Retirees Shafted :shock:
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- Nov 21, 2003
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UAL Judge Appoints Examiner in Flight-Attendant Complaint
Fri Feb 20, 7:49 PM ET
By Michael McHugh
CHICAGO -- A bankruptcy court judge appointed an independent examiner in the UAL Corp. case Friday to look into allegations the airline misrepresented its plans regarding retiree medical benefits during contract negotiations.
After a morning of arguments, Judge Eugene Wedoff felt the law required the appointment of such an investigator. But he limited the scope of the inquiry into whether or not UAL had already decided to change its retiree medical benefits prior to a July 1 deadline the airline set for workers to take early retirement, and thereby preserve existing benefits.
The motion was brought by the flight attendants' union, which saw more than 2, 000 members retire in the months leading up to the July 1 deadline.
UAL Corp., parent of United Airlines, filed for bankruptcy protection in December 2002.
In its motion to the court filed earlier this month, the Association of Flight Attendants claimed UAL negotiated in bad faith and "engaged in a scheme to intentionally mislead thousands of flight attendants into ending their careers and retiring early, defrauding them out of their retirement benefits."
At issue is the request by UAL, made formally to the court in January, to restructure the company's medical benefits for retirees under section 1114 of the Bankruptcy Code. The unions claimed UAL knew long before January that they were going to seek cuts in benefits, yet continued to give every impression that the $2.5 billion in annual concessions it wrung out of labor as part of its restructuring plan would be enough. Furthermore, it sat quietly by as thousands of employees retired early hoping to save the level of benefits they had enjoyed.
UAL's lawyers contended the company had always reserved the right to seek changes to the benefits even during contract negotiations last year. Also, while it had discussions about pursuing such a course, they were mainly of an exploratory nature and billing records don't prove they had intended to proceed with such changes.
Richard Clayman, attorney for the AFA, said in court that the atmosphere has been poisoned and he believed it would be difficult for both sides to negotiate in good faith over changes to retiree medical benefits with the cloud of fraud hanging over the proceedings.
Judge Wedoff acknowledged the bad blood between the parties, and said an examiner would be "well worth the investment" if it cleared the air and enabled both parties to come to a resolution on an issue that has become "a stumbling block" to the company's reorganization.
"Ultimate success depends on working together," he said. "Without cooperation, the reorganization won't succeed."
But he put the examiner on a tight leash, requiring a report back to the court in 30 days. He also instructed the examiner, whom Judge Wedoff hopes will be appointed by next Tuesday, to investigate only whether UAL had already decided prior to the July 1, 2003, deadline to seek changes to the medical benefits.
Meanwhile, the issue over terms on aircraft leases between UAL and a group representing about 174 planes, the so-called Chapman Group, was put off until the April hearing. There had been charges that the deal may have violated antitrust law and may not be in the best interest of UAL and its creditors.
In an emergency motion filed Tuesday, the unsecured creditors committee had asked for UAL to produce documents outlining a proposed deal between UAL and the Chapman Group.
A motion by OurHouse Inc. for UAL to produce documents relating to the consolidation of assets by the debtor was continued to the March hearing. The two sides have begun exchanging some documents relating to the case.
Earlier Friday, Judge Wedoff granted UAL a 30-day extension on its exclusivity period to file its reorganization plan. The original deadline was March 8. The judge said the extension would be revisited on a monthly basis. UAL had requested an extension until June 30.
-By Michael McHugh, Dow Jones Newswires; 312-750-4142; [email protected]
Fri Feb 20, 7:49 PM ET
By Michael McHugh
CHICAGO -- A bankruptcy court judge appointed an independent examiner in the UAL Corp. case Friday to look into allegations the airline misrepresented its plans regarding retiree medical benefits during contract negotiations.
After a morning of arguments, Judge Eugene Wedoff felt the law required the appointment of such an investigator. But he limited the scope of the inquiry into whether or not UAL had already decided to change its retiree medical benefits prior to a July 1 deadline the airline set for workers to take early retirement, and thereby preserve existing benefits.
The motion was brought by the flight attendants' union, which saw more than 2, 000 members retire in the months leading up to the July 1 deadline.
UAL Corp., parent of United Airlines, filed for bankruptcy protection in December 2002.
In its motion to the court filed earlier this month, the Association of Flight Attendants claimed UAL negotiated in bad faith and "engaged in a scheme to intentionally mislead thousands of flight attendants into ending their careers and retiring early, defrauding them out of their retirement benefits."
At issue is the request by UAL, made formally to the court in January, to restructure the company's medical benefits for retirees under section 1114 of the Bankruptcy Code. The unions claimed UAL knew long before January that they were going to seek cuts in benefits, yet continued to give every impression that the $2.5 billion in annual concessions it wrung out of labor as part of its restructuring plan would be enough. Furthermore, it sat quietly by as thousands of employees retired early hoping to save the level of benefits they had enjoyed.
UAL's lawyers contended the company had always reserved the right to seek changes to the benefits even during contract negotiations last year. Also, while it had discussions about pursuing such a course, they were mainly of an exploratory nature and billing records don't prove they had intended to proceed with such changes.
Richard Clayman, attorney for the AFA, said in court that the atmosphere has been poisoned and he believed it would be difficult for both sides to negotiate in good faith over changes to retiree medical benefits with the cloud of fraud hanging over the proceedings.
Judge Wedoff acknowledged the bad blood between the parties, and said an examiner would be "well worth the investment" if it cleared the air and enabled both parties to come to a resolution on an issue that has become "a stumbling block" to the company's reorganization.
"Ultimate success depends on working together," he said. "Without cooperation, the reorganization won't succeed."
But he put the examiner on a tight leash, requiring a report back to the court in 30 days. He also instructed the examiner, whom Judge Wedoff hopes will be appointed by next Tuesday, to investigate only whether UAL had already decided prior to the July 1, 2003, deadline to seek changes to the medical benefits.
Meanwhile, the issue over terms on aircraft leases between UAL and a group representing about 174 planes, the so-called Chapman Group, was put off until the April hearing. There had been charges that the deal may have violated antitrust law and may not be in the best interest of UAL and its creditors.
In an emergency motion filed Tuesday, the unsecured creditors committee had asked for UAL to produce documents outlining a proposed deal between UAL and the Chapman Group.
A motion by OurHouse Inc. for UAL to produce documents relating to the consolidation of assets by the debtor was continued to the March hearing. The two sides have begun exchanging some documents relating to the case.
Earlier Friday, Judge Wedoff granted UAL a 30-day extension on its exclusivity period to file its reorganization plan. The original deadline was March 8. The judge said the extension would be revisited on a monthly basis. UAL had requested an extension until June 30.
-By Michael McHugh, Dow Jones Newswires; 312-750-4142; [email protected]
