Liquidating fiduciary exception to warn

13-Nov-2015 00:27

It provides administrative status to “wages and benefits awarded pursuant to a judicial proceeding or a proceeding of the National Labor Relations Board as back pay attributable to any period of time occurring after commencement of the case under this title, as a result of a violation of Federal or State law by the debtor, without regard to the time of the occurrence of unlawful conduct on which such award is based or to whether any services were rendered,” so long as the payment of such claims won’t substantially increase the likelihood of layoffs or terminations of the company’s employees. One district court has said yes, ruling that a bankruptcy aimed at avoiding the payment of withdrawal liability lacked good faith, violated ERISA, and ran afoul of the requirement that a bankruptcy plan not be proposed “by any means forbidden by law.” See Bricklayers and Trowel Trades International Pension Fund, et al. The press release, captioned “WASCO filed Chapter 11 to Resolve Issue With Union,” attributed the bankruptcy to a “disagreement with the Union” regarding a “miscalculated” withdrawal liability “penalty,” and stated its intention that the bankruptcy go “unnoticed” by its other stakeholders. Whether a bonus plan for “insiders” passes muster generally depends on its purpose.

After Fresh & Easy filed for Chapter 11 protection, the employee brought a class-action adversary proceeding against it in the bankruptcy court, claiming that the company failed to give her and other employees the advanced notice of termination required by federal and state law. 2009), the bankruptcy court held that the judicial proceeding must be in a court of general jurisdiction, not the bankruptcy court itself. This post offers some tips on how a union might oppose a company’s motion for approval of a KEIP. The Bankruptcy Code’s definition of a corporate “insider,” which includes an officer, director or “person in control,” see 11 U. One helpful case defines a corporate insider simply as someone “taking part in the management of the debtor.” In re Foothills Texas, Inc., 408 B. What the court described as its “broad, contextual view” of Section 1113 led it to conclude that a debtor can reject an expired agreement, even though nothing in Section 1113(c) refers to rejection of agreements that have expired or the NLRA status quo.

The agreement gave her 30 days to opt out of the agreement after signing it, but she didn’t opt out. To the company’s rank-and-file employees, who may face wage and benefit cuts during the Chapter 11, such bonus plans — typically called “key employee incentive plans” or KEIP’s — often seem grossly unfair. The starting point for a challenge to a KEIP is Section 503(c)(1) of the Bankruptcy Code, 11 U. In attacking a proposed KEIP, a union might first consider challenging the company’s claim that those eligible to receive the bonuses are too low in the corporate hierarchy to be considered insiders. §101(31)(B), is non-exhaustive, and job titles are not determinative. The court also emphasized that Congress intended the Bankruptcy Code to grant debtors “flexibility and breathing space” in restructuring their obligations to creditors, and that permitting rejection of the terms of an expired collective bargaining agreement was consistent with that intention.

Welcome to the bankruptcy law blog uniquely devoted to the interests of organized labor and multiemployer funds. Fresh & Easy moved to stay the adversary proceeding, arguing that the arbitration clause the employee signed barred the class-action claim. That distinction, however, has no basis in the language of the statute. The court rejected the union’s argument that since Section 365 of the Bankruptcy Code does not allow a debtor to reject an expired contract or lease, a debtor should not be allowed to reject an expired collective bargaining agreement.

When an employer goes bankrupt, leaving workers vulnerable, unions and their affiliated funds face a host of challenging legal issues. Judge Shannon first tackled the question whether the arbitration agreement’s prohibition on class claims violated the National Labor Relations Act (NLRA). The better view holds that proceedings in the bankruptcy court, which is after all an arm of the district court, constitute “judicial proceedings” within the meaning of subsection (ii). The court noted that the terms and conditions of a non-labor contract do not continue to apply post-expiration while those of a collective bargaining agreement do. District judge Brian Cogan disagreed with the defendants’ position and allowed the fund’s collection suit to continue against Canal’s alleged alter egos.

