With bankruptcy filings soaring during this economic downturn, it is always of great interest to benefits practitioners to learn how bankruptcy courts are dealing with the unmet employee benefit obligations that get thrown in the mix. The Ninth Circuit in the case of Consolidated Freightways Corp. v. Aetna, Inc. dealt a blow to retirees (and the insurer who had advanced amounts in payment of retiree claims) by ruling that the retirees' claims for benefits under a self-funded retiree medical portion of the employer's health plan were not entitled to "priority" in determining the number of employees under Section 507(a)(5) of the Bankruptcy Code, even though active employees' claims were so entitled. The court looked at the history of the Bankruptcy Code and determined the outcome based upon what the court determined to be the intent of Congress:
The next question is: For purposes of this priority, what is meant by employees and arising from services rendered? While at first blush there may be some ambiguity in that regard, we think that a consideration of § 507(a)(5) in the context of the statute renders the answer quite clear. . .Posted by B. Janell Grenier at May 12, 2009 09:26 AMConsidering, then, the provisions as a whole, and giving similar language similar meaning,we find the intent of Congress and the purpose of the provisions to be far from opaque; rather they are hyaline. In general, the scope of services rendered is those services performed by persons employed by the debtor during the 180-day period preceding bankruptcy.