Court Opinion

ID: 8917160
Source: CourtListenerOpinion
Date Created: 2022-11-27 05:33:06.370533+00
Date Added: 2024-06-11T17:09:05.865580
License: Public Domain

COFFEY, Circuit Judge,
dissenting.
I agree with the majority’s holding that the bankruptcy trustee acted lawfully in terminating Seeburg Corporation’s operations without prior consultation with the Union. However, I respectfully dissent as I disagree with the conclusion of the National Labor Relations Board and the majority that the Bankruptcy Trustee Yorke com*1147mitted an unfair labor practice by refusing to bargain in good faith with the Union subsequent to the termination of the corporation’s operations. This case raises vitally important questions concerning the relative jurisdictional roles of the bankruptcy court and the NLRB in the context of Chapter XI bankruptcy proceeding, questions of critical importance not only to the respective tribunals but to future litigants as well as the entire bench and bar. The majority’s rote and mechanistic application of principles that may be appropriate in the normal employer-employee relationship ignores the fact that this case arises in the context of a Federal Bankruptcy Chapter XI proceeding. Furthermore, the majority fails to respect the severe limitations imposed on the authority of Chapter XI Bankruptcy Trustees, thus encroaching on the Bankruptcy Court’s exclusive jurisdiction over Chapter XI bankruptcy proceedings. In failing to adequately consider the limited powers of a Trustee in bankruptcy, the majority’s decision undermines Congress’s goal in enacting Chapter XI of the Federal Bankruptcy Act, that of preserving the viability of financially troubled business entities whenever possible. See, In re Huntington, Ltd., 654 F.2d 578 (9th Cir.1981). The majority’s decision makes virtually impossible the Trustee’s “thankless task of determining who should share the losses incurred by an unsuccessful business and how the values of the estate should be apportioned among creditors . ... ” S.Rep. No. 95-989 (95th Cong. 2nd Sess. 10 reprinted in 1978 U.S.Code Cong. & Ad.News, 5787, 5796) and, furthermore violates Congress’s purpose, expressed in the National Labor Relations Act, of achieving industrial harmony and prosperity by “recognizing] the rights of all interested parties in labor relations ... be[ing] scrupulously fair to each — the employer, the employees, and the public.” H.R.Rep. No. 245, 80th Cong., 1st Sess. (1947) reprinted in 1 NLRB, Legislative History of the Labor Management Relations Act, 1947 at 295.
I.
To facilitate the goals of Chapter XI, Congress has vested the bankruptcy court with exclusive jurisdiction over the entire Chapter XI bankruptcy proceedings, and has delegated extremely limited authority to the Trustee to administer the debtor’s estate. The Chapter XI Trustee, an officer of the bankruptcy court, derives his authority exclusively from the Bankruptcy Act, and his power to act independently of the bankruptcy court is extremely circumscribed. The court in In Re Transatlantic and Pacific Corp., 216 F.Supp. 546, 552 (S.D.N.Y.1963) recited:
“The Trustee’s activities are specifically circumscribed by the Bankruptcy Act. His actions must be compatible with the bankrupt’s best interests as well as the interest of the bankrupt’s creditors. 2 Collier, Bankruptcy 1737 (Moore Ed.1962). The contention that the Trustee possesses the same unlimited powers ... as did the bankrupt before the bankruptcy is wholly without merit.” (emphasis added).
More recently, the Ninth Circuit stated:
“A debtor in possession or a receiver under Chapter XI of the Bankruptcy Act is, in a real sense, not the same entity as the pre-bankruptcy company. It is ‘[a] new entity ... with its own rights and duties, subject to the supervision of the bankruptcy court’
* * * * * *

‘[i]t is well settled bankruptcy law that on important decisions, whatever their character, the Trustee must get the court’s approval.’ ”

Local Joint Executive Board v. Hotel Circle, 613 F.2d 210, 213, 216 (9th Cir.1980) (emphasis added).
