Great Atlantic Withdrawal Liability Debtors Brief

8/22/2019 Great Atlantic Withdrawal Liability Debtors Brief

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James H.M. Sprayregen, P.C.Paul M. BastaRay C. SchrockKIRKLAND & ELLIS LLP601 Lexington Avenue

New York, New York 10022Telephone: (212) 446-4800Facsimile: (212) 446-4900

- and -

Michael B. SladeKristina K. AlexanderKIRKLAND & ELLIS LLP300 North LaSalleChicago, Illinois 60654Telephone (312) 862-2000Facsimile: (312) 862-2200

Counsel to the Reorganized Debtors

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

In re:

THE GREAT ATLANTIC & PACIFIC TEACOMPANY, INC., et al.,

Reorganized Debtors.

Chapter 11

Case No. 10-24549 (RDD)

Jointly Administered

SUPPLMENTAL BRIEF IN SUPPORT OF REORGANIZED DEBTORS

OBJECTION TO THE ADMINISTRATIVE CLAIM FILED BY THE FOOD

EMPLOYERS LABOR RELATIONS ASSOCIATION AND UNITED

FOOD AND COMMERCIAL WORKERS PENSION FUND [DOCKET NO. 3628]

10-24549-rdd Doc 4244 Filed 06/13/13 Entered 06/13/13 21:03:20 Main DocumentPg 1 of 95

1024549130613000000000004

Docket #4244 Date Filed: 6/13/20


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TABLE OF CONTENTS

Page

Background ....................................................................................................................................1Objection .........................................................................................................................................4

A. The Administrative Claim Should Be Valued at $0 ............................................5i. Method Advocated by the Reorganized Debtors .........................................8ii. Alternative Method 1 (the New Employer Method) ................................9iii. Alternative Method 2 (Petition Date vs. Withdrawal Date) ......................10

B. FELRAs Days Elapsed Method for Calculating the AdministrativeClaim Violates the Bankruptcy Codes Priority Rules .....................................11

Reservation of Rights ...................................................................................................................14Conclusion ....................................................................................................................................14



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TABLE OF AUTHORITIES

CasesAmalgamated Ins. Fund v. William B. Kessler, Inc., 55 B.R. 735, 740 (S.D.N.Y. 1985) 6

In re A.C.E. Elevator Co., Inc., 347 B.R. 473, 479 (Bankr. S.D.N.Y. 2006) 5

In re Bethlehem Steel Corp., 479 F.3d 167, 172-73 (2d Cir. 2007) 7

In re Caldor, Inc.-NY, 240 B.R. 180, 192-93 (Bankr. S.D.N.Y. 1999) aff'd sub nom. Pearl-PhilGMT (Far E.) Ltd. v. Caldor Corp., 266 B.R. 575 (S.D.N.Y. 2001) 11

In re CF & I Fabricators of Utah, Inc., 150 F.3d 1293, 1299 (10th Cir. 1998) 6

In re Chateaugay Corp., 944 F.2d 997, 1004 (2d Cir. 1991) 10

In re Cott Corp., 47 B.R. 487, 489 (Bankr. D. Conn. 1984) 14

In re Great Ne. Lumber & Millwork Corp., 64 B.R. 426, 428 (Bankr. E.D. Pa. 1986) 13

In re HNRC Dissolution Co., 396 B.R. 461, 480-81 (B.A.P. 6th Cir. 2008) 6

In re Marcal Paper Mills, Inc., 650 F.3d 311 (3d. Cir. 2011) 7

In re Pub. Ledger,Inc., 161 F.2d 762, 768-69 (3d Cir. 1947) 6

In re Sunarhauserman, Inc., 184 B.R. 279 (Bankr. N.D. Ohio 1995) 8

In re The Great Atlantic & Pacific Tea Co., Inc., No. Civ. 2809(ER), 2013 WL 1310330(S.D.N.Y. March 31, 2013) 4

In re United Dept Stores, Inc., 49 B.R. 462, 466 (Bankr. S.D.N.Y. 1985) 6

McMillan v. LTV Steel, Inc., 555 F.3d 218, 226 (6th Cir. 2009) 6

Trustees of Amalgamated Insurance Fund v. McFarlins, Inc., 789 F.2d 98 (2d Cir. 1986) 6, 13,14

Statutes11 U.S.C. 503(b)(1)(A) ................................................................................................................ 5

29 U.S.C. 1385 ............................................................................................................................. 2



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The Great Atlantic & Pacific Tea Company, Inc. (A& P) and certain affiliates, as

reorganized debtors and debtors in possession (the Reorganized Debtors, or, prior to

emergence from chapter 11, the Debtors) hereby submit this supplemental brief in support of

their objection, filed May 15, 2012 [Docket No. 3775] (the Objection) to theMotion for Entry

of an Order Allowing Administrative Expense Claim [Docket No. 3628] filed by the Food

Employers Labor Relations Association and United Food and Commercial Workers Pension

Fund (FELRA) seeking allowance of an administrative claim (the Administrative Claim).1

When calculated correctly, the value of FELRAs Administrative Claim is zero.

Accordingly, FELRAs Administrative Claim should be disallowed.

Background

1. The Debtors filed these Chapter 11 cases on December 12, 2010 (the PetitionDate). As of the Petition Date, the Debtors were parties to approximately 34 collective

bargaining agreements (the CBAs) with 14 local unions affiliated with the United Food and

Commercial Workers (the UFCW). The CBAs obligated the Debtors to, among other things,

pay specific wages, provide employees certain benefits, and make payments into certain multi-

employer defined benefit pension plans. One of the multi-employer defined benefit pension

plans into which the Debtors paid as of the Petition Date was FELRA.

2. Specifically, on the Petition Date, Super Fresh Food Markets, Inc. employedapproximately 1,385 employees represented by UFCW Local 27 for which Super Fresh

contributed to FELRA. During the Chapter 11 Cases and as part of the reorganization process,

that number was ultimately reduced to zero.

1 Capitalized terms used but not defined herein shall have the meanings set forth in the Objection and theDebtors First Amended Joint Plan of Reorganization Pursuant to Chapter 11 of the United States BankruptcyCode [Docket No. 3417] (the Plan of Reorganization or Plan).



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3. First, in approximately June of 2011, the Debtors sold 12 of the so-calledSouthern Stores operating under the Super Fresh banner and began winding down the business

of another 13 stores. This process left only 3 storestwo in Maryland and one in Delaware

with employees covered by Local 27s CBA requiring contributions to FELRA. All but

approximately 100 FELRA-covered employees were terminated, triggering a partial withdrawal

from FELRA and giving rise to a prepetition claim subject to discharge. Anticipating the

Debtors pension fund withdrawal liability, FELRA asserted claims against each of the Debtors

alleging estimated withdrawal liability of $76,846,817.2

4.

Second, on February 1, 2012 (the Withdrawal Date), the Debtors entered into

an agreement with Local 27 completely and permanently eliminating the Debtors obligations to

contribute to FELRA, effectuating a complete withdrawal from FELRA.3

The Debtors have

made no contributions to FELRA since the Withdrawal Date.

5. The Debtors Plan classified FELRAs withdrawal liability claim as a Class JPension Withdrawal Claims.

4On January 24, 2012, FELRA objected to the Plan on various

grounds, including that the Plan failed to provide administrative priority treatment to the alleged

2 See (I) Objection of the Food Employers Labor Relations Association and United Food and CommercialWorkers Pension Fund to Confirmation of the Debtors Joint Plan of Reorganization Pursuant to Chapter 11 of

the United States Bankruptcy Code and (II) Request for Reclassification of Claims, filed Jan. 24, 2012 [DocketNo. 3240] (FELRA Plan Objection), at 16.

3 Employee Retirement Income Security Act (ERISA) 4203(a), 29 U.S.C. 1385 (complete withdrawaltriggered when employer no longer has obligations to make contributions to a multiemployer pension plan).

4 Class J Pension Claims are defined under the Plan as follows: Any and all Claims against the Debtors arisingfrom the Debtors complete or partial withdrawal from any Multiemployer Pension Plans related to actions orevents occurring prior to the Effective Date, including: (a) Amalgamated Meat Cutters and Retail Food StoreEmployees Union Local 342 Pension Fund; (b) Central States, Southeast and Southwest Areas Pension Fund;(c) Retail, Wholesale and Department Store International Union and Industry Benefit and Pension Funds; (d)UFCW Local 1262 and Employees Pension Fund; (e) UFCW and Participating Food Industry Employers Tri-State Pension Fund; and (f) Food Employers Labor Relations Association and United Food and CommercialWorkers Pension Fund.



