Petition for Writ of Certiorari — United Retired Pilots Benefit Protection Association Association v. United Air Lines, Inc. (No. 06-8)

Supreme Court brief2006

Ask Donna

What actually matters in this document.

Text

In The

Supreme Court of the Gnited States

UNITED RETIRED PILOTS BENEFIT

PROTECTION ASSOCIATION, et al.,

Petitioners,

UNITED AIR LINES, INC., et al.,

Respondents.

On Petition For A Writ Of Certiorari

To The United States Court Of Appeals

For The Seventh Circuit

PETITION FOR A WRIT CF CERTIORARI

—_—____—¢

JACK J. CARRIGLIO FRANK CUMMINGS

Counsel of Record LEBOEUF, LAMB, GREENE &

Eric E. NEWMAN MacRAE LLP

JAMES G. ARGIONIS 1875 Connecticut Avenue, NW

JENNIFER J. POMARANSKI Washington, DC 20009

MECKLER BULGER & (202) 986-8000

TILSON LLP

123 N. Wacker Drive,

Suite 1800

Chicago, Il. 60606

(312) 474-7900

Counsel for Petitioners

(XOKLE LAW BRIEF PRINTING

OR <

BEST AVAILABLE COPY

QUESTIONS PRESENTED

If the collective-bargaining agreement that is in

existence on the date a union employee retires provides to

that employee the right to receive pension benefits for the

rest of his or her life, those benefits become contractually

vested on his or her retirement date. Under well-

established law, after that employee retires, his or her

former employer may not modify or terminate the retiree’s

contractually vested benefits without the actual consent of

the retiree. The questions presented are:

(1)

Is an employer who is reorganizing under Chap-

ter 11 of the Bankruptcy Code obligated to sat-

isfy the requirements of 11 U.S.C. §1113 and

negotiate in good faith with an authorized repre-

sentative for retired employees who have con-

tractually vested pension rights before the

employer modifies or terminates the pension

benefits?

If a bankruptcy court approves an agreement be-

tween a Chapter 11 debtor and a union that only

represents active employees, and the agreement

modifies the pension benefits of the debtor’s re-

tired employees, including non-tax-qualified pen-

sion benefits that are not insured by the Pension

Benefit Guaranty Corporation, even though the

debtor failed to negotiate with an authorized rep-

resentative for retired employees or comply with

the other requirements of 11 U.S.C. § 1113 with

respect to its retirees, should a reviewing court

vacate the order approving the agreement and

require the debtor to comply with 11 U.S.C.

§ 1113?

RULE 29.6 STATEMENT

Pursuant to Supreme Court Rule 29.6, the United

Retired Pilot Benefit Protection Association states that it

has no parent companies or subsidiaries.

PARTIES TO THE PROCEEDINGS

In addition to the parties naméd in the caption, the

following individuals were appellants in the Seventh

Circuit Court of Appeals and are petitioners in this Court:

Roger D. Hall

Dennis D. Dillon

Gerard Terstiege

Eugene M. Cummings

Raymond P. Fink

James M. Krasno

William L. Rutherford

Although United Air Lines, Inc. was the primary

defendant in the proceedings below, UAL Corporation, its

parent company, and other related Chapter 11 debtors

may have also been considered parties in the Chapter 11

proceedings from which the bankruptcy court orders under

appeal arose.

TABLE OF CONTENTS

QUESTIONS PRESENTED

RULE 29.6 STATEMENT

PARTIES TO THE PROCEEDINGS ............... eee eeeee

TABLE OF AUTHORITIES

OPINIONS BELOW

Pte TAI tare SEO et Ee PER IRaRE Ne! ae

CONSTITUTIONAL AND STATUTORY PROVISIONS

INVOLVED

STATEMENT .

Overview

The Bildisco Decision And The Enactment Of

11 U.S.C. § 1113

The Second And Sixth Circuit Decisions In

Century Brass and Unimet

The LTV Bankruptcy And The Enactment Of

11 U.S.C. § 1114

The United Air Lines, Inc., The Air Line Pilots

Association, International And The Pilots’ De-

fined Benefit Plan

United’s Chapter 11 Proceedings And The

OGURA IE hed cs ti ipuikc chvncnsconaodeniawescanswen

United’s Section 1113 Motion, URPBPA’s

Motion For The Appointment Of An Authorized

Representative and The Bankruptcy Court’s

Approval of Letter Agreement 05-01

TABLE OF CONTENTS - Continued

H. URPBPA’s District Court Appeals....................

I. The Seventh Circuit Affirms The District Court

On Different Grounds

REASONS FOR GRANTING THE PETITION............

I. The Affirmed Bankruptcy Court Orders Refus-

ing To Appoint An Authorized Representative

To Protect The Retired Pilots’ Contractual Pen-

sion Rights And Approving Letter Agreement

05-01 Lack Legal Justification, Are At Odds

With Notions Of Fundamental Fairness And, If

Not Corrected, Will Affect The Lives Of Thou-

sands Of Retired Pilots

This Court Should Grant Certiorari Because

The Opinions And Rulings Issued Below Con-

flict With United States Supreme Court Prece-

dent And Congress’ Legislative Intent

This Court Should Resolve The Split In Au-

thority Between The Second And Sixth Circuit

Courts Of Appeals And The Seventh Circuit

ete IIE 1s cnc socunsdanesaipaeacneiomoniions 28

CONCLUSION

APPENDIK........... eR ghd CRE pS App. 1

TABLE OF AUTHORITIES

CASES:

Allied Chemical & Alkali Workers Of America v.

Pittsburgh Plate Glass Co., 404 U.S. 157, 92

Is IE a oss ct hci cs bdboeseuiaeebve decdeneiedeeuuiul passim

American Federation of Grain Millers, AFL-CIO v.

International Multifoods Corp., 116 F.3d 976 (2nd

Cir. 1997)

Anderson v. Alpha Portland Industries, Inc., 836

F.2d 1512 (8th Cir. 1988)

Bidlack v. Wheelabrator Corp., 993 F.2d 603 (7th

Cir. 1993)

Bower v. Bunker Hill Co., 725 F.2d 1221 (9th Cir.

1984)

Gable v. Sweetheart Cup Co., Inc., 35 F.3d 851 (4th

Cir. 1994)

Hoefel v. Atlas Tack Corp., 581 F.2d 1 (1st Cir. 1978)

Hurd v. Hutnick, 419 F. Supp. 630 (D.N.J. 1976)

In re Century Brass, 795 F.2d 265 (2nd Cir. 1986)

In re Chateaugay Corp., 64 B.R. 990 (Bankr.

S.D.N.Y. 1986)

In re Delta Air Lines, Inc., No. 05-17923 (Bankr.

ee te Ig I iis tis cnninecisthensinnidbaceniineaonascocaunans 24

In re Farmland Industries, Inc., 294 B.R. 903

(Bankr. W.D. Miss. 2003)

TABLE OF AUTHORITIES — Continued

In re Garofalo’s Finer Foods, Inc., 117 B.R. 363

(N.D. Til. 1990)

In re UAL Corp., No. 02-B-48191, 2005 WL 2840266

(Bankr. N.D. Ill. Oct. 26, 2005)

In re UAL Corp., 333 B.R. 802 (Bankr. N.D. Il.

2005)

In re United Air Lines, Inc., 337 B.R. 904 (N.D. Tl.

2006)

In re Unimet Corp., 842 F.2d 876 (6th Cir.

ID ciisa ts. ccstassicstuntiaes Dene nhigesdcaceraoscepbdetcaasine’ 7, 24, 26,

International Assoc. of Machinists and Aerospace

Workers v. Masonite Corp., 122 F.3d 228 (Sth Cir.

International Union, United Automobile, Aerospace

and Agricultural Implement Workers of America,

U.A.W. v. Skinner Engine Co., 188 F.3d 130 (3rd

Rls INN Siseodchttentaicsccrechhabuedtneesidustcmatsaiceariatsackdousaderud 18

International Union, United Automobile, Aerospace

and Agricultural Implement Workers of America

(UAW) v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir.

BD scale cba dicciensceoud dete Hchsinasiinevumnndeaiianaanmananiin 19, 20

Keefer v. H.K. Porter Company, Inc., 872 F.2d 60

(4th Cir. 1989)

Litton Financial Printing Division v. NLRB, 501

U.S. 190, 111 S. Ct. 2215 (1991)

Local Union No. 150-A, United Food and Commer-

cial Workers v. Dubuque Packing Co., 756 F.2d 66

(8th Cir. 1985)

National Relations Board v. Bildisco and Bildisco,

3, 24, 25, 26, 28

Vill

TABLE O’ —‘JTHORITIES — Continued

Rochester Corp. v. W.L. Rochester, 450 F.2d 118 (4th

Cir. 1971)

Truck Drivers Local 807 v. Carey Transportation,

BO, ee Ue ee GU EE, BONED ovivecessevicdnsevcciccedneveces secs: 5

Turner v. Local Union No. 302, 604 F.2d 1219 (9th

Oe a i a a a 20

United Retired Pilots Benefit Protection Association

v. United Air Lines, Inc., No. 05-C-1202, 2005 WL

1528259 (N.D. Ill. June 22, 2005)

United Retired Pilots Benefit Protection Association

vu. United Airlines, Inc., 443 F.3d 565 (7th Cir.

