Search Results for: hostess

In re Hostess Brands, Inc.: Southern District of New York Bankruptcy Court Refuses to Send Cash Collateral Dispute to Arbitration

On January 7, 2013, the Judge Robert D. Drain of the United States Bankruptcy Court for the Southern District of New York held that a dispute concerning the debtors’ use of cash collateral was not subject to arbitration, notwithstanding a broad arbitration clause in the parties’ underlying agreement, because the decision to allow a debtor to use cash collateral constituted a “core” issue and was a fundamental aspect of the bankruptcy process. In re Hostess Brands, Inc., No. 12-22052 (RDD), 2013 WL 82914 (Bankr. S.D.N.Y. Jan. 7, 2013). Continue reading

2012 Year in Review – Part 2

To our readers:

From the Supreme Court weighing in on a chapter 11 case to Bankruptcy Court opinions that may profoundly impact venue selection, many important bankruptcy developments occurred in Restructuring Review’s inaugural year. Below is Part II in our first annual year-end list of the most significant decisions and developments in 2012. This list is presented chronologically. We’d love to hear your feedback as to what you think are the most important events of the year.

We appreciate you visiting Restructuring Review this year and look forward to providing you with frequent insight and analysis in 2013.

Best wishes for a happy and healthy holiday season.

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Court Denies Pinnacle Airlines’ Motion to Reject Collective Bargaining Agreement: Outlines Potential Resolution

Following the pattern recently established by other S.D.N.Y. bankruptcy judges in Hostess and American Airlines, Judge Robert Gerber denied Pinnacle Airlines’ motion to reject its collective bargaining agreement with the Air Line Pilots Association on narrow factual grounds. Although Judge Gerber found that Pinnacle had demonstrated that the “great bulk” of its final offer to the pilots was necessary to Pinnacle’s reorganization, the court held that:

• Pinnacle had not demonstrated that it was necessary to reduce its labor costs below the labor costs of its competitors,
• Given the substantial concessions requested from the pilots, the profit sharing proposals offered to the pilots were not fair and equitable, and
• Pinnacle’s failure to make any changes to the total labor cost savings requested from the pilots constituted good cause on the part of the pilots to reject Pinnacle’s proposal.
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Hostess to Liquidate

After a final mediation session between Hostess and its unions failed to put Hostess’s reorganization back on track, Bankruptcy Judge Robert Drain authorized the orderly wind down of Hostess’s operations. As a result, Hostess will prepare to sell its assets and shut down its factories. However, a purchaser may seek to restart the production of the beloved baked goods such as Twinkies, Ho-Hos and Donettes. Continue reading

Eighth Circuit Rules That a “Perpetual” Trademark Licensing Agreement Is an “Executory” Contract Subject to Rejection Under Bankruptcy Code Section 365

The United States Court of Appeals for the Eighth Circuit recently ruled that a perpetual, royalty-free, and exclusive trademark licensing agreement qualified as an executory contract subject to assumption or rejection under section 365 of the Bankruptcy Code. The decision creates new uncertainty for licensees under similar agreements, who may suddenly find that intellectual property rights they had taken for granted are at risk of termination in the event of a bankruptcy filing by the licensor. Lewis Bros. Bakeries Inc. v. Interstate Brands Corp. (In re Interstate Bakeries Corp.), 690 F.3d 1069 (8th Cir. 2012). Continue reading

Hostess Does Not Liquidate, Set to Mediate With Union

Reports of Twinkie the Kid’s death have been exaggerated. Despite widespread mainstream media reports of Hostess’ impending liquidation, the court has not yet approved liquidation. To the contrary, on November 19, 2012, after a brief hearing on Hostess’s emergency motions to begin the wind down of its operations, Hostess and its two main unions agreed to attend a confidential mediation session. At the mediation, Bankruptcy Judge Robert Drain intends to determine if the parties can avoid liquidation. Continue reading

Eighth Circuit Rules That a “Perpetual” Trademark Licensing Agreement Is an “Executory” Contract Subject to Rejection Under Bankruptcy Code Section 365

The United States Court of Appeals for the Eighth Circuit recently ruled that a perpetual, royalty-free, and exclusive trademark licensing agreement qualified as an executory contract subject to assumption or rejection under section 365 of the Bankruptcy Code. The Eighth Circuit’s ruling is seemingly at odds with a 2010 decision by the Third Circuit which found an extremely similar licensing agreement to be non-executory. These decisions may signal a circuit split on the issue, and in any event, create uncertainty for licensees who have acquired perpetual licenses in connection with an asset sale, and have otherwise been operating under the licensing agreement post-closing without incident. Continue reading

Hostess Court Authorizes Rejection of Bakers’ Union Collective Bargaining Agreements

Last month the drama surrounding Hostess’s efforts to reject various collective bargaining agreements drew to a close (pending appeal). Bankruptcy Judge Robert Drain (in an unpublished decision) authorized Hostess to reject its existing CBAs with affiliates of the Bakery, Confectionery, Tobacco and Grain Workers International Union, and modify the terms of its expired CBAs with the Bakers’ Union on an interim basis. The Bakers Union was the last of Hostess’s major unions holding out and refusing to accept modifications to its CBAs. See Transcript of Hearing, In re Hostess Brands, Inc., No. 12-22052 (RDD) (Bankr. S.D.N.Y. Oct 3, 2012). This decision resolves an open question that arose in May when Judge Drain held that debtors could not reject expired CBAs on a final basis pursuant to section 1113(c) of the Bankruptcy Code but might be allowed to reject such CBAs on an interim basis pursuant to section 1113(e). Cadwalader reviewed the hearing transcript to analyze the opinion. Continue reading

AMR Update: Judge Authorizes American Airlines to Reject Pilots’ CBA

On September 4, 2012, Judge Sean H. Lane granted American’s renewed motion to reject its CBA with the Allied Pilots Association. As discussed HERE, on August 15, the court denied American’s original motion to reject the CBA on narrow grounds, but allowed American to submit a renewed motion that remedied the codesharing and furlough defects identified by the court. American submitted a revised proposal to the APA the following day and renewed its motion on August 17. Notably, the APA did not argue that American’s modifications to the codesharing and furlough provisions were not necessary. Instead, the APA argued that new information regarding (i) a potential American-US Airways merger, (ii) American’s labor costs as compared to the rest of the airline industry, and (iii) American’s decision to accept a reduced amount of labor savings from its non-pilot employees made American’s proposed changes to the CBA unnecessary to its reorganization. Continue reading

Court Denies American Airlines’ Motion to Reject CBAs; Provides Roadmap to Future Rejection

On August, 15, 2012, Bankruptcy Judge Sean H. Lane of the Southern District of New York denied American’s motion to reject its collective bargaining agreement with the Allied Pilots Association (“APA”) on narrow grounds. The Court held that American had not demonstrated that its proposals to eliminate contractual restrictions on pilot furloughs and enter into essentially unlimited codesharing arrangements were necessary to its reorganization. However, the court rejected the vast majority of the APA’s broader arguments, found that the CBA was “a burden that American is unable to maintain” and that American had met the standards for rejecting a CBA under section 1113 of the Bankruptcy Code. Specifically, the court held that (i) American could reject the CBA even though a potential merger between American and US Airways may have resulted in fewer sacrifices by the APA; (ii) American’s business plan was a sufficient basis to reject the CBA; (iii) American’s proposal was fair and equitable; and (iv) American negotiated in good faith. Accordingly, the court denied American’s motion without prejudice to remedying the furlough and codesharing shortcomings.
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