alg Doc 4718 Filed 08/09/13 Entered 08/09/13 13:59:30 Main Document Pg 1 of 9

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1 Pg 1 of 9 BOND, SCHOENECK & KING, PLLC Ingrid S. Palermo, Esq. Office and Post Office Address 350 Linden Oaks Suite 310 Rochester, New York Telephone: (585) Facsimile: (585) Attorneys for the Retirees UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: EASTMAN KODAK COMPANY, et al. Debtors. Case No (ALG) Chapter 11 Case (Jointly Administered) RETIREES OPPOSITION TO THE CONFIRMATION OF THE DEBTOR S FIRST AMENDED PLAN OF REORGANIZATION William and Edna Bennis, Ronald and Patricia Bern, Richard Ferris, Edgar Greco, Ronald Karaken, Ronald and Valarie Schroder, John and Maureen Secker, Donald Spieler, Kay Stammers, William and Pauline Sutton and David Tomer (collectively, the Retirees ), by and through their attorneys, Bond, Schoeneck, & King, PLLC, submit this limited opposition to the Debtor s Motion for an Order Approving the Disclosure Statement and respectfully state as follows: BACKGROUND 1. The Retirees are all individuals who worked for Kodak and participated in the retirement plans that were available to them. When the Retirees retired, they were given a summary of their benefits on the standard Your Kodak Retirement /9/2013

2 Pg 2 of 9 Confirmation form ( Retirement Form ). The Retirement Form confirmed the contractual obligation between the parties and indicated (i) the exact retirement plans in which the Retirees had participated and (ii) the elections the Retirees had made to fund their retirement. Like the generations of Kodak retirees before them, the Retirees believed that they could rely on the promises that Kodak had made to them. Some of the Retirees had been receiving these promises consistently for as long as 50 years. 2. Retirees were shocked and troubled when, on February 1, 2012, their monthly pension payments were not deposited in their bank accounts. The payments that had been consistently made on the first day of the month for years were discontinued without notice or opportunity to be heard. 3. Without any warning or notice at all, the Retirees were forced to completely change their lives. Some have had to sell their homes; others have had to take minimum wage jobs; some are relying on their children; but the financial impact of losing this promised source of retirement income has been devastating to all. 4. Although Retirees are part of the same contractual obligation, Kodak has sought and obtained this Court s approval to fully participate in these same plans for only current employees through the termination of the plans on the Effective Date, 1 resulting in impermissible cherrypicking which responsibilities under a single contractual obligation Kodak intends to perform. 5. Even more troubling is that Kodak has obtained approval for the KPP Settlement [Bankruptcy Docket #4113], which is only a guaranty and not a direct obligation, while at the same timecertain Retirees, who are citizens of the United Kingdom and should be receiving the same protections of the UK Pension s Regulator, 1 Capitalized terms used and not defined shall have the same meanings set forth in Kodak s Plan /9/2013

3 Pg 3 of 9 are being told by Kodak that they will no longer receive payments under Kodak s Bermuda Plan (which is now part of the GPP). The sole purpose of the Bermuda Plan was to provide foreign citizens the equivalent of Social Security since those individuals would not be eligible for Social Security or the equivalent social safety net from their country due to their employment by an American corporation. ARGUMENT 6. Bankruptcy Code Section 1129(a) sets forth the requirements for the confirmation of the plan. a. The court shall confirm a plan only if all the following requirements are met: (1) The plan complies with the applicable provisions of this title. (3) The plan has been proposed in good faith and not by any means forbidden by law. 11 U.S.C. 1129(a) (2013)( Section 1129(a) ). Both the legislative history and case law are clear that a debtor s plan must comply with Sections 1122 and 1123 of the Bankruptcy Code to satisfy the requirements of Section 1129(a)(1). See, S. Rep. No. 989, 95 th Cong., 2d Sess. 126 (1978); Cadle Company II, Inc. v. PC Liquidation Corp., 383 B.R. 856 (N.D.N.Y. 2008); In re Cajun Elec. Power Coop., Inc., 150 F.3d 503 (5 th Cir. 1998), cert denied, 526 U.S (1999). 7. Section 1122 of the Bankruptcy Code sets forth the requirements for placing claims in the same class, but whether similar claims can be classified in separate classes has been up to the Courts to decide. In addressing this question, the Bankruptcy and District Courts have almost unanimously held that similar claims cannot be placed in different classes solely to gerrymander a class that will accept the plan /9/2013