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post-petition portion of FELRAs withdrawal liability claims.5 FELRA argued at the Debtors

confirmation hearing that its claims should not be classified as Class J Pension Withdrawal

Claims, and this Court confirmed the Plan over FELRAs objection.6

6. On April 10, 2012, FELRA appealed this Courts decision to the District Court.The next day, FELRA filed the Motion at issue here, alleging total withdrawal liability of

$78,459,613 and seeking to have $8,316,969 of that amount treated as an administrative priority

claim under the Plan. The claim was submitted subject to FELRAs then-pending appeal of this

Courts order confirming the Plan.

7.

On May 15, 2012, the Reorganized Debtors objected to FERLAs Motion on the

basis that no portion of the Debtors withdrawal liability was entitled to administrative priority

because the claim did not reflect liability for benefits earned by the Debtors employees for

services rendered post-petition.7 FELRA filed a response on July 24, 2012.8

8. On July 27, 2012, the parties appeared before the Court and jointly proposed topostpone adjudication of the matter pending discovery and revised calculations. The parties

thereafter engaged in briefing and limited discovery on the Administrative Claim, including

expert depositions, regarding the appropriate methodology for calculating the Administrative

Claim (if any). On January 10, 2013, FELRA filed a Notice of Supplemental Exhibit to the

Motion, which amended FELRAs previous withdrawal liability claim to reflect FELRAs final

5 FELRA Plan Objection at 51-56.

6 2/6/2012 Tr. at 80-123; 2/27/2012 Tr. at 75-81.

7 See Reorganized Debtors Objection to the Administrative Claims of United Food and Commercial Workers,Local 464A and the Food Employers Labor Relations Association and United Food and Commercial Workers

Pension Fund, filed May 15, 2012 [Docket No. 3775].

8 See FELRA Pension Funds Reply to Reorganized Debtors Objection to the Funds Administrative ExpenseClaim, filed July 24, 2012 [Docket No. 3890] (FELRA Reply).



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calculation of the Debtors withdrawal liability. FELRA now asserts a total withdrawal liability

claim in the amount of $77,420,079, and has revised the Administrative Claim to $7,219,172.

9. On March 31, 2013, the District Court dismissed FELRAs appeal.9 FELRA didnot appeal the District Courts ruling.

10. The parties are currently scheduled to appear before this Court for an evidentiaryhearing on June 27, 2013 at 10:00 a.m. The parties have exchanged witness declarations, which

have been submitted for this Courts consideration and are discussed herein, and the witnesses

will be available for cross-examination, if necessary, at the hearing.10

Objection

11. As a preliminary matter, the dispute between the Reorganized Debtors andFELRA appears to be one of law, not fact. The Reorganized Debtors dispute with FELRA is a

dispute over methodology and bankruptcy law, not mathematics. For its part, FELRA does not

dispute any of the calculations done by Darren French, the Reorganized Debtors expert.11

Critically, FELRA does not dispute that the Reorganized Debtors post-petition contributions to

FELRA exceeded by some margin the value of any benefits accrued by the Debtors employees

during the post-petition period.12

12. Regardless, whether as a matter of law or fact, FELRAs calculation of itsadministrative claim defies the applicable law in the Second Circuit and elsewhere. When the

9 In re The Great Atlantic & Pacific Tea Co., Inc., No. Civ. 2809, 2013 WL 1310330 (S.D.N.Y. March 31, 2013),attached hereto as Exhibit A.

10

See Declaration of Kevin Woodrich, FSA, EA, MAAA, Witness for the Food Employers Labor RelationsAssociation and United Food and Commercial Workers Pension Fund, filed December 21, 2012 [Docket No.4094] (the Woodrich Declaration), and the Amended Declaration of Darren French in Support of

Reorganized Debtors' Objection to FELRA's Motion for Entry of an Order Allowing an Administrative Expense

Claim, filed January 23, 2013 [Docket No. 4119] (the French Declaration), attached hereto as Exhibit B.

11 See infra 22, 25, and 27.

12 Id.



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applicable bankruptcy law is applied to the facts here, the correct calculation of FELRAs

administrative claim is $0 because any benefit to the estate post-petition was far outweighed by

the Debtors post-petition contributions to the Fund.

A. The Administrative Claim Should Be Valued at $0

13. FELRA seeks allowance and payment of an Administrative Claim for $7,219,172.The methodology used by FELRA to calculate its claim ignores this Courts statement at the

confirmation hearingthat if any administrative claim existed, it could only be possibly a tiny

sliver that would be attr ibu table to the services providedby the covered uni on workers for the

post-petit ion per iod (2/6/12 Tr. at 119:17-19) (emphasis added)and is wrong as a matter of

law.

14. Administrative priority under 503(b)(1)(A) of the Bankruptcy Code is grantedto a claim only for the actual, necessary costs and expenses of preserving the estate, including

wages, salaries, and commissions for services rendered after the commencement of the case.

(Id.) (emphasis added). And, as a baseline principle, the Second Circuit has consistently

recognized that statutory priorities are narrowly construed, In re Bethlehem Steel Corp., 479

F.3d 167, 172 (2d Cir. 2007) (internal quotation marks omitted), and that the party seeking

administrative priority carries the burden of proving entitlement to priority payment as an

administrative expense, id. at 172 (internal quotation marks omitted).

15. Basic precepts of bankruptcy law dictate that any amount of withdrawal liabilityrelated to benefits earned before the Petition Date cannot constitute an administrative claim,

because the consideration supporting that withdrawal liability is the past labor of the employees

covered by the plan. In re A.C.E. Elevator Co., Inc., 347 B.R. 473, 479 (Bankr. S.D.N.Y. 2006)

(internal citations omitted). In fact, due to the tenuous or non-existent connection between



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withdrawal liability and actual services rendered post-petition, many courts have held that

withdrawal liability should not be afforded administrative priority at all.13 And courts

consistently find that benefits earned as a result of prepetition labor cannot give rise to an

administrative claim under the Bankruptcy Code.14

16. The Second Circuits controlling case on this issue, Trustees of AmalgamatedInsurance Fund v. McFarlins, Inc., 789 F.2d 98 (2d Cir. 1986), confirms that benefits accrued

as a result of work performed pre-petition are not entitled to administrative priority. In

McFarlins, the Court held that withdrawal liability reflecting benefits accrued by employees

prepetition was a prepetition claim, even where the withdrawal occurred more than seven months

into the chapter 11 case. See 789 F.2d at 10304. The Second Circuit denied the administrative

claim because the consideration supporting the withdrawal liability was prepetition labor, and

payments made to guarantee pension benefits already earnedby those employees covered by

the Plan cannot constitute an administrative claim. 789 F.2d at 101 (emphasis added).

17. Over 20 years later, the Second Circuit affirmed the principles that form the basisfor its holding inMcFarlins: (i) withdrawal liability is the means by which the employer funds

13 See, e.g.,Amalgamated Ins. Fund v. William B. Kessler, Inc., 55 B.R. 735, 740 (S.D.N.Y. 1985) (Withdrawalliability, on the other hand, is imposed on employers withdrawing from multiemployer pension plans to makeup for past failures by employers to fund fully pension plan benefits. Essentially, withdrawal liability is belatedcompensation for services provided before the start of bankruptcy proceeding. As such, a claim for withdrawalliability is not entitled to administrative expense status.); In re United Dept Stores, Inc., 49 B.R. 462, 466(Bankr. S.D.N.Y. 1985) (Withdrawal liability, in contrast, is not direct compensation to any employee, nor is itdirect compensation for the termination of the employment relationship. Rather, it is an obligation of thedebtor pursuant to the MPPA[A], to a designated group of beneficiaries, some of which have absolutely noconnection to the bankruptcy.) (internal citation omitted);In re HNRC Dissolution Co., 396 B.R. 461, 480-81(B.A.P. 6th Cir. 2008) (Accordingly, we conclude, as a matter of law, that claims for withdrawal liability lack

the requisite causal relationship to the work performed by the Debtors employees for the claim to be treated asan administrative expense.).

