Kalina Mesrobian 

St. John’s University School of Law

American Bankruptcy Institute Law Review Staff

According to the United States Bankruptcy Court for the Southern District of New York, a beneficiary of an independent pension improvement fund is not entitled to defer a ruling on the debtor’s objections to them in abeyance by asserting that contingent claims may arise in the future.[1]

Pursuant to a collective agreement between Scandinavian Airlines System Denmark-Norway-Sweden (“SAS Consortium”) and the Cabin Attendants Union, a Foundation for pension improvement (the “Fund”) was established for the benefit of retired SAS Consortium employees.  In accordance with the collective bargaining agreement, the Fund made certain payments to SAS employee beneficiaries. However, at some point, the Fund stopped making payments at a particular level.  Thus, certain former employees organized under the name Fonden Live, sued their employer, SAS Consortium in a Danish Trial Court (“Copenhagen District Court”), alleging that the SAS Consortium breached its obligation to ensure the Fund had “sufficient resources.”[2]

The Copenhagen District Court determined that the SAS Consortium did not have any obligations to the beneficiaries and denied the Fonden Live claim.[3] In 2021, on appeal, the higher court in Denmark (“Eastern High Court”) affirmed the decision of the District Court, holding that SAS had not assumed the obligation to pay additional funds nor to ensure that there were sufficient funds to make payments to the beneficiaries.[4]

In 2022, SAS Consortium (and certain affiliates) filed for relief under chapter 11 of title 11 of the United States Code (the “Bankruptcy Code”) with the United States Bankruptcy Court for the Southern District of New York (the “Court”). In early 2024, members of Fonden Live asserted claims against SAS Consortium demanding payment to fulfill the Fund. SAS objected to the claims, arguing that the claims had been resolved through the prior litigation in Denmark, and that the beneficiaries were not entitled to payment from the Debtor. In response, Fonden Live requested that the Debtor’s Omnibus objections against this claim not be decided and instead delayed, because there are “regulatory proceedings” that may potentially give rise to claims in the future.[5] Specifically, Fonden Live asserted that if the Danish Financial Supervisory Authority (“FSA”) were to conduct an investigation, the FSA may find that the Fund was a pension fund, direct SAS to provide funding, and find that the Debtors are liable to the members of Fonden Live based on an identity between SAS and the Fund.[6]

Under section 502(b)(1) of the Bankruptcy Code, a claim is not allowed when it is “unenforceable against the debtor and property of the debtor, under any agreement or applicable law for a reason other than because such claim is contingent or unmatured.” [7] Here, the members of Fonden Live requested that the Court defer ruling on the bankruptcy of SAS Consortium and hold the objection to their claims open, in hopes that potential claims may arise in the future based on investigations of the FSA. 

The Court established that there was no evidence beyond speculation of what the FSA may or may not find, and if an investigation were to reach a different result, the claimants could ask for the disallowance of their claims to be reconsidered under section 502(j) of the Bankruptcy Code.[8] Additionally, if the FSA were to conduct an investigation, the individual beneficiary members would not be “parties” in the proceeding, nor would they have the right to any claims.[9] The Court dismissed potential liability on the theory that there was an identity between the Fund and SAS because the beneficiaries could have named SAS as a defendant in the prior litigation, but chose not to do so.[10] Further, claimants did not provide support that this was a claim of merit, as the Fund was established to be an independent legal entity with elected board members. Ultimately, the Court found that deferring a decision would only further delay the pending reorganization of SAS and the countless creditors awaiting recovery.[11] The claimants’ reasoning was not sufficient in the Court’s view, thus Fonden Live’s claims were disallowed and denied under § 502(b)(1).[12]  

A bankruptcy court will not delay ruling on an objection to claim solely because a claimant asserts that a future event may occur. Instead, the court will rule on those claims and dismiss them with the possibility of reopening a case should circumstances change in the future.