## Facts

- Alpha Natural Resources, Inc. and numerous subsidiaries filed Chapter 11 petitions and operated as debtors in possession.
- Alpha was a major coal producer facing severe industry decline, substantial liabilities, and significant postpetition losses.
- Alpha was party to multiple collective bargaining agreements (CBAs) with the United Mine Workers of America (UMWA) that included successorship clauses requiring a purchaser to assume certain labor and benefit obligations.
- Alpha also had obligations to provide retiree health benefits, including payments required by the Coal Industry Retiree Health Benefit Act of 1992 (Coal Act) and contractual obligations to UMWA-related benefit funds.
- Alpha pursued a going-concern sale of core assets under § 363 to an entity formed by its prepetition lenders; the buyers conditioned closing on receiving assets free and clear of Coal Act and CBA-related retiree obligations, including successorship requirements.
- Negotiations with the UMWA did not produce agreement on eliminating or altering those obligations.
- Alpha moved to (i) reject specified CBAs under 11 U.S.C. § 1113 and (ii) modify retiree benefits under 11 U.S.C. § 1114, including eliminating Coal Act-related liabilities, to facilitate the sale.
- The UMWA objected, arguing that §§ 1113 and 1114 were inapplicable (especially to Coal Act obligations) and that the statutory standards for relief were not met.

## Issues

1. Whether 11 U.S.C. § 1113 permits rejection of CBAs containing successorship and benefit provisions as part of a Chapter 11 strategy centered on a § 363 going-concern sale.
2. Whether 11 U.S.C. § 1114 authorizes modification of retiree health benefits that arise from the Coal Act and related obligations to UMWA benefit funds.
3. Whether the debtors satisfied the substantive requirements of §§ 1113 and 1114, including necessity to permit reorganization, good-faith negotiations and adequate information, union refusal without good cause, and a balance of equities favoring relief.

## Decision

- The court held that §§ 1113 and 1114 applied to the challenged obligations, including Coal Act retiree health benefit obligations and CBA-based benefit obligations.
- The court found the debtors met the statutory requirements for rejection of the CBAs under § 1113 and modification of retiree benefits under § 1114.
- The court granted the motion, authorizing rejection of the specified CBAs and modification of retiree benefits, including elimination of Coal Act-related liabilities, to permit the proposed § 363 sale to close.

## Legal Principles

- Section 1113 provides the mechanism for rejecting a collective bargaining agreement in Chapter 11 when the debtor satisfies statutory prerequisites, including necessity to permit reorganization, good-faith negotiation based on reliable information, lack of good-cause refusal by the union, and equities favoring rejection.
- A reorganization may be implemented through a § 363 going-concern sale; §§ 1113 and 1114 are not limited to reorganizations accomplished solely through continued debtor operations.
- Section 1114 covers “retiree benefits” provided under any plan, fund, or program maintained or established by the debtor and is not confined to purely contractual retiree benefits.
- Coal Act payment obligations may be treated as retiree health benefits within § 1114 when they function as retiree health benefit funding obligations tied to the debtor, rather than as ordinary taxes or penalties.
- When a proposed transaction is the only realistic alternative to liquidation and is conditioned on labor and retiree benefit relief, courts may find the “necessary to permit reorganization” and “balance of equities” elements satisfied on that record.

## Conclusion

The court authorized Alpha to reject specified UMWA CBAs under § 1113 and to modify retiree health benefits under § 1114, including eliminating Coal Act-related obligations, because the statutes applied to those obligations and the evidentiary record showed the relief was necessary to consummate a value-preserving § 363 sale and avoid worse outcomes from liquidation.


In re Alpha Natural Res., Inc., 552 B.R. 314 (Bankr. E.D. Va. 2016)