14 See, e.g., McMillan v. LTV Steel, Inc., 555 F.3d 218, 226 (6th Cir. 2009) (a claim for retirement benefits thatvested before the debtor filed for chapter 11 relief is a prepetition claim); In re CF & I Fabricators of Utah,

Inc., 150 F.3d 1293, 1299 (10th Cir. 1998) (denying administrative priority status to a claim for pension benefitsearned by prepetition labor of the pension plans participants); In re Pub. Ledger, Inc., 161 F.2d 762, 768-69(3d Cir. 1947) (vacation pay earned but not paid prepetition does not constitute an administrative expensebecause the services to earn the pay were rendered prepetition).



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benefits that his employees have earned by their past service and that he would normally

finance through continuing contributions to his employees pension plan; (ii) the employees

service [constitutes] the consideration for the withdrawal liability; and (iii) the portion of an

employers withdrawal liability that represents an accelerated lump-sum contribution toward the

benefits its employees had accrued over the course of their prepetition employment cannot be

an administrative claim. Bethlehem Steel, 479 F.3d at 172-73 (Sotomayor, J.) (internal footnote

and citations toMcFarlins omitted).

18. Assuming McFarlins does not completely prohibit treating some portion ofwithdrawal liability as an administrative claim, controlling Second Circuit law at a minimum

requires an administrative claim be limited to benefits earned post-petition by employees in

consideration for their post-petition labor. (See id.) This reading ofMcFarlins would lead to

the same outcome here as the Third Circuits decision in In re Marcal Paper Mills, Inc., 650

F.3d 311 (3d. Cir. 2011). Marcal explicitly allows for the possibility that some portion of

withdrawal liability can be given administrative priority, but found that the administrative claim

amount is limited to the extent to which new vested benefits that arose from the post-petition

workof covered employees. . . have become underfunded.Id. at 319 (emphasis added).15

19. To be clear, the Reorganized Debtors believe that only the first method identifiedbelow is consistent with the relevant case law. Two alternative methods are offered for reference

and comparison, primarily because they illustrate the unreasonableness of FELRAs approach.

These methods (as well as FELRAs proposed method) are each described below.

15 FELRA claims that any argument that an administrative claim for withdrawal liability must be limited to thevalue of benefits earned post-petition is inconsistent with Marcal. (FELRA Reply at 4) There is no basis forthis statement; not only is the Reorganized Debtors argument consistent with Marcal, but it appears to beprecisely whatMarcalinstructs. See 650 F.3dat 319.



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i. Method Advocated by the Reorganized Debtors

20. The Reorganized Debtors believe the method used by a bankruptcy court in In reSunarhauserman, Inc., 184 B.R. 279 (Bankr. N.D. Ohio 1995), best captures the underlying

requirements for allowance of an administrative claim. Under this method, the pension benefits

accrued by the Debtors FELRA-covered employees post-petition are compared to the

contributions made by Debtors to FELRA during the same period. To the extent that the value of

the post-petition accrued benefits exceeds the Debtors post-petition contributions to FELRA, a

deficit would exist, which would be the amount of the administrative claim.

21. This method is unique from other methods described below, and uniquelyconsistent with the typical standards for allowance of an administrative claim, because no

liabilities arising from sources other than the post-petition labor of the Debtors employees

such as benefits earned prepetition, benefits earned and accrued for employees of other FELRA

employers, or investment losseswould be given administrative priority. Remarkably,

FELRAs expert objects to the method for this very reason, noting that this method look[s] at

just the benefit, trying to isolate the benefits accrued whereas what I was asked to do . . . is

calculate the total withdrawal liability . . . and try and apportion it.16

22. FELRA agrees that the Administrative Claim is less than $0 when calculatedunder the method advocated by the Reorganized Debtors.17 In fact, the Debtors contributions

during the post-petition period was more than four times the total benefits accrued by the

16 Woodrich Deposition Tr. at 96:3-15, attached hereto as Exhibit C.

17 See Food Employers Labor Relations Association and United Food and Commercial Workers Pension FundsObjections and Responses to Reorganized Debtors Second Set of Request for Admission and Interrogatories(FELRA s Second Responses), dated Feb. 13, 2013, attached hereto as Exhibit D, at 4 (Response to Requestfor Admission #1) and 2 (Response to Interrogatory #1); Woodrich Deposition Tr. at 64:23 - 65:15; 101:7-12.



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Debtors FELRA-covered employees during that period.18 As FELRAs expert acknowledged,

the increase in FELRAs unfunded vested benefits during the post-petition periodthe amount

that forms the basis of FELRAs Administrative Claimwas not caused by the Debtors

employees accruing more in benefits than the Debtors contributed.19

23. The calculations performed by the Reorganized Debtors retained expert, as wellas the statements made by FELRA and its own expert, demonstrate that the Administrative

Claim as filed has no connection to the post-petition labor of the Debtors employees.

Accordingly, the Reorganized Debtors believe FELRAs Administrative Claim should be $0 and

the Debtors withdrawal liability should remain a Class J Pension Fund Withdrawal claim.

ii. Alternative Method 1 (the New Employer Method)

24. Another possible method to determine the administrative portion of FELRAswithdrawal liability claim would be to determine what the Reorganized Debtors withdrawal

liability would have been had it been a new employer entering FELRA on the Petition Date and

withdrawing on the Withdrawal Date. The Reorganized Debtors expert considered this method

as a theoretically possible alternative because (i) under ERISA withdrawal liability is generally

allocated based on an employers contributions to the plan (not the days of participation in the

plan, which is what FELRA uses); and (ii) this is the method by which FELRA would calculate

withdrawal liability for a new employer.

25. This alternative method, which would treat the Debtors as a new employer as ofthe Petition Date, yields an Administrative Claim of $713,024. FELRA does not dispute the

18 The Reorganized Debtors expert has estimated the post-petition contributions to be approximately $2,097,969,and has estimated the present value of vested benefits earned by the Debtors employees during the post-petitionperiod to be approximately $494,604.

19 Woodrich Deposition Tr. at 65:16-24.



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estimates in the French Declaration underlying the calculation of the Administrative Claim under

this potential method, and FELRAs expert agrees that the estimates are reasonable.20

iii. Alternative Method 2 (Petition Date vs. Withdrawal Date)

26. A final possible method for calculating the Administrative Claim is to comparethe Debtors withdrawal liability under FELRA as of the Petition Date (as if the Debtors had

withdrawn from the Plan on the Petition Date), with the Debtors withdrawal liability on the

actual Withdrawal Date. In other words, under this method, the Administrative Claim would

represent the actual increase in Debtors withdrawal liability during the post-petition period.21

27. The Reorganized Debtors expert estimates that the Debtors withdrawal liabilityas of December 12, 2010 would have been $76,894,839, compared to the Debtors withdrawal

liability as of February 1, 2012, which FELRA has calculated as $77,420,079. Accordingly,

under this alternative method, the Administrative Claim would equal approximately $525,240.

FELRA does not dispute the estimates in the French Declaration underlying the calculation of

the Administrative Claim under this potential method, and FELRAs expert agrees that the

estimates are reasonable.22

20 FELRAs Second Responses at 6-7 (Interrogatories #3, 4); Woodrich Deposition Tr. at 103:11-18.

21

As this Court noted in discussing FERLAs claim at the confirmation hearing, withdrawal liability generally isno different than any other contingent liability that becomes due upon the happening of a future event and waswithin the contemplation of the parties when their relationship began. See 2/27/2012 Tr. at 120:7-22(discussingIn re Chateauguay);In re Chateaugay Corp., 944 F.2d 997, 1004 (2d Cir. 1991). Thus, AlternativeMethod 1 is deficient in that it will incorporate at least some withdrawal liability attributable to funding benefitsearned pre-petition, but at a minimum, it will exclude from the administrative claim all withdrawal liability, ascalculated under ERISA, that would have existed as of the Petition Date.

