Miners block path of ‘hot goods’
Botched bankruptcy leads to standoff in Ky. coal country
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.