## Facts

- Federated Department Stores, Inc. (Federated) and Allied Stores Corporation (Allied), along with related entities, filed Chapter 11 cases as a consolidated retail group.
- The debtors maintained health and welfare benefits for prepetition retirees, and an Official Retirees’ Committee was appointed to represent retirees’ interests under 11 U.S.C. § 1114.
- During the Chapter 11 cases, the debtors and the Retirees’ Committee negotiated over the future treatment and possible reduction of retiree benefits.
- A dispute developed over whether the Bankruptcy Code required any Chapter 11 plan to provide ongoing retiree benefits after confirmation unless (a) the committee agreed, or (b) the court entered an order under § 1114(g) modifying the benefits.
- The debtors sought a declaratory judgment that their plan could be confirmed without guaranteeing continued retiree benefits for the rest of retirees’ lives, and that § 1129(a)(13) did not create a lifetime “vesting” of prepetition retiree benefits.
- The Retirees’ Committee opposed the motion, arguing the request was not justiciable and that § 1129(a)(13) effectively required continuation of retiree benefits beyond confirmation absent an agreement or a § 1114(g) order.
- After evaluating the status of negotiations and the parties’ positions, the bankruptcy court found the dispute sufficiently concrete to decide and addressed the statutory interpretation question.

## Issues

1. Whether the bankruptcy court had jurisdiction and whether the declaratory-judgment request presented a ripe, justiciable controversy in the pending Chapter 11 cases.
2. Whether 11 U.S.C. § 1129(a)(13) creates an automatic lifetime vesting of prepetition retiree health and welfare benefits.
3. Whether a Chapter 11 plan is categorically unconfirmable if it does not provide for continued retiree benefits after confirmation when there is no § 1114 agreement and no § 1114(g) modification order.

## Decision

- The court exercised jurisdiction and found the controversy ripe for declaratory relief.
- The court granted the debtors’ motion for declaratory judgment.
- The court held that § 1129(a)(13) does not create automatic lifetime vesting of prepetition retiree benefits and does not grant retirees new substantive rights to benefits.
- The court ruled that § 1129(a)(13) must be construed together with § 1114, which establishes the negotiation and court-review framework for continuation or modification of retiree benefits during the Chapter 11 process.
- The court clarified that its ruling did not authorize the debtors to terminate retiree benefits unilaterally; rather, the statutory process in § 1114 and the confirmation standards still govern any proposed treatment.

## Legal Principles

- A bankruptcy court may issue declaratory relief in a core Chapter 11 dispute when the parties’ positions create a concrete controversy and decision will affect plan confirmation and case administration.
- Section 1129(a)(13) does not itself vest prepetition retiree benefits for life and does not create new substantive benefit rights; it functions as a confirmation requirement tied to the treatment of retiree benefits under the Code.
- Sections 1114 and 1129(a)(13) are read together: retirees receive protection during the Chapter 11 case through continued benefits (subject to permitted modifications), negotiation in good faith, proposals for changes, and, if necessary, court action under § 1114(g) and review at confirmation.
- The presence or absence of lifetime retiree benefits after confirmation depends on the underlying legal/contract rights and the outcome of the § 1114 process and confirmation analysis, not on an automatic statutory vesting theory.

## Conclusion

The bankruptcy court granted declaratory judgment for the Chapter 11 debtors, holding that § 1129(a)(13) does not automatically vest prepetition retiree benefits for retirees’ lifetimes and must be interpreted alongside § 1114’s negotiation and court-modification framework, leaving the debtors subject to the Code’s retiree-benefit process and overall confirmation requirements.


Federated Department Stores, Inc., 1991 Bankr. LEXIS 743 (1991)