by James S. Feltman
Mesirow Financial Consulting, LLC; Miami
As of Dec. 31, 2000, total underfunding in the single-employer defined benefit system totaled under $50 billion. Two years later, total underfunding exceeded $400 billion, the result of:
- Declining interest rates and equity values
- Ongoing benefit payment obligations and accrual of liabilities
- Minimal cash contributions into plans.
by Hon. Stephen S. Mitchell
U.S. Bankruptcy Court; Alexandria, Va.
Jeffrey B. Cohen
Pension Benefit Guaranty Corp.; Washington, DC
James S. Feltman
Mesirow Financial Consulting LLC; Miami
William W. Kannel
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC; Boston
Richard L. Wynne
Kirkland & Ellis, LLP; Los Angeles
Many CBAs provide for the continued maintenance of a plan. ERISA provides that a distress termination cannot be completed if it would violate a CBA. 29 U.S.C. §§1341(a)(3). This is known as the “contract bar.” Consequently, the debtor will often try to get the union to drop this contract bar either through negotiation of litigation as part of the §1113 process.
The debtor has a strategic option of simultaneously moving to reject the CBA and for the distress termination, or first moving to eliminate the contract bar and then moving for distress termination. In either event, the standards are very similar, and therefore if PBGC is opposing the distress termination, it may participate in the §1113 process to protect its position if the process is bifurcated.
New Committee: Pensions and Benefits in Bankruptcy
ABI welcomes all members to join its new Pensions and Benefits in Bankruptcy Committee. The new committee was created to study the effects of bankruptcy cases on pensions and employee/retiree benefits and is chaired by Prof. G. Ray Warner and Judy Thompson. The first meeting will be held at ABI’s Annual Spring Meeting in Washington, D.C.
G. Ray Warner is director of the LL.M. program at St. John’s University School of Law in Queens, N.Y. He is the former chair, former dean and a founder of the American Board of Certification. Prof. Warner served on ABI’s executive committee and is a former ABI resident scholar. Prof. Warner also serves as Of Counsel to the law firm of Greenberg Traurig, P.C., in New York.
Judy Thompson is chair of the Bankruptcy & Creditors’ Rights Section of Poyner & Spruill LLP in Charlotte, N.C. She primarily represents lenders, unsecured creditors and lessors and creditors’ committees in business bankruptcy cases and workouts. She also advises national consumer lenders on bankruptcy and debt collection practices and policy, and serves as an arbitrator and mediator in commercial and bankruptcy litigation. Ms. Thompson is a former program chair for ABI’s Southeast Bankruptcy Workshop.
ABI members can view the committee area on the web site. You can join the committee by clicking here.