Hostess pension contribution treatment order upheld by district court

By Caroline Salls

Pittsburgh, Oct. 2 - A bankruptcy court order denying a motion for administrative expense treatment of payments owed by Hostess Brands, Inc. to the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union was affirmed Wednesday by the U.S. District Court for the Southern District of New York.

Judge Edgardo Ramos said in his 15-page opinion and order that the sole issue raised on appeal of the June 27 order was whether Hostess remained contractually obligated to make post-bankruptcy pension contributions to a multiemployer pension fund on behalf of employees represented by the union.

Based on the theory that its collective bargaining agreements required payment of post-bankruptcy pension wage deferrals despite termination of a Bakery and Confectionery Union and International Health Benefits and Pension Fund, the union filed a motion on May 9, 2012 seeking administrative expense treatment of the deferrals and seeking an order forcing Hostess to make immediate payments.

As of May 9, 2012, the union claimed that Hostess owed its unionized employees roughly $14 million in pension wage deferrals that accrued after the company's Jan. 11, 2012 bankruptcy filing date.

At a June 19, 2012 hearing, the U.S. Bankruptcy Court for the Southern District of New York determined that the post-bankruptcy pension wage deferrals that Hostess owed to other funds should receive administrative expense priority.

However, the court denied the union's administrative expense motion, finding that Hostess ceased to be an employer under the terms of a trust agreement upon its expulsion from the fund in December 2011 and was no longer required to contribute to the fund except on a withdrawal basis.

Hostess Brands, an Irving, Texas-based operator of regional bakeries, filed for bankruptcy on Jan. 11, 2012. Its Chapter 11 case number is 12-22052.

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