510 B.R. 205
Bankr. N.D. Ill.2014Background
- Debtor Chicago Construction Specialties sought to reject CBAs under 11 U.S.C. §1113 in a liquidation context.
- Union and Funds objected to the motion.
- Debtor ceased operations in Feb 2013 and sold substantially all assets by May 2013.
- Debtor filed bankruptcy on Aug 5, 2013 and moved to reject the CBA on Dec 11, 2013.
- Court held §1113 applies in liquidating Chapter 11 and evaluated the nine-factor test.
- Rejection granted with effective date March 7, 2014.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does §1113 apply to a liquidating Chapter 11 case? | Debtor argues §1113 applies in liquidation. | Respondents argue §1113 is inapplicable to liquidation. | Yes, §1113 applies in liquidating Chapter 11. |
| Can the nine-factor test be applied in liquidation? | Debtor contends factors adapted to liquidation still apply. | Respondents say factors should be narrowed for liquidation. | Factors apply contextually to liquidation; some are satisfied by liquidation. |
| Did Debtor satisfy the first and information-related subsections before seeking rejection? | Notice satisfied pre-filing proposal requirement. | Information provided inadequate or premature. | Yes; notice/proposal met the requirement under the facts. |
| Is rejection necessary to permit the liquidation under §1113? | Rejection necessary to avoid administrative claims and preserve value. | Rejecting CBAs not necessary since no reorganization. | rejection is necessary for the Debtor’s liquidation under the circumstances. |
Key Cases Cited
- Northwest Airlines Corp., 346 B.R. 307 (Bankr.S.D.N.Y.2006) (nine-factor test for §1113 in reorganizations; flexible approach for liquidation context)
- Family Snacks, Inc., 257 B.R. 884 (8th Cir. BAP 2001) (distinguishes liquidation/rehabilitation and uses nine factors; remanded for full §1113 analysis)
- Garofalo’s Finer Foods, Inc., 117 B.R. 363 (Bankr.N.D.Ill.1990) (expands §1113 purposes; safeguards to prevent abuse in modification of CBAs)
- AMR Corp., 477 B.R. 384 (S.D.N.Y.2012) (nine-factor framework for §1113; information and good faith negotiations)
- Ionosphere Clubs, Inc., 134 B.R. 515 (Bankr.S.D.N.Y.1991) (contextual discussion of liquidation vs. reorganization under §1113)