2006)

United Steelworkers of America, AFL-CIO v. Con-

nors Steel Co., 855 F.2d 1499 (11th Cir. 1988)

United Steelworkers of America, AFL-CIO uv.

tron, Inc., 836 F.2d 6 (1st Cir. 1987)

Wheeling-Pittsburgh Steel Corp. v. United Steel-

workers of America, 791 F.2d 1074 (3rd Cir. 1986)

Wise v. El Paso Natural Gas Co., 986 F.2d 929 (5th

Cir. 1993)

Yolton v. El Paso Tennessee Pipeline Co., 435 F.3d

571 (6th Cir. 2006)

STATUTORY PROVISIONS:

11 U.S.C. § 363 (2004)

Gta ok pS. | en ean Sh

11 U.S.C. § 1113 (2004) passim

11 U.S.C. § 1114 (2004) passim

TABLE OF AUTHORITIES — Continued

rs BOR Re ee Se eee

Page

29 U.S.C. § 1341 (1998) " Gisnivcts Oe Gay BO

yy BOR Tee Be is ee

OTHER AUTHORITIES:

Athanassios Papaioannou, The Duty To Bargain

And Rejection Of Collective Bargaining Agree-

ments Under Section 1113 By A Bankrupt Airline:

Trying To Reconcile R.L.A. With Bankruptcy

Code, 13 Trans. L.J. 219 (1990)

Donald B. Smith & Richard A. Bales, Reconciling

Labor Law And Bankruptcy Law: The Applica-

tion Of 11 U.S.C. $ 1113, 2001 L. Rev. Mich. St.

U. Det. C.L. 1145 (Winter 2001)

Gabriel J. Mince, Bankruptcy and Employee Benefit

Plans, A.B.A. Center for C.L.E., N-25 (1998),

available at N9S8EBAB ABALGLED N-25 (West-

BW) .caceccccceoecleuce maaan SS

Lewis Kruger, Chapter 11 and Plan Formulation,

PLI Comm. L. & Prac., 850 (Nov.-Dec. 2001),

available at 828 PL/Comm 745 (Westlaw)

Oversight On The LTV Corporation Filing For

Bankruptcy Under Chapter 11 Of The Federal

Bankruptcy Code: Hearing Before The Committee

On The Judiciary United States Senate, 99th

Cong. 1-80 (1986)

3, 15

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The March 31, 2006 opinion of the United States

Court of Appeals for the Seventh Circuit is reported at

United Retired Pilots Benefit Protection Association uv.

United Air Lines, Inc., 443 F.3d 565 (7th Cir. 2006) (App.

at 1-13). The Seventh Circuit affirmed the June 22, 2005

decision of the United States District Court for the North-

ern District of Illinois, Eastern Division reported at 2005

WL 1528259 (N.D. Ill. 2005) (App. at 14-21). The district

court opinion affirmed the December 14, 2004 and Janu-

ary 31, 2005 orders of the United States Bankruptcy Court

for the Northern District of Illinois, Eastern Division. A

copy of the bankruptcy court’s December 14, 2004 order is

attached (App. at 22-37) along with a copy of the tran-

script from the proceedings that led to the entry of the

order (App. at 38). The bankruptcy court’s January 31,

2005 order is also attached (App. at 39-41).

JURISDICTION

This Court’s jurisdiction is invoked under 28 U.S.C.

§ 1254(1).

The Seventh Circuit’s opinion was rendered on March

31, 2006.

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

11 U.S.C. § 1113 is lengthy and, therefore, is set out in

App. at 42-44 pursuant to Supreme Court Rule 14.1(f).

STATEMENT

A. Overview

This case involves a pilots union that explicitly refused

to represent its own retired pilots and an employer, reorgan-

izing under Chapter 11 of the Bankruptcy Code, that refused

to allow a retiree representative into negotiations that

involved the retired pilots’ pension benefits. During these

negotiations, the union and employer signed an agreement

regarding the termination of the retired pilots’ pensions in

exchange for substitute payments made solely to the union

and active employees, again excluding the retired pilots

who had the most to lose from a pension termination. The

question here is whether that type of bargain should be

sanctioned by the federal courts, a question upon which

the Circuit Courts of Appeal are split.

There is no dispute regarding one point. Many of

United Air Lines, Inc.’s (“United’s”) retired pilots, who

have already had their benefits cut as a result of United’s

reorganization under Chapter 11 of the Bankruptcy Code,

will suffer drastic, life-altering losses in retirement income

if their defined benefit pension plan is terminated. They

will lose the pension benefits they earned during their

long careers serving United and the flying public, the

benefits for which they negotiated in past collective

bargaining sessions in lieu of immediate wages. Many

retired pilots will lose more than 50 percent of their

pension income in non-tax-qualified pension benefits,

which are benefits that are not insured or protected by -1e

Pension Benefit Guaranty Corporation (“PBGC”).

The United Retired Pilots Benefit Protection Associa-

tion’s (““URPBPA’s”) appeals below, and this petition for

certiorari, relate to United’s contractual obligations to pay

pension benefits it promised its retired pilots and the effect

United’s Chapter 11 petition had on these contractual

obligations.. URPBPA asks this Court to decide whether a

’ United recognized in its bankruptcy court pleadings that, in order

to terminate the pilots’ defined benefit pension plan, it had to terminate

both the contractual obligations and its obligations under the Employee

Retirement Income Security Act of 1974 (“ERISA”), 29 U.S.C. § 1301 et

seq., that required it to maintain the plan. This appeal relates to ques-

tions regarding what United is required to do in order to terminate its

contractual duties to pay pension benefits. This appeal does not address

issues related to United’s statutory duties under ERISA or the burden an

employer or the Pension Benefit Guaranty Corporation (“PBGC”) must

satisfy in order to terminate a defined benefit plan under ERISA’s

(Continued on following page)

Chapter 11 debtor is required to negotiate in good faith

with an authorized representative for retirees and satisfy

the other requirements of 11 U.S.C. § 1113 with respect to

those retirees before it modifies or terminates its contrac-

tual obligation to pay retiree pension benefits.

B. The Bildisco Decision And The Enactment Of 11

U.S.C. § 1113

Section 1113 of the Bankruptcy Code was enacted

shortly after the Supreme Court published its ruling in

National Labor Relations Board v. Bildisco and Bildisco,

465 U.S. 513, 104 S. Ct. 1188 (1984). In Bildisco, all nine

Justices agreed that an employer could reject a collective

bargaining agreement under 11 U.S.C. § 365, a section of

the Bankruptcy Code that permits the rejection of execu-

tory contracts, if the employer could satisfy a heightened

“balance of the equities” standard. But, in a controversial

part of its ruling that split the Court in a 5-4 decision, the

Court stated that a debtor who unilaterally rejects its

collective bargaining agreement before obtaining court

approval does not commit an unfair labor practice under

the National Labor Relations Act. Congress reacted imme-

diately to this part of the Court’s ruling and enacted 11

U.S.C. § 1113. See Wheeling-Pittsburgh Steel Corp. v. United

Steelworkers of America, 791 F.2d 1074, 1081-84 (3rd Cir.

1986) (describing Congress’ reaction to the Bildisco decision

and the enactment of 11 U.S.C. § 1113); Athanassios Papaio-

annou, The Duty to Bargain and Rejection of Collective

“distress termination” or “involuntary termination” provisions. See 29

U.S.C. § 1341(c 2 B)GiXTV); 29 U.S.C. § 1342.

* Typically, a debtor who seeks to reject an executory contract

under 11 U.S.C. § 365 is only required to satisfy the lenient “business

judgment” standard by showing that the rejection of a contract is in the

best interest of the bankruptcy estate. Because bankruptcy courts are

expected to take labor law considerations into account when making

decisions that implicate federal labor law concerns, the Court held that

a heightened standard should apply when a debtor seeks to reject a

collectively bargained agreement.

Bargaining Agreements Under Section 1113 By A Bankrupt

Airline: Trying To Reconcile R.L.A. With Bankruptcy Code,

13 Transp. L.J. 219, 225-28 (1990) (same); Donald B. Smith

& Richard A. Bales, Reconciling Labor Law and Bankruptcy

Law: The Application of 11 U.S.C. § 1113, 2001 L. Rev.

Mich. St. U. Det. C.L. 1145, 1149-62 (Winter 2001) (same).

11 U.S.C. § 1113 establishes a framework under which

a Chapter 11 debtor is required to exhaust the possibilities

of negotiating a compromise with an “authorized represen-

tative” before it seeks to terminate any collectively bar-

gained agreement. Under 11 U.S.C. § 1113(f), a debtor-in-

possession may not “unilaterally terminate or alter any

provisions of a collective bargaining agreement prior to

compliance with the provisions of this section [§ 1113]}.”

The debtor must, first, “make a proposal to the authorized

representative of the employees covered by such agree-

ment, based on the most complete and reliable information

available at the time of such proposal ... ” 11 U.S.C.

§ 1113(b)(1)A) (Century Brass, which is discussed below,

interprets the term “employees” in this section as includ-

ing retired employees). The debtor must “provide ... the

representative of the employees with such relevant infor-

mation as is necessary to evaluate the proposal,” 11 U.S.C.

§ 1113(b)(1)(B), and “ ... meet, at reasonable times, with

the authorized representative to confer in good faith in

attempting to reach mutually satisfactory modifications of

such an agreement.” 11 U.S.C. § 1113(b)(2). If an agree-

ment between a debtor and an authorized representative

cannot be reached, a hearing regarding the debtor’s

proposal will be held pursuant to § 1113(d)(1) and the

debtor is required to prove that it has satisfied its § 1113

obligations and that the proposal made to the authorized

representative includes only “those necessary modifica-

tions in the employee benefits and protections that are

necessary to permit the reorganization of the debtor... .”

11 U.S.C. § 1113(b)(1)(A) and (c(1) °

' For a discussion of the elements a debtor must satisfy in order to

obtain § 1113 relief, see Jn re Garofalo’s Finer Foods, Inc., 117 B.R. 363

Continued on following page)

C. The Second And Sixth Circuit Decisions In

Century Brass and Unimet

In re Century Brass, 795 1".2d 265 (2nd Cir. 1986) was

decided soon after § 1113 was enacted. After Century

Brass Products, Inc. (“Century Brass”) filed its Chapter 11

petition, it presented a series of proposals to its employees’

union, the United Automobile,-Aerospace & Agricultural

Implement Workers of America (“UAW”), that called for

the termination or modification of the defined benefit

pension and medical plans that provided benefits to both

active and retired employees. The UAW told Century

Brass that it would not consider any proposal that would

affect the vested retirement rights of retired employees

because it was not the authorized representative for the

retirees. Negotiations broke down and Century Brass

obtained an order from the bankruptcy court, under

§ 1113, terminating their collective bargaining.

