Lugar de Noticias Haynes and Boone
John Penn Discusses Implications of Second Circuit Ruling Regarding Pensions
Oneida Pension Ruling Could Spur Backlash
Excerpted from Law360
Pension Benefit Guaranty Corp. officials have high hopes that a recent U.S. Court of Appeals for the Second Circuit decision will help dissuade bankrupt companies from terminating pension plans, but some attorneys warn that the ruling may have unintended consequences.
The U.S. Supreme Court declined in December to take up flatware maker Oneida Ltd.'s appeal, letting stand a controversial decision that bars companies in bankruptcy protection from discharging the fees imposed if they choose to dump their pension plans.
The ruling could be a game-changer for companies seeking Chapter 11 protection in the U.S. Bankruptcy Court for the Southern District of New York, one of the country’s biggest bankruptcy venues, as they mull selling off assets or liquidating rather than reorganizing and incurring the fees, attorneys say.
Though a short-term solution may be found, the real fear with the Second Circuit ruling is that it could harm business health and job creation overall, said John D. Penn, a partner with Haynes and Boone LLP and past president of the American Bankruptcy Institute.
"Any time you have a company that cannot emerge, you're going to lose employees," he said. "You're going to have creditors and suppliers who suffer, and that company's crash will create ripples. Depending on the size of the company, it could be a little ripple or it could be a big wave."