* Kodak plans to cut $1 bln in retiree benefits

* Auction plan set for Kodak web publishing business

By Nick Brown

NEW YORK, March 20 (Reuters) - Retirees of Eastman Kodak Co asked a bankruptcy judge to appoint a committee to represent their interests in light of the company's plan to shed $1 billion in benefits for Medicare-eligible retirees.

Two retiree groups argued in U.S. Bankruptcy Court in Manhattan on Tuesday that a committee was necessary under bankruptcy statutes governing retiree benefits.

"Most of these folks are without college education," R. Scott Williams, an attorney for one retiree group, told Judge Allan Gropper. "They are sitting there, needing the healthcare benefits that their employers promised them."

The proposed committee, which would be paid for with money in Kodak's estate, met with opposition from Kodak. The company said it was too early in the case to decide whether a committee was needed.

Kodak filed for bankruptcy on Jan. 19 after falling behind in a photography industry that has moved digital.

At the hearing, Kodak said it plans to terminate non-vested benefits for Medicare-eligible employees who retired after 1991 in an effort to bring its costs in line with declining revenues. The move would reduce Kodak's total liability for retiree medical and survivor benefits to $223 million from $1.223 billion, according to court papers filed by the company.

"These benefits do not provide core coverage," Kodak attorney Marc Trevino told the judge. "They are secondary to Medicare, and they are replaceable in the market. This motion represents a necessary but regrettable first step."

Gropper did not rule on the retirees' request but said the matter should be decided before a ruling is made on cutting benefits. He asked the parties to set an April hearing to argue the matter further.

APRIL AUCTION SET

Earlier this month, Kodak agreed to sell its online photo services business, Kodak Gallery, to Shutterfly Inc for $23.8 million. The deal followed a "stalking horse" bid by Shutterfly -- a starting offer that other potential bidders would have to surpass in a court-supervised auction.

Potential bidders have until April 20 to submit offers under bidding procedures approved by Gropper on Tuesday. If multiple bids are received, an auction would be held on April 26, with a hearing to approve a deal set for April 30.

Shutterfly would get a $250,000 breakup fee if outbid by another party. That fee was lowered from $600,000 in an earlier version of the agreement.

Kodak Gallery has more than 75 million users. Shutterfly has said it would transfer those customers' accounts and images in the United States and Canada to its own database, and would give customers opt-out rights.

Separately at Tuesday's hearing, Gropper granted Kodak's request to examine certain Apple Inc documents related to a dispute over the ownership of a digital imaging patent.

Apple and Kodak are fighting over who owns the patent, which involves the technology for previewing digital photographs on LCD screens. Kodak said it needed access to documents and communications related to Apple's claims that it owns the patent and is entitled to restitution.

Earlier in March, Gropper denied a request by Apple to continue pursuing its claims while Kodak is in bankruptcy. But he said the parties should try to resolve the dispute quickly, and in a way that does not interfere with Kodak's plans to sell its patent portfolio in June and emerge from bankruptcy.

The case is In re: Eastman Kodak Co et al, U.S. Bankruptcy Court, Southern District of New York, No. 12-10202.

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