4 Pg 4 of 9 See In re Boston Post Road Ltd. Partnership, 145 Bankr. 745, 748 (Bankr. D. Conn. 1992) ("[t]he courts... have uniformly prohibited a debtor from classifying similar claims differently in order to gerrymander an affirmative vote in favor of a reorganization plan."); In re Boston Post Road Ltd. Partnership, 154 Bankr. 617, 621 (D. Conn. 1993) ("classes may not be manipulated so as to gerrymander the voting process and circumvent the 1129 requirements"). Otherwise, some courts have held that separate classification of similar claims is permissible only upon proof of a legitimate reason for separate classification, and that separate classification to gerrymander an affirmative vote is impermissible. See, e.g., Phoenix Mut. Life Ins. Co. v. Greystone III Joint Venture (In re Greystone III), 995 F.2d 1274, 1279 (5th Cir. 1991), cert. denied, 121 L. Ed. 2d 37, 113 S. Ct. 72 (1992) ("Thou shalt not classify similar claims differently in order to gerrymander an affirmative vote on a reorganization plan."). Boston Post Rd. Ltd. Partnership v. FDIC (In re Boston Post Rd. Ltd. Partnership), 21 F.3d 477, 481, (2d Cir. 1994). 8. There is no case law that allows a debtor to separately classify multiple parties to the same contract so that they can be treated differently, which is exactly what Kodak is attempting to do. Kodak is proposing to give the employees an unclassified administrative claim that will be paid in full, providing for the payment of a guaranty for non-debtor employee pensions, while providing no real distribution to the Retirees up to the Termination Date. 9. Kodak indicates that The Debtors are terminating all Non-Qualified Plans as of the Effective Date. See Bankruptcy Docket # 4489, Plan Supplement Exhibit G. Kodak has classified the Retirees as general unsecured creditors for their entire /9/2013

5 Pg 5 of 9 pension claim, but, although the employees rights are governed by the exact same contract, Kodak proposes to give the employees an administrative claim through the Effective Date of the Plan, without needing to make any claim for those benefits. See Bankruptcy Docket #4143, First Amended Disclosure Statement p : As of the Effective Date, all Non-Qualified Plans will be deemed terminated and any accruals thereunder will be frozen and other than any Non-Qualified Plan Accrual Claims, treated as general unsecured claims. Id at 109. In essence, Kodak seeks to terminate the Non-Qualified Plans as to the Retirees as of the Petition Date but to continue to offer all the benefits of these plans to current employees through the Termination Date. Since these are single contracts with no partial termination provisions, it is impermissible to terminate the Retirees under the Non-Qualified Plans but still pay current employees all their accruals through the Effective Date. 2 Courts throughout the country have made it clear that a single contract must be treated as one obligation or benefit, and until assumption or rejection, if the debtor elects to receive the benefits of the contract, then it is obligated to pay for those benefits. See, NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984). 10. Kodak has attempted to differentiate the employees from the Retirees as a way to justify this impermissible severance of the contract and somehow blame the Retirees for Kodak s financial troubles, even though it is the Retirees whose work made Kodak [the] trusted leader in conventional and digital technologies. Id at 1. On the Petition Date, Kodak filed the Debtor s Motion for Entry of Interim and Final Orders Authorizing But Not Directing, Debtors to (A) Pay Certain PrePetition Wages and 2 Upon information and belief, although Kodak indicates that it is not entering the New Non-Qualified Employee Compensation Plan, employees believe Kodak will be providing a supplemental executive retirement plan, funded through a paid life insurance policy and deferred income /9/2013

6 Pg 6 of 9 Reimbursable Employee Expenses, (B) Pay and Honor Employee Medical and Other Benefits and (C) Continue Employee Benefit Programs. Bankruptcy Docket #10 ( Employee Wages and Benefit Motion ). 11. In this Motion, Kodak acknowledges that KURIP is one contract with approximately 225 active Employees and 675 former employees participating. Employee Wage and Benefit Motion at 51. Kodak sought the authority to continue to administer the KURIP in the ordinary course of business. Id. 12. The Employee Wages and Benefits Motion sought the authority to continue to administer the KURIP in the ordinary course of business; provided, however, until further order of the Court, no prepetition KURIP amount will be paid. Id. Further, it did not seek authority to pay the Retiree s ongoing postpetition payments. 13. Kodak sought the same authority to administer the GPP as the KURIP in the Employee Wages and Benefits Motion. Id. at It is clear that Kodak proposes to discriminate against similarly situated creditors who are governed by the same contract and pay some in full through the termination of the plan, while others will receive pennies. This discriminatory treatment violates the confirmation requirements contained in 11 U.S.C. 1129(a)(1), which requires that [t]he plan complies with the applicable provisions of this title. 15. Since the plans constitute one contract and should be classified in the same class, the claims must be treated similarly, as required by the Bankruptcy Code. Section 1123 of the Code specifically requires the same treatment of similar claims. A plan shall /9/2013