Viewing the facts of this ease in their proper context, that of a Chapter XI bankruptcy proceeding, it is clear that the Trustee Yorke acted reasonably under the circumstances. Yorke was appointed Trustee of a corporation in dire financial straits, with its financial position deteriorating hourly. Yorke recognized that swift action was necessary if he was to have even a glimmer of hope of fulfilling his duty of protecting the interests of the corporation’s creditors by salvaging even a small part of *1148the corporation’s assets and that the only reasonable course of action was to expeditiously close down the plant. He promptly petitioned the bankruptcy court and obtained authorization to terminate the company’s operations and lay off the remaining employees. The Union responded to the Trustee’s court-approved action taken to protect the best interests of all the corporation’s creditors, with the following letter:
“Gentlemen:
“The undersigned represents Local 743 IBT. The union has a collective bargaining agreement covering the employees of Seeburg Corporation. As you are well aware, this agreement governs the wages, hours and working conditions of those employees.
It is apparent to the undersigned that the rights of these employees are being seriously undermined. It has come to our attention that numerous employees whom we represent are being transferred to do work for different companies within your corporate structure and that work, covered by our contract, is being performed elsewhere. It has also come to our attention that the remaining employees of See-burg Corp. have been locked out as of February 11, 1980....
This is also to demand that an immediate meeting be set up so that we can discuss the decision and effects that your action has on our bargaining unit employees....
What were the reasons that the See-burg employees were denied the ability to come to work on February 11,1980. Will they be transferred to other payrolls of either Choice Vend, XCor or any other companies under those companies’ control? What has happened to the Seeburg supervisory personnel? Have they been transferred to either Choice Vend, Xcor or any companies under those companies’ control?
Third, are you aware of any prospective purchasers of the Seeburg Corporation? If so, please identify their names and addresses. If a sale or other disposition of the Seeburg Corporation is contemplated, please inform us what will happen to the existing facility, such as the property, fixtures, machinery, trucks, furniture, etc.? In particular, we would desire to know if there will be a sale or transfer to other companies within the Xcor Corporation. If there will be acquisition by another Xcor Corporation company, we would like to know the intentions of Xcor concerning future employment of the managerial, supervisory, or other non-union employees who have been working for Seeburg. This would also include any transfer of employees to Choice Vend. Further, we would desire to know what will happen to existing accounts receivable and payable, existing lease agreements or contracts, other existing liabilities as well as goodwill. We would further desire to know the disposition of any existing commitments to customers or creditors. We are particularly interested in knowing what will be the disposition of work done by Seeburg employees covered by our collective bargaining agreement. Will that work be transferred to any other entity within the Xcor Corporation or Choice Vend?
Please be advised that we expect our collective bargaining agreement to be abided by and we expect a response to this letter by the close of business February 22, 1980. Failure to answer this letter by the time indicated will necessitate the institution of the proper proceeding.”
Trustee Yorke responded to this letter stating:
“I am in receipt of your letter dated February 15, 1980. Please be advised that the undersigned was appointed Trustee on February 4, 1980. Be further advised that the Trustee discontinued the operation of the business and has no employees.
“In reply to your questions, Excor is a publicly owned company. Consolidated Entertainment owns all the stock of the Seeburg Corporation. I do not know who owns Choice Vend. I do not know if Choice Vend or Excor have any collective bargaining agreements with labor organizations.

*1149
“If there is any further information you desire, I will be happy to furnish same.”

(Emphasis added).
The Union’s “shotgun” letter demanded that Yorke, the trustee of a multimillion dollar corporation appointed less than two weeks earlier, provide extensive and detailed information such as “what will happen to existing accounts receivable and payable, existing lease agreements or contracts, other existing liabilities as well as goodwill.” It is absurd to expect Yorke to provide on such short notice the particularized data and accounting information requested by the Union, information which was certainly not available to Yorke, even during this computerized age, at this early stage of the Chapter XI proceedings.
