Legal Document

465 U.S. 513 104 S.Ct. 1188 79 L.Ed.2d 482 NATIONAL LABOR RELATIONS BOARD, Petitioner,v.BILDISCO AND BILDISCO, Debtor-In-Possession, et al. LOCAL 408, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, etc., Petitioner v. BOARD Nos. 82-818, 82-852. Argued Oct. 11, 1983. Decided Feb. 22, 1984. Syllabus Section 365(a) of the Bankruptcy Code (Code) provides that, with certain exceptions, trustee, subject to Court's approval, may assume or reject "any executory contract" debtor. In April 1980, respondent debtor (hereafter respondent), a building supplies distributor, filed voluntary petition in bankruptcy for reorganization under Chapter 11 Code, and was subsequently authorized by Court operate business as debtor-in-possession. At time filed, some respondent's employees were represented petitioner Union whom had negotiated collective-bargaining agreement that expire 1982. Beginning January failed meet its obligations agreement, including payment health pension benefits remittance dues collected, May 1980 refused pay wage increases called agreement. Thereafter, requested received permission from allowed 30 days which file claim damages stemming rejection. The District upheld order. summer unfair labor practice charges National Labor Relations Board (Board), found violated §§ 8(a)(5) 8(a)(1) Act (NLRA) unilaterally changing terms refusing negotiate Union, ordered make contributions remit Union. Consolidating Union's appeal order Board's enforcement order, Appeals held is an contract rejection debtor-in-possession § Code; debtor-in-possession's authority seek not qualified 8(d) NLRA; but obtain must show only burdens estate also equities balance favor case remanded reconsideration light this standard. enforce rejecting conclusion respondent, debtor-in-possession, alter ego prepetition employer, holding deemed "new entity" bound debtor's prior Held: 1. language "executory includes agreements NLRA, should permit such if can Pp. 521-527. (a) Any inference are included within general scope because they differ purposes ordinary contracts rebutted 365(a)'s statutory design 1167 expressly exempting Railway Act. failure grant similar exemption NLRA indicates Congress intended apply all covered NLRA. 521-523. (b) Because special nature consequent "law shop" it creates, somewhat stricter standard than "business judgment" applied authorize govern decision allow But would require demonstrate will fail unless permitted at odds flexibility equity built into subordinates multiple, competing considerations underlying issue whether necessary prevent going liquidation. 523-526. (c) Before acting on modify be pursuaded reasonable efforts modification have been made likely produce prompt satisfactory solution. If parties unable agree, become process. since policy successful rehabilitation debtors, without finding served action. Determining what constitute involves balancing interests debtor, creditors, employees, striking court consider degree hardship faced each party any qualitative differences between types face. 526-527. 2. A does commit when rejects modifies before formal approved Court. 527-534. To hold commits circumstances undermine whatever benefit otherwise obtains request difference reorganization, wherein has until plan confirmed decide accept contract, 7 liquidation, trustee 60 relief decision, reflects Congress' considered judgment seeking reorganize granted more latitude making 528-529. Since recovery arising after filing through administration suit against necessarily precluded from, effect, enforcing charge violating Such run directly counter Code's express provisions overall effort give breathing space. From acceptance, enforceable meaning 8(d). Accordingly, need comply It follows corresponding duty bargain impasse subordinated exigencies bankruptcy. 529-534. 