Meet the St. Louis bankruptcy boss who aims for pragmatism

(Reuters) – After a decade on the bench, St. Louis Chief Bankruptcy Judge Kathy Surratt-States was caught between a coal company trying to cut retirement benefits and miners to the retreat who were appalled by the proposal. All eyes were on her as she tried to balance the reality of a business burdened with unsustainable debt and its obligations to its miners. In the end, she approved the company’s plan, a tough decision she maintains.

But it was not easy. To decide what to do about pension benefits in the first Chapter 11 case of St. Louis-based Patriot Coal (she filed a second time a few years later, selling her assets to another coal producer), she read over 900 letters from minors and their families, often detailing the personal and financial hardships they endured.

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

Patriot Coal was one of the most high-profile cases that Surratt-States, 54, had chaired since taking office in 2003. It made headlines in 2013 with its endorsement of pension cuts, which had met with strong opposition from the United Mine Workers. from America. Pension cuts for miners had become a hot topic as other major coal producers went bankrupt.

A TT START

Unlike many attorneys and judges who turn to bankruptcy later in their careers, Surratt-States had his first glimpse of the practice area early on, taking a job at the United States Bankruptcy Court for the Eastern District of Missouri. after his first year of law school. She has taken on what she calls the “somewhat inglorious job” of revamping the forensic library.

Despite the somewhat exciting nature of the role, she enjoyed the work. Bankruptcy judges would sometimes tell him about interesting cases they were overseeing, which caused him to slip into the back of their courtrooms and witness the action directly.

Surratt-States would ultimately become the first black bankruptcy judge in the judicial districts that make up the 8th U.S. Circuit. She said she was excited to bring some diversity to an area where “there weren’t a lot of women and certainly not a lot of people of color.”

At the 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 bar is moving in the right direction in terms of diversifying its membership, there is still some way to go, she said. This will likely have to start with building a pipeline that starts with summer partners in law firms, she added.

FAMILY MATTERS

Surratt-States grew up in Tulsa, Oklahoma and graduated from Booker T. Washington High School. Her mother was a schoolteacher and her father was an aircraft mechanic at American Airlines (which herself filed for bankruptcy in 2011.)

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

Surratt-States, who is married to a lieutenant in the St. Louis Police Department, spent two years working in St. Louis bankruptcy court after graduating from law school. She then practiced bankruptcy and commercial litigation at Campbell & Coyne, followed by Ziercher and Hocker. After her appointment to the bench in 2003, she became Chief Justice in 2012.

Her daughter is now in her second year at university studying film production. Surratt-States takes pride in the fact that when a group of her daughter’s classmates recently watched Ferris Bueller’s Day Off – one of the judge’s favorite movies – her daughter was one of the few who saw the film. (The Blues Brothers are the judge’s other favorite.)

“She told them, ‘Don’t worry, you’ll be fine. It’s a great movie, ”Surratt-States said.

MAKING DIFFICULT CALLS

Since most of the cases on the St. Louis registry are consumer bankruptcies, Surratt-States spends a great deal of its time dealing with family issues. The judge says that as difficult as Patriot Coal is, individual debtors often present the most difficult situations for it.

Consumption cases are particularly difficult if they involve domestic support obligations or children, she said.

“It’s always difficult – to compare what happened with people who may have appeared in family court versus what is happening in their lives now that one of the parties is bankrupt,” she declared.

Sometimes that means dealing with a debtor who is trying to keep a house or keep a family afloat when money got tough, thanks to the pandemic, she said.

The good news, she said, is that she has noticed that Chapter 13 trustees have been more lenient with individual debtors during the COVID-19 crisis, giving them more time to settle their finances or put their money down. hand over the necessary tax documents.

On the corporate side, the Patriot Coal decision posed a different kind of challenge. Approving the company’s request to change its benefits for thousands of retirees and their families involved stopping pension contributions and replacing existing health benefits with a voluntary association of employee beneficiaries. The issue was all the more sensitive as the company’s executives had recently been approved for bonuses. The United Mine Workers of America threatened to strike.

Surratt-States rendered its decision after a five-day trial. In the ruling, she said the situation may have been the result of “unwarranted optimism” on the part of the leaders, but that for unions there “is probably some responsibility to be taken in demanding benefits that the employer cannot reasonably fund in perpetuity ”.

The main thing, she said, was the practicality of the situation. Patriot Coal, which was struggling with $ 3 billion in debt at the time, simply could not afford to continue paying for health insurance at the level agreed to in the collective agreement.

“Coal prices have gone down and expenses have gone up,” Surratt-States said. “So in practice, will they have no insurance or insurance in the future? That’s basically what it was going to come down to.

Read more:

Bankrupt Patriot Coal May Reject Collective Bargaining – Court