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Union: Why Is Patriot Coal Bankruptcy Case in New York?

Patriot said interested parties can follow the case on its Web site. Also, a Sept. 11 court hearing was simulcast in St. Louis and West Virginia, where hundreds of miners watched.

Historically, companies from Eastern Airlines to Delta (DAL) to GM (GM) have filed bankruptcy cases in New York, but in those cases filings were justified partially by the argument that the companies did business in New York.

Bankruptcy Court Judge Shelley Chapman is considering a motion on a venue change. If the case is heard in New York, Roberts promises once the hearings begin that hundreds of mineworkers will travel from West Virginia and elsewhere to demonstrate.

Peabody spokeswoman Meg Gallagher disputed various points raised by the mineworkers. She said the union "was fully aware of the plan regarding retiree health care benefits at the time of the spinoff and assented to the payment arrangement." As part of the plan, she said, "Peabody assumed payment obligations for significant liabilities related to Patriot retirees, and one of our subsidiaries continues to pay for nearly 10,000 retirees/family members today." Additionally, she said, a Peabody subsidiary assumed an obligation to pay more than $600 million in liabilities for some retirees from Patriot subsidiaries.

Coal stocks soared before the recession, but are in the doldrums now. Patriot went public in 2007 at about $35 a share. By June 2008, shares reached $164.45. Within five months, they fell 96% to $5.24. Shares rebounded to about $29 in February 2011 before another decline. They trade today at 19 cents.

"When Patriot was spun off, it was a hot stock, like all the rest of the coal stocks at the time," said Bill Gunderson, president of San Diego-based Gunderson Capital Management, which has about $50 million under management. "Normally, you look at the top of a cycle, that's when you start seeing the spinoffs. A lot of people jumped on it.

"Then the coal stocks all went to hell in the financial crisis. China was the biggest factor: It was sucking up all the commodities in the world --- more than it needed - and the bottom fell out of demand. Then fracking and natural gas came along and then President Obama came in, and it hasn't been a coal-friend administration. Romney has tried to capitalize on that by reaching out to the coal industry."
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