Third Circuit Prevents Plan Sponsor
from Terminating Contractually Amendable
Retiree Health and Welfare Benefits

October 7, 2010

In a recent controversial decision, In re Visteon Corp., the U.S. Court of Appeals for the Third Circuit ruled that a debtor must comply with the stringent procedural and substantive requirements of 11 U.S.C. 1114 to terminate retiree health and welfare benefits that the debtor contractually retained the right to modify at will. In a lengthy decision, the Third Circuit overruled the district and bankruptcy courts, broke with the majority of courts across the country that have addressed this issue (including, most recently, the decision of Judge Robert D. Drain of the U.S. Bankruptcy Court for the Southern District of New York in In re Delphi Corporation) and reached the opposite result.

The Third Circuit, in siding with the retirees, concluded that a plain reading of section 1114 compels this result and reasoned that Congress, in singling out retirees as arguably the only constituency to fare better in bankruptcy than outside, likely had good cause to expand the rights of such a sympathetic constituency at a time when its benefits are most vulnerable.

The article "Contractually Amendable Retiree Health and Welfare Benefits - Third Circuit Prevents Plan Sponsor from Terminating," published by Marshall Huebner and Brian Resnick in this month's edition of "The Bankruptcy Strategist," examines this decision and its practical implications.

Please click here for a copy of the article.


If you have questions regarding this publication, please contact any of the lawyers listed below or your regular Davis Polk contact.

Donald S. Bernstein 212 450
Timothy Graulich 212 450
Marshall S. Huebner 212 450 4099
Damian S. Schaible 212 450
Brian M. Resnick 212 450 4213
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