International Union, United Automobile Implement Workers v. Acorn Building Components, Inc. (In re Acorn Building Components, Inc.)

168 B.R. 169, 31 Collier Bankr. Cas. 2d 264, 1994 Bankr. LEXIS 770
CourtDistrict Court, E.D. Michigan
DecidedApril 6, 1994
DocketBankruptcy No. 92-04583-G; Adv. No. 93-4182
StatusPublished
Cited by1 cases

This text of 168 B.R. 169 (International Union, United Automobile Implement Workers v. Acorn Building Components, Inc. (In re Acorn Building Components, Inc.)) is published on Counsel Stack Legal Research, covering District Court, E.D. Michigan primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
International Union, United Automobile Implement Workers v. Acorn Building Components, Inc. (In re Acorn Building Components, Inc.), 168 B.R. 169, 31 Collier Bankr. Cas. 2d 264, 1994 Bankr. LEXIS 770 (E.D. Mich. 1994).

Opinion

OPINION DENYING ENTRY OF UAW’S 1113(F) ORDER

RAY REYNOLDS GRAVES, Chief Judge.

This matter is before the Court upon remand from the Honorable Anna Diggs Taylor of the Eastern District of Michigan, directing this Court to rule on the merits of the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW) and UAW Local 2194 (collectively UAW’s Motion [for] Entry of Order Under § 1113(f)) payment of wages and benefits served under the Collective Bargaining Agreement as administrative expenses.

This Court having previously engaged in a lengthy colloquy during the hearing held on July 20,1992 between the parties and upon a thorough review of the extensive pleadings hereby denies entry of the UAW’s order.

Introduction

On April 6, 1992, the Debtor commenced these proceedings under Chapter 11. Shortly thereafter, on or about June 24, 1992, the Debtor filed an application to reject the collective bargaining agreement (“agreement”) between the Debtor and the UAW. In response, the UAW filed a Motion for Entry of Order Under Section 1113(f) of the Bankruptcy Code (i) requiring compliance by Debtor with collective bargaining agreement and (ii) payment of wages and benefits as administrative expenses.

After a lengthy hearing on the motion and upon extensive colloquy between the Court and all parties, this Court denied the Union’s motion as to part (i) and held part (ii) as moot. The UAW appealed this Court’s decision to the Eastern District of Michigan whereby this Court’s ruling as to part (i) was upheld and part (ii) was remanded to this Court for a decision on the merits.

Issue

The Union contends in part (ii) of its motion that pre-petition health claims should be given administrative priority in accordance with 11 U.S.C. § 1113(f).

Discussion and Law

I.

The applicable standard in determining the rejection of a collective bargaining agreement finds its genesis in Bildisco & Bildisco, 465 U.S. 513, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1948), which pre-dates 11 U.S.C. § 1113. In Bildisco, the Supreme Court held that the fifing of a bankruptcy petition rendered unenforceable a collective bargaining agreement to which a debtor was a party. As a result, the debtor was able to unilaterally terminate or modify the terms of a collective bargaining agreement pursuant to 11 U.S.C. § 365. In Bildisco, the Court agreed that 11 U.S.C. § 365 applied to collective bargaining agreements, but that the special nature of a collective bargaining agreement gave rise to a special standard.

In response to Bildisco, Congress enacted 11 U.S.C. § 1113 embracing the question of rejection of labor contracts in bankruptcy. In re Ionosphere Clubs, Inc., 922 F.2d 984, 989, cert. denied, sub nom. Air Line Pilots Ass’n v. Shugrue, — U.S. —, 112 S.Ct. 50, 116 L.Ed.2d 28 (1991) (“Ionosphere”). Subparagraph (f) of § 1113 provides that “[n]o provision of this title shall be construed to permit a trustee to unilaterally terminate or alter any provision of a collective bargaining agreement prior to compliance with the provisions of this section.”

In accordance with United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 109 S.Ct. 1026, 103 L.Ed.2d 290 (1989), the clear and unambiguous language of a statute must be construed. Specifically 11 U.S.C. § 1113 provides that nothing in Title 11 should be construed to prevent the trustee or the debt- or-in-possession from unilaterally altering or terminating the provisions of a collective bargaining agreement absent compliance with § 1113. See 11 U.S.C. § 1107. Therefore, [171]*171§ 1113 stands for the premise that a trustee or debtor-in-possession is bound by the terms of a collective bargaining agreement post-petition, until the collective bargaining agreement is modified or rejected. See Ionosphere, 922 F.2d at 990. Accordingly, § 1113(f) reverses that part of Bildisco which held that a trustee or debtor in possession was not legally bound to a collective bargaining agreement subsequent to the filing date and prior to the Court’s determination of the application for authority to reject such agreement. We may therefore glean that by its very terms, § 1113(f) does not affect pre-petition conduct of a debtor, nor does it have any bearing on the consequences of such pre-petition conduct.

II.

The UAW asserts that in accordance with Unimet Corp. v. United States Steelworkers of America, 842 F.2d 879 (6th Cir.), cert. denied, 488 U.S. 828, 109 S.Ct. 81, 102 L.Ed.2d 57 (1988) (“Unimet”) 11 U.S.C. § 1113, and not the law with respect to rejection of executory contracts, is applicable under 11 U.S.C. § 365, and must control disposition of the UAWs motion. See also Ionosphere. The UAW further contends that the Sixth Circuit, by quoting Senator Paekwood and other legislative sponsors of 11 U.S.C. § 1113, has made it clear that § 1113(f) requires a debtor to comply with all the terms of the collective bargaining agreement until the debtor obtains relief under § 1113.

The UAW analyzes the holdings in Unimet and Ionosphere and concludes that “the language of the statute indicates that Congress intended § 1113 to be the sole method by which a debtor could terminate or modify a collective bargaining agreement and that application of other provisions of the bankruptcy code that allow a debtor to bypass the requirements of § 1113 are prohibited.” Ionosphere, 922 F.2d at 989-90.

After an extensive analysis of the legislative history of § 1113(f) and upon a well developed analysis of Ionosphere, Bildisco and Unimet, the UAW concludes that due to the enactment of § 1113(f), debtors may no longer be authorized by a section of the bankruptcy code to achieve unilateral alterations in the terms provided by a collective bargaining agreement, whether these alterations involve a failure to pay wages or benefits called for by such an agreement, or any other terms of such an agreement pre or post-petition.

Contrary to the Union’s assertions that pre-petition claims of its members should be elevated to administrative priority status as a result of § 1118(f),

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168 B.R. 169, 31 Collier Bankr. Cas. 2d 264, 1994 Bankr. LEXIS 770, Counsel Stack Legal Research, https://law.counselstack.com/opinion/international-union-united-automobile-implement-workers-v-acorn-building-mied-1994.