Contrary to the National Labor Relations Board’s conclusion, I would hold that the Trustee’s letter could not under any circumstances be interpreted as a refusal to bargain; rather, the letter plainly and unambiguously concluded by stating: “If there is any further information you desire, I will be happy to furnish same.” Thus, with those words, the Trustee Yorke issued an open-ended invitation to the Union to contact him if they desired any further information, an invitation which the union rejected. To hold that Yorke’s letter was anything other than an open-ended invitation to the Union for further dealings is to “stifle the promptings of common sense.” Planned Parenthood Ass’n of Chicago v. Kempiners, 700 F.2d 1115, 1137 (7th Cir. 1983). The Trustee’s court-approved termination of operations at the plant and responding to the Union’s requests as he did were, in fact, all that a bankruptcy Trustee could have been expected to do under the circumstances; any further action by the Trustee Yorke would have been inconsistent with his limited powers as a bankruptcy Trustee since, as discussed more fully below, a bankruptcy Trustee absent prior court approval is without authority (1) to make important decisions on behalf of the bankrupt corporation; or (2) to adopt an executory contract, such as a collective bargaining agreement.
It is clear that the Trustee was not authorized to bargain with the Union without first receiving the approval of the Court. In light of the fact that “it is well settled bankruptcy law that on important decisions, whatever their character, the Trustee must get the court’s approval” Hotel Circle, 613 F.2d at 210, bargaining with a Union over the effects of the plant closing (e.g. severance pay, payments into the pension fund, etc.) obviously would entail making “important decisions” affecting the bankrupt corporation. Thus, the Trustee would be engaging in an exercise in futility were he to meet with the Union in an attempt to bargain, as he was without authority to bind the bankrupt corporation absent specific prior approval of the bankruptcy judge. If, on the other hand, the Trustee did purport to bind the .bankrupt corporation, he would breach his duty as an officer of the court by acting on “important matters” without pri- or court approval.
Yorke was without authority to immediately accede to the Union’s request to bargain, since the powers of the Trustee are limited as “it is improper for a Trustee to assume executory contracts on his own responsibility.” 4A Collier on Bankruptcy, Paragraph 70-43(5) at 531 (14th Ed.1976); “the assumption ... of executory agreements affects the outcome of the chapter [XI] proceeding and should proceed under the supervision of the court.” Hotel Circle, 613 F.2d at 216. The limitation on the Trustee’s power to assume executory contracts becomes especially significant in this context as a collective bargaining agreement between a union and a bankrupt corporation is an executory contract. In re Brada Miller Freight System, 702 F.2d 890 (11th Cir.1983); In re Bildisco, 682 F.2d 72 (3rd Cir.1982), cert. granted,-U.S.-, 103 S.Ct. 784, 74 L.Ed.2d 992 (1983); Hotel Circle, 613 F.2d at 213; Shopman’s Local 455 v. Kevin Steel Products, Inc., 519 F.2d 698 (2d Cir.1975). Furthermore, where a successor employer, such as a Chapter XI Trustee, has chosen to act in a conformance *1150with the terms of a collective bargaining agreement, that successor may be found to have assumed the collective bargaining agreement, cf. NLRB v. Burns International Security Service, Inc., 406 U.S.272, 291, 92 S.Ct. 1571, 1584, 32 L.Ed.2d 61 (1972). Thus, if the Trustee had actually instituted bargaining with the Union without first securing the court’s approval, he may have been deemed to have tacitly assumed the collective bargaining agreement by acceding to its terms.
