General Motors Retirees Sue Over Cuts in Benefits After 2009 Bankruptcy
May 12 (Bloomberg) -- Jessica Caldwell, an analyst with Edmunds.com, talks about Toyota Motor Corp.'s financial results and the outlook for the global auto industry. Toyota said fourth-quarter net income fell to the lowest in 1 1/2 years amid parts shortages following Japan's record earthquake. Nissan Motor Co. reports financial results today. Caldwell speaks from Santa Monica, California, with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Dozens of General Motors Co. (GM) executive retirees sued the company contending they suffered loss of benefits after the automaker’s bankruptcy.
The pensioners, including former GM Vice President John G. Middlebrook, are asking a judge to rule that the company violated the federal Employee Retirement Income Security Act and order it to pay past-due benefits with interest, plus legal fees and expenses.
“In erroneously administering” the retirement plan, GM “contravenes the plain text” of the contract, lawyers for the executives said May 9 in a complaint filed in federal court in Detroit. Denial of benefits “constitutes an abuse of the discretion provided” in the plan, and is “arbitrary and capricious,” the lawyers said.
GM, based in Detroit, filed the third-largest bankruptcy in history in June 2009. The U.S. Treasury provided billions of dollars in loans that converted into equity.
“Sacrifices were made by every stakeholder, including former executives, to create a foundation upon which the new GM can thrive,” James Cain, a company spokesman, said in a telephone interview. He said the pension plan administrator “properly considered and denied” the claims.
In a Nov. 23 letter included in court filings, plaintiffs’ lawyers allege that under a modified retirement plan, only benefits of more than $100,000 a year are to be reduced by two- thirds, and not benefits under $100,000.
In response, plan administrator Janice K. Uhlig wrote on Feb. 8 that GM properly interpreted life-annuity reductions under the U.S. bankruptcy code and she “has the discretionary authority to construe, interpret, apply and administer” the retirement plan.
GM rose 14 cents to $31.75 in New York Stock Exchange composite trading at 10:06 a.m. The shares have declined 14 percent this year.
The case is Tate v. General Motors LLC, 2:11-cv-12028, U.S. District Court, Eastern District of Michigan (Detroit).
To contact the reporter on this story: Phil Milford in Wilmington, Delaware, at pmilford@bloomberg.net.
To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.
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