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Author Archives: Douglas Mintz
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 Bankruptcy Judge Robert Drain (in an unpublished decision) authorized Hostess to reject its existing CBAs with affiliates of the Bakery, Confectionery, Tobacco and Grain Workers International Union, and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
Posted in Section 1113 Issues
Patriot Coal Update: Mining For Venue
Late last week, Judge Shelley C. Chapman of the Bankruptcy Court for the Southern District of New York heard arguments from a number of parties regarding whether the New York bankruptcy court is the proper venue for Patriot Coal Corporation’s bankruptcy cases. In re Patriot Coal Corp., Case No. 1:12-bk-12900. Judge Chapman did not rule on the venue question from the bench. Instead, the parties will wait for a ruling while proceeding with the bankruptcy case. Continue reading
Posted in Analysis
Tagged coal, distressed energy, mining, Southern District, UMWA
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.
Continue reading
Posted in Section 1113 Issues
Hostess Court Dismisses Motion to Reject Expired Collective Bargaining Agreements Under Bankruptcy Code Section 1113
On June 22, 2012, Judge Robert Drain of the United States Bankruptcy Court for the Southern District of New York granted the motion of the Bakery, Confectionary, Tobacco Workers and Grain Millers International Union to dismiss Hostess’s motion to reject certain expired collective bargaining agreements. The court held that section 1113 of the Bankruptcy Code no longer applied to key portions of the CBAs because the agreements had expired – certain CBA obligations remained in force only by operation of the National Labor Relations Act. In re Hostess Brands, Inc., 2012 WL 2374235 (Bankr. S.D.N.Y. June 22, 2012). Continue reading
Posted in Analysis
Stockton: Bankruptcy Court Upholds Municipal Debtor’s Power to Impair Retiree Contracts
On August 6, 2012, Judge Christopher M. Klein of the Bankruptcy Court for the Eastern District of California dismissed a group of retirees’ adversary proceeding and held that under its pendency plan, a chapter 9 debtor has the power to … Continue reading
Posted in Analysis, Chapter 9
Tagged 10th Amendment, California, Chapter 9, Constitution, stockton
Jefferson County: Court Rejects Expansive Carve Out of “Net Operating Expenses” From Special Revenue Bond Payments
On June 29, 2012, Judge Thomas B. Bennett of the Bankruptcy Court for the Northern District of Alabama held that operating expenses as determined under Jefferson County’s sewer warrants indenture do not include (i) a reservation for depreciation, amortization or future expenditures or (ii) an estimate for professional fees and expenses and that the monies remaining in the sewer system’s revenue account after the payment of actual operating expense should be paid to the warrant holders in accordance with the Indenture. This decision represents an unequivocal win for special revenue lenders because it ensures that special revenue bonds will continue to be secured and serviced in accordance with the underlying indenture during a municipality’s Chapter 9 case. The Bank of New York Mellon v. Jefferson Co., Ala. (In re Jefferson Co., Ala.), Case No. 12-00016-TBB (Bankr. N.D. Ala. June 29, 2012). Continue reading
Posted in Chapter 9
Cadwalader Presents to LSTA on 11th Circuit TOUSA Decision
Cadwalader attorneys Peter Friedman, Doug Mintz and Josh Brant, joined by Morgan Stanley Executive Director Colin Adams, recently addressed the Loan Syndications and Trading Association and discussed their views on the 11th Circuit’s recent controversial TOUSA decision upholding a bankruptcy court’s decision finding that certain loans and liens constituted fraudulent transfers. Continue reading
Posted in Avoidance Actions/Fraudulent Transfers
The Devil (Dog) ® is in the Details: Bankruptcy Court Denies Hostess’s Motion to Reject Collective Bargaining Agreements on Narrow Factual Grounds
The recent bankruptcy case of Hostess has centered on Hostess’s attempts to reject collective bargaining agreements with its unions. Hostess has emphasized that realigning labor costs is essential to its ability to successfully reorganize. Section 1113 of the Bankruptcy Code sets forth detailed requirements that a debtor must meet to modify or reject CBAs. Bankruptcy courts’ ultimate decision to authorize rejection of a CBA frequently turns on a detailed examination of the evidence presented in support of the rejection motion. This post discusses the recent ruling of Judge Robert Drain of the United States Bankruptcy Court for the Southern District of New York denying Hostess’s motion to reject several CBAs with local affiliates of the International Brotherhood of Teamsters. Although the court did not issue a written opinion of its decision, we have reviewed and analyzed the lengthy hearing transcript. See Transcript of Hearing, In re Hostess Brands, Inc., No. 12-22052 (RDD) (Bankr. S.D.N.Y. May 14, 2012). Judge Drain analyzed extensively the parties’ proposed modifications to the CBAs. Although he found that most of the key modifications related to withdrawing from multiemployer pension plans were necessary and thus permitted under applicable law, he did not authorize the rejection because the Teamsters had cause to reject Hostess’s final proposal. Judge Drain’s holding turned on a relatively minor point of fact pertaining to a one percent difference in proposed EBITDA margin – an issue only addressed briefly in the pleadings and the ruling. Continue reading
Posted in Analysis
Just When I Thought I Was Out . . . Eleventh Circuit Rules in TOUSA that Refinanced Lenders Can Be “Pulled Back In” and Held Liable if a Replacement Loan is a Fraudulent Transfer
On May 15, 2012, the Eleventh Circuit Court of Appeals upheld a ruling by the Bankruptcy Court for the Southern District of Florida, which required certain lenders to return $403 million in prepetition payments they had received from TOUSA, Inc. because the new loan TOUSA obtained to make those payments was a fraudulent transfer. The Eleventh Circuit’s decision raises serious questions regarding whether lenders whose loans are paid off in a refinancing may be forced to disgorge or return funds to a debtor if the refinancing loan is later found to be avoidable under the bankruptcy code. Senior Transeastern Lenders v. Official Committee of Unsecured Creditors (In re TOUSA, Inc.), Case No. 11-11071 (11th Cir. May 15, 2012). Continue reading
Posted in Avoidance Actions/Fraudulent Transfers
Not So Fast – 363 Sales May Not Be Free and Clear of Future Claims
In recent years, section 363 sales have increased in prominence. According to the UCLA-LoPucki Bankruptcy Research Database, less than 4 percent of all large, public company bankruptcies were resolved by sales of all or substantially all of a debtor’s assets from 1990-2000. However, in the period from 2001-2010, that figure rose to nearly 20 percent – peaking in 2008 when 32 percent of large public cases were resolved by an asset sale.[i] Purchasers like section 363 sales because, among other reasons, they purchase assets “free and clear” of all pre-bankruptcy obligations under section 363(f) of the Bankruptcy Code. However, as 363 sales increased in frequency, courts have begun to limit the free and clear nature of those sales, particularly with respect to future claims that had not arisen at the time of the sale. Continue reading
Posted in 363 Sales