682 F.2d 72 (CA3 1982), affirmed. Lawrence G. Wallace, Washington, D.C., N.L.R.B. James R. Zazzali, Newark, N.J., Local Intern. Broth. Teamsters. Jack M. Zackin, Roseland, Bildisco Bildisco. Justice REHNQUIST delivered opinion 1 Two important related questions presented these petitions certiorari: (1) conditions agreement; (2) find guilty terminating modifying We U.S.C. 365 Act, approve upon appropriate showing. when, court-approved terminates one therefore affirm Third Circuit cases. 2 * A. 3 On 14, ("Bildisco"), New Jersey partnership distributing supplies, 1101 seq.1 1107.2 4 bankruptcy, approximately 40 45 percent Bildisco's force 408 International Brotherhood Teamsters, Chauffeurs, Warehousemen Helpers America ("Union"). three-year 30, 1982, provided binding their successors even though supervene. January, collected May, 5 December, Court, pursuant 365(a),3 hearing sole witness partners, who testified save his company $100,000 1981. offered no witnesses own, cross-examined 15, 1981, contract. appealed Circuit. B 6 During mid-summer ("Board"). General Counsel issued complaint alleging ("NLRA"), 29 158(a)(5) 158(a)(1),4 failing contractually mandated fringe Ultimately pension, health, welfare required petitioned C consolidated re Bildisco, 1982). That Code. restrictions established detailed guidelines mid-term agreements,5 court's view, concluded, however, given favored status accorded agreements, stringent test usual rule accepted Second Shopmen's No. 455 Kevin Steel Products, Inc., 519 698, 707 (CA2 1975), burdensome estate, standards enunciated. 8 alter-ego pre-petition employer. Under relates back petition, premising implied determined rejected, could violation 9 certiorari review apparent conflict Employees REA Express, 523 164, cert. denied, 423 1017, 96 451, 46 388 (1975). II 10 365, full: "(a) Except sections 765 766 title subsections (b), (c), (d) section, unexpired lease debtor." 12 This except those exempted, disputed contract.6 contracts, see John Wiley & Sons, Inc. Livingston, 376 543, 550 (1964), text concerned about power regarding purposely drafted limit assumption circumstances.7 Yet none limitations agreements. 1167, turn, exempts grants NLRA.8 Obviously, knew how draft exclusion wanted to; do so instance 13 None dispute foregoing proposition. contends judge traditional courts See Group Institutional Investors Chicago, Milwaukee, St. Paul Pacific Co., 318 523, 550, 63 727, 742, 87 L.Ed. 959 (1943); Minges, 602 38, 42 1979); Tilco, 558 1369, 1372 (CA10 1977). procedural requirements minimum, either 14 Although there indication governed different governing other Courts matter concluded one. Brada-Miller Freight System, 702 890 (CA11 1983); 1982); Joint Executive Hotel Circle, 613 210 (CA9 1980) (rejection Act); 698 1975) (same). agree supra; United Steelworkers Warrior Gulf Navigation 363 574, 578-579, 80 1347, 1350-1351, 1409 (1960), 15 argue rights created permitted. very strict adopted Airline Clerks 167-169 (CA2), (1975), decided former three years passed Congress. canon construction presumed aware judicial interpretations statute, argues interpretation enacted 365(a). Merrill, Lynch, Pierce, Fenner Smith, Curran, 456 353, 379-382, 102 1825, 1839-1841, 182 (1982); Lorillard Pons, 434 575, 580-581, 98 866, 869-870, 55 (1978). makes argument fully Express enacting legislative history accompanying 82 provision relating municipal bankruptcies, report House Committee Judiciary referred supra, proposition showing H.R.Rep. 94-686, p. 17-18 applicable 901(a), reference supports 16 These arguments wholly unconvincing. Quite simply, reflect two formulations cannot over affirmative preferred. congressional endorsement imposed preference formulation. most, use higher appraising 17 fundamentally policies workers important, issue: evidentiary burden insurmountable, present difficulties interfere 18 below, Eleventh case, (1983), careful scrutiny, we think rule, lesser embodied 19 persuaded requires less. Not union 158(a)(5), post, 18-19, national avoiding strife encouraging collective bargaining, id., 1, 151, generally employers unions reach own employment free governmental interference. See, e.g., Howard Johnson Co. Employees, 417 249, 94 2236, 41 (1974); NLRB Burns Security Services, 406 272, 282-294, 92 1571, 1579-1585, 32 61 (1972). step process parties' inability threatens impede success reorganization. point, action required, while adequately made. determine bargained determination outside field expertise. 