Peabody Energy Seeks Dismissal of Patriot Coal Lawsuit

Peabody Energy Corp. (BTU) is seeking dismissal of a Patriot Coal Corp. (PCXCQ) lawsuit over obligations to retirees, saying the case isn’t “ripe” because it depends on the outcome of Patriot’s negotiations with its union.

Patriot’s lawsuit, filed in U.S. Bankruptcy Court in St. Louis in March, shouldn’t go forward, Peabody said in court papers filed April 12. Peabody also said that Patriot shouldn’t blame its financial problems on the 2007 spinoff that split the St. Louis-based companies.

The issues raised by Patriot “do not present an ‘actual controversy’ between the parties that is ripe for judicial resolution,” lawyers for Peabody wrote. A hearing on Peabody’s request is set for April 29.

Under a contract, Peabody has funded part of Patriot’s health-care expenses for specified retirees since the spinoff. Patriot said that if it succeeds in reducing its obligations to retirees under a pending motion to reject an agreement with the United Mine Workers of America, Peabody shouldn’t be able to get out of its own obligations.

Because Patriot hasn’t reduced its own obligations yet, the case against Peabody can’t go forward, Peabody said in its motion to dismiss.

Patriot also is seeking permission to investigate its 2007 spinoff from Peabody, saying the transaction rid Peabody of $600 million in health-care and environmental liabilities.

‘Patriot’s Failure’

“Although the problems that face Patriot today originated elsewhere, some are attempting to lay at Peabody’s feet the consequences of Patriot’s failure,” lawyers for Peabody wrote. The Environmental Protection Agency’s “war on coal,” the global financial crisis and changes to water-treatment regulations are to blame for Patriot’s bankruptcy, Peabody said.

Patriot filed for court protection in July after U.S. coal demand tumbled amid increased competition from cheaper natural gas and as it faced stricter environmental regulations. The company has said its obligation to pay lifetime health care for 8,100 retirees is $1.6 billion.

The case In re Patriot Coal Corp., 12-51502, U.S. Bankruptcy Court, Eastern District of Missouri (St. Louis).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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