Trump Entertainment Resorts and its predecessors have filed for Chapter 11 bankruptcy protection four times, in 1991, following construction of the $1-billion Trump Taj Mahal, and in 2004, 2009 and 2014.
Last week the 3rd Circuit Court of Appeals, issued an important ruling. Here are excerpts from the opinion:
This appeal requires us to resolve the effect of two potentially conflicting provisions of federal law. Section 1113 of the Bankruptcy Code allows a Chapter 11 debtor to “reject” its collective bargaining agreements (CBAs) under certain circumstances.1 The National Labor Relations Act (NLRA) prohibits an employer from unilaterally changing the terms and conditions of a CBA even after its expiration.2 Thus, under the NLRA, the key terms and conditions of an expired CBA continue to govern the relationship between a debtor-employer and its unionized employees until the parties reach a new agreement or bargain to impasse. This case presents a question of first impression among the courts of appeals: is a Chapter 11 debtor-employer able to reject the continuing terms and conditions of a CBA under § 1113 after the CBA has expired?UNITE HERE Local 54 (Union) appeals the Bankruptcy Court’s order granting the Debtors’ motion to reject their CBA with the Union pursuant to § 1113(c). The Union contends that the Bankruptcy Court lacked subject matter jurisdiction to approve the Debtors’ motion because the CBA had expired. The Debtors, Trump Entertainment Resorts, Inc., and its affiliated debtors,3 contend that § 1113(c) governs all CBAs, expired and unexpired, and that the Bankruptcy Court’s interpretation of § 1113 is consistent with the policies underlying the Bankruptcy Code.We conclude that § 1113 does not distinguish between the terms of an unexpired CBA and the terms and conditions that continue to govern after the CBA expires.
Thus, we will affirm the order of the Bankruptcy Court. – See more at: http://caselaw.findlaw.com/us-3rd-Circuit/1723108.html#sthash.QY9WSfqj.dpuf
Under the policies of bankruptcy law, it is preferable to preserve jobs through a rejection of a CBA, as opposed to losing the positions permanently by requiring the debtor to comply with the continuing obligations set out by the CBA. Moreover, it is essential that the Bankruptcy Court be afforded the opportunity to evaluate those conditions that can detrimentally affect the life of a debtor, whether such encumbrances attach by operation of contract or a complex statutory framework. In light of Chapter 11’s overarching purposes and the exigencies that the Debtors faced, we conclude that the Bankruptcy Court did not err in granting the Debtors’ motion.