22 FELRAs Second Responses at 7-8 (Interrogatories #5, 6); Woodrich Deposition Tr. at 107:19-21.



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B. FELRAs Days Elapsed Method for Calculating the Administrative Claim

Violates the Bankruptcy Codes Priority Rules

28. FELRAs methodology for calculating the Administrative Claim does not reflectbenefits actually earned by the Debtors employees post-petition. Instead, FELRA uses an

ERISA-based formula employed by plans to allocate changes in unfunded vested benefits year-

over-year, based on (among other things) new benefits accrued fund-wide, investment

performance, and new assumptions utilized. Under FELRAs method, for example, obligations

for benefits earned by non-A&P employees in 2005 or 2006 that became underfunded in 2011

(because of, for example, FELRAs investment losses or changes in assumptions used to value

rates of return or liabilities) are part of the Administrative Claim.23

29. That result is unacceptable. The law is clear that bankruptcy lawnot ERISAgoverns whether and how much of a claim qualifies for administrative priority under the code.

In re Caldor, Inc.-NY, 240 B.R. 180, 192-93 (Bankr. S.D.N.Y. 1999) aff'd sub nom. Pearl-Phil

GMT (Far E.) Ltd. v. Caldor Corp., 266 B.R. 575 (S.D.N.Y. 2001) (citations omitted).

FELRAs methodology defies the Bankruptcy Code by attempting to give prepetition obligations

administrative priority, and it is inconsistent with the very cases on which FELRA relies.

30. Tellingly, outside of litigation, FELRAs actuarial firm (Cheiron) prepared aclient advisory on potential ways to calculate the administrative portion of withdrawal liability

for employers that withdraw from a multiemployer fund in the middle of their chapter 11 cases.24

The methodology FELRA proffers here is notone of the methods in Cheirons publication.

Instead, the methods described in the Cheiron Observation are near-identical to the method

advocated by the Reorganized Debtors here (determining the extent to which post-petition vested

23 See Woodrich Declaration at 4-7 (summarizing withdrawal liability calculation year-over-year).

24 See Cheiron Client Advisory, Vol. 8, No. 2, Summer 2011, attached hereto as Exhibit E, at 3-4.



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benefits exceed a debtors post-petition contributions), and the Alternative Method 2 described

above (subtracting withdrawal liability as of the Petition Date from withdrawal liability as of the

actual Withdrawal Date).25

31. FELRA essentially concedes as much. Indeed, the initial declaration submittedby FELRAs expert claimed that he calculated the withdrawal liability attributable to post-

petiti on work performed by A& P s covered employeesfrom December 12, 2010 through

December 31, 2011.26 Because that is false, FELRAs expert amended his declaration, now

asserting that his calculation of FELRAs administrative claim is attributable to A&Ps

continued parti cipation in the Fundfrom December 12, 2010 through December 31, 2011.

27

32. This distinction is important. FELRAs expert has acknowledged that thewithdrawal liability incorporated into FELRAs Administrative Claim results from many factors

other than the Debtors conduct post-petition, including: FELRAs investment losses; the

amount of benefit payments actually paid out to retirees; assumptions about participant behavior

(retirement, termination, etc.); the discount rate selected to determine the present value of the

total unfunded vested benefits; and underfunding of liabilities by other employers participating in

the Fund.28 The $7.2 million Administrative Claim reflects liabilities that, as FELRAs expert

concedes, accrued to the Fund long before the Petition Date.29

25 Id. at 4; Woodrich Deposition Tr. at 127:14-24 (confirming that option (a) in the Cheiron Observation is thesame as Alternative Method 2); Woodrich Deposition Tr. at 129:3-9 (confirming that option (b) in the Cheiron

Observation is similar to the method advocated by the Reorganized Debtors).

26 SeeDeclaration of Kevin Woodrich, FSA, EA, MAAA, filed July 24, 2012 [Docket No. 3890-1], at 9.

27 Woodrich Declaration, at 9.

28 See Woodrich Deposition Tr. at 37:16-23; 40:15-42:18; 47:15-24; 54:5 - 55:6; 91:11-24.

29 Woodrich Deposition Tr. at 107:22 - 108:7.



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33. While FELRA cites to both McFarlins and Marcal to argue that anAdministrative Claim for some portion of withdrawal liability may be permissible, FELRA

disregards both courts instructions that the administrative claim cannot include amounts to

satisfy benefits earned pre-petition. FELRA acknowledgesMcFarlins conclusion that, since

the consideration supporting the withdrawal liability claim was entirely pre-petiti on work, the

pension plan was not entitled to administrative claim priority.30 But FELRA then twists the

holding and argues, [t]hus. . . . to the extent a withdrawal liability calculation is based on post-

petiti on per iods, the consideration for that portion of the withdrawal liability is supplied post-

petition, and the post-petition portion is an administrative expense. Id. (emphasis added).

FELRAs stretched extrapolation ignores the key sentence on the very same page of the

McFarlins decision: The consideration supporting its withdrawal l iabil ity was, therefore, the

work of employeesin the alteration department during those earlier years. 789 F.2d at 103

(emphasis added). FELRA seeks to trade post-petition workfor post-petition period, and

craft a calculation using days of participation in the Fund rather than actual services rendered

or benefits accrued by employees after the Petition Date.31

30 FELRA Reply at 3.

31 FELRA also misplaces reliance onIn re Great Ne. Lumber & Millwork Corp., 64 B.R. 426, 428 (Bankr. E.D.Pa. 1986). The bankruptcy court in that case made clear that an administrative claim must be calculated basedon the consideration supplied and wages earned post-petition:

[A] claim is given administrative status. . . . only to the extent that the consideration supporting theclaimant's right to payment was both supplied to and beneficial to the debtor-in-possession. . . .

[Withdrawal] liability usually accumulates over a period of years prior to the departure of thewithdrawing employer. . . . Thus, the consideration supporting the withdrawal liability is,therefore, the same as that supporting the pensions themselves, the past labor of the employeescovered by the plan. . . . As such, the liability is not accorded administrative priority. . . . [W]emust apply the general rule that the withdrawal liability is not an administrative claim under 503(b)(1)(A) unless it is attributable to wages earned after the filing of the petition.

(Id.) (internal citations omitted) (denying administrative claim for withdrawal liability where debtor withdrewfrom plan post-petition).



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34. FELRAs expert formulated his opinion of how to calculate the AdministrativeClaim based on one case, In re Cott Corp., 47 B.R. 487, 489 (Bankr. D. Conn. 1984).32

Critically, Cottwas decided by the U.S. Bankruptcy Court for the District of Connecticut before

the Second Circuit decided McFarlins, and thus does not reflect the insight provided by that

now-controlling precedent. The courts holding in Cott is also premised on a finding that a

debtors withdrawal liability accrues when the vested pension benefits of a plan become

underfunded. 47 B.R. at 493. This is at odds with the now well-accepted principle that

withdrawal liability is not entitled to priority simply because the right to payment arises after

the debtor in possession has begun managing the estate. McFarlin's, 789 F.2d at 101.

Moreover, it not completely clear from Cott exactly how the court expected pre- and post-

petition portions of withdrawal liability to calculated, as the opinion neither cites a case to

demonstrate how an administrative claim should be calculated, nor includes a calculation.

Regardless, given the lack of precedent at the time Cott was decided in 1984, and given that

precedent would lead to a different analysis ifCottwere decided today, this Court should not

give the case any weight.

Reservation of Rights

35. The Reorganized Debtors reserve their rights to further object to theAdministrative Claim and to object to any proofs of claim asserted by FELRA on any ground.

Conclusion

WHEREFORE, for all of the foregoing reasons and the reasons set forth in the

Reorganized Debtors Objection, the Reorganized Debtors respectfully request that the Court

deny the administrative expense claim filed by FELRA.

32 See Woodrich Deposition Tr. at 20:24 - 22:14; 25:10-22.



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New York, New YorkDated: June 13, 2013

/s/ Michael B. SladeJames H.M. Sprayregen, P.C.Paul M. BastaRay C. SchrockKIRKLAND & ELLIS LLP

601 Lexington AvenueNew York, New York 10022Telephone: (212) 446-4800Facsimile: (212) 446-4900

- and -

Michael B. SladeKristina K. AlexanderKIRKLAND & ELLIS LLP300 North LaSalleChicago, Illinois 60654

Telephone: (312) 862-2000Facsimile: (312) 862-2200

Counsel to the Reorganized Debtors



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EXHIBIT A



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Case 7:12-cv-02809-ER Document 24 Filed 03/31/13 Page 1 of 1610-24549-rdd Doc 4244 Filed 06/13/13 Entered 06/13/13 21:03:20 Main DocumentPg 20 of 95


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motion to dismiss FELRAs appeal. Doc. 6. For the reasons set forth below, the appeal is

DISMISSED as equitably moot.

