Former Co-op Atlantic workers lose first step in pension cut battle

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A group of former employees of Co-op Atlantic have lost a battle over a 32-per-cent cut in their pensions after a judge ruled Monday they could not have their lawyer recognized in the case as the first step toward reopening negotiations in the company's insolvency.

The non-unionized former employees of the Moncton-based co-operative asked for standing to become a recognized group in the wind-up, allowing them to launch new talks with creditors to try to improve a settlement deal approved in April.

Co-op Atlantic, which previously operated an array of retail and wholesale businesses and employed 1,200 workers, filed for court protection from bankruptcy in June, 2015, and has sold off almost all of its business operations and assets, including its grocery stores and gas stations.

The employee group was upset with a deal negotiated between the company and its creditors, which will see the pension plan receive $5.5-million from the funds amassed from asset sales, representing 7.4 per cent of the pension plan's total $74.65-million deficit. Banks and secured creditors will receive far more, with National Bank paid $13.4-million or 95 per cent of its claim, and Farm Credit Canada receiving $7-million or 94 per cent of its claim.

Lawyer Andrew Hatnay, who is representing the former non-unionized employees, argued in court filings that the pension plan should have received far more in the negotiations because it had priority as a creditor under New Brunswick's Pension Benefits Act, placing the pension claims ahead of secured creditors.

But Justice Darrell Stephenson of the New Brunswick Court of Queen's Bench ruled on Monday that Mr. Hatnay could not become representative counsel for the employee group as the insolvency case nears its conclusion.

Mr. Hatnay said he does not know if the employee group will try to challenge the decision. "We're speaking with our clients to determine next steps," he said.

Retiree Murielle DiDomenicantonio, a former executive assistant to the CEO of Co-op Atlantic who worked at the company for 13 years, said she received a letter in April informing her that her monthly pension payment was being cut by 32 per cent, to $607.88 a month from $893.94, because of the pension shortfall. In an interview, she said the cut, which took effect in May, "is substantial" and "is making a difference in my life."

Some of the other 400 former Co-op Atlantic employees who are already retired are in even worse shape, she said, including couples who worked for the company.

"It's a big loss when you have worked all your life to put money in a pension plan, only to have them tell you 32 per cent is lost," she said.

Two unions representing Co-op Atlantic's former unionized employees had standing in the insolvency and advocated on behalf of pension plan members. But the non-unionized employees say they were not represented and would not have agreed to the negotiated settlement deal if they had known about it before it was finalized.

Co-op Atlantic opposed the non-unionized employees' efforts to reopen negotiations, arguing the deal took months to negotiate with all creditors.

The company's lawyers said the non-unionized employees did not need to have separate representation in the insolvency talks because they belong to the same pension plan as the unionized employees, and therefore were represented by the union's lawyers and were treated the same as all other employees in the deal that was concluded.

In a letter filed in court, Co-op Atlantic lawyer Robert Chadwick said the interests of employees and pensioners "have been very well represented" throughout the proceedings by the unions' lawyers, and by Eckler Ltd., which was hired to be administrator of the pension plan.

Mr. Chadwick said pension plans may have priority under New Brunswick legislation, but without a negotiated deal in the restructuring under the Companies' Creditors Arrangement Act, the company could have been forced into full bankruptcy under the Bankruptcy and Insolvency Act, where the pension plan would not have priority.

"The settlement was negotiated and arrived at with the prospect of that outcome in mind," Mr. Chadwick said in the letter.

He added that the company does not want to fund more lawyers' fees for the non-unionized employees out of its "limited" remaining money, and said the pension plan should also receive a majority of the unallocated money remaining in the company, estimated to be between $2.5-million and $3.5-million.

Co-op Atlantic's pension plan has had a deficit since its investment portfolio took a hit during the 2008 financial crisis, losing 14 per cent of its value. Funding declined further during the era of low interest rates that followed 2009, leaving the plan just 68 per cent funded as of Dec. 31, 2015, according to a pension notice sent to plan members.

In an interview Monday, Mr. Chadwick said Co-op Atlantic is sorry retirees had their pensions reduced, and said the company tried its best to protect their interests while negotiating the best possible deal for all parties.

"We did what we thought was in the best interests of all the stakeholders," he said.

‎Mr. Chadwick said the alternative to reaching a negotiated settlement could have been far worse if the case had gone to court for a judge to determine how to distribute the assets. He said retirees could have gotten less, and could have seen a lot of the company's remaining money lost to lawyers' fees.

"There has to be a balance to that," he said.