NASA defines a black hole as a place in space where gravity is relentless and pulls so much that not even light can get out.  And, so it goes with Chicago as it attempts to get out of its pension black hole. The recent Illinois Supreme Court opinion in Jones v. Municipal Employees’ Annuity and Benefit Fund of Chicago, 2016 IL 119618 (Ill. 2016) (“Jones”) may have created a wormhole or way through Chicago’s pension black hole.  That way through is collective bargaining, as discussed below.

In this installment of the Weil Bankruptcy Blog’s series on the ABI Commission Report, we consider the Commission’s recommendations on collective bargaining agreements under section 1113 and retiree benefits under section 1114 of the Bankruptcy Code.

Section 1113: The Commission’s Considerations

When evaluating a debtor’s bankruptcy or restructuring options, determining how to increase or preserve the debtor’s liquidity is crucial to the analysis. Well-advised debtors with significant labor liabilities will need to explore whether attaining cost savings through rejection of their collective bargaining agreements is a viable alternative.

A significant consideration in a prospective chapter 11 debtor’s strategic prebankruptcy planning is the most favorable venue for the bankruptcy filing.

A significant consideration in a prospective chapter 11 debtor's strategic prebankruptcy planning is the most favorable venue for the bankruptcy filing.

The devastating consequences of an enduring global recession for businesses and individuals alike have been writ large in headlines worldwide, as governments around the globe scramble to implement assistance programs designed to jumpstart stalled economies. Less visible amid the carnage wrought among the financial institutions, automakers, airlines, retailers, newspapers, homebuilders, homeowners, and suddenly laid-off workers is the plight of the nation's cities, towns, and other municipalities.

One of the most significant considerations in a prospective chapter 11 debtor’s strategic pre-bankruptcy planning is the most favorable venue for the bankruptcy filing.

Last week’s Chapter 11 filing by NewPage Corporation, a company with assets and liabilities in the billions of dollars, stands as a relative rarity in the current restructuring environment.

The rejection of collective bargaining agreements or modification of retiree benefits under Bankruptcy Code §§ 1113 and 1114, respectively, were again of central importance in a number of airline cases.

Last month the drama surrounding Hostess’s efforts to reject various collective bargaining agreements drew to a close (pending appeal).  Bankruptcy Judge Robert Drain (in an unpublished decision) authorized Hostess to reject its existing CBAs with affiliates of the Bakery, Confectionery, Tobacco and Grain Workers International Union, and modify the terms of its expired CBAs with the Bakers’ Union on an interim basis.  The Bakers Union was the last of Hostess’s major unions holding out and refusing to accept modifications to its CBAs.  See Transcript of Hearing, In re Hoste