This article examines the April 2013 American Airlines decision denying $20 million CEO severance payment under § 503(c) but seemingly adopting the exception set forth in In re Journal Register Co. allowing for the insider severance payment to be approved as part of a plan of reorganization if “reasonable” under § 1129(a)(4). Four days after the decision, American Airlines filed its plan of reorganization, conditioned on approval of the CEO severance payment, setting up a showdown on the “reasonableness” of the $20 million payment at confirmation.
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