3.26.12 – (LAA) – Court Orders Formation of “Retiree Committee”

Court orders formation of “Retiree Committee”

On Friday, March 23, the Bankruptcy Court issued an order regarding the formation of a “Retiree Committee” concerning medical benefits for currently retired American Airlines employees. Section 1114 of the Bankruptcy Code provides that a debtor may not modify retiree benefits without first negotiating with the Authorized Representative of retirees, both unionized and non-represented, and if necessary going through a court approval process similar to the contract rejection process of Section 1113. Under Section 1114, the unions which represent active employees can choose whether or not to serve as the Authorized Representative of its retirees. If a union elects not to serve as the Representative, the United States Trustee will appoint one or more people to serve in that capacity.

It is typical in large bankruptcies for the Court to order the formation of a Retiree Committee consisting of the Authorized Representatives of all the retirees. This Committee is formed with the input of the United States Trustee, and it hires its own counsel and advisors.

The order issued on March 23 directs the U.S. Trustee to begin the process of forming a Retiree Committee and determining who will serve on that Committee. Each of the unions, including APFA, will be asked whether it elects to serve as the Authorized Representative for its retirees. Under the order, APFA retains the right to later withdraw from the Retiree Committee if it so chooses.

To see the court order click here.