533-534. 20 reasoned record why affected parties—the employees. likelihood consequences liquidation absent rejection, reduced value creditors' claims follow affirmance impose them, impact balance, party, 21 equity, real sense equities, suggested. Nevertheless, focus ultimate goal considering equities. free-wheeling consideration every conceivable rather relate inquiry necessity speculative great type evidence relevant issue. III 22 second raised Much expended question properly characterized "alter ego" "successor employer" prebankruptcy used our decisions. Detroit Board, 259 n. 5, 2249 (1972); Southport Petroleum NLRB, 315 100, 106, 62 452, 455, 86 718 (1942). profit exhaustive identify which, either, represents closest analogy Obviously latter entity," unnecessary first place. For purposes, sensible view same "entity" existed empowered virtue deal property manner done filing. 23 fundamental purpose attendant loss jobs possible misuse economic resources. 95-595, 220 (1977). cases succeed new creditors infuse ailing firm additional capital. recognized desirability analogous infusion capital Burns, U.S., 288, S.Ct., 1582; similarly beneficial recapitalization jeopardized saddled automatically Thus, vital basic release 24 While ultimately concede nonetheless insist violates changes date authorizes agreement.9 acceptance contention largely, completely, although creditor particular time. 365(d)(2). contrast, during 365(d)(1). seems us proceedings deciding 25 proof administration, lost confirmed. 501, 502, 1141.10 Actions brought are, limited exceptions here, stayed automatic stay 362(a). specifies assumed constitutes breach immediately preceding 365(g)(1).11 Consequently, filing, result normal estimated classified. 502(g); Hoe 508 1126, 1132 1974); Workman Harrison, 282 693, 699 1960). Thus bankruptcy.12 26 insists 365(g)(1) deals priorities payment, implications relation just priority claims.13 Damages noted, administered receive unsecured creditors. 502(g), 507. elects continue pending obligated services, Philadelphia Dipple, 312 168, 174, 538, 541, 85 651 (1941), depending specified Public Ledger, 161 762, 770-771 1947). Mammoth Mart, 536 950, 954-955 (CA1 1976). Should elect assumes cum onere, Italian Cook Oil Corp., 190 994, 996 1951), expenses liabilities incurred treated administrative expenses, afforded highest 503(b)(1)(A). 27 discussion practices Though nominally practical effect adherence means longer enforceable, never again. claimed 340 conclude Cf. Chemical Workers Pittsburgh Plate Glass 404 157, 383, 341; Dowd Box Courtney, 368 510-513, 519, 524-525, 483 (1962). 28 procedures set forth 158(d). ante, 5. 8(d), applies contractual repudiated unilateral actions Congress's central regulate facilitate place warfare. Alkali America, 187, 401, 341 (1971); 510, 80th Cong., 1st Sess., 34 (1947) (Report Conference). "modification" accomplished employer's action, operation law. unenforceable, application already unenforceable Indeed, concedes cumbersome rigid imported proceedings. Brief 41. maintains, fall-back position, fully, "bargain impasse" interpret mean excused further negotiations fruitless, little American Insurance 343 395, 404, 824, 829, 1027 (1952); Taft Broadcasting 163 475, 478 (1967); enforced, 395 622 (CADC 1968). Our full compliance bankruptcy.14 Whether reached call make; imposing requirement condition precedent simply divert customary area expertise presumably none. 31 policy, protect negotiations, results parties. H.K. Porter 397 99, 105, 90 821, 146 (1970); Jones Laughlin 301 45, 57 615, 628, 81 893 (1937). note relieved "employer" 152(1) (2), collectively employees' certified representative existing following approval 281, 1578, remains good faith breaching 33 Affirmed. BRENNAN, WHITE, MARSHALL, BLACKMUN join, concurring part dissenting part. holds Code,1 possession2 "burdens contract." Ante, 526. accommodates I join Parts opinion. Part possession he alters 532. holding, completely ignored underlie well 35 alteration employer "to refuse representatives . ."3 defines collectively" "the performance mutual obligation times confer respect wages, hours, employment."4 When "in effect," adds four collectively: "no [a contract] shall terminate unless" timely written notice proposed modification, "offers party," (3) Federal Mediation Conciliation Service state agencies, (4) "continues period sixty expiration whichever occurs later."5 8(a)(5), complying 8(a)(5). Lion 352 282, 285, 77 330, 332, 331 (1956) (employer 8(d)(4) 8(a)(5)).6 is, therefore, 159, 185, 387, 400, Oil, 332. 36 (Board) altering Chauffers, Warehousemen, America.7 Specifically, increase contributions, withheld vacation benefits. Some activities occurred seq., 408. period, operating possession. aspect presents and, result, interim 37 today modifications asserting post-filing "would Code." Yet, points purports render inapplicable, preclude 534. 38 achieve desired forced infer treatment treatment, inapplicable. 529-532. observes post-petition nondebtor sue terms, 530, recover conferred estate. 531.8 By "though agreement." finds suspending enforceability serves goals providing "flexibility space," concludes remain once filed. 39 unpersuasive. However correct description treats unavoidable grapple. Permitting seriously undermines thus way both federal statutes. done, fashion, concentrating alone; approach, inapplicable obviously follow. One easily, justification, alone applicable. Rather, examine statutes answer concentration refusal accommodate statute particularly incongruous analysis rests almost exclusively recognition accommodated. Part, "because 524. Surely, "special determining able terms. examination inexorably leads did intend affect applicability collectivebargaining III. centers begin examining absence countervailing undertaking threshold analysis, remember previously construed flexibly effectuate 290, 334, (1956); Mastro Plastics Corp. 350 270, 76 349, 100 309 (1956). As stated serve "is avoided words chosen clearly compel it." addition, resolving mindful deference Ironworkers, 335, 350, 651, 660, 54 586 (1978); Weingarten, 420 251, 267, 95 959, 968, 43 171 (1975); Erie Resistor 373 221, 236, 83 1139, 1149, 308 (1963). position 8(d).10 ISG Extrusion Toolings, 262 114 (1982) (debtor agreement); Airport Limousine Service, 231 932 (1977) (receiver 8(d)). Plainly, contrary chosen" reveals "clearly compel" result. cooling-off "there "party seeks "terminate modify" it. "debtor-in-possession '[a] entity duties, supervision court.' " F.2d, 82, quoting 704 1975). "party" 8(d).11 44 theory, conceding 528. nevertheless reaches equally unsupportable concluding 8(d)." Of course, phrase "enforceable appear point effect" section. plain Perhaps omission specific agrees dispositive. event, incorrect suggest retain sufficient vitality reasonably termed statute. suspended characteristics period. example, Collier ¶ 365.03, 365-24 (15th ed. 1983). compensation earned payable employee expense. Countryman, Executory Contracts Bankruptcy: II, 58 Minn.L.Rev. 479, 484 (1974). Fogel, Unexpired Leases 64 341, (1980). eventually effective petition. 365(g). resulting breach. Bankruptcy, 502.07, 502-99 Note, Law's Effect Collective Bargaining Agreements, Colum.L.Rev. 391 (1981). stem Therefore, support arises out period.12 Additionally, 531, assumption, liable services perform. rate frequently measure services. Chase Commissary, F.Supp. 288 (SDNY 1935) (rental occupancy); 370 (generally presume rentals reasonable). reasons, inaccurate say 8(d).13 Other effect."14 47 definitional plainly notes, 19.15 imposes employers, debtors Ibid. And definition "cooling-off" logical alterations well. most unlikely duty. 48 general, particular, strongly context. explained First Maintenance 452 666, 101 2573, 69 (1981), "[a] aim establishment maintenance industrial peace preserve flow interstate commerce. Central achievement promotion bargaining method defusing chanelling management." Id., 674, 2578 (citations omitted). 