By: Bertrand J. Choe
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
In In re Arclin U.S. Holding, Inc.,[1] the Bankruptcy Court for the District of Delaware held that a company, subsequent to its chapter 11 petition, was required to continue health insurance premium payments made to a former employee pursuant to a severance agreement. In so doing, the court limited protections for debtors under section 1114 of the Bankruptcy Code,[2] which requires chapter 11 business debtors to continue “retiree benefit” payments post-petition. Six months prior to filing its chapter 11 petition, Arclin U.S. Holding, Inc. (“Arclin” or “debtors”) instituted a reduction in its work force, whereby thirty-nine of its employees, including Steve Phillips, were terminated. Phillips was given a severance package including separation pay, car allowance, and payment of his health insurance premiums. Upon filing for bankruptcy, Arclin discontinued its payments to Phillips, at which point Phillips brought the present suit. The court looked to the plain meaning of section 1114(a), which requires, inter alia, that for benefits to be considered “retiree benefits,” they must be both medical in nature and for retirees.[3] Since the benefits to Phillips included payments for health insurance, the court deemed them to be “medical” within the meaning of section 1114(a). The court further deemed the payments to be for retirees because of Arclin’s own description of the payments as “an early retirement package.”[4]
 
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