519 B.R. 76
Bankr. D. Del.2014Background
- Trump Entertainment Resorts and affiliates (including Trump Taj Mahal Associates, LLC "Taj Mahal") filed Chapter 11 on Sept 9, 2014; Taj Mahal operates a large Atlantic City casino facing severe revenue decline and imminent cash exhaustion.
- Taj Mahal employed ~2,953 workers; UNITE HERE Local 54 represented 1,136 employees under a CBA that expired Sept 14, 2014 but whose terms continued under the NLRA status-quo obligations.
- Debtors proposed significant labor-cost concessions (pension withdrawal in favor of 401(k), replacement of health/welfare with ACA coverage plus $2,000 supplement, operational and pay-rule changes) in a Proposal dated Sept 17, 2014 (amended Oct 10, 2014).
- Debtors presented uncontroverted evidence that without CBA relief and other concessions (secured creditor debt-to-equity and $100M infusion, tax relief), they would likely have to close the casino and liquidate within weeks, costing ~3,000 jobs.
- Debtors documented repeated efforts to negotiate, provided extensive financial data and a data room; the Union delayed, engaged in public campaigns, and offered a late, partial counterproposal and no witnesses at the hearing.
Issues
| Issue | Plaintiff's Argument (Debtor) | Defendant's Argument (Union) | Held |
|---|---|---|---|
| Whether §1113 applies to an expired CBA whose terms continue under NLRA status-quo | §1113 applies — Congress used "continues in effect" and intended bankruptcy courts to address post-expiration status-quo burdens to enable reorganization | §1113 does not apply to expired CBAs; remaining obligations are statutory under NLRA and within NLRB jurisdiction | Court: §1113 applies to expired CBAs that continue in effect under NLRA; bankruptcy court may approve rejection |
| Whether debtor satisfied §1113 procedural/substantive requirements to reject CBA | Debtor made a proposal based on most complete/reliable info, provided necessary documents, bargained in good faith, and showed modifications are necessary for reorganization | Union contends bargaining insufficiencies and challenges some Proposal terms (e.g., lack of "snap-back") | Court: Debtor met §1113(b) and (c) requirements (proposal, information, good-faith bargaining, necessity); Union rejected without good cause |
| Whether proposed concessions treat employees fairly and equitably | Concessions spread sacrifice across constituencies (secured creditor, trade creditors, non-union employees, govt.) and are necessary to attract capital | Union argued employees would bear disproportionate burden and sought snap-back protection | Court: Proposal does not impose disproportionate burden; absence of snap-back not fatal here |
| Whether court may implement Proposal terms after rejection | Debtor: court may authorize implementation of approved §1113 proposal to permit immediate relief | Union: §1113 does not explicitly authorize wholesale implementation; implementation may be beyond court's power | Court: Authorizes debtor to implement the Proposal as satisfying §1113; implementation consistent with treating §1113 as accommodation with NLRA obligations |
Key Cases Cited
- Litton Fin. Printing Div. v. NLRB, 501 U.S. 190 (status-quo duties under NLRA after CBA expiration)
- NLRB v. Bildisco & Bildisco, 465 U.S. 513 (Supreme Court on rejection of CBAs in bankruptcy; historical context for §1113)
- Wheeling-Pittsburgh Steel Corp. v. United Steelworkers of Am., 791 F.2d 1074 (3d Cir. 1986) ("necessary" standard for §1113 — modifications must be essential to reorganization)
- Truck Drivers Local 807 v. Carey Transp., Inc., 816 F.2d 82 (2d Cir. 1987) (factors for balance of equities under §1113)
- In re Northwest Airlines Corp., 483 F.3d 160 (2d Cir. 2007) (discussion on court authority post-rejection to implement proposals)
- In re Hostess Brands, Inc., 477 B.R. 378 (Bankr. S.D.N.Y.) (court holding §1113 does not apply to expired CBA)
- In re Karykeion, 435 B.R. 663 (Bankr. C.D. Cal. 2010) (§1113 can apply to post-expiration status-quo obligations)
- In re 710 Long Ridge Rd. Operating Co., II, LLC, 518 B.R. 810 (Bankr. D.N.J. 2014) (supports §1113 application to expired CBAs continuing in effect)
- Bowen Enters., Inc. v. United Food & Commercial Workers Int’l Union (In re Bowen Enters., Inc.), 196 B.R. 734 (Bankr. W.D. Pa. 1996) (approving rejection where debtor faced imminent liquidation)