On appeal, the UAW argued that it had “good cause”

to reject Century Brass’ § 1113 proposals because the

company failed to limit its proposals to matters pertaining

to the active employees’ benefits. The union argued that,

because Century Brass and UAW had no right to negotiate

over the benefits of the company’s retirees, Century Brass

could not insist that the UAW bargain over proposals that

included issues related to the retirees’ vested benefits.

Although the district court affirmed the bankruptcy court’s

order, the Second Circuit Court of Appeals agreed with the

UAW and reversed.

In reaching its decision, the_Second Circuit relied

heavily on Allied Chemical & Alkali Workers of America uv.

Pittsburgh Plate Glass Co., 404 U.S. 157, 92 S. Ct. 383

(1971). In that case, the Supreme Court held that an

employer may negotiate directly with its retired employees

over the modification of their vested retirement rights and

(N.D. Ill. 1990); Wheeling-Pittsburgh Steel Corp. v. United Steelworkers

of America, 791 F.2d 1074 (3rd Cir. 1986) and Truck Drivers Local 807 v.

Carey Transportation, Inc., 816 F.2d 82 (2nd Cir. 1987).

benefits. The Court stated that unions should not be forced

to represent its retirees in negotiations with an employer

because forcing a union to represent both active employees

and retirees can “create the potential for severe internal

conflicts” and create the risk that “union representatives

may see fit to bargain for improved wages or other condi-

tions favoring active employees at the expense of retirees’

benefits.” Pittsburgh Plate Glass, 404 U.S. at 173, 92S. Ct.

at 394. The Supreme Court also held that “[u]nder estab-

lished contract principles, vested retirement rights may

not be altered without the pensioner’s consent.” Jd., 404

U.S. at 182 n.20, 92 S. Ct. at 399 n.20.

The Century Brass court held that, in order to pro-

mote the policies of flexibility and equity built into the

Bankruptcy Code, retired employees are “employees”

under § 1113. Century Brass, 795 F.2d at 274-75. The court

stated that “if retiree benefits are subjects of bargaining

between the union and the employer, and no modification

can occur absent the retirees’ consent, those retirees must

be represented in the negotiations.” Jd. at 274. The court

also observed that, because it “may not always be appro-

priate for a union to represent both active and retired

workers in modification negotiations,” when a conflict

between active and retired employees exists, or when the

union will not represent its retirees, “a representative for

the class of retirees should be appointed by the bankruptcy

judge” so that the retired employees will have a bargain-

ing agent and representative throughout the § 1113

proceedings. Id. at 275. According to the court, retirees

should be represented during any negotiation regarding

their vested, retirement benefits, even if the employer is in

the midst of a Chapter 11 reorganization.

The court stated that, while the appointment of an

authorized representative for retired employees in § 1113

negotiations and proceedings “departs somewhat from a

literal reading of § 1113, well-established precedent for an

appointment of this sort is found in other areas of the law.”

Id. The Second Circuit then reversed the bankruptcy court’s

§ 1113 order and remanded the case “with instructions to

the bankruptcy court to appoint a representative for the

retired employees of the debtor, and for such further pro-

ceedings under § 1113 as are appropriate.” Jd. The court

held that Century Brass failed to satisfy the procedural and

substantive requirements of § 1113 because it “failed to

meet its threshold burden of negotiating with a representa-

tive of the company’s retired employees covered by” the

collective bargaining agreement. /d. at 276.

The Sixth Circuit Court of Appeal’s opinion in Jn re

Unimet Corp., 842 F.2d 876 (6th Cir. 1988) also held that

§ 1113 protections apply to retiree benefits. The Unimet

court stated that its “reading of 11 U.S.C. § 1113 leads us to

the conclusion that Congress intended to give broad protec-

tion to collectively bargained for rights which are threatened by

a corporate reorganization under Chapter 11 of the Bankruptcy

Code.” Unimet, 842 F.2d at 885. The Unimet court identified

numerous statements from the legislative history of § 1113

which indicate that when Congress enacted § 1113, it intended

to protect the collectively bargained pension rights of both

active and retired employees. The court concluded as follows:

“(bly requiring the debtor-in-possession to establish that the

equities militate in favor of rejection of the benefits collectively

bargained for on behalf of retirees, we believe we strike the

appropriate balance between the interests of the debtor-in-

possession in effectuating a reorganization and the interests of

the retirees who have achieved through the collective bargain-

ing process some measure of security.” Id. at 876-78.

D. The LTV Bankruptcy And The Enactment of 11

U.S.C. § 1114

The enactment of the legislation that has now become

codified at 11 U.S.C. §1114 was based upon Congress’

reaction to a situation where a Chapter 11 debtor, LTV Steel

Co., Inc., believed it had the right to unilaterally terminate

the life and health insurance benefits of its 78,000 retirees.

See In re Chateaugay Corp., 64 B.R. 990 (Bankr. S.D.N_Y.

1986) (summarizing the facts surrounding the LTV bank-

ruptcy); Gabriel J. Minc, Bankruptcy and Employee Benefit

Plans, A.B.A. Center for C.L.E., N-25, N-46 (1998), available

at N9S8EBAB ABALGLED N-25 (Westlaw); Lewis Kruger,

Chapter 11 and Plan Formulation, PLI Comm. L. & Prac.,

850-62 (Nov.-Dec. 2001), available at 828 PLI/Comm 745

(Westlaw). Although the members of Congress who drafted

Bankruptcy Code § 1113 stated that they believed § 1113

protected against the unilateral termination of all collectively

bargained benefits, including the health and life insurance

benefits LTV stopped paying when it entered into bankruptcy,

11 U.S.C. § 1114 was enacted to ensure that the insurance-

based benefits of retirees are protected regardless of whether

the benefits are collectively bargained.‘ See Oversight on the

LTV Corporation Filing For Bankruptcy Under Chapter 11 of

the Federal Bankruptcy Code: Hearing Before the Committee on

the Judiciary, United States Senate, 99th Cong. 1-80 (1986)

(members of Congress and Professor Vern Countryman stated

that LTV violated § 1113 when it discontinued retiree medical

benefits, but members of Congress also stated that new legisla-

tion would be enacted to force LTV to continue paying insur-

ance benefits and to reinforce the law).

E. The United Air Lines, Inc., The Air Line Pilots

Association, International And The Pilots’ De-

fined Benefit Plan

United Air Lines, Inc. (“United”), the primary subsidi-

ary of UAL Corporation, operates one of the world’s largest

commercial airlines. United has employed and continues to

employ commercial airline pilots under agreements it has

negotiated with the Air Line Pilots Association, Interna-

tional (“ALPA”), the union that represents United’s active

pilots. ALPA does not represent United’s retired pilots.

The defined benefit plan that provides pension bene-

fits to United’s retired pilots is called the U».ited Airlines

Pilot Defined Benefit Pension Plan (the “Pilot Plan”).° The

* 11 U.S.C. § 1114(c) relates to collectively barga. retiree insurance

benefits. 11 U.S.C. § 1114(d) expands protections tw retiree insurance

benefits that are not covered by a collective bargaining agreement.

* A “defined benefit plan” is a pension plan that guarantees

participants a specific level of retirement income. A defined benefit plan

is distinguished from “defined contribution plan,” which is a- pension

(Continued on following page)

1999 Amendment and Restatement of the Pilots’ Plan

makes it clear that the defined benefit plan provides

contractually vested benefits for retirees who satisfy the

plan’s vesting requirements.

In addition, because § 415 of the Internal Revenue

Code (“I.R.C.”) places a limit on the amount an employer

can contribute to a “tax-qualified” pension plan on behalf

of any one employee, ALPA and United have executed

Letter Agreement 85-10 and Letter Agreement 92-10 in

order to provide a mechanism for the payment of contrac-

tually agreed benefits from the Pilot Plan that exceed

I.R.C. limits. Section B(1)(a) of Letter Agreement 85-10

states that United “will agree to pay to pilots or their

spouses, beneficiaries or estates, as the case may be, the

difference between a) the benefits to which a pilot would

have been entitled under the Qualified Plans but for the

limitations of Section 415 of the Internal Revenue Code,

and b) the amount of benefits to which a pilot is entitled

under the Qualified Plans after taking into account the

limitations of Section 415.” Section B(1)(b) of the agree-

ment states that “payments of the difference are to be

made under a non-qualified program and shall be made at

the same time and in the same manner as payments are

made under the Qualified Plan.” As a result of Letter

Agreements 85-10 and 92-10, (which have been incorpo-

rated by reference into each subsequent collective bargain-

ing agreement between ALPA and United), retired pilots

became eligible to receive pension benefits from the “tax- -

qualified” and the “non-tax-qualified” parts of the Pilot

Plan.*

plan that does not guarantee participants any specific level of retire-

ment income but, instead, sets up an individual account for each

participant so that contributions can be made into that account by an

employer, an employee or both.

* Non-tax-qualified pension benefits do not receive the same

statutory protections under ERISA as tax-qualified benefits and are not

insured by the PBGC. As a result, retirees seeking to enforce their non-

qualified pension benefits are forced to rely primarily upon their

contractual rights.

F. United’s Chapter 11 Proceedings And The For-

mation Of URPBPA

On December 9, 2002, UAL Corporation, and its related

companies, including United, filed voluntary petitions for

relief under Chapter 11 of the Bankruptcy Code. That same

month, a greup of retired United pilots formed and incorpo-

rated URPBPA under Illinois law. URPBPA was created to

protect the retirement benefits of pilot retirees, survivors and

dependents (referred to generally as “retired pilots”) because,

as stated above, ALPA will not represent the interests of

United’s retired pilots.’ URPBPA’s Board of Directors con-

sists of seven retired United Captains (Roger Hall, Dennis D.

Dillon, Gerard Terstiege, Eugene M. Cummings, Raymond P.

