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 debtors filed a motion for partial summary judgment arguing that the retirees do not have a vested right to any retiree benefits.
On December 10, 2012, the court entered a stipulated order adjusting the schedule to confirm that that AMR, the section 1114 committee of retired employees (the “Retiree Committee”), and the official committee of unsecured creditors (the “Committee”) agreed to the following schedule as to the filing and hearing of AMR’s partial summary judgment motion: (1) discovery ends on November 19, 2012; (2) the Retiree Committee must file its response to the summary judgment motion on November 19, 2012; (3) Replies, if any to the Retiree Committee’s response must be filed on or before January 2, 2013 and the Committee shall file and serve its reply, if any, on January 2, 2013; (4) the Retiree Committee shall file its sur-reply on January 15, 2012; and (5) oral argument on the motion for partial summary judgment will be held on January 23, 2013 at 2:00 PM Eastern.
On January 23, 2013, the bankruptcy court heard argument on AMR’s motion for summary judgment for a declaration that AMR 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.
AMR took 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.
After nearly three hours of arguments, the bankruptcy judge did not rule on the motion. Instead the court reserved decision did not state when the decision will be issued. To date there has been no ruling on the motion or any further developments.
Lowenstein Sandler LLP
Sharon L. Levine
Paul Kizel
S. Jason Teele