Eleventh Circuit Allows Termination of Retiree Benefits in a Chapter 11 Liquidation

The Eleventh Circuit broadly interpreted the words “maintain” and “reorganization” in Section 1114 to ensure that companies of all types, including coal producers, can terminate retiree health benefits, even if the company sells its assets under Section 363 and converts from chapter 11 to chapter 7. The appeals court added a caveat: To terminate or modify retiree benefits following a sale of assets in chapter 11, the business must continue to operate. The decision means that a liquidation in chapter 11 allows the buyer to compel the rejection of union contracts and the termination of retiree health benefits.

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