Fink, James M. Krasno and William L. Rutherford) and Lise

Bentsen, a survivor of a deceased United pilot. URPBPA’s

membership consists of more than half of United’s approxi-

mately 6,000 retired pilots. URPBPA is the only organization

of retired pilots that appeared in connection with United’s

bankruptcy proceedings in an effort to protect the retired

pilots’ pension benefits.

As a result of other proceedings and orders entered in

United’s bankruptcy, retired pilots have lost their life

insurance benefits and have had their medical benefits

reduced significantly. Many retired pilots suffered addi-

tional losses when the United stock they obtained from

United’s employee stock ownership plan was rendered

valueless during United’s Chapter 11 proceedings.

G. United’s Section 1113 Motion, URPBPA’s Motion

For The Appointment Of An Authorized Repre-

sentative and The Bankruptcy Court’s Ap-

proval of Letter Agreement 05-01

In the summer and fall of 2004, United stated that it

was considering seeking the termination of the Pilot Plan

" All of the other unions representing United's active employees

represented their retired employees throughout United’s Chapter 11

proceedings.

and three of its other defined benefit plans. United recog-

nized in its bankruptcy court filings that it needed to go

through a two-step process in order to terminate any of its

defined benefit plans. In step one, United would need to

satisfy the requirements of 11 U.S.C. § 1113 and remove the

contractual obligations that required it to maintain its plans.

In step two, United would need to satisfy ERISA’s distress

termination provisions. See 29 U.S.C. § 1341(c2)(B\iXIV).

In November and December of 2004, United made a

series of filings which sought to schedule a § 1113 hearing

(and various pre-hearing deadlines) and present arguments

in favor of the termination of its pension plans. United

stated that it was “presenting its unions with proposals to

modify the Company’s collective bargaining agreements”

and stated that “[plart of the Company’s proposal to its

unions is to remove any requirement in the collective

bargaining agreements that the Company maintain defined

benefit pension plans.” United stated that it was “commit-

ted to attempting to negotiate agreements with its unions”

but that, in the event agreements could not be reached, it

sought authority to reject its collective bargaining agree-

ments with all of its unions, including ALPA. Although

United cited the nine requirements a debtor must satisfy in

order to terminate collectively bargained rights under

§ 1113, as those requirements are described in In re Garo-

falo’s Finer Foods, Inc. 117 B.R. 363, 370 (Bankr. N.D. II.

1990), the motion did not state how United would satisfy

these requirements, or any others, with respect to the rights

of its retired pilots. Rather, United’s motion assumed that, as

long as it could reach an agreement with ALPA and its active

pilots, it could remove any contractual obstacle that would

otherwise prevent it from terminating the Pilot Plan.

On December 10, 2004, URPBPA filed with the bank-

ruptcy court its Emergency Motion to Appoint Section 1113

Authorized Representative For United’s Retired Pilots In

Connection With Debtors’ Authority to Reject Their Collec-

tive Bargaining Agreements (“Motion to Appoint”). In this

motion, URPBPA argued that an authorized representa-

tive should be appointed, pursuant to 11 U.S.C. § 1113, to

represent United’s retired pilots and their vested pension

benefits. URPBPA informed the Court that all of United’s

unions except ALPA were representing their retirees.

United and ALPA were, in fact, conducting closed-door

bargaining sessions during the time this motion was filed

over the fate of the Pilot Plan. Representatives for the

retired pilots were not allowed to participate.

On December 14, 2004, the bankruptcy court denied

URPBPA’s Motion to Appoint. The bankruptcy court com-

pared 11 U.S.C. § 1113 with 11 U.S.C. § 1114 and stated:

... the first is a motion to be appointe as sec-

tion 1113 authorized representative. If ['m not

mistaken, there’s no such thing. Section 1114

calls for the appointment of an authorized repre-

sentative for retirees who are not being repre-

sented by their union in connection with the

change in retiree medical benefits. But there’s no

parallel provision in section 1113.

(App. at 24). The court stated that while it did not “take it

that there’s any objection about your participating to

some extent” (emphasis supplied), it also said “|t]here’s no

requirement now for the debtor to be negotiating with

retired pilots.” (App. at 24).-When URPBPA’s attorney

commented that, unless an authorized representative was

appointed to represent United’s retired pilots, United and

ALPA could be bargaining away the vested pension rights

of United’s retired pilots, the court said “they’re perfectly

free to do that.” (App. at 26).

Although the court said URPBPA could participate in

any § 1113 hearing that related to the Pilot Plan, the court

made it clear that United’s retired pilots would not be

permitted to participate in any other part of the § 1113

negotiation process and would not be permitted to use

§ 1113 protections to defend their pension benefits. The

court stated that URPBPA’s “participation is allowed solely

because it might have an impact on the later determina-

tion that the court would be required to make in a[n

ERISA] distress termination proceeding where your

clients would unquestionably have standing to partici-

pate.” (App. at 28).

As a result of their § 1113 negotiations, United and

ALPA reached an agreement on December 16, 2004, and,

on January 31, 2005, ALPA’s membership ratified a

modified version of that agreement (which is known as

Letter Agreement 05-01) and the bankruptcy court ap-

proved the agreement that same day. Letter Agreement

05-01 states that ALPA will not object to any motion

United may file seeking the distress termination of the

Pilot Plan under 29 U.S.C. § 1341 of ERISA if United

complies with certain terms outlined in the agreement

and, in addition, gives ALPA replacement benefits for

active pilots which include $550 million in convertible

notes, access to a new profit sharing plan, a new defined

contribution plan and other benefits. The agreement gives

United’s retired pilots nothing, even though it contem-

plates the termination of the Pilot Plan and cessation of

United’s obligation to pay pension benefits, including

benefits that are not insured by the PBGC.

H. URPBPA’s District Court Appeals

URPBPA appealed the bankruptcy court’s December 14,

2004 order denying its Motion to Appoint and then appealed

the bankruptcy court’s January 31, 2005 order approving

Letter Agreement 05-01. On February 14, 2005, the district

court dismissed URPBPA’s first appeal, observing that the

essential remedy URPBPA sought was the “voiding of any

agreement (the revised CBA) that United and ALPA reach

that affects the vested pension rights of United’s retired

pilots.” Because URPBPA had “already appealed the bank-

ruptcy court’s approval of the revised CBA by its order of

January 31, 2005, in which it intends to seek the same

remedy sought here,” the court ruled that URPBPA’s first

appeal could be dismissed in light of URPBPA’s second

appeal. Then, on June 22, 2005, the district court dismissed

URPBPA’s second appeal, United Retired Pilots Benefit

Protection Association v. United Air Lines, Inc., No. 05-C-

1202, 2005 WL 1528259 (N.D. Ill. June 22, 2005), stating

that because the Pilot Plan had not yet been terminated,

URPBPA did not have a right to appeal at that time.

I. The Seventh Circuit Affirms The District Court

On Different Grounds

On March 31, 2006, two months after United confirmed

a Chapter 11 plan and emerged from bankruptcy, the

Seventh Circuit Court of Appeals issued an opinion affirm-

ing the district court on different grounds. United Retired

Pilots Benefit Protection Association v. United Airlines, Inc.,

443 F.3d 565 (7th Cir. 2006). The Seventh Circuit opinion

disagreed with the district court and stated that URPBPA’s

appeal was not interlocutory because the January 31, 2005

order approving Letter Agreement 05-01 “was the equiva-

lent of a final judgment in a suit for breach of contract, and

therefore appealable as concluding a severable phase of the

bankruptcy proceeding.” United Retired Pilots, 443 F.3d at

569. The court also did not grant a motion filed by United to

dismiss the appeal as “moot” and stated that, despite

United’s argument, the bankruptcy judge could still conduct

a §1113 hearing in a way that would not jeopardize

United’s “newly recovered solvency.” Jd. at 567. But, ulti-

mately, the court affirmed the lower courts and ruled that

even if the bankruptcy court should have conditioned

approval of Letter Agreement 05-01 “on the retired pilots’

being made negotiating partners with United and the

union, there is no longer any feasible remedy that a court

could order.” Jd. at 572-73.

The Court recited a number of facts related to this

dispute and distinguished between the tax-qualified and

non-tax-qualified pension benefits to which United’s

retired pilots are entitled.“ The court correctly noted that,

because the bankruptcy court denied URPBPA’s Motion to

* At the beginnizg of the opinion, the Seventh Circuit stated that the

bankruptcy court and the district court “allowed United to eliminate the

contractual pension rights of its 3,000 or so retired pilots without a

hearing to determine whether they should receive ‘replacement’ benefits

(compensation for giving up those rights), which United had given its

active pilots.” While the Court’s statement is mostly correct, it should be

noted there are actually about 6,000 retired pilots enrolled in the Pilot

Plan (over 3,000 of which are members of URPBPA).

Appoint, ALPA and United did not allow retired pilots to

participate in negotiations that took place regarding their

pension benefits.” The court observed that, if the retired

pilots had been permitted to participate in § 1113 negotia-

tions regarding the termination of the Pilot Plan, these

negotiations may have caused United to provide “replace-

ment benefits” to the retired pilots as well as the active

pilots. The court emphasized throughout its opinion that “the

retired pilots received not merely lower replacement benefits

than the active pilots; they received nothing — and with no

opportunity to have negotiated for something.” Jd. at 570.

The court explained that, after United and ALPA

reached their agreement during the § 1113 process, the

PBGC filed a petition for the “involuntary termination” of

the Pilot Plan under 29 U.S.C. § 1342 and (after a Sep-

tember 2005 trial) this petition was granted by the bank-

ruptcy court.” While describing. certain factors related to

* Although the Court was puzzled regarding the purpose of

URPBPA’s Motion to Appoint, URPBPA’s motion was necessitated by

the fact that URPBPA did not represent all of United’s retired pilots.

Even if URPBPA had reached an agreement with United regarding the

terms under which URPBPA would have agreed to the termination of

the Pilot Plan, this agreement would not have bound all of United’s

unrepresented retired pilots. Consistent with the ruling in Century

Brass, URPBPA sought the appointment of a representative authorized

to represent and negotiate on behalf of all of United’s retired pilots.