We decided to create this blog to highlight recent developments in the field, discuss significant milestones and share some of our insights. This blog is for informational purposes only and is not intended to provide legal advice. But does the employer dodge an NLRA violation by inserting an opt-out clause in the arbitration agreement? Finally, the court held that, with the class-action waiver at the heart of the arbitration agreement stricken, the arbitration agreement itself could not stand. It is unfortunate that the first decision from a court of appeals addressing this question takes a results-oriented approach and expands a debtor’s power to avoid its obligations to its workers beyond what is authorized by the plain language of the Code. The fund had obtained a court ruling enforcing the payments, but before entry of the court’s order, the companies filed Chapter 11 bankruptcies. Another problem with extending the automatic stay to alleged alter egos, the judge wrote, is that it would make the automatic stay “into a provision that can only be applied with the benefit of hindsight,” since determining whether one entity is in fact the alter ego of another typically requires litigation.

The blog should not be used as a substitute for competent legal counsel by a licensed attorney. 2277, that employer-imposed arbitration clauses violate federal law if they prohibit employees from bringing class-action claims. On that issue, Judge Shannon concluded, the NLRA provided no clear guidance. The court thus denied the company’s motion to stay the class-action proceeding. 2016), has proven to be a real head-scratcher for the courts called upon to interpret it. The decision is particularly unfortunate because the Third Circuit has jurisdiction over bankruptcy courts in Delaware, the site of a large number of major corporate bankruptcies. Bricklayers involved the bankruptcy cases of two family-owned masonry businesses in Tennessee, Wasco, Inc. In addition, in the years just prior to bankruptcy filings, and at the same time they were failing to make their interim withdrawal liability payments and claiming financial distress, Wasco and Lovell’s had undertaken a number of financial transactions that benefitted company “insiders”—essentially, family member shareholders who ran the business. Applying a stay of litigation only after the litigation has occurred makes little sense.

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For decades, we at Cohen, Weiss and Simon LLP have been helping our union and fund clients navigate the often treacherous waters of the bankruptcy world. Some bankruptcy judges might shrink from such a charged, non-bankruptcy controversy. Shannon of the United States Bankruptcy Court for the District of Delaware, faced recently with a class-action waiver case, strode into the fray, and with some deft strokes of legal reasoning produced an admirable decision, striking down an arbitration clause that a bankrupt employer raised as a defense to an employee class action. With a touch of understatement, he observed that “[t]here is little consensus on this issue.” Despite the swirl of controversy, and some federal appeals courts lined up on the other side, Judge Shannon concluded that the NLRA “unambiguously protects the right of employees to bring a collective action.” The NLRA gives employees the right to engage in “concerted activities” for their “mutual aid or protection” and prohibits employers from interfering with that right. The union also argued that because Section 1113(e) allows a debtor, under emergency circumstances, temporarily to reject a collective bargaining agreement that “continues in effect,” while Section 1113(c), by contrast, makes no mention of collectively-bargained obligations that “continue[] in effect,” Congress must have intended Section 1113(e), but not 1113(c), to apply to the NLRA’s post-expiration status quo obligation. 2014), a case in which a bankruptcy court wrote that the automatic stay applied to a debtor’s alter egos since the debtor and alter egos are “one and the same entity.” 494 B. “Just because two entities are alter egos does not make them both debtors under the Bankruptcy Code,” he explained.

Indeed, we helped write some of the key laws, and litigated some of the key cases, in this area of the law. According to the bankruptcy court’s analysis, the collective pursuit of claims constitutes a form of concerted activity, so arbitration agreements that prohibit class actions interfere with employees’ NLRA rights. 2016), and held the arbitration clause unlawful despite the opt-out clause. The court, however, dismissed this argument as “hyper-technical parsing” of the statutory language. “It simply means they are liable for each other’s debts.” He wrote that the bankruptcy court in the Adler case, by indicating otherwise, had ignored the plain language of the Bankruptcy Code.

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