Hostess Bankruptcy Update

November 20, 2012

Last January, I posted about the Hostess bankruptcy filing. On Friday, Hostess filed a request to wind down their business and liquidate. The company indicated that their financial difficulties were caused by wage and pension demands, and that a recent strike by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union had prevented them from continuing to operate multiple facilities.


You can find Friday’s request on Westlaw at entry number 1710 at docket number 7:12-BK-22052.


Hostess’ implication that union activity had lead to the company’s financial distress lead me to thinking more about what the role a union plays in a company’s bankruptcy generally.  On WestlawNext, I clicked on the “Topics” tab, and then the link to “Bankruptcy” to explore further. I clicked on “All Bankruptcy Secondary Sources” and ran the following search:


A sampling of a few of the results I get with that search:

Harvey R. Miller, Michele J. Meises, Christopher Marcus (FNd1), The State of the Unions in Reorganization and Restructuring Cases, 15 Am. Bankr. Inst. L. Rev. 465 (2007)

Labor and Employment Labor Unions in Today’s Bankruptcies, 120309 ABI-CLE 215

Management vs. Labor: The Collision of Bankruptcy and Labor Law Policy, 061130 ABI-CLE 5

Hon. William T. Bodoh, Beth A. Buchanan (FNd1), Ignored Consequences-the Conflicting Policies of Labor Law and Business Reorganization and Its Impact on Organized Labor, 15 Am. Bankr. Inst. L. Rev. 395 (2007)

Christopher Updike, Ingrid Bagby, Collective Bargaining Agreements and the Bankruptcy Code: Are Damage Claims for Rejection of Collective Bargaining Agreements Available under Section 1113?, Jnl. of Bankr. L. 2008.01-2

The results include references to “Section 1113.”  For example, the Journal of Bankruptcy Law article quotes:

“Section 1113 of the Bankruptcy Code was enacted to address the treatment of collective bargaining agreements when a company in such distress declares bankruptcy. Specifically, Section 1113 provides a heightened standard for allowing the rejection of collective bargaining agreements by the debtor company. Under that statute, a bankruptcy court can approve the rejection of a collective bargaining agreement only if the company can prove that such rejection is necessary for reorganization.”
Jnl. of Bankr. L. 2008.01-2

11 U.S.C.A. § 1113 (West) has well over 200 notes of decision, nearly 5,000 citing references, and nearly 300 context & analysis references. For details on 1113,  try this simple,  narrow search in secondary sources:

PURPOS! INTEN! /5 1113

We get 76 articles in Bankruptcy Secondary Sources. I just browse the first few results to see how the terms are coming up. I click into the following article:

Babette A. Ceccotti, Lost in Transformation: The Disappearance of Labor Policies in Applying Section 1113 of the Bankruptcy Code, 15 Am. Bankr. Inst. L. Rev. 415 (2007) There, when I click to where my terms are appearing, I find a nice history of the codification of Section 1113.

“Enacted in 1984 as part of the Bankruptcy Amendments and Federal Judgeships Act, section 1113 was intended to overturn the Supreme Court’s decision in NLRB v. Bildisco with respect to the treatment of collective bargaining agreements in bankruptcy. In Bildisco, the Court confirmed that collective bargaining agreements could be rejected under bankruptcy law. In addition, the Supreme Court settled a dispute among the lower courts regarding the standard to be applied to rejection of collective bargaining agreements. The decision also addressed the consequences of unilateral modification by a debtor in the absence of court-approved rejection.”
Babette A. Ceccotti, Lost in Transformation: The Disappearance of Labor Policies in 15 Am. Bankr. Inst. L. Rev., 420

So it appears that the rule was created to address concerns over how the court was handling collective bargaining agreements in bankruptcy cases. We’ve seen from our secondary source searches, that there is a fair amount out there discussing labor issues in bankruptcy. So next time you are lamenting the loss of Twinkies from the office vending machine, just distract yourself with a little bankruptcy research on Westlaw.