retired miners.
“I want to be very clear: This decision does nothing to slow our effort to maintain a union contract at Walter Energy operations nor does it end our fight to maintain retiree health care benefits,” said Roberts. ”
UMWA is continuing to negotiate with Walter management and its lenders who have offered to buy the company.
“I sincerely hope we can reach an agreement. We will advise our members regarding the progress of those talks as soon as we can,” said Roberts.