National Labor Relations Board v. Bildisco & Bildisco

PETITIONER: National Labor Relations Board
RESPONDENT: Bildisco & Bildisco
LOCATION: Stauffer Chemical Plant

DOCKET NO.: 82-818
DECIDED BY: Burger Court (1981-1986)
LOWER COURT: United States Court of Appeals for the Third Circuit

CITATION: 465 US 513 (1984)
ARGUED: Oct 11, 1983
DECIDED: Feb 22, 1984

ADVOCATES:
Jack M. Zackin - on behalf of Bildisco and Bildisco
James R. Zazzali - on behalf of Local 408, IBT, etc
Lawrence G. Wallace - on behalf of the NLRB

Facts of the case

Question

Media for National Labor Relations Board v. Bildisco & Bildisco

Audio Transcription for Oral Argument - October 11, 1983 in National Labor Relations Board v. Bildisco & Bildisco

Audio Transcription for Opinion Announcement - February 22, 1984 in National Labor Relations Board v. Bildisco & Bildisco

Warren E. Burger:

The judgments and opinion of the Court in National Labor Relations Board against Bildisco and the consolidated case will be announced by Justice Rehnquist.

William H. Rehnquist:

Under the Bankruptcy Act of business debtor may choose between straight bankruptcy and are continued to operate as business as a debtor-in-possession.

And one of the benefits conferred by the Act in the debtor-in-possession is the right to apply to the bankruptcy judge for the authority to reject the contract entered into by the bankrupt as burdensome to the estate.

These consolidated cases present two questions involving the application of the Bankruptcy Act to collective-bargaining agreements negotiated by the debtor-in-possession.

First, what standards apply to rejection of a collective-bargaining agreement in bankruptcy proceedings.

And second, does the debtor-in-possession violate the labor law if it unilaterally modifies the labor contract after it files a bankruptcy position and before it obtains formal court approval to reject the contract.

The Court of Appeals for the Third Circuit from which this case comes ruled in favor of Bildisco, which was the debtor-in-possession in this case on both of these issues, rejecting the standard of rejection proposed by the Union and refusing to enforce an order of the Labor Board.

In an opinion filed today with the clerk, we affirm the judgment of the Court of Appeals.

In passing the Bankruptcy Code in 1978, Congress provided the debtors undergoing a reorganization would have the power to apply to the bankruptcy judge and ask the bankruptcy judge to allow them to reject a contract.

Congress provided a special provision in the Bankruptcy Code to govern the rejection of some labor contracts, those under the Railway Act, but provided no special provision for separate treatment for those under the National Labor Relations Act.

We therefore hold that the contracts are governed by the general provision allowing rejection.

But we've also held that a collective-bargaining agreement is a special type of agreement and we hold that it somewhat stricter standard than the traditional business judgment standard should govern the Bankruptcy Cour's decision to permit a collective-bargaining agreement to be rejected.

The debtor-in-possession must show that the collective-bargaining agreement burdens the estate and that the equities balance in favor of rejecting the contract.

We also hold today that a debtor-in-possession does not commit an unfair labor practice when it unilaterally modifies a collective-bargaining agreement.

The policy of the Bankruptcy Act is to give the debtor time and flexibility to reorganize its business.

The Bankruptcy Code clearly delineates how claims arising from a post-petition breach of contract claim should be processed.

Requiring compliance with the terms of the collective-bargaining agreement through the mechanism of Board enforcement, we think would undermine the Bankruptcy Code's in a regulation of such claims.

Even more important, it undermines the goal of the Bankruptcy Act to facilitate a successful reorganization.

We think that our determination respects the basic policy of the labor laws to protect the process of collective-bargaining and still recognizes the overwriting goals of the Bankruptcy Act.

All nine members of the Court joined in the Court's opinion establishing the standard for rejecting a collective-bargaining agreement.

Justice Brennan has filed a separate opinion dissenting from the holding about the unfair labor practices in which Justices White, Marshall, Blackmun joined.

Warren E. Burger:

Thank you, Justice Rehnquist.