There is an inherent tension between the goals of bankruptcy law and the state law doctrine of constructive trust. A central tenet of bankruptcy policy is that similarly situated creditors should be treated equally: because an insolvent business or individual will not be able to pay all creditors in full, a proper bankruptcy system must provide as equitable a distribution to each of them as possible. Constructive trust law, on the other hand, works to the advantage of a single creditor – which always means the detriment of the others when everyone is competing for limited funds.

It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement.  However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?

It is a familiar scenario: a company is on the verge of bankruptcy, bound by the terms of a collective bargaining agreement (CBA), and unable to negotiate a new agreement.  However, this time, an analysis of this distressed scenario prompted a new question: does it matter if the CBA is already expired, i.e., does the Bankruptcy Code distinguish between a CBA that expires pre-petition versus one that has not lapsed?