152. role played achieving "[e]nforcement crucial scheme." 402, 828, (1951). components bargain, specifically designed terminations (1971), "[t]he proscription be, assure termination paragraphs warfare [T]he 'seeks bring interrupting commerce production goods.' Plastics, 284, 358. 49 "economic warfare" threat day filed.16 ignore realities construing (1963) (citing function applying "general complexities life" reason defer judgment). Nor stems understanding 'the actualities relations,' 1150, (1962), Steelworkers, 357 357, 362-363, 78 1268, 1271-1272, 1383 50 basis 8(d)'s prohibition antithetical peace. context Fibreboard Paper Products 379 203, 211, 398, 403, 233 framed awareness refusals prolific causes strife." lie heart sum, 51 turn nothing conclusion. said, 539, renders anything forbid 8(d).17 then despite deleterious 52 correctly out, primary enable restructure operating. Unquestionably, option essential goal. violate rejected scarcely insuring temporary jeopardize announced today, granted.18 unrest inimical prospects often lead strife, decrease 53 requiring adhere conflicts "Code's space." Again explain interferes policies; expects financial pressures put pressure rapid possibly premature contract.19 apparent, believe unlimited options outweigh considerations. permits "at confirmation plan," circumstances, More importantly, early noted above, major danger deliberation. contains favorable later renegotiation impaired. largely illusory. members lose fails, highly least rejected. 681 19, 2582, (1980) (noting instances aided businesses); York Times, October 9, 1983, 3, (reporting agreeing reductions response threatened plant closings). strong incentive avoid willing enter settlements forestall many cases, all. chances IV My disregard supported consistent like What Douglas wrote 1960 true today: 56 "The contract; generalized code myriad draftsmen anticipate. erect system self-government. relationship, voluntarily, compulsion another, opposed dealing choice entering probability preexists negotiations. having relationship agreed-upon law leaving resolution dependent solely relative strength, moment, contending forces." 578-580, (1960) footnotes 84 909, 914, 898 committing practice, deprives "system government." Without system, disputes indeed left strength 580, 1352. tension Holding strikes section will, believe, spawn precisely avoid. impaired continues apply. reason, practice. Reform 1978, Pub.L. 95-598, Stat. 2549 revision laws 1938, chapters single chapter, intention reorganizations quicker efficient provide greater protection public interest. U.S.Code Cong. Admin.News, 5787 1107 Title provides: Subject prescribes, rights, right 330 title, powers, perform functions duties 1106(a)(2), (3), serving chapter." term interchangable issues attempting Subsection reads: 8(a) 158, pertinent part: Unfair employer— with, restrain, coerce exercise guaranteed [7]; (5) *." 158(d), reads "(d) Obligation employment, negotiation thereunder, execution incorporating proposal concession: Provided, where covering industry affecting commerce, desiring modification— thereof, event date, modification; offers negotiating containing modifications; notifies thirty existence dispute, .; resorting strike lockout, later: organizations discuss contained fixed reopened furnishes 365(a), "on due extent sides." 347 (1977), S.Rep. 95-989, amicus Mine reciprocal obligations, life Contract Teamsters Appendix, pp. 78-115. broad situations. Very generally, trustee's several circumstances; subsection commodity brokerage business. Notwithstanding neither nor change wages working (45 151 seq.) accordance 156)." derived 77(n) Reflective long-standing railway labor, Hansen, 351 225, 232 714, 1112 (1951), too delicate upset relationships." 137 dissent states deference. Post, 542-543. deference, likewise deferred novel. intent passing presentation permissive. 501. allowance claim, confirmed, administration. 