Meet the St. Louis bankruptcy chief who aims for pragmatism

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(Reuters) – After a decade in the bank, senior St. Louis bankruptcy judge Kathy Surratt-States stood between a coal company trying to cut pension benefits and retired miners appalled by the proposal. All eyes were on her as she tried to balance the reality of a business of unsustainable debt and its obligations to its miners. In the end, she agreed to the company’s plan, a difficult decision to which she stood by.

But it wasn’t easy. In deciding what to do with the retirement benefits in the first Patriot Coal case in St. Louis (a second filing a few years later and its assets sold to another coal producer), she read over 900 letters from miners and miners their families, often describing the personal and financial hardships they endured.

Judge Kathy Surratt-States

In a recent interview with Reuters, Surratt-States said she would record the number of letters she received at each hearing: “I thought it was important that these people wrote to me, that I read these letters, and that we recognized their part and did Opinions in the case. “

Patriot Coal was one of the most prominent cases Surratt-States, 54, had spearheaded since joining the bank in 2003. She hit the headlines in 2013 by approving the pension cuts that led to staunch opposition from United Mine Workers of America. Pension cuts for miners had become a hot topic when other large coal producers went bankrupt.

AN EARLY START

Unlike many attorneys and judges who turn to bankruptcy later in their careers, Surratt-States got a glimpse of the practice early on and after her first year of law school, accepted a position in the U.S. Bankruptcy Court for the Eastern District of Missouri . She took on what she calls the “rather unspectacular job” of reorganizing the legal clerkship library.

Despite the slightly unexciting nature of the role, she enjoyed the work. Bankruptcy judges sometimes told her of interesting cases she was overseeing, which resulted in her sneaking to the back of her courtrooms and witnessing the action firsthand.

Surratt-States eventually became the first black bankruptcy judge in the judicial districts that comprise the US 8th Circuit. She said she was excited to bring some diversity to an area where “there weren’t many women, and certainly not many people of color”.

At that time, she was only the eighth black bankruptcy judge in the country, out of a total of around 350. There are now 17.

While she believes the bankruptcy line is going in the right direction in terms of diversifying its makeup, there is still a way to go, she says. That’ll likely have to begin with building a pipeline starting with summer partners in law firms, she added.

FAMILY AFFAIRS

Surratt-States grew up in Tulsa, Oklahoma and is a graduate of Booker T. Washington High School. Her mother was a teacher and her father was an aircraft mechanic with American Airlines (which itself filed for bankruptcy in 2011).

Her parents emphasized the importance of education and she eventually became the first female lawyer in her family. She graduated from Oklahoma City University with a degree in political science in 1988 and a law degree from Washington University School of Law in 1991.

US bankruptcy judge Kathy Surratt-States

Surratt-States, who is married to a St. Louis Police Department lieutenant, spent two years as a clerk in the St. Louis Bankruptcy Court after graduating from law school. She later worked on bankruptcy and commercial litigation at Campbell & Coyne, followed by Ziercher and Hocker. After her appointment to the bank in 2003, she became the presiding judge in 2012.

Her daughter is now a sophomore studying film production. Surratt-States prides itself on the fact that when a group of their daughter’s classmates recently watched Ferris Bueller’s Day Off – one of the judge’s favorite films – their daughter was one of the few to see the film. (The Blues Brothers is the judge’s other favorite.)

“She said to the others, ‘Don’t worry, it will be fine. It’s a great movie, ‘”said Surratt-States.

MAKE THE HARD CALLS

Since most of the cases on the St. Louis file are consumer bankruptcies, Surratt-States spends a lot of time grappling with family problems. The judge says that as challenging as Patriot Coal is, the individual debtors are often the most difficult situations for her.

Consumer cases are particularly difficult when they involve domestic support duties or children, she said.

“It’s always difficult – seeing what happened to people who may have faced a family court versus what’s going on in their lives now as one of the parties goes bankrupt,” she said.

Sometimes that means dealing with a debtor trying to keep a house or keep a family afloat when the pandemic has run out of money, she said.

The good news, she said, is that she found that Chapter 13 trustees were more lenient with individual debtors during the COVID-19 crisis, which gave them more time to organize their finances or get their hands on the necessary tax records to get.

On the corporate side, the Patriot Coal’s decision presented a different kind of challenge. The company’s approval to change its benefits for thousands of retirees and their families meant discontinuing pension contributions and replacing existing health care benefits with a voluntary benefit association. The subject was particularly sensitive as the company’s executives had recently been approved for bonuses. The United Mine Workers of America threatened to strike.

Surratt-States issued their decision after a five-day process. In the judgment, it noted that the situation may have been the result of “unjustified optimism” on the part of executives, but that unions “are likely to have some responsibility for demanding benefits that employers cannot realistically fund over the long term”.

The bottom line, she said, was the practicality of the situation. Patriot Coal, struggling with a $ 3 billion debt burden at the time, simply couldn’t afford to keep paying health insurance at the levels agreed in the collective agreement.

“Coal prices have gone down and spending has increased,” said Surratt-States. “So for practical reasons, will you have no insurance or will you have it in the future? This is basically what it should boil down to. “

Continue reading:

Bankrupt Patriot Coal may refuse collective bargaining – court

Maria Chutchian

Maria Chutchian reports on corporate bankruptcies and restructurings. She can be reached at maria.chutchian@thomsonreuters.com.