I. BackgroundAs relevant to the instant motion, the well-known supermarket chain A&P and its

affiliates commenced the underlying bankruptcy proceedings on December 12, 2010, by filing

voluntary petitions for relief pursuant to chapter 11 of the Bankruptcy Code. Bankr. Doc. 1.

Negotiations between A&P and FELRA and the Side Letter Agreement

At the time A&P filed for bankruptcy, its subsidiary, Super Fresh Markets, Inc. (Super

Fresh), operated approximately 25 stores in the Mid-Atlantic region. Bankr. Doc. 3332, Notice

of Debtors Motion for Authority to Enter into a Side Letter Agreement 8. A&P and United

Food and Commercial Workers Local 27 (Local 27) were parties to a Collective Bargaining

Agreement (CBA) which covered approximately 1,300 employees in the Super Fresh stores.

Id. Pursuant to the terms of the CBA, Super Fresh was obligated to make contributions to a

pension fund (the Pension Fund) for covered employees. Bankr. Doc. 3240, Declaration of

George Murphy, Jr. 5. As part of its reorganization, A&P sold or closed all but three of the

Super Fresh stores. By order dated June 1, 2011, the bankruptcy court authorized the sale of the

Super Fresh stores in accordance with certain Store Rationalization Procedures it had

previously approved. Bankr. Doc. 1734. The sale of the assets of the Super Fresh stores

generated more than $40 million in cash proceeds (excluding additional proceeds for inventory)

and freed A&P from the costs of operating underperforming stores that were not part of their

going-forward business plan. Bankr. Doc. 3041, Revised Disclosure Statement p. 40.

As a result of the sales, the number of employees covered by the CBA was reduced to

approximately 100, or by approximately 91%. Given the size of the reduction of covered



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employees, A&P thus concluded that a partial withdrawal from the pension fund covered by

the CBA was triggered and subjected it to ERISA liability. 2 The partial withdrawal arguably

gave FERLA a claim subject to the Bankruptcy Codes discharge provisions. 11. U.S.C.

101(5). FERLA thereafter filed contingent proofs of claim for withdrawal liability in the

estimated amount of $76,846,817, which reflected the amounts that might be owed in the event

of a future withdrawal and clearly stated that its claims were contingent. Bankr. Doc. 3240,

FERLAs Objection to the Debtors Joint Plan of Reorganization 16-17.

In order to eliminate any doubt as to how FERLAs claim would be treated in the Plan,

on January 9, 2012, A&P proposed to enter into a side letter agreement (the Side Letter

Agreement) with Local 27 explicitly eliminating A&Ps obligation to contribute to the Pension

Fund for the remaining employees permanently and completely. Id. Ex. 2, Dec. of George

Murphy, Jr. 11. FELRA initially refused to enter into the agreement and, in its filing entered

on January 24, 2012, specifically contested that A&P had even partially withdrawn from the

pension fund. Id. Ex. 1, Dec. of William R. Jensen 4. In their objections to the proposed Joint

Plan of Reorganization, FELRA argued:

Super Fresh does not satisfy either of these standards for [complete]withdrawal, but the Debtors have nonetheless elected to classify thePension Funds claims as Class J Pension Withdrawal Claims treatingthe Pension Funds contingent claims as liquidated, prepetition unsecuredclaims, and improperly including the Pension Funds claims with otherpension plans from which the Debtors withdrew prepetition.

Id. 3 (emphasis in original).

On January 31, A&P sent the president of Local 27 a letter which provided:

2 Under the Employee Retirement Income Security Act (ERISA), a partial withdrawal frommultiemployer plans covering retail food employees, like the Super Fresh employees here, occurs when theemployer reduces its contribution base units by 35% during a three-year testing period, which consists ofthe plan year and two immediately preceding plan years. 29 U.S.C. 1385(c). Complete withdrawalfrom a multiemployer plan occurs when an employer permanently ceases to have an obligation tocontribute to the plan or permanently ceases the operations for which it had an obligation to contribute tothe plan. 29 U.S.C. 1383.



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As we discussed over the past few months, [A&P] will immediately effectuate acomplete withdrawal from the FELRA Pension Fund prior to the confirmation ofits plan of reorganization. This can be accomplished either by (i) Local 27sagreement that [A&P]s obligation to contribute to the FELRA fund for allemployees ceases immediately and permanently, with all affected employees

being transferred to another retirement plan, such as the UFCW InternationalPension Plan, for future benefits or (ii) [A&P] closing the affected storesemploying Local 27 members who participate in FELRA, effective as of February1, 2012.

Bankr. Doc. 3346, FELRAs Objection to Debtors Motion for Authority to Enter into a Side

Letter Agreement, Ex. A. Faced with the possibility of the employees at the remaining stores

losing their jobs, Doc. 18 p. 6, Local 27 relented and entered into the Side Letter Agreement.

The Side Letter Agreement, dated January 31, 2012 between FELRA and A&P provides in

relevant part:

As a result of the sale or closure of stores by [A&P] during its bankruptcyproceedings (Store Sales), [A&P] has significantly reduced itscontributions to the FELRA Fund under the CBA.

In consideration of mutual promises and covenants made herein and forother good and valuable consideration, the parties agree as follows:

1. The Parties acknowledge and agree that as of January 31, 2012: (a)[A&Ps] obligations under the CBA to contribute to the FELRA Fund

with respect to all employees will cease immediately and permanently

and A&P will withdraw from the FELRA Fund in a complete

withdrawal, and (b) the CBA shall be deemed modified, as necessary

to reflect such cessation and withdrawal, effective immediately and

permanently.

Bankr. Doc. 3332.

The effect of the Side Letter Agreement was, of course, that FELRAs claim would be

discharged upon the confirmation of the Plan as a complete withdrawal.3 That was precisely the

3 Section 1141(d)(1) of the Bankruptcy Code provides in relevant part, Except as otherwise provided inthis subsection . . . the confirmation of a plan . . . discharges the debtor from any debt that arose before thedate of such confirmation . . . whether or not a proof of claim based on such debt is filed[.] 11 U.S.C. 1141(d)(1).



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certainty that A&P had sought. See Bankr. Doc. 3354, Debtors Memorandum of Law in

Support of Confirmation of the Joint Plan 139 (During Debtors negotiations with Local 27 . .

. the Debtors made clear that a complete and permanent cessation of their obligations to

contribute to FELRA was absolutely essential to the Debtors emergence from chapter 11

protection.) (emphasis added). After executing the Side Letter Agreement, however, FELRA

had a change of heart and challenged the transaction as one whose principal purpose was to

evade or avoid withdrawal liability within the meaning of Section 4212(c)4 of [ERISA]. Bankr.

Doc. 3346 4. Accordingly, FELRA objected to A&Ps request for authorization to enter into

the Side Letter Agreement and requested that the matter be resolved through arbitration. Id.

FELRA also objected on the alternate ground that its claims were not properly classified as

Pension Withdrawal Claims.5 Id. 22.

At the confirmation hearing on February 6, 2012, FELRA sought to have itself removed

from the Plans Class J, Pension Withdrawal Claims. Doc. 18. p. 7. Over FELRAs objection,

Judge Drain authorized the Side Letter Agreement in an order dated February 8, 2011. Bankr.

Doc. 3391.

The confirmation hearing was continued on February 27, 2012. At that time, FELRA

orally moved for a stay pending its appeal of the Bankruptcy Courts decision overruling its

objections to the Plan. Judge Drain denied the request for a stay. The judge noted:

4 Section 4212 of ERISA, codified at 29 U.S.C. 1392, defines an employers obligation to contributeunder a collective bargaining agreement, provides that payments of withdrawal liability are not consideredcontributions, and requires that this part be applied to any transaction whose principal purpose is to evadeor avoid liability under this part. 29 U.S.C. 1392 (a)-(c).

5 The Plan defines Class J, Pension Withdrawal Claims any and all claims against the Debtors arising fromthe Debtors complete or partial withdrawal from any Multiemployer Pension Plans related to actions orevents occurring prior to the Effective Date, including . . . Food Employers Labor Relations Associationand United Food and Commercial Workers Pension Fund. Bankr. Doc. 3477-1 at 11.



