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Katy Industries Section 1114 Compliance Sought

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Katy Industries’ official committee of retirees filed with the U.S. Bankruptcy Court an emergency motion to compel the Debtors’ compliance with Section 1114 of Title 11 of the United States Code, 11 U.S.C. Sections 101.

The motion explains, “By this Motion, the Committee respectfully requests the entry of an order, substantially in the form attached hereto, (i) requiring the Debtors to restore the Retiree Welfare Programs in place as of the Petition Date; (ii) authorizing and directing the Debtors to immediately pay the retirees any increased expenses incurred by any retiree as a result of any modification or termination of any of the Retiree Welfare Programs; and (iii) mandating that the Debtors provide notice to each of the affected retirees to inform them of any erroneous cancellation of benefits, the restoration of such benefits pending further order of the Court, and the process by which expense reimbursements may be submitted and paid.”

In addition, “Further, the Debtors should be ordered to immediately reimburse retirees for any increased costs and penalties they have incurred as a result of the Debtors’ violation of Bankruptcy Code section 1114. The retirees have limited resources. They were given no notice of the termination of certain of their Retiree Welfare Programs, and therefore, have had no opportunity to plan or save for these changes, which in some cases will require the immediate payment of thousands of dollars in order to maintain coverage….Finally, the Committee requests that the Debtors be required to inform each of the retirees of the termination of their coverage, the restoration of their coverage, and the process by which to request reimbursement. The Committee only learned of certain of the terminations when retirees attempted to utilize their drug and/or dental benefits only to be turned away.”

The Debtors also filed with the Court a motion to shorten notice and expedite consideration of this motion. The Court approved and scheduled a February 13, 2018 hearing, with objections due on the same date.

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