NEW YORK ( TheStreet) -- Patriot Coal's ( PCXCQ) bankruptcy filing in July took the share price down 72% over a weekend, which didn't please shareholders. The United Mine Workers union wasn't happy either. St. Louis-based Patriot was created in 2007 when St. Louis-based Peabody ( BTU) spun off assets, primarily coal mines in West Virginia and Kentucky. Subsequently, Patriot acquired additional mines, as well as pension and health care obligations, from St. Louis-based Arch Coal. ( ACI). Patriot holds pension and health care obligations for about 10,600 pensioners and 20,000 dependents, of whom only about 10% every worked for Patriot, according to the union. In bankruptcy, the ability to make pension and health care claims would likely be severely diminished. On Thursday, union members and leaders will meet with Patriot executives at the U.S. Attorney's office at 80 Broad Street in New York. "Our people will be able to ask the company how we got into this mess," said UMW president Cecil Roberts, in an interview. "Both Peabody and Arch took these liabilities off their books and passed them on to somebody else," Roberts said. "Peabody, when it did this spinoff, had no consultation with the union. They spun off their West Virginia and Kentucky operations, and their pension and health care liabilities, and they issued stock in Patriot to their shareholders." The union objects not only to the spinoff, but also to the bankruptcy case venue. "There are no coal mines in New York, no coal miners in New York and no coal mine retirees in New York," Roberts said. "But there are thousands of people in West Virginia who are interested in this, because it could have an adverse effect on their lives. " Patriot shopped around and determined that the Southern District of New York is the best court for them to file bankruptcy, even though they never had an affiliate in New York," he said. "So they set up two dummy companies right before they filed. "If you're going to do something to us, we expect you to look us in the face when you do it," he said. In its filing, Patriot argued that the Southern District of New York is "the optimal venue for the Debtors' chapter 11 cases and in the best interests of the debtors, their creditors and other stakeholders and these estates." The legal and financial advisers and the arrangers of the debtor-in-possession financing are in New York, it said. "Had we filed in one of the other jurisdictions that were also available to us, most of our domestic and foreign creditors would have been inconvenienced and the costs and inefficiency of administration of the estates would have materially increased," the filing said.
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."