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[I]t seems to me that while I obviously have to weigh the issue of your objectionbecoming moot, it's not clear to me necessarily that it would become moot, and,more importantly, the harm to the debtors of delaying confirmation pending adetermination on a seventy-three-million-dollar claim far outweighs the risk thatFELRA faces.

Clearly to me, this was a claim that falls within the case law of Chateaugay andthe other cases that is a pre-petition claim, except for, possibly, for the tiny sliverearned post-petition. And leaving that issue open is going to cause irreparableharm to the debtors because they won't be able to close. So on the merits,obviously I would not deny a request for a stay because I ruled against you --that's not the standard -- I do believe that as far as the nature of the claim isconcerned, pre or post-petition or dischargeable or not, that is a clear loser onyour part, and I would stand on that.

Bankr. Doc. 3505, Transcript of February 27, 2012 confirmation hearing, 78:7-22 (emphasis

added).

Notwithstanding his preliminary ruling, Judge Drain invited FELRA to make a further

written submission on their request for a stay: You could persuade me in writing otherwise.

Or, alternatively, my preliminary ruling could be my final ruling andyou can go right away to

the district court if you want and ask for a stay . Id. 79:14-17 (emphasis added). FELRA opted

for the latter option, and requested that the Judge issue a final oral ruling. The judge found:

All right. Well, what I just gave you will be my final ruling on this issue. I findthat, given the balance of the harms here and my analysis of the -- as well as myanalysis of the merits, but primarily based on the balance of the harms, that a stayis not warranted, particularly as here, where there's no offer of any bond to protectthe debtors in the event that the proposed transaction or the financing -- the exitfinancing -- go by the boards as a result of the stay.

Id. 81:15-22.

FELRA did not seek an appeal of Judge Drains denial of their request for a stay in this

Court. Judge Drain signed the Confirmation Order that very day, Feburary 27, 2012, and it was

entered on February 28, 2012. The Plan became effective on March 13, 2012 (the Effective



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Date). The Notice of Appeal was filed approximately one month later, on April 10, 2012. Doc.

1.

The Confirmation of the Plan of Reorganization

The negotiations concerning the CBA with FELRA were, of course, but one piece of a

much larger, complex plan of reorganization. Frederic F. Brace, a consultant for A&P and, prior

to its emergence from chapter 11 protection, its Chief Financial Officer, Chief Administrative

Officer and Chief Restructuring Officer, submitted a declaration in support of the instant motion

describing, among other things, the cascade of transactions and other events that occurred

immediately after the Effective Date the Plan on March 13, 2012. Doc. 7 (Brace Dec.). On

the Effective Date, the Reorganized Debtors emerged from chapter 11 protection and began

conducting business as a reorganized company. Specifically, over the course of the following

month Mr. Brace noted that A&P engaged in the following transactions:

discharged nearly a billion dollars in debt held by over 7,000 creditors andpermanently enjoined those creditors from asserting those claims against A&P;

cancelled approximately 53.8 million shares of publicly traded common stock inThe Great Atlantic & Pacific Tea Company, Inc. held by more than 16,000shareholders;

issued approximately 800,000 shares of new common stock;

issued over $455 million in second and third lien notes;

issued warrants to Yucaipa Companies LLC (an investor) to allow it to purchasenew common stock and new third lien convertible notes;

received over $490 million from the convertible noteholders and Yucaipa fortheir new money investment and an additional $5 million from one of A&Pssuppliers;

closed on a $645 million exit financing facility;



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disbursed over $310 million in cash to second lien noteholders through theDepository Trust Company (DTC), making it difficult if not impossible to nowclaw back the distributions;

disbursed more than $55 million in payments on account of cure payments,

503(b)(9) claims, and other administrative claims to approximately 250 separatevendors, landlords, service providers, contract counterparties, and others;

filed amended certificates of incorporation for all A&P corporate entities andamended the operating agreements for each LLC subsidiary;

formed new holding companies for real estate and pharmaceutical assets;

filed a Form 15 with the Securities Exchange Commission to deregister its oldcommon stock; and

named a new slate of seven directors as required by the Plan, who have begun tomake critical decisions for the Reorganized Debtors.

Id. 5.

A&P argues that, as a practical matter, granting FELRA the relief it requests would

require unwinding the entire Plan which would likely be impossible given the countless other

transactions have been entered into in reliance on the Plan. Specifically, to unwind the Plan,

A&P would have to return the $490 million in new investment received from its investors and

reclaim the 800,000 shares of new stock and over $455 million in second and third lien notes that

have been issued. Id. 6.

A&P has now paid hundreds of millions of dollars in distributions. In particular,

over $310 million was distributed to over 200 holders of the Reorganized Debtors prepetition

second lien notes through DTC, which then made distributions to the participants who certified

an interest in the securities with their DTC counterpart. Id. 7. The participants then further

distributed or credited the underlying book entry account of the second lien noteholders. Id.

A&P does not have a record of the second lien noteholders or their holdingsmaking reversal of

the distributions to such holders a daunting, if not impossible, task. Id. Unwinding the Plan



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would further require the reinstatement of the old A&P common stock outstanding prior to the

Effective Date, which was delisted during the course of the chapter 11 cases and cancelled upon

the Plan becoming effective. Id.

In light of the foregoing, Brace concluded that unwinding the Plan would be impractical,

[] likely impossible, and would certainly be inequitable. Id. Moreover, Brace opines that if the

Confirmation Order were overturned, A&P would be forced to liquidate, forcing thousands out

of work and leaving FELRA in, at best, the same position it is in now. Id. 8.

For its part, FELRA does not dispute that the significant and consequential economic

activity detailed in the Brace declaration has taken placeor indeed that the Plan is

substantially consummatedand concedes that the drastic undertaking of unwinding the entire

Plan and forcing liquidation . . . would not achieve the Pension Funds objectives at all. Doc.

18 p. 11. Rather, FELRA argues that the relief it requests does not require unwinding the entire

Plan at all, and that it only seeks the removal of itself as a creditor under Plan on the basis that

the Debtors have not withdrawn from the Pension Fund. Id.6

II. DiscussionA. Standard of Review

This Court has jurisdiction to hear appeals from decisions of a bankruptcy court pursuant

to 28 U.S.C. 158(a), which provides in relevant part that [t]he district courts of the United

States shall have jurisdiction to hear appeals . . . from final judgments, orders, and decrees; . . .

[and,] with leave of court, from other interlocutory orders and decrees . . . of bankruptcy judges.

28 U.S.C. 158(a). A district court reviews a bankruptcy courts findings of fact for clear error

6 The Court notes that FELRA has not met Braces Declaration concerning the likely effects of granting the relief itseeks with a declaration or other factual submission of its own, aside from the arguments in its memorandum inopposition.



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and its conclusions of law de novo. Overbaugh v. Household Bank, N.A. (In re Overbaugh), 559

F.3d 125, 129 (2d Cir. 2009); see Fed. R. Bankr. P. 8013 (a district court may affirm, modify, or

reverse a bankruptcy judges judgment, order, or decree, and [f]indings of fact, whether based

on oral or documentary evidence, shall not be set aside unless clearly erroneous).

B. FELRAs Appeal is Equitably MootEquitable mootness is a prudential doctrine that is invoked to avoid disturbing a

reorganization plan once implemented. In re Metromedia Fiber Network, Inc., 416 F.3d 136,

144 (2d. Cir. 2005); see also MAC Panel Co. v. Va. Panel Corp., 283 F.3d 622, 625 (4th

Cir.2002) ([E]quitable mootness is a pragmatic principle, grounded in the notion that, with the

passage of time after a judgment in equity and implementation of that judgment, effective relief

on appeal becomes impractical, imprudent, and therefore inequitable. (emphasis omitted)). An

appeal should also be dismissed as moot when, even though effective relief could conceivably be

fashioned, implementation of that relief would be inequitable. In Re Chateaugay Corp., 988

F.2d 322, 325 (2d Cir. 1993) (Chateaugay I) (citingIn re AOV Industries, Inc., 792 F.2d 1140,

1147 (D.C.Cir.1986)). Such a dismissal is appropriate when, for example, the appellant has

made no effort to obtain a stay and has permitted such a comprehensive change of circumstances

to occur as to render it inequitable for the appellate court to reach the merits of the appeal. Id.

