Chrysler Canada Inc. v Gatens et al.

In 2009, the auto sector in North America experienced the most severe crisis in its history. Chrysler filed for insolvency protection in the U.S., and was poised to file in Canada as well.

A major issue in the Canadian restructuring of CCI was the treatment of post-retirement health care benefits for over 10,000 Canadian retirees and their families – up to 30,000 beneficiaries.

Koskie Minsky LLP represented the Canadian Auto Workers in the key phases of the negotiations between Chrysler and the CAW over the treatment of post-retirement health liabilities.

In particular, Koskie Minsky advised the CAW on the creation and funding of an independent health care trust, now established and known as the ”Auto Sector Retirees Health Care Trust” (“asrTrust”) to provide post-retirement health benefits to Chrysler retirees. Koskie Minsky was instrumental in negotiating the terms of the $1.325 billion settlement, designing the independent health care trust, advising on taxation and compliance issues and project managing the implementation of the settlement. Koskie Minsky also worked on the development of amendments to the Income Tax Act (Canada) to create a new category of “Employee Life and Health Trust” that provided tax assistance to the new trust.

The asrTrust is the first pre-funded health care trust of its kind in Canada, and was a key feature of the restructuring permitting CCI to remain a going concern and to provide post-employment health care to CAW retirees. Koskie Minsky LLP represented the CAW through the negotiation, litigation and implementation phases. Koskie Minsky LLP employee benefits and tax practitioners also worked on the legislative reforms required to enable this significant development in the benefits industry.