Trent Ernst, Editor
The Steelworkers had applied to the courts to force Walter Energy to settle their outstanding grievances against the company after the Wolverine Mine shut down in April of 2014.
According to the union, Walter Energy did not give appropriate notice for the shutdown, nor have they paid out the Northern Allowance.
In June of last year, the BC Labour Relations Board found that Walter, doing business as Wolverine LP, was in breach of section 54 of the Labour Relations Code. The Board ordered Wolverine LP to pay $771,378.70 into trust by way of remedy.
This was estimated to be the amount of damages owed by Wolverine LP, though the Steelworkers believe further amounts are owed. This amount was set aside in trust until the case is settled.
In November, Wolverine LP filed a proceeding in this court seeking a judicial review of the Board’s decision, which was then caught up when Walter sought court protection from its creditors, including the union.
“As a result,” says Justice Fitzpatrick, “the final determination of the damages arising from the Code breach has not yet occurred and may never occur if Wolverine LP succeeds in its judicial review.”
Justice Fitzpatrick says the Union had not met the “heavy onus” on it to justify the lifting of the stay to allow the company to pursue restructuring and/or sale.
The Steelworkers argued in court that the materials are essentially already assembled and that these judicial reviews can be scheduled for short chambers matters. As such, the Union argues that there is “minimal prejudice” to Wolverine LP.
However, says the judge, “while this may be so, proceeding with these matters will inevitably detract both managerial and legal focus from the primary task at hand, namely to implement the Sales and Investment Solicitation Process (SISP), and as such, potentially interfere with the restructuring efforts.”
The Union also argues that any purchaser of Wolverine LP’s mine will inherit outstanding employee obligations pursuant to the Code, saying it will be more attractive to a buyer for the mine to have all outstanding employee claims resolved. “Again, while this may come to pass, such an argument presupposes an outcome that is anything less than clear at this time. Such a rationale is clearly premature,” says Fitzpatrick.
Finally, the Union argues that it is unable to distribute the $771,378.70 to its members until Wolverine LP’s judicial review is addressed.
This argument, says the judge, is the only one that is valid. “However, on the other hand, one might argue that the Union members are in a favourable position with these monies being held in trust as opposed to being unsecured creditors of Wolverine.
“In summary, there is nothing to elevate the Union’s claims such that it is imperative that they be determined now. There is nothing to justify the distraction and expense of proceeding with these actions to the detriment of the restructuring efforts. If it should come to pass that monies will be distributed to creditors, such as the Union, then I expect that the usual claims process will be implemented to decide the validity of those claims. In the meantime, if it becomes necessary to determine the validity of these claims quickly (such as to clarify potential successor claims for a purchaser), the Union will be at liberty to renew its application to lift the stay for that purpose.”
The Wolverine mine was originally opened by Western Canadian Coal in 2006. In 2010, with prices skyrocketing, the mining company was bought out, and Walter Energy took over the mine, along with a number of other properties held by Western.
But the timing of could not have been worse, writes Justice Fitzpatrick in her ruling. “Since 2011, the market for metallurgical coal has fallen dramatically. This in turn led to financial difficulties in all three jurisdictions in which the Walter Group operated. The three Canadian mines were placed in care and maintenance between April 2013 and June 2014. The mines remain in this state today, at an estimated annual cost in excess of $16 million.”
Similarly, the U.K. mines which are held under the umbrella of Walter Canada were idled in 2015.
In July 2015, the U.S. companies in the Walter Group filed and sought creditor protection by filing a proceeding under Chapter 11 of the U.S. Bankruptcy Code.
“From the time of the granting of the initial order, it was apparent that the outcome of the U.S. proceedings would have a substantial impact on Walter Energy Canada,” writes Justice Fitzpatrick. “A sales process completed in the U.S. proceeding is anticipated to result in a transfer of the U.S. assets to a stalking horse bidder sometime early this year. This is significant because the U.S. companies have historically supported the Canadian operations with funding and provided essential management services.”
With the parent company trying to restructure, Walter Canada is in deep financial difficulty, says the judge. It is anticipated that Walter Energy will no longer support the Canadian Company, which has limited cash on hand, and with each day that goes by, the company loses approximately $50,000. The company only has about $40.5-million on hand, and doesn’t have enough set aside for reclamation of the mines if they are forced to close.
Walter is working on restructuring or, alternatively, a sale and liquidation of their assets, and asked the judge to extend court protection from its creditors for another 90 days to give it time for the process to play out.
While most of the stakeholders have been supportive, two have not. The United Steelworkers and the United Mine Workers of America 1974 Pension Plan and Trust, which opposes certain aspects of the relief sought as to who should be appointed to conduct the sales process.
The status of the 1974 Pension Plan arises from somewhat unusual circumstances, says Fitzpatrick. One of Walter Energy’s sub-companies is Jim Walter Resources, Inc, which was party to a collective bargaining agreement with the 1974 Pension Plan.
In late December 2015, the U.S. bankruptcy court issued a decision that allowed Jim Walter Resources to reject the Collective Bargaining Agreement (CBA). The court also ordered that the sale of the US assets would be free and clear of any liabilities under the CBA. As a result, the 1974 Pension Plan has filed a proof of claim in the US proceedings advancing a contingent claim against Jim Walter Resources with respect to a potential “withdrawal liability” under US law of approximately US$900 million.
The Pension Plan argues that all companies “under common control with Jim Walter Resources are jointly and severally liable for this withdrawal liability,” and that some of the entities in the Walter Canada Group come within this provision.
The judge granted Walter an extension until April 5 of this year.