Introduction
The US Court of Appeals for the Third Circuit's recent opinion in In re Visteon Corp(1) is a significant victory for retirees whose rights could be impaired in a Chapter 11 case, and further signals the court's inclination towards strict statutory construction. Following In re Visteon Corp, a debtor whose retiree benefits plans include the unilateral right to terminate such plans at any time will nevertheless be required to comply with Section 1114 of the Bankruptcy Code in order to terminate such plans post-petition, as well as during the six-month period before commencing bankruptcy.
In reaching its decision, the Third Circuit applied the plain meaning rule to Section 1114, finding that the Bankruptcy Code unambiguously requires that payments under retiree benefit plans can be terminated only in compliance with the procedures set forth in Section 1114, notwithstanding any contractual language to the contrary. The decision is directly at odds with In re Delphi Corp,(2) as well as the Second Circuit's decision in In re Chateaugay Corp,(3) and could have strategic implications for distressed companies with significant retiree benefits obligations considering filing for bankruptcy.
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