’* Judge Posner’s opinion indicates that the bankruptcy court order

granting the PBGC’s petition and terminating the Pilot Plan (see the

bankruptcy court rulings in the PBGC termination case at In re UAL Corp.,

02-48191, 2005 WL 2840266 (Bankr. N.D. Ill. Oct. 26, 2005) and Jn re UAL

Corp., 333 B.R. 802 (Bankr. N.D. Il]. 2005)) was on appeal to the district

court. These district court appeals have been resolved. First, District Court

Judge John Darrah reversed the bankruptcy court, stating that it did not

have the jurisdictional authority to enter an order terminating the Pilot

Plan. In re United Air Lines, Inc., 337 B.R. 904 (N.D. Ill. 2006). The case

was remanded and the bankruptcy court issued findings of fact and

conclusions of law to the district court. On June 13, 2006, District Court

Judge Joan Lefkow entered a Memorandum Opinion and Order accepting

a modified version of the recommendations of the bankruptcy court and

entering a judicial decree terminating the Pilot Plan. URPBPA has

“appealed Judge Lefkow’s order to the Seventh Circuit Court of Appeals.

the PBGC’s termination insurance program, the court

noted that. the PBGC “does not replace any non-tax-

qualified benefits” and the PBGC’s guaranty of tax-

qualified benefits is limited by the PBGC’s maximum

guaranty. Id. at 569.

The court also made a number of legal observations and

rulings. The court dismissed United’s argument that the

enactment of 11 U.S.C. § 1114 somehow implies that no retiree

representative need be appointed for negotiations pursuant to

11 U.S.C. § 1113 and stated that “there is no indication that

Congress was specifying or disallowing procedures to be used

in section 1113 proceedings” when it enacted § 1114. Jd. at

571. But the court also concluded that, because the retired

pilots were not parties to the collective bargaining agreement

ALPA and United sought to modify in December 2005, and

because, in the court’s opinion, the retired pilots were not

third-party beneficiaries of that agreement, ALPA and United

would ordinarily be “free to modify it without regard to the

impact on the financial interests of third parties who are not

third-party beneficiaries.”” Jd. Because United was in bank-

ruptcy, though, the opinion stated that the bankruptcy court

had an obligation to consider the impact of agreements “not in

the ordinary course” on United’s other creditors, including the

retired pilots.

While the court believed United’s retired pilots may

have had some form of “potential blocking power” based

upon their status as bankruptcy creditors and potential

" For many of United’s retired pilots, the amount of post-

termination benefits the PBGC will pay will be significantly less than

United’s pension obligation under the tax-qualified portion of the Pilot

Plan. As a result, many of United’s retired pilots stand to lose a portion

of their tax-qualified pension benefits and all of their non-tax-qualified

benefits, which are not insured by the PBGC.

* URPBPA’s argument to the Seventh Circuit had been that, even

though United and ALPA are free to modify their agreements regarding the

terms and conditions of employment for active pilots, they cannot enter into

a new collective bargaining agreement that purports to terminate separate

and distinct contractual obligations United has to the retired pilots (which

are vested contractual obligations to which ALPA is not a party).

participants in any upcoming ERISA termination proceed-

ing, and the court also stated that United could have

attempted to “buy” from the retired pilots an agreement

(similar to Letter Agreement 05-01) wherein the retired

pilots agreed not to oppose the termination of the Pilot

Plan, the court did not base its ruling on any recognition

that the retired pilots had vested contract rights that are

independent of the current collective bargaining arrange-

ments between ALPA and United. Despite the court’s

observation that the bankruptcy court approved Letter

Agreement 05-01 “without giving any consideration to the

retired pilots’ interests,” the Seventh Circuit also concluded

that the retired pilots “probably” did not have the right to

protect their pension benefits in a § 1113 proceeding.”

REASONS FOR GRANTING THE PETITION

The Affirmed Bankruptcy Court Orders Refus-

ing To Appoint An Authorized Representative

To Protect The Retired Pilots’ Contractual

Pension Rights And Approving Letter Agree-

ment 05-01 Lack Legal Justification, Are At

Odds With Notions Of Fundamental Fairness

And, If Not Corrected, Will Affect The Lives Of

Thousands Of Retired Pilots.

The fundamental question presented is how could a

bankruptcy court allow an employer, reorganizing under

Chapter 11 of the Bankruptcy Code, and a union to strip

retired employees of their contractual rights without provid-

ing them the opportunity to protect their interests under 11

U.S.C. § 1113? What legal support could the bankruptcy

court have for ruling that an employer and a union are

“perfectly free” to bargain away the vested pension rights of

the employer’s retirees while enriching the active employees

with replacement benefits in the event of a pension plan

termination? If employees retire after spending their lives

The Court did say Century Brass “injects some uncertainty concern-

ing the retired pilots’ rights in a section 1113 proceeding.” Jd. at 571.

working for an employer and paying union dues, can the

employer file for bankruptcy and then enter into closed-door

negotiations with the union to take these pensions away

from the retirees?

This Court should review the rulings issued below

because the bankruptcy court had no legal justification for

denying URPBPA’s Motion to Appoint and approving

Letter Agreement 05-01, because the bankruptcy court’s

orders are unfair and because the elimination of the

retired pilots’ pension rights has impacted and will con-

tinue to affect thousands of retirees. If not reversed, the

bankruptcy court’s rulings could set dangerous precedents

for other courts while presenting a roadmap for Chapter

11 debtors seeking to rid themselves of obligations from

their most vulnerable creditors — their retired employees.

The Pilot Plan provides collectively bargained, vested

pension rights to United’s retired pilots. United’s obligation

to pay pension benefits extends to each of United’s retired

pilots under the terms of the collective bargaining agreement

that was in place at the time each former pilot retired.

United has never disputed this because it is beyond dispute

that when an employer promises lifelong benefits to its

retirees, that promise is enforceable.“ When an employer

“ The Courts of Appeals agree that an employer’s promise to pay

lifetime, vested benefits constitutes an enforceable contractual obligation. See

Hoefel v. Atlas Tack Corp., 581 F.2d 1, 4-6 (1st Cir. 1978) (under contractual

vesting, once an employee complies with conditions entitling him or her to

participate in a plan, his rights cannot be divested by employer); United

Steelworkers of America, AFL-CIO v. Textron, Inc., 836 F.2d 6, 9 (1st Cir.

1987); American Federation of Grain Millers, AFL-CIO v. International

Multifoods Corp., 116 F.3d 976, 980 (2nd Cir. 1997) (“af an employer promises

vested benefits, that promise will be enforced”); International Union, United

Automobile, Aerospace and Agricultural Implement Workers of America,

UA.W. v. Skinner Engine Co., 188 F.3d 130, 13747 (3rd Cir. 1999) (employer

may agree to provide for lifetime vesting even in plans where vesting not

required under ERISA); Rochester Corp. v. W.L. Rochester, 450 F.2d 118, 122

n.6 (4th Cir. 1971) (contractual provisions granting right to vested pension

benefits must be enforceable to prevent contractual promise from being

purely illusory); Gable v. Sweetheart Cup Co., Inc., 35 F.3d 851, 855 (4th Cir.

1994); Wise v. El Paso Natural Gas Co., 986 F.2d 929, 937 (5th Cir. 1993)

(Continued on following page)

promises vested benefits in a collective bargaining agree-

ment or plan document, those promises remain enforceable

even after the collective bargaining agreement expires. See

Bidlack v. Wheelabrator Corp., 993 F.2d 603, 607 (7th Cir.

1993) citing Litton Financial Printing Division v. NLRB, 501

U.S. 190, 207, 111 S. Ct. 2215, 2226 (1991) (“Rights which

accrued or vested under the [collective bargaining] agree-

ment will, as a general rule, survive termination of the

agreement”). When employers and unions negotiate new

(employer may enter into contractual obligations requiring it to provide

lifetime benefits to retirees in situations where it would not otherwise be

required to do so under ERISA); Yolton v. El Paso Tennessee Pipeline Co., 435

F.3d 571, 581 (6th Cir. 2006) (“parties to CBAs can agree to vest benefits

beyond the termination of the agreement”); /nternational Union, United

Automobile, Aerospace and Agricultural Implement Workers of America

(UAW) v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1982); Bidlack v. Wheela-

brator Corp., 993 F.2d 603, 607 (7th Cir. 1993); Anderson v. Alpha Portland

Industries, Inc., 836 F.2d 1512, 1516 (8th Cir. 1988); Bower v. Bunker Hull

Co., 725 F.2d 1221, 1223 (9th Cir. 1984); Chiles v. Ceridian Corp., 95 F.3d

1505, 1510-14 (10th Cir. 1996) (benefits vested under contract with an

employer are nonforfeitable); United Steelworkers of America, AFL-CIO v.

Connors Steel Co., 855 F.2d 1499, 1504-05 (11th Cir. 1988).

'° See also Yolton v. El Paso Tennessee Pipeline Co., 435 F.3d 571, 581

(6th Cir. 2006) (“the retirement package available to someone contemplat-

ing retirement will change with the expiration and adoption of CBAs, but

someone already retired under a particular CBA continues to receive the

benefits provided-therein-despite the expiration of the agreement itself”);

United Steelworkers of America, AFL-CIO v. Textron, Inc., 836 F.2d 6, 9 (1st

Cir. 1987) (“The contract language .. . is consistent with a Textron promise

to pay retirees’ insurance costs throughout their retirement, even after the

particular collective bargaining agreement expires”); Keefer v. H.K. Porter

Company, Inc., 872 F.2d 60, 62 (4th Cir. 1989) (“In determining whether an

employer’s obligation to provide benefits to its retirees or their surviving

spouses continues beyond the expiration of the collective bargaining

agreement, we look to the parties’ intent as expressed in their agreement”);

International Assoc. of Machinists and Aerospace Workers v. Masonite

Corp., 122 F.3d 228, 233 (5th Cir. 1997) (the renegotiation or termination of

an agreement between a union and an employer has no effect on benefits

that have already become contractually vested); United Steelworkers of

America, AFL-CIO v. Connors Steel Co., 855 F.2d 1499, 1504-05 (11th Cir.

