Tuesday, June 22, 2010

Nortel's motion on medical plan eliminates 1114 committee

Docket 3204- Nortel's motion to terminate the US medical and disability plans

Nortel’s motion states that section 1114 of the bankruptcy code does not apply to their case since the medical and disability benefits are not vested. Furthermore Nortel explains at great length that the plans are welfare, unvested, and specifically state that they can be terminated at any time. Their motion contains previous legal rulings that support their position, quoting Delphi, Ceridian, General Motors, Container Group of America, and Doscokil company cases.

Nortel’s motion states “Section 1114 is inapplicable to the termination of the Retiree Welfare plans because the plan documents unambiguously provide NNI the right to unilaterally modify or terminate the plan at any time.”

As a result it is likely that the judge will rule in favor of Nortel and will not require the establishment of a 1114 committee with retiree representation to negotiate the termination of the medical benefits.

Since there is no organization to represent the rights of retirees on the creditor’s committee, we are essentially at the mercy of the court, and have no vote in whether or not a 1114 committee should be established.

Nortel also indicates that by terminating the medical and disability plans they will save $8 million this year. They argue that retirees and disabled people provide no service or value to the company and based on this, they are comfortable with making the decision to stop these benefits.

Who are these people? They must be outsourced consultants. This would never have happened in my time working at Nortel.

Objections to this motion must be filed with the court by July 6th 2010, and also with the Debtors (NNI). The hearing will be July 16th 2010 at the court in Delaware.


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  2. The medical disability benefits not being vested really hurt their case.