Court Grants Trump Entertainment’s Petition to Break Union Contract

by San Antonio Attorney

Trump Entertainment Resorts has been allowed to break its collective bargaining agreement with union workers, stating that the obligations of the employer needs to comply with the terms of the expired agreement, which would undermine the ability to avail reorganization, according to the court ruling last January 15.

This addressed two conflicting provisions of the Section 1113 of the Bankruptcy code, which states that a debtor is allowed to reject collective bargaining agreements.

The U.S. Court of Appeals, Third Circuit, discovered that Section 1113 refers to both expired and unexpired agreements and a court ruling which allows Trump Entertainment to have escaped union contract in bankruptcy.  This was consistent with the policies found in the Bankruptcy Code.

Prior to bankruptcy filing, Trump Entertainment had already sold its assets and shut down its casinos located in Atlantic City and New Jersey, in order to raise funds and minimize debts.

However, these desperate efforts did not patch a hole in the company’s sinking finances.

In the September 2014 report, the company has $12 million in working capital cash but this was not enough as the company secured debt is $286 million.

Trump Entertainment has projected an annual savings of $14.6 million, which falls under the rejected CBA.  The first lien secured creditor has conditioned a capital infusion of $100 million following a ruling in the debtor’s favor.  Section 1113 established ‘strict procedural and substantive requirements’ needed to be fulfilled in order to reject a CBA.

Bankruptcy court still has the right to reject an application should a debtor submit a proposal that provides pertinent information, conferring in ‘good faith.’ The changes made by the debtor is highly important for the company’s reorganization process after bankruptcy filing and ‘the balance of equities’ has to prove that it will be evidently favorable to rejection.

 

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