Nevertheless, the Trustee did not close the door on the Union’s request to bargain. Rather, Yorke specifically informed the Union that he had been appointed bankruptcy Trustee of the corporation and told the Union “if there is any further information you desire, I will be happy to furnish same.” The Union, fully aware that Yorke was acting as bankruptcy Trustee of the corporation, chose to blatantly ignore this invitation for further dealings, even though, as a matter of law, the Union, like all other citizens dealing in bankruptcy matters, is charged with knowledge of the limitations on the Trustee’s powers to act without court approval. “Parties dealing with a receiver are charged with knowledge of the extent of any restriction upon his authority.” Hotel Circle, 613 F.2d at 210; In re Yellow Transit Freight Lines, 207 F.2d 602, 606 (7th Cir.1953). Despite their knowledge that the corporation was in receivership and the limitations on the Trustee’s powers, which the law properly holds them to have, the Union ignored, without even so much as the courtesy of a phone call or a letter, the Trustee’s invitation to contact him for more information. Instead, a mere seventy-two hours after Yorke wrote his letter inviting the Union to contact him for further information, the Union filed an unfair labor practice charge with the NLRB without making any attempt to deal directly with Yorke. It is clear that it was the Union, and not the Trustee, who acted in bad faith in choosing to ignore the limitations on Yorke’s power to act without the court’s prior approval. The NLRB, despite their supposed legal expertise, compounded the problem by ignoring the restrictions on the Trustee’s power to act without prior court approval and taking the myopic and shortsighted view that the Trustee should be held to the same standards as a financially sound corporation.
The appropriate course of action for the Union to have followed in response to Yorke’s invitation for further dealings would have been to respond to Yorke’s letter of invitation and then the Trustee could go to the Bankruptcy Court to seek authorization to bargain. The Union would be free to appear before the Bankruptcy Court as well, since a Bankruptcy Court has broad discretion to permit interested parties to appear before it and be heard. In re Penn-Dixie Industries, Inc., 9 B.R. 936 (S.D.N.Y.1981); In re Citizen’s Loan & Thrift Co., 7 B.R. 88 (Bkrtcy.N.D.Iowa 1980). If the Bankruptcy Court refused to allow the Trustee to bargain, or if the Trustee subsequently failed to bargain in good faith, then, and only then, should the Union be permitted to bring an unfair labor practice charge before the NLRB. Undue encroachment by the NLRB in the Bankruptcy Court’s exclusive jurisdictional sphere would be avoided, or at least minimized, by affording the Bankruptcy Court an opportunity to act within their proper realm before instituting an unfair labor practice proceeding with the NLRB. The course of action adopted by the Union and the NLRB in this case, on the other hand, fails to respect the authority of the Bankruptcy Court and the severe limitations on a bankruptcy Trustee’s powers. In sanctioning the Union’s actions, the majority’s decision will inevitably lead to jurisdictional conflicts between two separate federal tribunals, the Bankruptcy Court and the NLRB.
II.
This is a case of first impression involving two vitally important, though conflicting, national policies: the revitalization of financially troubled business enterprises and the regulation of labor-management relations through collective bargaining. As a case of first impression, this court’s decision will have a direct impact on the resolution *1151of future cases pertaining to the scope of a Chapter XI bankruptcy Trustee’s duty to bargain with the bankrupt corporation’s unionized employees. Therefore, I believe it is essential for this court to achieve an equitable balance between the goals of revitalizing financially troubled corporations and encouraging harmonious labor relations, a balance which will not frustrate the financial recovery of corporations involved in Chapter XI bankruptcy proceedings. I believe the majority opinion in this case fails to achieve this equitable balance, and rather takes a myopic and short-sighted view of the critical interests involved in Chapter XI bankruptcy proceedings. As the Eleventh Circuit recently stated:
“We do not contemplate that Congress intended the ultimate fate of a corporation under Chapter XI to rest so largely in the hands of the company’s protected employees. There simply exist too many other critical interests, those of other employees, creditors, and shareholders, the protection of which provides the stimulus for the bankruptcy laws, for this Court to conclude that the collective bargaining agreement was meant to hold a stranglehold position .... ”
In re Brada Miller Freight System, 702 F.2d 890, 897 (11th Cir.1983).
I dissent as I believe the majority’s decision foists an unreasonable burden on business enterprises involved in Chapter XI bankruptcy proceedings. It is the height of absurdity for the NLRB to exert a fatal chokehold on Congress’s specific intent to allow mortally wounded businesses a chance to make a financial comeback at a time when our basic industries are struggling to survive. Courts not only have the obligation to interpret and apply the law, but must also continue to be aware of economic reality while showing fiscal responsibility in their decisions and must not decide cases in an economic vacuum.