Section 1114 of title 11 of the United States Code (the “Bankruptcy Code”) provides in relevant part that: “the debtor in possession shall timely pay and shall not modify any retiree benefits” unless “the court, on the motion of the [debtor] or authorized representative [of the retirees,]” orders or the debtor and the authorized representative agree to the modification of such benefits. A bankruptcy court may, after notice and hearing, approve a settlement, including a settlement of retiree benefit claims, under Federal Rule of Bankruptcy Procedure 9019. Consequently, creditors and other parties in interest may voice their views on a proposed settlement.
Courts necessarily consider interests of the creditors before approving the settlement, and the retirees’ collective interests are served by the authorized representative of retirees in crafting the settlement. Because debtors, unions, and authorized representatives of retirees usually negotiate settlements, the goals of such settlements are successful reorganization of the debtors and satisfying the collective interests of retirees and current employees. Therefore, parties objecting to retiree benefits settlements are often unsecured creditors, individual retirees, and other entities which may be adversely affected by the settlement. Upon bankruptcy courts’ approval of settlement over objection, parties must have standing to appeal that decision. Part I discusses Article III standing and prudential standing requirements necessary for bankruptcy appeal. Part II examines how courts apply these standards to unsecured creditors, individual retirees, and parties in interest.