(internal quotation omitted) (citingIn re Crystal Oil Co., 854 F.2d 79, 82 (5th Cir.1988).

As an initial matter, the Court finds that the Plan is substantially consummated. Under

the Bankruptcy Code, a plan is substantially consummated upon (1) transfer of substantially all

of the property proposed by the plan to be transferred; (2) the reorganized debtor's assumption of

the debtor's business; and (3) commencement of distribution under the plan. 11 U.S.C.

1101(2). Here, A&P has pointed to the number, size, and complexity of the transactions it has



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completed since the Plan's March 13, 2012 Effective Date, including: the issuance of 800,000

shares of new stock; the discharge of nearly a billion dollars in debt to over 7,000 creditors; the

closing on a $645 million exit financing facility; and the disbursement of $310 million in cash to

second lien holders. Accordingly, A&Ps Plan has been substantially consummated as that

term is defined by the Code, and FELRA has not argued otherwise on appeal. In re Metromedia

Fiber Network, Inc., 416 F.3d at 144.

When a reorganization has been substantially consummated, there is a strong

presumption that an appeal of an unstayed order is moot. Freeman v. Journal Register Co., No.

09-CIV-7296 (JGK), 2010 WL 768942, at *4 (quotingAllstate Ins. Co. v. Hughes, 174 B.R. 884,

889 (S.D.N.Y.1994)); see also In re Metromedia Fiber Network, Inc., 416 F.3d at 144. This

presumption may only be overcome when five circumstances are present:

(a) the court can still order some effective relief; (b) such relief will not affect there-emergence of the debtor as a revitalized corporate entity; (c) such relief willnot unravel intricate transactions so as to knock the props out from under theauthorization for every transaction that has taken place and create an

unmanageable, uncontrollable situation for the Bankruptcy Court; (d) the partieswho would be adversely affected by the modification have notice of the appealand an opportunity to participate in the proceedings; and (e) the appellant pursuedwith diligence all available remedies to obtain a stay of execution of theobjectionable order ... if the failure to do so creates a situation rendering itinequitable to reverse the orders appealed from.

FritoLay, Inc. v. LTV Steel Co. (In re Chateaugay, Corp.), 10 F.3d 944, 95253 (2d Cir.1993)

( Chateaugay II) (internal citations, quotations, and alterations omitted).

The parties agree that a resolution of the motion requires an analysis of the Chateaugay II

factors. Even a cursory review of those factors, however, make clear that FELRA is not able

overcome the presumption that a substantially consummate plan should not be disturbed.



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i. The Court is Unable to Order Some Effective ReliefWhile substantial consummation of a reorganization plan is a momentous event, the

Second Circuit has cautioned that it does not necessarily make it impossible or inequitable for an

appellate court to grant effective relief. Chateaugay II,10 F.3d at 952. Thus, failure to provide

effective relief has been found where the transactions already consummated cannot be undone,

assets sales have been completed, and funds have been disbursed to persons who are not parties

to the appeal. See e.g. Bartel v. Bar Harbor Airways, Inc., 196 B.R. 268, 272 (S.D.N.Y. 1996)

(finding inability to provide effective relief where the asset sales are completed and the proceeds

already distributed);In re Blumer, 66 B.R. 109, 113 (B.A.P. 9th Cir. 1986), affd, 826 F.2d 1069

(finding it impossible to grant effective relief where funds have been disbursed to non-litigants).

Here, FELRAs conclusory assertion that the relief it requests would not require the

unwinding of the entire Plan is unpersuasive, and insufficient to rebut the finding of the

Bankruptcy Court that [e]ach term and provision of the Plan . . . is integral to the Plan.

Confirmation Order 182. See also Confirmation Order 214 (For the avoidance of doubt, the

Debtors are assuming the Modified Collective Bargaining Agreement between the Debtors and

United Food and Commercial Workers International Union Local 27 . . . as further modified by

the Side Letter of Agreement, dated January 31, 2012, between the Debtors and Local 27.)

(emphasis added). A&P has submitted sufficient evidence for the Court to conclude that

excising FELRAs $76 million dollar claim, and reclassifying it, would have a deleterious effect

on the numerous transactions that necessarily had to be consummated for the Plan to become

effective. FELRA has offered no facts in response. See In re Metromedia Fiber Network, Inc.,

416 F.3d at 145 (denying appeal as equitably moot after finding that the inter-relatedness of the



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transactions would be affected by the relief sought: It appears that all these things have been

done, and that none can be undone without violence to the overall arrangements.)

ii. The Relief Requested Will Affect the Re-emergence of A&P as aRevitalized Corporate Entity

A&P asserts that reclassifying FELRAs claim would constitute a default under the

financing and investment agreements that underlie the Plan. FELRAs response is that such an

occurrence is unsupported speculation about the future. Doc. 18 p. 12. The Court notes that it

is not speculation to conclude that A&Ps counterparties would move appropriately to assert

their rights under the agreements in the event that a $76 million claim were found to not to be

dischargeable in Bankruptcy. As the Judge Drain noted at the February 6, 2012 hearing: I cant

imagine any investor agreeing to close on a deal where they wouldnt know whether a seventy-

three million dollar claim was going to be discharged or not. I mean, its just a joke. They

would never do that. Transcript of February 6, 2012 Hearing, 111:2-6.

The same irrefutable logic applies after substantial consummation of the Plan. If

reclassification results in an event of default, it would be unreasonable assume that the investors

would not exercise their foreclosure rights in the face of a liability that could imperil the entire

Plan and their substantial investment. Such an event would clearly affect the ability of A&P to

emerge as a revitalized entity. In any event, even if the Court cannot predict what will happen if

this settlement is in any part altered, having sought no stay of the bankruptcy court's order (and

no expedited appeal), appellants bear the burden of this uncertainty. In re Metromedia Fiber

Network, Inc., 416 F.3d 145 (citing Chateaugay I, 988 F.2d at 326 (The party who appeals

without seeking to avail himself of that protection does so at his own risk.)).



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iii. Such Relief Will Likely Unravel The PlanThe Plan includes a severability provision that provides in relevant part that [t]he

Confirmation Order shall constitute a judicial determination and shall provide that each term and

provision of the Plan . . . is . . . nonseverable and mutually dependent. Doc. 1 Ex. 1, Art. XI.N.

Clearly, the classification of FELRAs claim, as well as the Modified Collective Bargaining

Agreement with Local 27, as further modified by the Side Letter Agreement, see Confirmation

Order 214, are valid and integral to the Plan. Id. 182. Thus, pursuant to the terms of the

Plan, if FELRA were to prevail on its appeal of the Confirmation Order, the entire Plan, having

already been substantially consummated, would be doubt. SeeBartel v. Bar Harbor Airways,

Inc., 196 B.R. 268, 272 (S.D.N.Y. 1996) (finding that where the asset sales are completed and

the proceeds already distributed, the relief requested would unravel intricate transactions and

create an unmanageable, uncontrollable situation for the Bankruptcy Court.); see alsoIn re

Continental Airlines, 91 F.3d 553, 565 (Where, as here, investors and other third parties

consummated a massive reorganization in reliance on an unstayed confirmation order that,

explicitly and as a condition of feasibility, denied the claim for which appellate review is sought,

the allowance of such appellate review would likely undermine public confidence in the finality

of bankruptcy confirmation orders and make successful completion of large reorganizations like

this more difficult.)

iv. All Parties Who Would be Adversely Affected Have Not ReceivedNotice of the Appeal

FELRA has conceded that the only parties who have received notice of the appeal are

those that were present at the February 27, 2012 hearing, or who received notice pursuant to

Bankruptcy Rule 8001(a). Doc. 18 p. 15. FELRAs view as to the sufficiency of its effortif it

can be described as suchis based on the premise that its requested relief only focuses on a



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narrow aspect of the Plan. Id. As discussed above, FELRAs position is rebutted by the plain

terms of the Plan and by the significance of its claim. This Court cannot find as a matter of fact

or law that reclassification of FELRAs $76 million dollar claim, and the attendant rejection of

the Confirmation Order, would not affect the dozens of innocent third parties that have already

consummated transactions in reliance on the Plan. Accordingly, FELRA, admittedly, has failed

to provide proper notice to all those who would be adversely affected by the Plan.

v. FELRA has not Pursued with Diligence All Available Remedies toObtain a Stay of Execution of the Order

FELRA asserts that the fact that it made an oral request of the Bankruptcy Court to issue

a stay, which was promptly denied, satisfies its obligation under the fifth Chateaugay IIfactor.