7 Pg 7 of 9 (4) provide the same treatment for each claim of a particular class unless the holder of a particular claim agrees to a less favorable treatment. 11 U.S.C. 1123(a)(4)(2013). The Retirees do not agree to the discriminatory treatment of their claims. As such, the plan does not comply with the applicable provisions of this title. 16. Kodak seeks to terminate all Non-Qualified Plans as they relate to the Retirees. Kodak should abide by the termination procedures contained within these plans, which means payment to the Retirees throughout that date, just as they propose for employees, and a general unsecured claim for the balance. Clearly, Kodak is not acting in good faith, as required by Section 1129(a)(3). 17. Although the Bankruptcy Code does not define the term "good faith," case law has defined the term as requiring that (1) the plan be consistent with the objectives of the Bankruptcy Code; (2) the plan be proposed with honesty and good intentions and with a basis for expecting that reorganization can be achieved; or (3) there was fundamental fairness in dealing with the creditors. Stonington Partners, Inc. v. Official Comm. of Unsecured Creditors (In re Lernout & Hauspie Speech Prods. N.V.), 308 B.R. 672, 675 (D. Del. 2004). 18. Courts look for a debtor s good faith through its fundamental fairness in dealing with its creditors. To determine good faith under Section 1129(a)(3), courts inquire into the plan itself and whether such plan will fairly achieve a result consistent with the objectives and purposes of the Bankruptcy Code. In re Madison Hotel Associates, 749 F.2d 410, 425, (7th Cir. 1984). 19. Courts also evaluate the overall reorganization plan in terms of fundamental fairness. In a case concerning the chapter 11 filing of a company with /9/2013

8 Pg 8 of 9 pending asbestos claims, the court held that although the plan may meet the technical classification requirements of Sections 1122 and 1129(b), it is fundamentally unfair that one claimant will be paid in full, while [another] risk[s] receiving nothing. The court is informed that other judges have confirmed plans with such discriminatory classifications. This judge cannot do so in good conscience. In re ACandS, Inc., 311 B.R. 36, 43, 2004 Bankr. LEXIS 81 (Bankr. D. Del. 2004). 20. Furthermore, Kodak s proposed treatment of the Bermuda Plan participants is arguably a violation of the laws of the United Kingdom, just as Kodak s failure to perform under the KPP Settlement would be. As such, the plan cannot be confirmed because it is forbidden by law. 21. The Retirees respectfully request that this Court grant them an administrative claim from the petition date through the termination date, consistent with the treatment given to all other parties to these contracts; and that the Bermuda Plan participants contract be assumed so that their treatment is consistent with all other international employees that are not United States citizens. 22. The Retirees reserve all rights to supplement this objection in light of any additional disclosures or modifications to the plan that Kodak may provide. WHEREFORE, the Retirees request (i) that the Court deny confirmation of Kodak s plan of reorganization, (ii) that the Court rule that creditors governed by the [Remainder of page intentionally left blank.] /9/2013

9 Pg 9 of 9 same contractual document be treated similarly, and (iii) such further and equitable relief as to this Court seems just and proper. Dated: August 9, 2013 Rochester, New York BOND, SCHOENECK & KING, PLLC Attorneys for the Retirees By: /s/ Ingrid Palermo Ingrid C. Palermo, Esq. 350 Linden Oaks, Suite 310 Rochester, New York Telephone: (585) Facsimile: (585) /9/2013

10 alg Doc Filed 08/09/13 Entered 08/09/13 13:59:30 Certificate of Service Pg 1 of 2 Ingrid S. Palermo, Esq. BOND, SCHOENECK & KING, PLLC 350 Linden Oaks Suite 310 Rochester, New York Telephone: (585) Facsimile: (585) Attorneys for the Retirees UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK In re: EASTMAN KODAK COMPANY, et al. Debtors. Case No (ALG) Chapter 11 Case Jointly Administered CERTIFICATE OF SERVICE I hereby certify that on August 9, 2013, I electronically filed the Retirees Opposition to the Confirmation of the Debtor s First Amended Plan of Reorganization with the Court using the CM/ECF System. And I hereby certify that I caused a copy of the Opposition to be mailed, via overnight delivery using Federal Express, to the following individuals: Honorable Allan L. Gropper, Esq. United States Bankruptcy Court Southern District of New York One Bowling Green New York, New York Office of the United States Trustee for the Southern District of New York 33 Whitehall Street 21 st Floor New York, New York And I hereby certify that I caused copies of the Opposition to be faxed to the parties on the annexed service list. /s/ Ingrid Palermo Ingrid Palermo

11 alg Doc Filed 08/09/13 Entered 08/09/13 13:59:30 Certificate of Service Pg 2 of 2 Andrew G. Dietderich, Esq. Michael H. Torkin, Esq. Mark U. Schneiderman, Esq. Sullivan & Cromwell, LLP Facsimile: (212) R. Scott Williams, Esq. Jennifer B. Kimble, Esq. Haskell Slaughter Young & Rediker LLC Facsimile: (205) Michael S. Stamer, Esq. Meredith A. Lahaie, Esq. Akin Gump Strauss Hauer & Feld LLP Facsimile: (212) Dennis F. Dunne, Esq. Tyson M. Lomazow, Esq. Brian Kinney, Esq. Milbank, Tweed, Hadley & McCloy LLP Facsimile: (212) Brian M. Resnick, Esq. Davis Polk & Wardwell LLP Facsimile: (212) Ronald Hewitt, Esq. Covington & Burling LLP Facsimile: (212) James Savin, Esq. Akin Gump Strauss Hauer & Feld LLP Facsimile: (202)