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Arch Coal appeals jurisdictional ruling in black lung liability case

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Essential Energy Insights - February 2021

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Arch Coal appeals jurisdictional ruling in black lung liability case

A legal case between Arch Coal Inc. and the U.S. Department of Labor related to Patriot Coal Corp.'s black lung liabilities is scheduled for oral argument in circuit court Dec. 1.

In April 2016, Arch sued the department for what it claims as a final agency action of imposing black lung liability on prior stockholders or owners of Patriot Coal's subsidiaries, when Patriot became insolvent. A district judge dismissed Arch's complaint in March for lack of jurisdiction.

Arch sold several of its subsidiaries to Magnum Coal Co. in December 2005. As part of the sale, Magnum assumed the liabilities associated with the subsidiaries Arch divested. Magnum would later become a part of Patriot, now liquidated after its second bankruptcy reorganization in 2015.

In a Sept. 6 filing, Arch claimed that beginning Dec. 31, 2005, it did not insure any of the liabilities passed on to Magnum or Patriot and was not required to do so by the Labor Department.

Prior to Arch's sale to Magnum, the government had approved self-insurance of its own black lung benefits liability and "did not require Arch to include any of the Magnum entities in its self-insurance program projections or to provide security for these claims," the company stated in a legal brief filed with the U.S. Court of Appeals for the District of Columbia Circuit.

The coal company's filing said the Labor Department's regulations "specifically state that with respect to insurance coverage, the purchaser, not the seller, is responsible for the payment of benefits in the event a coal mine is sold whether or not the claimant worked for the mine when it was owned by the subsequent (or successor) operator of the mine."

"Arch had no reason to believe that the department might someday attempt to pierce the corporate veil and seek to hold it responsible as a remote stockholder for liabilities that were acquired by others."

The Department of Labor argued in an Oct. 2 brief that the department's bulletin "does not constitute final agency action" and that the notice of claim "does not definitively determine Arch's liability — that determination comes only after Arch is allowed to contest its liability before the district director, the administrative law judge and the board, any of whom may determine that Arch is not liable."

Arch is seeking to have the case returned to district court for adjudication.