Doc. 18 p. 16. FELRA is mistaken. Courts in this Circuit do not merely require appellants in

bankruptcy proceedings to request a stay in a perfunctory manner; they require diligence. In the

instant case, while FELRA rightly notes that it did not request an oral ruling from Judge Drain so

that it could request a stay from this Court, id., it is the case that Judge Drain reasonably assumed

that to be the case: You could persuade me in writing otherwise. Or, alternatively, my

preliminary ruling could be my final ruling and then you can go right away to the district court if

you want and ask for a stay. Bankr. Doc. 3505, Transcript of February 27, 2012 confirmation

hearing, 79:14-17. FELRA did not thereafter seek a stay of the Confirmation Order in this

Court.

Its failure to do so is fatal under Second Circuit authority. That is so because in the

Second Circuit, courts expect appellants to proceed with dispatch at every step of the process.

See Chateaugay II, 10 F.3d at 954 (finding appeal not equitably moot in part because appellant

sought to stay the confirmation of the Plan in urgent applications before the bankruptcy court,



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Exhibit 1

A&P Post-Petition Period Contributions to FELRA

Estimated Present Value of Vested Benefits Accrued in Post-Petition Period

Debtors Post-PetitionContributions

Full-TimeContributionRate

Number ofmonths1

Multiplied by$47 BenefitAccrual Rate

RoughPresentValue2

2010 $130,701 $872.54/month 150 $7,050 $35,250

2011 $1,815,940 $1104.59/month 1,644 $77,268 $386,340

2012 $151,328 $1156.63/month 131 $6,157 $30,785

Total post-petition

contributions

$2,097,969 Estimate of total accruedbenefits, assuming all

employees were full-timeduring post-petition period

$452,375

Part-TimeContributionRate

Multiplied by$32 BenefitAccrual Rate

2010 $130,701 $323.05/month 405 $12,960 $38,880

2011 $1,815,940 $375.64/month 4,834 $154,688 $464,064

2012 $151,328 $428.23/month 353 $11,296 $33,888

Total post-petitioncontributions

$2,097,969 Estimate of total accruedbenefits, assuming all

employees were part-timeduring post-petition period

$536,832

Estimate of total accrued benefits, assuming 50% full-time and 50% part-timeemployment during post-petition period = ($452,375 * .5) + ($536,832 * .5) =

$494,604

1 Assumed total number of months for which contributions were made on behalf of employees based on total

contributions divided by the full-time and part-time contribution rates.

2 Conservative PV factor of 5 assumed for full-time participants and 3 for part-time participants. This

corresponds to an assumed average age of 53 for full-time and 46 for part-time, deferral age (unreduced) of 62, 8.0%

per annum discount rate and 2012 unisex mortality. This calculation is intended only as a rough, ballpark present

value.




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Exhibit 2

12/31/2009 A&P Withdrawal Liability Estimate

Year After

Pool Year

A&P Allocation at

12/31/2008

A&P Allocation at

12/31/20091991 24,161 12,081

1992 36,686 24,457

1993 50,595 37,946

1994 64,830 51,864

1995 79202 66,002

1996 94,828 81,281

1997 110,545 96,727

1998 128,400 114,133

1999 146,420 131,778

2000 165,189 150,172

2001 5,178,004 4,746,5042002 10,550,392 9,738,823

2003 19,368,435 17,984,975

2004 (2,312,007) (2,157,873)

2005 3,715,125 3,482,930

2006 1,435,188 1,350,765

2007 5,774,130 5,453,345

2008 4,493,803 4,257,287

2009 27,426,304 26,054,989

2010 5,216,653

Total 76,894,839




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Exhibit 3

Original Declaration of Darren French

(December 21, 2012)




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EXHIBIT C



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212-400-8845 - [email protected]

TransPerfect Legal Solutions

Page 1

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

------------------------------x

In Re:

THE GREAT ATLANTIC & PACIFIC

Case No. 10-24549(RDD)

TEA COMPANY, INC., et al.,

Reorganized Debtors.

------------------------------x

DEPOSITION OF

KEVIN JAMES WOODRICH

New York, New York

Wednesday, January 16, 2013

Reported by:

Steven Neil Cohen

Ref: 8825



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1 Woodrich

2 that you are going to offer in this case?

3 A. Speaking with both counsel and my

4 colleagues as well as one case, Cott versus

5 New England.

6 Q. Sorry. What was the case?

7 A. Cott, C-O-T-T, versus New England

8 were relied upon.

9 Q. Okay. And what documents did you

10 review in forming your opinion?

11 A. I read the Cott versus New England

12 and prior to that in order to calculate the

13 withdrawal liability referred to the fund's

14 withdrawal liability policy in accordance

15 with ERISA using that to first calculate the

16 total amount.

17 Q. Okay. So, other than the document

18 you have described did you look at any other

19 documents in coming to your opinion?

20 A. No.

21 Q. So if I understand your testimony

22 correctly FELRA's counsel gave you one case,

23 the Cott versus New England case?

24 A. No. They gave me other cases but

25 the one used to formulate my opinion was



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1 Woodrich

2 based on the aforementioned Cott versus New

3 England.

4 Q. Okay. Let me make sure my

5 question is clear then. What documents, any

6 documents, and that can be cases, other

7 documents or articles provided by your

8 attorney, any document did you look at in

9 connection with forming your opinion?

10 A. There were other cases provided to

11 me of which the names of those I don't

12 recall.

13 Q. Sure. Anything other than cases?

14 A. No.

15 Q. Any materials at Cheiron?

16 A. No.

17 Q. Any published articles or --

18 A. No.

19 Q. Any Google searches for documents

20 on the topic?

21 A. No.

22 Q. Okay. So it is fair to say that

23 you formed your opinion based on the cases

24 provided to you by FELRA's counsel?

25 A. Yes, as well as conversations with



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1 Woodrich

2 both counsel and fellow colleagues.

3 Q. Okay. Let's talk about those

4 conversations.

5 What conversations did you have

6 with fellow colleagues?

7 A. One other colleague pointed in

8 discussing how to separate the pre-petition

9 and the post-petition portion of the

10 withdrawal liability in conversation pointed

11 me in the direction of the Cott versus New

12 England to consider as one option, if you

13 will, for performing the job that we were

14 asked to do.

15 Q. Okay. Who is that colleague?

16 A. Peter Hardcastle.

17 Q. He is also at Cheiron?

18 A. Yes.

19 Q. And it was him that provided you

20 with this Cott versus New England case?

21 A. Not the actual document.

22 Q. Sure. But he suggested?

23 A. But he suggested.

24 Q. Prior to getting that suggestion

25 from Peter Hardcastle had FELRA's counsel



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1 Woodrich

2 quality control process is to have people

3 review the calculations and it was Peter's

4 responsibility to review the calculations

5 that were performed by myself.

6 Q. Okay. And so did Mr. Hardcastle

7 and you prior to you doing the calculation,

8 did Mr. Hardcastle and you discuss how you

9 would do the calculation?

10 A. He provided or referenced the Cott

11 versus New England and upon reading it I

12 interpreted and applied it in performing the

13 calculation which was later reviewed by

14 Peter.

15 Q. Okay. So you believe your

16 calculation and proposed methodology in your

17 declaration is derived from this Cott versus

18 New England case; is that correct?

19 A. Yes.

20 Q. Did you derive it from any other

21 source?

22 A. No.

23 Q. And just to confirm, did

24 Mr. Hardcastle suggest any other

25 methodologies you might want to consider in



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1 Woodrich

2 correct?

3 A. Yes.

4 Q. So it is correct then that

5 investment losses will decrease the value of

6 FELRA's assets?

7 A. Yes.

8 Q. And if assuming vested benefits

9 remain unchanged, a -- you would agree with

10 me that a decrease in FELRA's assets caused

11 by investment losses would actually increase

12 FELRA

Great Atlantic Withdrawal Liability Debtors Brief

Documents

Transcript of Great Atlantic Withdrawal Liability Debtors Brief