In a press release yesterday, law firm Quarles & Brady Streich Lang LLP, which represents the pilots, said the suit was filed on behalf of more than 1,000 pilots who are allegedly receiving lower pensions than what they had been promised – as much as $1,500 per month less, according to the complaint.
The suit, which was filed in May in the US District Court for the District of Columbia, represents the latest chapter in the controversial 1992 acquisition of the airline.
As part of that acquisition, Icahn entered into an agreement with the PBGC, the unions, and creditors of the airline, under which Icahn had to put $200 million into TWA and assume liability for its pension plans. However, he gained the right to terminate the plans any time after 1995. Ownership was transferred to TWA’s employees and creditors, and a bankruptcy court approved the final agreement in 1993. The pension plans were frozen, preventing new benefits from being added to them.
Then in late 2000, Icahn did terminate the plans, placing the Pilot’s Pension Plan (which, at the time, was underfunded by $200 million) and the Employees’ Pension Plan (which was underfunded by more than $500 million) in the hands of the PBGC. The current complaint alleges that the termination violated the Employee Retirement Income Security Act (ERISA).
The pilots claim that Icahn and the other defendants tricked them into a drastic reduction of wages and benefits in return for stock equity in the company and job security items including enhanced retirement benefits. However, the Employee Stock Ownership Plan (ESOP) became worthless after Icahn was unable to turn the airline around and filed for bankruptcy.
The pilots also claim that later, when faced with having to fully fund the retirement plans, Icahn “made a deal with the unions and the PBGC to gut the plans without even asking for our input or opinions.”
The multiple page complaint is online at www.aplandefense.org