1988) (“The trial court was clearly correct in deciding that Connors’

obligation to provide the [retiree] insurance benefits continued after the

expiration of the negotiated labor contract.”).

collective bargaining agreements, these new agreements do

not divest retirees of their vested rights and benefits. A union

employee who retires under a collective bargaining agree-

ment that promises vested benefits has already lived up to

his or her end of the bargain by providing years of work. It is

the employer’s turn to satisfy its contractual obligation to

pay pension benefits.

Outside of bankruptcy protection, an employer can

only modify the vested retirement benefits of its retired

employees with the actual consent of its retirees. See

Pittsburgh Plate Glass, 404 U.S. at 182 n.20, 92 S. Ct. at

399 n.20 (“[u]nder established contract principles, vested

retirement rights may not be altered without the pen-

sioner’s consent”)."” Outside of these Chapter 11 proceed-

ings, neither United nor ALPA could have divested

United’s retired pilots of their contractually vested pension

rights without the actual consent of the retired pilots.

Therefore, the important question here is, to what extent

are a retiree’s vested pension rights entitled to protection

when a debtor like United files a Chapter 11 petition?

Neither United nor any of the courts below have identi-

fied a provision in the Bankruptcy Code that states that an

employer can unilaterally eliminate a retiree’s contractual

right to receive pension benefits after it enters into Chapter

11 proceedings. If a retiree is not entitled to protect his or her

° See also Yard-Man, 716 F.2d at 1478-88 (although retirees may

negotiate directly with their former employer regarding the modification of

their vested retirement benefits, such benefits may not be unilaterally

changed by the employer); Local Union No. 150-A, United Food and

Commercial Workers v. Dubuque Packing Co., 756 F.2d 66, 70 (8th Cir.

1985) (“The status of a retiree cannot be affected by future negotiations or

agreements between the Company and the Union; neither can act on behalf

of retirees. ... Because the [retirees’] right to benefits has become vested

and the retirees are not part of the collective bargaining process, the

Company's claim that it may implement its final offer to the retirees of

lower benefits, because it has bargained to impasse, is without merit”);

Turner v. Local Union No. 302, 604 F.2d 1219, 1225 (9th Cir. 1979) (“Under

Allied Chemical, supra, it is clear that appellant’s consent would be

required to deprive him of any of his vested pension rights”); Bower v.

Bunker Hill Co., 725 F.2d 1221, 1223 (9th Cir. 1984).

pension benefits under 11 U.S.C. $1113 and participate in

§ 1113 negotiations and proceedings, by what provision of the

Bankruptcy Code does an employer, who would be absolutely

prohibited from modifying or terminating a retired em-

ployee’s vested benefits without the retiree’s consent outside

of bankruptcy, have the authority to terminate a retiree’s

contractual right to receive a pension?

While United recognized it could not terminate the

Pilot Plan without negotiating with ALPA over the con-

tractual obligations in its current collective bargaining

agreement, United and the courts below failed to recognize

the contractual obligations United had to the retired

pilots. United always has the right to negotiate and enter

into new collective bargaining agreements that affect the

active employees’ wages and benefits. Retirees have no

right to interfere with agreements that only affect the

rights of active workers. But, inside or outside of bank-

ruptcy, an employer and union do not have the right to

enter into an agreement that changes or terminates the

retired employees’ contract rights.

United has asserted that 11 U.S.C. § 363(b)(1) pro-

vides a legal justification for the bankruptcy court’s

approval of Letter Agreement 05-01. But § 363(b)(1) does

nothing more than give a bankruptcy court authority to

approve contracts that are “out of the ordinary course of

business.” It does not give Chapter 11 debtors the right to

cancel retiree obligations.”

It is fundamentally unfair, and contrary to fundamen-

tal principles of American law, for two parties to negotiate

” Even if the collective bargaining agreements under which the

retired pilots’ pension benefits became vested were deemed to be

nothing more than ordinary executory contracts, United would still

have to comply with the requirements of 11 U.S.C. § 365 in order to

terminate the retired pilots’ contractual rights (the courts below have

failed to suggest that United even had to do this). But the rights of the

retired pilots are more than ordinary contractual obligations. They are

contractual rights that were collectively bargained and they are eatitled

to protection under 11 U.S.C. § 1113.

over and take rights away from a third party who has been

denied access to those negotiations. Bankruptcy law does

not allow two parties to negotiate over and take property

away from a third party. It is manifestly unfair for an

employer and a union to use the pension rights of retirees

as bargaining chips in negotiations that are conducted

solely for the benefit of the union and the employer.

The fundamental unfairness here is similar to the

unfairness in Hurd v. Hutnick, 419 F. Supp. 630 (D.N.J.

1976), a case where an industry association and a union

agreed to enter into a new collective bargaining agreement

that purported to terminate the retirees’ pension plan

while providing new pension plans and other lucrative

benefits to the active employees. Retirees were not allowed

to participate in the negotiations that led to the union’s

agreement to “sell their old people down the river.” Jd. at

637 n.1, 650. The court framed the issue as follows: “when

employers who have previously entered into a multi-

employer pension plan find the plan too expensive to

maintain, may they enter into a new agreement with the

union extinguishing the pension fund by eliminating

further contributions to it, while making no provision for

the financial protection of some 1400 former employees

who have retired and are currently receiving pension

benefits from the fund?” Jd. at 637.

The court found that because the collective bargaining

agreements and plan documents that adopted the pension

plan had promised former employees lifetime pension benefits

upon retirement, any attempt by the union or employers to

enter into a new agreement terminating the retirees’ pension

plan would be a violation of the retirees’ vested contract

rights. Jd. at 637, 644-45. The court stated that the

employee-pensioner’s rights were fixed according to

the terms and conditions of the collective bargain-

ing agreement and pension plan in effect at the

time he retired. No pensioner’s benefits may be re-

duced by virtue of the provisions of a collective bar-

gaining agreement executed after his retirement,

when he was no longer a union member and there-

fore unrepresented at the negotiations.

Id. at 645. Furthermore, the court stated that the employ-

ers’ attempts to revoke their promises of lifetime benefits,

while providing new benefits to active workers, were

unconscionable and would not be permitted by a court of

equity. Jd. at 655.

Just like in Hurd, United and ALPA have entered into a

collective bargaining agreement that purports to terminate

all of United’s contractual obligations to pay pension benefits

to the retired pilots. Just like in Hurd, United's retired pilots

were not allowed to participate in the negotiations that led to

active employees receiving millions of dollars in benefits in

exchange for ALPA’s agreement not to oppose termination of

the Pilot Plan. The agreement reached between United and

ALPA is just as unconscionable as the one reached in Hurd

and should not have been approved.

The bankruptcy court’s errors, if not reversed, will

impact thousands of vulnerable United retired pilots who

have already suffered through huge cuts in their retirement

benefits. In addition, if this Court does not examine the

problems created by the bankruptcy and Seventh Circuit

rulings, which fail to recognize the importance of protecting

retirees’ vested contract rights during Chapter 11 proceed-

ings, these decisions will provide a number of perverse

incentives. First, the rulings will provide reorganizing

debtors with incentives to ignore the pension rights of its

retirees. Second, they will provide employers with incentives

to file Chapter 11 petitions in order to extinguish vested

contract obligations to retirees that could not be shed outside

of bankruptcy without retiree consent. Third, these decisions

will provide unions with incentives to bargain away the

rights of their retired members.

This Court should clarify the purpose of § 1113 and

provide guidance regarding the way in which bankruptcy

courts are supposed to handle retired pilots’ pension

rights. This would help the lower courts establish uniform

procedures that give retirees a fair opportunity to partici-

pate, negotiate and defend their rights. Clear ground rules

would also help Chapter 11 debtors plan for reorganiza-

tions that are efficient, but still treat retirees equitably,

and would help unions understand how negotiations

regarding plans that provide benefits to both active and

retired union members should be conducted.”

II. This Court Should Grant Certiorari Because

The Opinions And Rulings Issued Below Con-

flict With United States Supreme Court Prece-

dent And Congress’ Legislative Intent.

The opinions issued by the courts below should be

reviewed and reversed because they are inconsistent with

this Court’s previous rulings and the legislative intent

behind 11 U.S.C. $1113. While the Second Circuit in

Century Brass made an appropriately thorough analysis of

Pittsburgh Plate Glass and Bildisco and, like the Sixth

Circuit opinion in Unimet, analyzed the animating pur-

poses behind the enactment of § 1112. the bankruptcy

court and the Seventh Circuit ignored controlling Supreme

Court precedent and the legislative intent behind § 1113.

* A significant number of lower courts are deciding issues related to

§ 1113, including the United States Bankruptcy Court for the Southern

District of New York, which issued a October 31, 2005 order in Delta Air

Lines, Inc.’s (“Delta’s”) Chapter 11 proceedings. See Jn re Delta Air Lines,

Inc., No. 05-17923 (Bankr. S.D.N.Y. Oct. 31, 2005) (Docket No. 970). In this

order, the bankruptcy court denied a motion filed by an organization of

retired pilots (who, like here, ALPA refuses to represent) which sought to

compel Delta to continue paying contractually vested pension benefits. The

court denied the motion, stating that “only the Debtor may move for relief

under Bankruptcy Code 1113.” The court’s ruling missed the entire point

of § 1113, which prohibit. 1 Chapter 11 debtor from unilaterally terminat-

ing “any provisions of a collective bargaining agreement prior to compliance

with the provisions of this section,” 11 U.S.C. § 1113(f), and attempted to

turn § 1113 from a shield that is supposed to protect collectively bargained

benefits into a sword that can only be utilized by a Chapter 11 debtor. On

appeal, the district court reversed the bankruptcy court stating that “a

motion to compel is a procedurally proper means for a non-debtor party in

interest to compel the debtor to comply with § 1113” and remanded for

further proceedings. Delta, (Docket No. 33). It is likely that this bankruptcy

court, and others, will continue to struggle to interpret § 1113 as it pertains

to the rights of retired pensioners.

