Miners block path of ‘hot goods’

Botched bank­ruptcy leads to stand­off in Ky. coal coun­try

The Morning Call - - NATION & WORLD - By Jeremy Hill

Any­one ap­proach­ing the rail­road tracks late last month from U.S. Route 119 out­side Cum­ber­land, Ken­tucky, would have seen the mass of pop-up tents, and per­haps the hand-scrawled sign in cap­i­tal let­ters, dark­ened from heavy rain: “COAL OR WORK­ERS — WHICH SIDE ARE YOU ON?”

A lit­tle more than a mile down the tracks, about 100 CSX rail­cars are piled high with coal mined by Black­jewel from the hills of Har­lan County. David Pratt Jr., a 29-year-old fa­ther of three, is one of more than 200 peo­ple who helped dig out that coal and haven’t been paid for it. That’s why he’s helped block the tracks that lead out of the coal mine south of Cum­ber­land for more than a month. No wages, no coal.

“They can’t rail­road us,” said Pratt, among about 1,700 peo­ple idled across the coun­try af­ter Black­jewel filed for Chap­ter 11 bank­ruptcy on July 1. Pratt’s pay­check for the first half of June bounced, and the se­cond one never came. The same had hap­pened to other miners that milled about camp that day.

Early court pa­pers said the back wages to­tal at least $664,000. “That’s money that we’ve worked for — all the Black­jewel em­ploy­ees — that we earned,” Pratt said. “We de­serve it.”

Mak­ing good on pay­roll is usu­ally rou­tine in bank­ruptcy, one of the first mat­ters of busi­ness. But that hasn’t hap­pened for every­one, and far from the hills of south­east Ken­tucky, the omis­sion is cre­at­ing headaches for white-shoe in­vest­ment firms with mil­lions of dol­lars at stake.

Lime Rock Part­ners’ ma­jor­ity stake in Black­jewel is poised to be wiped out, en­ergy in­vest­ment firm River­stone Hold­ings is owed more than $30 mil­lion in loans, and two hedge funds, White­box Ad­vi­sors and High­bridge Cap­i­tal Man­age­ment, lent $2.9 mil­lion to the com­pany to stave off liq­ui­da­tion.

The Har­lan County block­ade might’ve been a mi­nor ir­ri­tant if not for the U.S. De­part­ment of La­bor, which sided with Pratt and his fel­low work­ers, ar­gu­ing in court that coal pro­duced by un­paid miners amounts to “hot goods.” The agency has asked Judge Frank Volk to keep coal in both Ken­tucky and Vir­ginia from mov­ing any­where un­til peo­ple who mined it are paid; that’s the only way the coal can be “cooled,” Ryma Lewis, a trial lawyer for the La­bor De­part­ment, said in an Aug. 23 court hearing.

The miners’ old-school dis­play of sol­i­dar­ity high­lights a theme emerg­ing in the world of trou­bled en­ter­prises: Work­ers have power and bank­rupt com­pa­nies must reckon with it. The treat­ment of em­ploy­ees has be­come a key flash­point in re­cent bank­rupt­cies.

It’s es­pe­cially salient in the coal busi­ness, where a hand­ful of miners in­clud­ing Black­hawk Min­ing, West­more­land Coal and Cloud Peak En­ergy have gone bust in the past year, and credit raters say at least two more are near the brink.

Rep. Alexan­dria Oca­sio­Cortez, D-N.Y., and Sen. El­iz­a­beth War­ren, are tak­ing the con­ver­sa­tion main­stream, lam­bast­ing pri­vate equity spon­sors for their roles in re­tail bank­rupt­cies and pitch­ing re­forms.

“Th­ese com­pa­nies have mis­treated miners for a long time,” Chris Rowe, a 35-year-old for­mer Black­jewel worker, said in an in­ter­view at the protest site just a few yards from the tent he’d been sleep­ing in for about a month. “This one, it wasn’t a typ­i­cal lay­off. They pulled our checks back from us, and then they tried to sneak a train out. It just hit that cer­tain spot and we had to stand up for what’s right.”

The protest is an echo of Har­lan County’s past. This is where Florence Reece in 1931 penned the la­bor move­ment an­them “Which Side Are You On?” as skir­mishes be­tween coal miners and law en­force­ment in the county turned fa­tal, earn­ing the south­east­ern en­clave the name “Bloody Har­lan.”

The dif­fer­ence be­tween then and now is a lack of vi­o­lence, and a sim­pler mes­sage. Miners like Rowe and Pratt said they’ll move off the tracks as soon as they’re paid what they’re owed.

“Black­jewel knows that each day that passes cre­ates ad­di­tional hard­ship for miners who have not yet been brought back to work and their fam­i­lies, and the com­pany is do­ing ev­ery­thing pos­si­ble to ac­cel­er­ate the process,” in­terim Chief Ex­ec­u­tive Of­fi­cer David Beck­man said in an emailed state­ment.

Beck­man said that when he and his man­age­ment team took over the com­pany af­ter it filed for bank­ruptcy, it be­came clear that the fastest way to re­sume op­er­a­tions was to sell its mines to new own­ers, which it is in the process of do­ing.

About 170 miles north­east of Cum­ber­land in Charleston, West Vir­ginia, Stephen Lerner of law firm Squire Pat­ton Boggs sounded ex­as­per­ated as he ad­dressed Volk in a fed­eral court­room on Aug. 23. The La­bor De­part­ment is “op­er­at­ing in an al­ter­nate uni­verse,” he said, ar­gu­ing that it’s fail­ing to see that get­ting the coal in Ken­tucky and Vir­ginia to its buyer is key to the com­ple­tion of as­set sales that could help re­pay the miners.

The La­bor De­part­ment wasn’t sym­pa­thetic, ar­gu­ing that goods pro­duced un­der unfair con­di­tions can’t be al­lowed to en­ter in­ter­state com­merce, re­gard­less of bank­ruptcy pro­ce­dures.

Volk could’ve ig­nored the La­bor De­part­ment that day and granted Black­jewel’s pro­posed res­o­lu­tion, which in­volves putting some pro­ceeds from the sale of the coal into a seg­re­gated ac­count un­til the miners are paid.

It could be months be­fore the miners see any of their back pay, if it ever comes. In bank­ruptcy, se­cured lenders and ad­min­is­tra­tive claimants like lawyers and bankers are paid first, said Eric Sny­der, chair­man of the bank­ruptcy prac­tice at Wilk Aus­lan­der LLP. Pre-bank­ruptcy wages typ­i­cally fall be­low those on the in­sol­vency pri­or­ity list.

A re­cently filed lawsuit may help. For­mer Black­jewel em­ploy­ees are seek­ing back pay and dam­ages, ar­gu­ing the com­pany didn’t give enough no­tice be­fore lay­ing off work­ers.

SCOTT OL­SON/GETTY

Un­em­ployed Black­jewel coal miners man a block­ade along the rail­road tracks that lead to their old mine in Ken­tucky.

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