1141(d)(1)(A)(i). Francis, B.R. 998, C.B.C.2d (Bkrtcy. EDNY 1981); 501.01 Undisputed listed 521(1) 1111(a). "(g) (h)(2) (i)(2) chapter 502(c) contingent unliquidated settling bankrupt losses occasioned estimated, attributable security seniority rights. law; 57d disallow difficult estimate. 502.03 extended cover vacation, severance, sick leave pay, increased amount priority. 507(a)(3); indicate paid priority, 1976); 1951); Cigar Stores 89 1937); Durand 296 1049, 1056 (WD Ark.1969); 1947); North Atlantic S.S. 204 899, 909 1962), aff'd. sub nom, Schilling A/S/D/S Dannebrog, 320 628 1963); Price Chopper Supermarkets, 462, 466-467 (B.Ct. SD Cal.1982). include "full force" end. Katz, 369 736 pendency dissent's suggestion, 13, Katz address "Except 365. 1101, person trustee." Herzog L. King, 1102, (1983). "[s]ubject powers" compensation. powers orders otherwise." 1101.01, 1101-2 complete follows: 159(a) title." 158(a). portion "For simultaneously therewith State Territorial agency mediate conciliate Territory occurred, time; (2)-(4) engages subsection, (g) engaged 158 160 reemployed employer." 4, begins defining "obligation hours employment," waiting "changes mandatory permissive bargaining." (1971). 8(a)(1). However, violation, independent issues. Workers, 6, 389 6. Gorman, Basic Text Law 132 (1976) (conduct 8(5) 8(1) derivatively). appears attribute conferred, 365(g)(1), 365(g)(1). not, function. part, petition." relied refer predecessor source limitation estate's liability conferred. aff'd nom., 1963), arguably principles retroactivity unenforceability Moreover, clear insure claims. Senate Reports [of 365(g)(1)] treat claims." 95th 2d Sess. 349 supra 365.08, 365-41. rules 502.08, 502-100. any, according Were post-petition, prepetition, claims, expenses. Bordewieck Rejection Agreements Debtors, Am.Bankr.L.J. 293, (1983); entirely clear, leading treatise concept pass assumed. 365-24. 303. possession's 503(b) allows "actual, costs preserving estate." 503.04, 503-15. Despite conclusion, periods desire maintained lockout expeditious determinations impossible. Nor, expertise, impasse. 526-527, enunciated proper preexisting drastic operations Blazer Industries, 236 103, 109-10 possession, suggesting significance took operation, today. doctrine successorship, my reliance misplaced. "successor" won Wackenhut Corporation. majority individuals hired Wackenhut's based ground bind agreed. relevance agreed potential might reluctant take predecessor's Given files act disincentive effectively debtor-in-possession" 84. 8, merely fiction useful extending helpful accommodation text, infra, 545-546, exist "ride through" proceeding discharge granted. Federal's, Edmonton Investment 555 577, 579 (CA6 1977); 365-22. party's survive proceeding. 487. noteworthy remaining 1977) (executory "remain proceedings); Consolidated Gas Electric Light Power Railways 799 (CA4 1936) "remains rejected"); Smith Hill, 317 542 1963) "continue rejected); Re Guardian Equipment 864, 867 (Bkrtcy.S.D.Fla.1982) (lease effect"). Even employment. 736, 743, 1107, 1111, 230 yet initial "an circumvention frustrates objectives much flat [to negotiate]." widely matters subjects expired. Peerless Roofing 641 734, 735 Clear Pine Mouldings, 632 721, 729 1980); Hinson 428 133, 136 (CA8 1970). 2(2), 152(2), agent indirectly." "person" 2(2) 2(1) 152(1), "trustees [which governs bankruptcy], receivers." Recent events fear hypothetical possibility. September 24, Continental Airlines instituted ranged 50%. 28, D6. 3rd, Continental's pilots flight attendants went strike. B13. Similarly, Wilson Foods Corporation Three later, D2. cut prompted June. June 31. 502(c), estimation 507(a)(3) third "indicate 531 12. If, conclude, would, repeat protections refers to, in, provision, 362(a), recovered procedures. 529-530. bar award procedures, us. disagree unsupported statement 529. primarily fact cost Bel Air Chateau Hospital, 106 LRRM (BNA) 2834 (C.D.Cal.1980) (Board backpay accruing administration); 333. Reading Brown, 471, 88 1759, 751 (1968) (damages negligence receiver administering XI expense).

Classification Label: 6