South-Western Legal Studies in Business

Independent Examiner May Be Appointed to Review Proposed Changes in Employee Benefits
Description Bankruptcy court accepted the motion of a union that an independent examiner be appointed to assist the court in reviewing a proposed cut in retirement benefits proposed by an employer in Chapter 11 reorganization. An examiner can help provide an objective review of the finances involved and the timing of the proposed changes.
Topic Bankruptcy
Key Words Examiner; Collective Bargaining Agreement; Retirement Benefits
C A S E   S U M M A R Y
Facts As part of its bankruptcy proceedings under Chapter 11, United Air Lines moved to have the bankruptcy court reject is collective bargaining agreement and negotiate new contracts with its unions. United sought reduction in medical benefits for union employees upon their retirement. Learning of the forthcoming reduction in benefits, 2,100 employees took early retirement to try to ensure the higher level benefits. After that, United announced that, as part of its bankruptcy proceedings, it would seek to reduce retirement benefits. The employees' union asked the bankruptcy court to appoint an examiner to investigate the claims by United that such a reduction was necessary.

Motion granted. The appointment of an examiner to investigate the timing of a Chapter 11 debtor’s decision to seek modification of retiree benefits is appropriate. There is a question as to whether United misled employees about the likely desirability of taking early retirement. A neutral examiner can assist the bankruptcy court in determining if the change in retirement benefits is an appropriate part of the company reorganization.

Citation In re UAL Corp., ---B.R.--- (2004 WL 502191, Bankr. N.D. Ill., 2004)

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