This Court has held that “[u]nder established contract

principles, vested retirement rights may not be altered

without the pensioner’s consent.” Pittsburgh Plate Glass,

404 U.S. at 182 n.20, 92 S.Ct. at 399 n.20. While the

bankruptcy court stated that United and ALPA were

“perfectly free” to negotiate away the retired pilots’ pen-

sion rights, the bankruptcy court did not cite any author-

ity for this conclusion and did not even attempt to address

Pittsburgh Plate Glass. Rather than analyzing and apply-

ing principles enunciated by the Supreme Court and other

courts that have struggled with issues related to the

protection of collectively bargained retiree benefits, the

court simply denied URPBPA’s Motion to Appoint without

citing any legal authority.

Amazingly, while the Seventh Circuit decision briefly

cited another portion of the opinion, it ignored the above-

quoted language from Pittsburgh Plate Glass and

URPBPA’s argument that 'Inited does not have the au-

thority to unilaterally terminate the retired pilots’ vested

retirement rights. The Seventh Circuit was so focused on

the current agreements between ALPA and United, it failed

to take into account the fact that United had separate and

distinct contractual obligations to its retired pilots. The

Seventh Circuit opinion attempts to characterize the retired

pilots as nothing more than third parties who have a non-

enforceable interest in pension benefits maintained under

ALPA and United’s most recent collective bargaining

agreement. This characterization is in direct conflict with

Pittsburgh Plate Glass, which states that vested retire-’

ment rights may not be altered without a retiree’s consent.

The Seventh Circuit’s opinion and the lower court

decisions are also inconsistent with this Court’s instruc-

tion that bankruptcy courts avoid adopting standards that

fail to protect collectively bargained rights or that are

“fundamentally at odds with the policies of flexibility and

equity built into Chapter 11 of the Bankruptcy Code”

Bildisco, 465 U.S. at 524, 104 S. Ct. at 1196 (this is from

the portion of the Bildisco decision that was not “legisla-

tively overruled” by 11 U.S.C. § 1113). After the Century

Brass court’s exhaustive analysis of Pittsburgh Plate

Glass, Bildisco and the legislative history of § 1113, the

Second Circuit followed the instructions in Bildisco and

made rulings regarding the rights of retirees under § 1113

that it believed harmonized labor law, bankruptcy law and

the rights of active and retired employees. Likewise, the

Sixth Circuit in Unimet court ruled that bankruptcy courts

should strike an equitable balance between “the interests

of the debtor-in-possession in effectuating a reorganization

and the interests of the retirees who have achieved

through the collective bargaining process some measure of

security.” Unimet, 842 F.2d at 876-78.

In the instant case, the Seventh Circuit did not

conduct a meaningful analysis of Pittsburgh Plate Glass,

Bildisco or the animating purpose of § 1113. While the

Seventh Circuit mentioned Pittsburgh Plate Glass, it did so

without analysis and it failed to cite the relevant portion

of the opinion. The Seventh Circuit did not cite the Bild-

isco opinion, analyze the history behind the enactment of

§ 1113 or attempt to balance the rights and interests of

United, the active pilots and the retired pilots.

Requiring United and other Chapter 11 debtors to

satisfy § 1113’s requirements before terminating the contrac-

tually vested pension rights of retired workers strikes a

reasonable and appropriate balance between the interests of

Chapter 11 debtors and the rights of retirees. Any other

interpretation or application of § 1113 in cases like this one

leads to arbitrary results. All of United’s unions except ALPA

represented the rights and pensions of their retirees during

United’s § 1113 proceedings. By refusing to appoint an

“authorized representative” for United’s retired pilots, the

bankruptcy court denied the retired pilots access to the

entire § 1113 negotiating process, which is designed to give

parties with collectively bargained rights “due process”

before these rights are modified or extinguished. It is arbi-

trary and unfair to establish a rule that, for all practical

purposes, results in situations where retirees whose rights

are protected by their unions receive the full procedural and

substantive protection of § 1113 while retirees who are not

represented by their unions do not.

Because United’s retired pilots did not have an au-

thorized representative appointed on their behalf, they did

not receive a §1113 negotiation proposal, they were

excluded from all negotiations regarding the Pilot Plan

and they were denied access to the proposals exchanged

between United and ALPA that related to the Pilot Plan.

United’s retired pilots were not given any ability to force

United to prove that the termination of the Pilot Plan is,

in fact, “necessary to permit the reorganization of the

debtor” under 11 U.S.C. § 1113(b)(1)(A) and (c)(1).

This Court should also grant certiorari because the

Seventh Circuit’s opinion is based upon an interpretation

of § 1113 that is inconsistent with Congress’ legislative

intent. As the Unimet court stated, a “discussion of 11

U.S.C. § 1113 is not complete without consideration of the

circumstances precipitating its enactment” and, as the

portions of the legislative record cited by the Unimet court

show, Congress intended to protect retiree pension rights

when it enacted § 1113. Unimet, 842 F.2d at 881-84. While

Century Brass and Unimet both gave careful consideration

to the context in which § 1113 was enacted, neither the

Seventh Circuit nor the lower courts made similar analy-

ses in this case. These rulings could cause other courts to

ignore the legislative purpose that was served by the

enactment of § 1113.

In addition, even though the Seventh Circuit corrected

the bankruptcy court’s misperception regarding the relation-

ship between § 1113 and § 1114 of the Bankruptcy Code by

stating that “there is no indication that Congress was

specifying or disallowing procedures to be used in section

1113 proceedings” when it enacted § 1114, United Retired

Pilots, 443 F.3d at 571, it would be helpful for this Court to

clarify the relationship between §1113 and § 1114 and

provide guidance to the lower courts. Both sections of the

Code were enacted as immediate reactions to situations

where the rights of employees and retirees were under

attack. By enacting these provisions, Congress showed that

it wanted courts to give employees and retirees broad protec-

tions that are not available to other types of bankruptcy

creditors. See also In re Farmland Industries, 294 B.R. 903,

915-19 (Bankr. W.D. Miss. 2003) (“It is clear that § 11133 is

designed to provide protections to employees and retirees

who are covered by collective bargaining agreements, and

that § 1114 is designed to provide protections to those retir-

ees who are covered by other plans, funds, or programs”). By

granting this petition, this Court can ensure that Congress’

intent behind § 1113 is enforced.

Ill. This Court Should Resolve The Split In Author-

ity Between The Second And Sixth Circuit

Courts Of Appeals And The Seventh Circuit

Court Of Appeals.

The Second and Sixth Circuits and the Seventh Circuit

have clear differences in their interpretations of § 1113 and

their approaches to questions regarding a bankruptcy court’s

responsibility for protecting retirees’ vested contract rights to

their pensions. The Second and Sixth Circuit’s interpreta-

tions of § 1113 are consistent with Bildisco because they

interpret the provision in a way that balances the rights of

retirees with the rights and obligations of Chapter 11 debtors

and active employees while taking both labor and bank-

ruptcy law into account. The Second Circuit’s opinion in

Century Brass and the Sixth Circuit’s opinion in Unimet are

also consistent with Pittsburgh Plate Glass. The Seventh

Circuit’s opinion in United Retired Pilots decision is not.

At the most important and fundamental level, the Second

and Sixth Circuit opinions show that a retiree’s benefits cannot

be taken away unless the bankruptcy court allows the retirees

an opportunity to defend their rights under § 1113. The United

Retired Pilots decision, on the other hand, failed to reverse the

bankruptcy court and does not provide United's retired pilots

the opportunity to defend their contractually vested pensions

under § 1113. In fact, the Seventh Circuit characterized the

retired pilots as mere creditors who may have “some potential

blocking power” but; ultimately, may not have been worth

“buying off.” United Retired Pilots, 443 F.3d at 572-73.

The differences between these two competing ap-

proaches is best exemplified by the actual rulings of the

Century Brass and United Retired Pilots courts. In Century

Brass, the bankruptcy court entered an order allowing an

employer to reject its collective bargaining agreement

after the union refused to bargain away the contractually

vested rights of its retirees. On appeal, the Second Circuit

stated that an authorized representative should have been

appointed to represent retirees in any negotiations with

the debtor that involved the retirees’ rights and benefits.

The Second Circuit vacated the bankruptcy court order

and “remanded with instructions that the bankruptcy

court appoint a representative for the retired employees of

the debtor, and for such further proceedings under § 1113

as are appropriate.” Century Brass, 795 F.2d at 276.

In United Retired Pilots, the bankruptcy court ap-

proved an agreement between an employer and union that

did not represent its retirees and a debtor even though the

agreement provided for the termination of the retirees’

contractually vested benefits. On appeal, the Seventh

Circuit failed to recognize that the retirees had the right to

the appointment of an authorized representative and

failed to recognize that the retirees had the right to protect

their contractually vested benefits under § 1113. Rather

than vaeating the bankruptcy court order, requiring the

appointment of a representative for the retirees and

ordering further proceedings under § 1113, the Seventh

Circuit affirmed the bankruptcy court order, stating that,

even if the retirees were entitled to some form of relief, too

much time had passed for the court to devise an appropri-

ate remedy.

By ruling that “there is no longer any feasible remedy

that a court could order,” United Retired Pilots, 443 F.3d at

572-73, the Seventh Circuit contradicted its earlier state-

ment, in the first paragraph of its opinion, that “[aJll the

retired pilots are seeking in the first instance is a hearing

before the bankruptcy judge, and we shall see that the

judge could at that hearing deny any relief that would

jeopardize United’s newly recovered solvency.” Jd. at 567.

Rather than making rulings based on facts that were not

before the court, the Seventh Circuit, like the Second

Circuit in Century Brass, should have remanded the case

to the bankruptcy court for further proceedings under

§ 1113..It is certainly possible that United and the retired

pilots could reach a compromise during § 1113 negotia-

tions. If not, United would have the opportunity to prove,

at a § 1113 hearing, that the retired pilots did not have

“good cause” for rejecting United’s negotiating proposa's.

