U.S. bankruptcy judge Sean Lane denied American's summary judgement request from 2012 to alter all of its retiree medical and life insurance plans. The Fort Worth-based carrier wanted to shift all of the premium costs of its retiree medical and life insurance plans to the retirees.
"For reasons set forth below, with limited exceptions, the Court denies the Motion because the relevant documents contain language reasonably susceptible to interpretation as a promise to vest benefits and lack language categorically reserving the Plaintiffs' right to terminate their contributions to the retiree benefits."
However, the company is allowed to change retiree benefits for the majority of current retirees who were non-union or management workers while at American, the judge wrote in his 49-page ruling which granted American's request for that set of retirees.
Lane denied American's request for summary judgement for TWA retirees because it was unclear what was American's responsibility to retiree when it purchased TWA.
"American will review his ruling and consider next steps related to the retiree health and life insurance benefits," the company said in a statement, thanking Lane for his analysis. "We always remain open to productive discussions to finally resolve this matter."
Typically when a request for summary judgement is denied, the issue moves forward with hearings and a possible trial to decide the issue. However, in his filing, Lane presented legal arguments that suggested that unions' collective bargaining agreements would take precedent over any retiree benefits plans.
"On this motion for summary judgement, the Court declines to allow the language in the unilaterally-drafted Omnibus Plan Documents to override the bargained-for language in the CBA," Lane wrote in the ruling.
In July 2012, American asked the bankruptcy court to allow it to modify its retiree health insurance plan to reduce its costs while restructuring.
Lane held a hearing in January 2013 to discuss the proposed modifications in which the plan would continue but retirees would be responsible for 100 percent of the premiums. But he never issued a ruling until Friday.
In previous court filings, American said its liability for retiree benefits in 2010 was $1.2 billion for its employees and $111 million for former TWA workers.
American has more than 46,000 retirees, but only 30,000 receive medical and life insurance through the company. Any changes made to the plan would affect those who retired before November 2012. Workers who retired after that date already pay the full cost of retiree medical plans if they are under 65.