In a 28 page opinion released October 20, 2014 in the Trump Entertainment Resorts case (Bank. D. Del. 14-12103), Judge Kevin Gross of the Delaware Bankruptcy Court provided a thorough analysis of the ability of a debtor to reject a collective bargaining agreement pursuant to 11 U.S.C § 1113. Judge Gross’s opinion is available here (the “Opinion”).
My colleague, Carl Neff, provided a summary of the Trump Entertainment Resorts bankruptcy here.
In this case, the debtors petitioned the Court to terminate the collective bargaining agreement (“CBA”) between UNITE HERE Local 54 (the “Union”) and Trump Taj Mahal Associates LLC, which operated the casino the Taj Majal. The Opinion lays out a history of attempts by the debtors to engage the Union to revise the CBA in an effort to cut costs and keep the Taj Mahal open. Opinion at *6-7. In the Court’s words, the debtors “stood on their heads to negotiate and were rebuffed time and time again.” Opinion at *26.
The Union argued that Section 1113 did not apply in this case because the CBA had expired by its own terms in early September, and was thus no longer an executory contract governed by Section 1113. Opinion at 10. As the Court discussed, the NLRA provides that the obligations of a CBA remain in effect after the expiration of a collective bargaining agreement, limiting an employers ability to unilaterally change the terms of employment for persons employed under a collective bargaining agreement.
Outside of bankruptcy, the NLRB has the exclusive jurisdiction to enforce and interpret the NLRA. Opinion at *17. However, once an employer has filed for bankruptcy, Bankruptcy Code Section 1113 grants a Bankruptcy Court, or District Court, jurisdiction to approve rejection of the terms of a collective bargaining agreement. Even after a collective bargaining agreement has expired, Section 1113 continues to provide jurisdiction to the Bankruptcy Court. This “avoids an absurd result and promotes consistency with the legislative purpose of the statute and the Bankruptcy Code as a whole.” Opinion at *16.
While Judge Gross’ analysis is extensive, it can be summarized simply: because the CBA continued in effect after expiration and a failure to modify or reject the CBA would result in irreparable damage to the estate (the liquidation of the debtors and the loss of every job the CBA applied to), Section 1113 applied and the CBA would be unilaterally amended.