Walter Energy—a coal mining firm that extracted and exported coal from mines in Alabama, West Virginia, Canada and the United Kingdom—promised retirees it would provide them with health benefits for life.

But when the company filed for bankruptcy in 2015, it sought to terminate that obligation.

On Dec. 27, the U.S. Court of Appeals for the Eleventh Circuit affirmed rulings by two Alabama federal judges allowing Walter Energy to break its promise to retired miners and shift the cost of all future benefit payments to the federal government.

But Circuit Judge Jill Pryor, writing for a panel that included Judge Beverly Martin and Senior Judge R. Lanier Anderson, noted the court was rendering its decision not as policymakers but based squarely on the statutes enacted by the U.S. Congress.

“Fortunately for Walter Energy's retirees, they nonetheless will continue to receive health care benefits at no cost” to the two United Mine Workers of America benefit funds that sued to prevent Walter Energy from shedding its obligation to pay retiree health benefits, Pryor wrote.

“The resolution of competing policy choices to determine whether a company, after promising its employees that they would receive health care benefits for life, should be permitted to file bankruptcy, shed this obligation, and leave the federal treasury on the hook for the cost of these retirees' health care is Congress's job, not ours,” she continued. “If changes in these laws are desirable from a policy standpoint, it is up to Congress to make them.”

At issue is the interplay of two federal laws—one codifying agreements coal companies decades ago struck with miner unions to provide lifetime health care benefits for employees and a second law permitting coal mining firms, in some cases, to sidestep that obligation if they file for bankruptcy.

Increasingly strapped for cash as coal prices plummeted, Walter Energy wanted to sell its assets in a deal that would consummate only if the buyer were excused from assuming Walter Energy's retiree benefits. In doing so, the mining company followed the lead of other firms seeking bankruptcy protection “as a way to rid themselves of the cost of retiree health care benefits” and leave retirees as unsecured creditors, Pryor wrote. The 74-page opinion includes a lengthy history of the unique statutory mandates at issue in the case.

The mining company by law needed the bankruptcy court's permission to shift the health care benefits to the federal government, Pryor observed.

Walter Energy had tried to reduce its expenses by cutting costs, idling or closing mines, selling assets, laying off workers and suspending dividends to investors, according to the appellate opinion.

Even so, Walter Energy's revenue still was insufficient to cover the interest payments on its debt and its labor costs, which included wages set by collective bargaining agreements as well as benefits to its employees and retirees, including pensions and post-retirement health care, Pryor wrote.

When Walter Energy filed for bankruptcy protection, it was financing health care benefits for 604 retirees, dependents and other beneficiaries at a cost of about $4.5 million annually, according to the opinion.

Walter Energy contended that, without the court's permission to cancel its retiree health benefit obligations, it couldn't finalize  the sale of its assets as “a going concern.” Absent such a sale, the mine company would run out of money and be forced to close all of its mines, the company argued.

The Alabama bankruptcy judge was persuaded and entered an order allowing Walter Energy to reject its collective bargaining agreements and end all obligation to pay premiums for retiree health care benefits.

As a result, “All of Walter Energy's retirees and their dependents were orphaned, meaning that the obligation to pay for their health care benefits effectively shifted to the federal government,” Pryor wrote.

It was a “difficult question” requiring “a nuanced analysis of both bankruptcy law and the unique system that Congress created to fund health care benefits for coal retirees,” Pryor wrote.

John Goodchild, a partner at Morgan Lewis & Bockius in Philadelphia, who argued for the United Mine Workers pension funds, was traveling and could not be reached for comment.

Scott Burnett Smith, a partner at Bradley Arant Boult Cummings' Huntsville office, who argued the case for Walter Energy, also could not be reached.