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Bankruptcy Update January 23 2013
Posted On: Jan 23, 2013
January 23, 2013 AMR Bankruptcy Update Summary of January 23, 2013 Bankruptcy Court Hearing Regarding Retiree Benefits Issues The bankruptcy court heard argument at a hearing held on January 23, 2013 at 2:00 p.m., to consider American Airline's ("AA") motion (the "Motion") for summary judgment for a declaration that AA has the unilateral right to modify or terminate "retiree benefits" for all its retirees because the benefits were not legally "vested." It should be noted that the term "Retiree Benefits" does not refer to pension plan payments. It refers to payments by a company for retired employees and their spouses and dependents for medical, surgical, or hospital care benefits, or insurance benefits in the event of sickness, accident, disability or death. AA takes the position that the company's various written "Benefit Guides" are the only documents that should be considered by the court to determine whether AA retained the unilateral right to modify or terminate retiree benefits and that those documents allegedly contain language that preserved AA's right to modify or terminate such benefits. AA takes the position that the language of the Benefit Guides is so clear and unambiguous that the only reasonably conclusion that the court can make is that AA retained the right to unilaterally modify or terminate retiree benefits. It should be noted that during oral argument AA's counsel indicated that the company intends to modify the retiree benefits not terminate them. On the other hand, the Official Committee of Retirees (the "Retiree Committee"), which has been appointed by the Office of the United States Trustee and which represents the interests of the retirees, opposes the Motion on the grounds that the Benefit Guides are not the only relevant and governing documents that the court can consider. The Retiree Committee argues that when other documents are considered, such as collective bargaining agreements, there is a material factual issue as to whether AA can modify or terminate retiree benefits. Therefore, the Retiree Committee argues that the court must conduct a full trial on the issue and cannot decide the issue by a motion for summary judgment. After nearly three hours of arguments, the bankruptcy judge did not rule on the Motion. Instead he reserved decision and indicated that he will attempt to rule on the Motion as quickly as possible but did not state when the decision will be issued. Lowenstein Sandler LLP Sharon Levine, Esq. Paul Kizel, Esq.
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