As you may recall, on July 6, 2012. AMR filed a complaint asking the bankruptcy court to declare that none of AMR’s current retirees (both union or non-union) have a vested right to retiree medical benefits. AMR asserts that under ERISA, the health and welfare benefits the debtors provide to current retirees (including TWU retirees) are welfare benefits and that these welfare benefits only vest where the debtors as the plan sponsor (1) promises to provide benefits for life and (2) do not reserve the right to modify or terminate those benefits. In order to vest benefits, AMR asserts that the benefit plans must provide in a specific written pledge to continue benefits for the remainder of the participants’ lives. The debtors argue that statements merely describing the benefits to be provided and the current cost structure of the plan do not create a vested right to benefits. Therefore, AMR hopes the bankruptcy court will enter an order declaring that (1) the retiree health and welfare benefits the Debtors currently provide to union retirees, the pilot retirees, the TWU retirees, flight attendant retirees may be unilaterally modified by the debtors without an 1114 process.
On August 15, 2012, the official committee of unsecured creditors, filed an expedited motion to allow the committee to intervene and participate fully in all aspects of this law suit. The court will consider the intervention motion at a hearing on August 22, 2012 at 10:00 AM.
As you also may recall, on August 8, the bankruptcy court approved a scheduling stipulation between AMR and the section 1114 committee for that law suit, in accordance with the stipulation, AMR intends to file a motion by August 15 to ask the bankruptcy court to decide the issues raised in that law suit as a matter of law without the need for a trial. AMR has now filed that motion asking the court to decide that it can terminate or change its retiree benefits without going through the section1114 process. The section 1114 committee will have until October 22 to take discovery on this issue and file a response. American will be given an opportunity to reply to that filing by November 12 and the section 1114 committee will have until November 27 to file a further reply. The Court will set a hearing for argument on this matter for sometime in December, assuming no settlement. There is no set ruling date.
On August 15, both the committee and AMR objected to the retention of Segal, the section 1114 committee’s proposed actuary. The committee contends that the retention should not be authorized until after the law suit concludes suggesting that if AMR wins and the retiree benefits are not vested, there is no need for an actuary, as there will never be an 1114 process. AMR objects on the grounds that Segal worked for the APFA and APA during the section 1113 process and it does not want to be billed inappropriately for work performed for the benefit of those unions as opposed to for the section 1114 committee. The court will consider these objections at the hearing on August 22, 2012 at 10:00 AM.