11 U.S.C. §§ 1113(b) and (c) of the Bankruptcy Code set forth the requirements for the rejection of a collective bargaining agreement. 11 U.S.C. §§ 1113(b) and (c) state as follows:
(b)(1) Subsequent to filing a petition and prior to filing an application seeking rejection of a collective bargaining agreement, the debtor in possession or trustee (hereinafter in this section “trustee” shall include a debtor in possession), shall – (A) make a proposal to the authorized representative of the employees covered by such agreement, based on the most complete and reliable information available at the time of such proposal, which provides for those necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably; and (B) provide . . . the representative of the employees with such relevant information as is necessary to evaluate the proposal.
(b)(2) During the period beginning on the date of the making of a proposal provided for in paragraph (1) and ending on the date of the hearing provided for in subsection (d)(1), the trustee shall meet, at reasonable times, with the authorized representative to confer in good faith in attempting to reach mutually satisfactory modifications of such agreement.
(c) The court shall approve an application for rejection of a collective bargaining agreement only if the court finds that – (1) a trustee has, prior to the hearing, made a proposal that fulfills the requirements of subsection (b)(1); (2) the authorized representative of the employees has refused to accept such proposal without good cause; and (3) the balance of the equities clearly favors rejection of such agreement.
The statutory requirements are often applied as a nine-factor test that was first described in In re American Provision Co., 44 B.R. 907, 909 (Bankr. D. Minn. 1984), and subsequently adopted and applied in the case of In re Amherst Sparkle Market, Inc., 75 B.R. 847 (Bankr. N.D. Ohio 1987). These nine factors are as follows:
(1) The debtor must make a proposal to the union to modify the collective bargaining agreement;
(2) The proposal must be based on the most complete and reliable information available at the time of the proposal;
(3) The proposed modifications must be necessary to permit the reorganization of the debtor;
(4) The proposed modifications must assure that all creditors, the debtor, and all of the affected parties are treated fairly and equitably;
(5) The debtor must provide to the union such relevant information as is necessary to evaluate the proposal;
(6) Between the time of the making of the proposal and the time of the hearing on approval of the rejection of the existing collective bargaining agreement, the debtor must meet at reasonable times with the union;
(7) At the meetings the debtor must confer in good faith in attempting to reach mutually satisfactory modifications of the collective bargaining agreement.
(8) 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.
Amherst Sparkle Marketat 849.
Jamie Harris is an associate attorney with DelCotto Law Group PLLC. Her practice of law focuses on helping business owners hurdle financial obstacles. Jamie is best known for her experience in filing Chapter 7, 11, 12, and 13 bankruptcies. In her Chapter 11 cases, Jamie has represented companies from many different industries including healthcare, nonprofit, trucking, construction, commercial real estate and telecommunications.