- Case Type:
- Case Status:
- 16-13483 (11th Circuit, Dec 27,2018) Published
- In affirming the district court's ruling, the Eleventh Circuit held that the bankruptcy court had the authority to modify the premiums that Walter Coal owed to two funds which it established to provide certain retirees with health care benefits for life as required under the Coal Industry Retiree Health and that the Retiree Benefits Bankruptcy Protection Act of 1988 permitted the bankruptcy court to terminate a debtor's statutory obligation to fund retiree health care benefits if the termination is necessary to effectuate the debtor's organization.
- Procedural context:
- Appeal from the United States District Court for the Northern District of Alabama.
- Walter Energy Inc. and 22 related entities ("Walter Energy") sought relief under chapter 11 of the Bankruptcy Code as a result of the sharp downturn in the global coal industry and insufficient revenue to service its debt and labor costs. Through its chapter 11 case, Walter Energy proposed to sell substantially all of its assets as a going concern to Warrior Met, an entity owned by Walter Energy's senior secured creditor. Warrior Met exercised its credit bid rights, and also agreed to fund various wind down trust and assume $115 million in liabilities. However, Warrior Met was only interested in purchasing the assets if assets were transferred free and clear of Walter Energy's obligation to provide retiree health care benefits and to fund the related premiums. Because the asset sale was necessary for Walter Energy's reorganization, the bankruptcy court concluded it had authority under the Retiree Benefits Bankruptcy Protection Act of 1988 ("RBBPA") to terminate Walter Energy's obligations to pay premiums to the retiree health care benefit funds (the "Funds"). The bankruptcy court approved the sale to Warrior Met and authorized the rejection of certain collective bargaining agreements, thereby terminating Walter Energy's obligations to provide retiree health care benefits and its obligations to pay premiums to the Funds while Walter Energy wound up its affairs. The district court affirmed both the sale order and the rejection order. On appeal, the Funds took the position that the bankruptcy court lacked the authority to terminate Walter Energy's obligation to pay premiums under the Anti-Injunction Act. The Funds also argued that the obligation to fund the premiums did not constitute "retiree benefits" withing the meaning of the RBBPA because the obligation to pay the premiums arose under the Coal Industry Retiree Health Benefit Act of 1992 (the "Coal Act"), rather than a voluntary contractual obligation. Finally, the Funds advanced the argument that the bankruptcy court had no authority to terminate Walter Energy's obligation to fund the premiums because Walter Energy was not pursuing a traditional chapter 11 reorganization, and instead was essentially liquidating through the chapter 11 process by selling substantially all of its assets. The Eleventh Circuit rejected all three arguments.
- Martin, Jill Pryor and Anderson
Margaret Kinney v. HSBC Bank USA
Summarizing by Lars Fuller
3285 in the system
2 Being Processed