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Chapter 11
Chapter 11 rejection of collective bargaining agreements
The rejection of a collective bargaining agreement may be an important
consideration in the bankruptcy debtor's effort to reorganize, and it is
governed by a different standard than other kinds of outstanding
contracts in a Chapter 11 case. Bankruptcy Code §1113.
A. Prerequisites for Rejection: Court approval of an application
by lawyers, to
reject a collective bargaining agreement requires that the lawyers for
bankruptcy debtor (or the trustee, if one has been appointed) prove the
following nine elements:
1.The bankruptcy debtor must make a proposal to the Union's attorneys to
modify the collective bargaining agreement. Bankruptcy Code
§1113(b)(1)(A);
2. The proposal must be based on the most complete and reliable
information available at the time of the proposal. Bankruptcy Code
§1113(b)(1) (A).
3.The proposed modifications must be necessary to permit the
bankruptcy reorganization of the debtor. Bankruptcy Code §1113(b)(1)
(A).
4. The proposed modifications must assure lawyers for the creditors,
that all creditors, the debtor, and all of the affected parties are
treated fairly and equitably. Bankruptcy Code §1113(b)(1) (A);
5. The bankruptcy debtor must provide attorneys for the Union such
relevant information as is necessary to evaluate the proposal.
Bankruptcy Code §1113(b)(1) (B);
6. Between the time lawyers make the proposal and the lime of the
hearing on approval of the rejection of the existing collective
bargaining agreement, the bankruptcy debtor must meet at reasonable times with the
lawyers for the Union.
7. At the meetings the debtor's lawyer must confer in good faith in
attempting to reach mutually satisfactory modifications of the
collective bargaining agreement.
8. The lawyers for the Union must have refused to accept the proposal
without good cause.
9. The balance of the equities must clearly favor rejection of the
collective bargaining agreement.
B. Hearing: A hearing on an application to reject a collective
bargaining agreement must be scheduled by the lawyers to occur within fourteen days
after the application is filed, and the bankruptcy court must rule on the issue
within thirty days after the commencement of the hearing. Bankruptcy
Code §1113(d);
C. Interim Change: The court may permit the lawyers for the
bankruptcy debtor or
Trustee to make temporary interim modifications in the terms of a
collective bargaining, agreement when such changes are necessary to
continue the debtor's business or to avoid irreparable harm to the
bankruptcy estate. Notice and a hearing are required.
Before that, the index was declining for the past two years. The latest
index decrease was 0.7 percent, which matched the decline in July. "This is
not a good sign for the local economy," said Alan Gin, the University of
San Diego economics professor
who compiles the index.
D. Unilateral Action Prohibited: The bankruptcy debtor in possession or trustee
or their lawyers may
not unilateral terminate or modify any terms of a collective bargaining
agreement before. compliance with the provisions set forth in section
1113.
San Diego Economy
Increased unemployment claims and a drop in consumer confidence in August
contributed to a fifth consecutive decrease to San Diego's Index of Leading
Economic Indicators. The index, a compilation of six measures related to
the economy, has been in decline since April following a four-month surge.
The Pacific Bankruptcy Center
The bankruptcy attorneys of the Pacific Bankruptcy Center, serve clients
in Southern California, including San Diego County, San Bernardino County,
and Riverside County; and the cities of San Diego, Riverside, San Bernardino,
Chula Vista, National City, El Cajon, La Mesa, Mission Bay, Hillcrest, Ramona,
Julian, Escondido, San Marcos, Vista, Oceanside, Encinitas, Solana Beach, Del Mar,
Rancho Bernardo, Rancho Santa Fe, La Jolla, Pacific Beach, Ocean Beach, Little Italy,
Old Town, Mira Mesa, North Park, Temecula, and Carlsbad.
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