All of section 1113 is a result of Lorenzo - it didn't exist when he took CO into chapter 11 back in the 1980's. At that time labor contracts were treated as any other contract that the debtor could ask the judge to reject. As I said a few weeks back in one of these threads, the word "abrogate" entered the lexicon of bankruptcy when section 1113 was added.
Jim
Look up "Bildisco Decision'. Surely Lorenzo was a factor but to say that all of 1113 is a result of Lorenzo isnt accurate and ther is no CBA, there are modified terms, not the same thing. If this was a modified CBA then there would be no reason to negotiate or ratify a new one.
Congress enacted Section 1113
favoring voluntary collective bargained solutions after deregulation in response to the
1984 Supreme Court case of NLRB v. Bildisco & Bildisco. In Bildisco, The Supreme Court ruled that a debtor could reject a collective bargaining agreement (CBA) merely upon a showing of a business justification and without engaging in union contract negotiations and that such unilateral alterations by a debtor would not violate federal labor law. Congress believed that the process of collective bargaining is so important that it overruled the Supreme Court’s Bildisco decision by enacting Section 1113.
Just a year before, Frank Lorenzo took Continental into bankruptcy on September 23,
1983, after
unsuccessfully attempting to negotiate a lower pay rate with labor unions. This saved the company from liquidation, but required substantial reorganization, which began immediately. Following bankruptcy, Continental was freed of its contractual obligations and imposed a series of new labor agreements on its union workers.
Airline unions fought Lorenzo and Continental at every step. In the Federal courts, they unsuccessfully sued to stop the company's reorganization. They were however successful in working to persuade Congress to pass the new bankruptcy law preventing bankrupt companies from terminating contracts as Continental had successfully done. The law was too late to affect Continental and the cost cutting and changes that had rescued it from liquidation.
Section 1113 was designed to level the playing field between labor and management by imposing procedural requirements that bankrupt debtors must satisfy in order to modify or reject a CBA. Those requirements, in a nutshell, require that bankrupt debtors provide all necessary information to unions and negotiate in good faith with these unions before seeking federal court approval to modify or reject the conditions of a CBA. Federal judges are supposed to hold the bankruptcy debtors’ feet to the fire and ensure that debtors do not unfairly or unnecessarily take such drastic steps as seeking to reject the contracts.
Unfortunately, the Section 1113 protections that Congress though it was providing to labor have not panned out, and bankruptcy debtors have continued to obtain court orders rejecting collective bargaining agreements without hardly breaking a sweat. This has especially been the case in the airline industry. In fact, another bitter irony related to Section 1113 is that Congress enacted it with full knowledge that the airline industry had horribly abused the bankruptcy rules in order to avoid their collective bargaining obligations in the years following deregulation. The industry has used Section 1113 to gut airline employee’s negotiated benefits, security, and wages.
I believe Boeing Boy is implying that Lorenzo was one of many to make challenges to the bankruptcy code and a very
major reason for the implementation of section 1113. By definition, he may have helped to create the mess we live with today. I would tend to agree with his statement.
