492 B.R. 518
Bankr. E.D. Mo.2013Background
- Debtors seek authority to implement two 2013 compensation plans: a corporate-wide 2013 AIP and a 2013 CERP for retention.
- Plans aim to address below-market pay and high attrition of key employees during bankruptcy reorganization.
- Pre-petition, Debtors had LTEIP and pre-petition incentive plans; LTEIP has been discontinued and some equity awards will not be delivered.
- Towers Watson conducted benchmarking, showing corporate pay below market; Towers and Blackstone assisted in designing the 2013 plans.
- OCUC opposed the 2012 Plans; after negotiations, the 2013 plans reflect concessions and are supported by the Committee.
- UMWA and funds object, alleging insiders, Section 503(c) scrutiny, and unfair discrimination; Debtors argue plans are incentive-oriented under 503(c)(3).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 2013 AIP is an incentive plan under 503(c)(3) | OCUC supports; UMWA opposes as insiders | Debtors argue plan is incentive, not retentive, with three installments and market-benchmarking | Granted; 2013 AIP approved under 503(c)(3) |
| Whether 2013 CERP contains insiders triggering 503(c)(1) | UMWA argues insiders exist; Trustee concerns persist | No insiders remain after removals; plan focuses on non-insiders | Granted; 2013 CERP approved under 503(c)(3) |
| Whether implementation is in the ordinary course of business | UMWA/UAW funds contend it is not ordinary course | Debtors rely on section 363(b) with 503(c) protections | Not ordinary course; approved under 363(b)/503(c)(3) |
| Whether the plan costs are reasonable and not uniform windfall | Insufficient due diligence; cost burdens on estate | Total cost modest (0.36% of revenue) and justified by attrition risk | Cost deemed reasonable and justified |
| Whether plan provisions are fair and non-discriminatory | Arguments of top-heavy allocations to higher earners | Broad participation; executives withdrew; plan aligned with industry standards | Determination that plan is fair and not unfairly discriminatory |
Key Cases Cited
- Dana Corp. (Dana II), 358 B.R. 567 (Bankr.S.D.N.Y. 2006) (retentive vs incentive analysis under 503(c)(3))
- In re Velo Holdings, Inc., 472 B.R. 201 (Bankr.S.D.N.Y. 2012) (retentive plans must be justified; business judgment standard applies)
- In re Global Home Prods., LLC, 369 B.R. 778 (Bankr.D. Del. 2007) (courts scrutinize incentives vs retention; due diligence required)
- In re Hawker Beechcraft, Inc., 479 B.R. 308 (Bankr.S.D.N.Y. 2012) (need for incentivizing insiders evaluated under 503(c)(3))
- In re Borders Group, Inc., 453 B.R. 459 (Bankr.S.D.N.Y. 2011) (example of retention/incentive distributions in bankruptcy)