But it was not for the Seventh Circuit to usurp Congress’

authority, prevent these § 1113 negotiations from being

conducted or speculate over the result of any $1113

hearing that would take place.

This Court should grant certiorari in order to resolve

the conflict between Century Brass and Unimet, on one

hand, and United Retired Pilots, on the other, regarding

the rights of retirees, unrepresented by a union, to protect

under § 1113 their contractually vested pension benefits.

Guidance from this Court will assist the lower courts in

determining how vested pension rights should be handled

in similar proceedings.

CONCLUSION

This Petition For A Writ Of Certiorari should be

granted.

Respectfully submitted,

JACK J. CARRIGLIO FRANK CUMMINGS

Counsel of Record LEBOEUF, LAMB, GREENE &

ERIC E. NEWMAN MACRAE LLP

JAMES G. ARGIONIS 1875 Connecticut Avenue, NW

JENNIFER J. POMARANSKI Washington, DC 20009

MECKLER BULGER & (202) 986-8000

TILSON LLP

123 N. Wacker Drive,

Suite 1800

Chicago, IL 60606

(312) 474-7900

Counsel for Petitioners

App. 1

443 F.3d 565

United States Court of Appeals,

Seventh Circuit.

In re: VAL CORPORATION, et al., Debtors.

United Retired Pilots Benefit Protection Association, et al.,

Appellants,

United Airlines, Inc., et al., Debtors-Appellees.

No. 05-3121.

Argued Feb. 24, 2006.

Decided March 31, 2006.

Jack J. Carriglio (argued), Meckler, Bulger & Tilson,

Chicago, IL, for Appellants.

David R. Seligman (argued), Kirkland & Ellis, Wash-

ington, DC, Peter D. DeChiara, Babette Ceccotti (argued),

Cohen, Weiss & Simon, New York, NY, Stanley Eisenstein,

Katz, Friedman, Eagle, Eisenstein & Johnson, Chicago,

IL, for Debtors-Appellees.

Before BAUER, POSNER, and WILLIAMS, Circuit

Judges.

POSNER, Circuit Judge.

In the course of United Airlines’ bankruptcy, the

bankruptcy judge, seconded by the district judge, allowed

United to eliminate the contractual pension rights of its

3,000 or so retired pilots without a hearing to determine

whether they should receive “replacement” benefits

(compensation for giving up those rights), which United

had given its active pilots. The association representing

the retired pilots has appealed. (The “et al.” parties on

both sides of the case can be ignored.) Recently United

emerged from bankruptcy, and it argues that this renders

the appeal moot. That is incorrect. All that the retired

App. 2

pilots are seeking in the first instance is a hearing before

the bankruptcy judge, and we shall see that the judge

could at that hearing deny any relief that would jeopardize

United’s newly recovered solvency. And there is no argu-

ment that the confirmed plan resolves the claims made by

the retired pilots in this appeal.

United had a (frequently amended) collective bargain-

ing agreement with the Air Line Pilots Association (ALPA)

that among other things established defined-benefit

pension plans for both active and retired pilots employed

by United. The plans provided both tax-qualified and non-

tax-qualified pension benefits; the distinctions relevant to

this case are that the latter are not insured by the Pension

Benefit Guaranty Corporation or protected by the provi-

sions of ERISA relating to the termination of pension

plans. 29 U.S.C. §§ 1321(a), (b)(8).

Normally a bankruptcy trustee, or as in this case a

debtor in possession, can freely reject the executory

portion of a contract. But section 1113 of the Bankruptcy

Code permits the rejection of the executory portion of a

collective bargaining agreement only with the approval of

the bankruptcy judge after negotiations looking to mutu-

ally satisfactory modifications of the agreement, 11 U.S.C.

§ 1113(b)(2), and only if (the negotiations failing) the judge

determines that “the balance of the equities clearly favors

rejection of such agreement.” § 1113(c)(3). Wanting to lift

the albatross of pension obligations from its shoulders as

well as to reduce the pilots’ wages, United filed an applica-

tion under section 1113 for rejection of the collective

bargaining agreement and proceeded to the negotiation

phase with ALPA. When ALPA made clear that it would

not represent the interests of the retired pilots in the

negotiations, the latter moved the bankruptcy judge to

App. 3

appoint a representative to participate in the negotiations

on their behalf. The purpose of the motion is a little

obscure. The retired pilots already had a representative —

the United Retired Pilots Benefit Protection Association,

the appeilant. What they really wanted was for the judge

to order United and ALPA to negotiate with URPBPA as

well. The judge denied, and as a result the retired pilots

did not participate in the negotiations. The judge’s refusal

is ome of the orders that the association is asking us to

reverse.

While the section 1113 proceeding was going on,

United and ALPA negotiated an agreement (the parties

call this the “Letter Agreement”) to modify the collective

bargaining agreement. The modification was intended to

eliminate the pension plans created by the agreement but

compensate the active pilots, that is, the pilots repre-

sented by ALPA, by giving them convertible notes valued

at $550 million and other consideration, including a

defined-contribution pension plan. In exchange for these

concessions ALPA agreed not to oppose United’s attempt to

terminate the collectively bargained pension plans under

29 U.S.C. § 1341, the provision of ERISA that governs the

voluntary termination of pension plans.

With the agreement to modify the collective bargain-

ing agreement, United’s application under section 1113 to

reject the agreement entered a state of suspended anima-

tion, since the modification of the collective bargaining

agreement by the Letter Agreement would, if that agree-

ment was approved, give United the relief it wanted

without its having to persuade the bankruptcy judge to

reject the collective bargaining agreement.

App. 4

United asked the bankruptcy judge to approve the

Letter Agreement under 11 U.S.C. § 363(b)(1), which

requires that the bankruptcy judge’s approval be obtained

for contracts made by the debtor during the bankruptcy

that are outside the ordinary course of business, as the

Letter Agreement obviously was. The judge gave his

approval, and this is the other order challenged on this

appeal. The retired pilots argue that he shouldn’t have

approved the agreement without giving them a chance to

participate in the negotiations for replacement benefits;

such participation might, they argue, have resulted in

their receiving replacement benefits too.

The order of approval extinguished any rights that the

retired pilots might have had under the collective bargain-

ing agreement. It was the equivalent of a final judgment

in a suit for breach of contract, and therefore appealable

as concluding a severable phase of the bankruptcy pro-

ceeding. Bank of America, N.A. v. Moglia, 330 F.3d 942,

944 (7th Cir.2003). The earlier order refusing to appoint a

representative to negotiate with United and ALPA on the

retired pilots’ behalf over replacement benefits to compen-

sate for the modification of the collective bargaining

agreement was interlocutory, but interlocutory to the order

extinguishing their contract rights and therefore review-

able by us with it.

After the bankruptcy judge approved the Letter

Agreement, United withdrew its section 1113 motion for

rejection of the collective bargaining agreement. The

approval did not, however, terminate the pension plans. For

that to happen an application had to be made to and ap-

proved by the bankruptcy judge under one of two sections of

ERISA. Under the first, 29 U.S.C. § 1341 (voluntary

termination), the employer asks for termination. Under

App. 5

the second, 29 U.S.C. § 1342 (involuntary termination),

the Pension Benefit Guaranty Corporation, which insures

vested rights under ERISA pension plans, 29 U.S.C. §

1322(a); Pension Benefit Guaranty Corp. v. LTV Corp., 496

U.S. 633, 637-38, 110 S.Ct. 2668, 110 L.Ed.2d 579 (1990),

asks. United started down the voluntary-termination road,

as we know, but withdrew when the PBGC applied for

involuntary termination. The PBGC anticipated that if the

pension plans were not terminated, and so continued

generating new vested pension rights, the plans would go

into default and as the insurer of those rights the PBGC

would face a staggering liability.

The bankruptcy judge granted the PBGC’s application

in an order that is currently on appeal to the district court.

Assuming the order is upheld, the PBGC will become the

obligor of the retired pilots’ vested pension rights, though

only to a limited extent. Although airline pilots must retire

at the age of 60, the PBGC does not begin to pay full

benefits until the retiree reaches the age of 65. Also, as we

noted earlier, it does not replace any non-tax-qualified

benefits. And it pays a maximum of $44,388 in annual

benefits to participants in plans terminated, as this one

was, in 2004. What is more, while the benefits that PBGC

will be paying the active pilots when they retire will be on

top of the replacement benefits that United has given

them in exchange for the surrender of their rights under

the pension plans, the retirees have received no replace-

ment benefits. They do have unsecured claims arising

from their contractual pension rights, to the extent they’re

not compensated by the PBGC insurance, but according to

the parties the value of those claims has not yet been

determined by the bankruptcy court. (That’s a puzzle; the

retired pilots have debt claims and debt is converted to

App. 6

stock in United’s plan of reorganization and it isn’t possi-

ble to confirm the plan without knowing who gets how

much stock. But it not a puzzle we need to unravel in

order to decide this appeal.) Nor do we know what fraction

of the claims will actually be paid. All that is clear is that

the retired pilots have some financial stake in pursuing

this litigation.

In the negotiations leading up to the Letter Agree-

ment, the active pilots, represented by ALPA, received as

we know sizable compensation for surrendering their right

to fight for their pension rights. The retired employees

were bound to receive less. They lost less; a retired pilot

will have enjoyed the benefit of full pension payments

since his retirement, while an active pilot who is near

retirement will have been contributing to the pension plan

for many years without receiving any benefits. More

important, the active pilots had a stick to use against

United — the threat of a strike — that the retirees didn’t

have. But the retired pilots received not merely lower

replacement benefits than the active pilots; they received

nothing — and with no opportunity to have negotiated for

something.

United defends this result primarily on the ground

that two parties to a contract are always free to modify it

without considering the views of any third parties. United

and ALPA are the only parties to the collective bargaining

agreement, and a union’s duty to bargain collectively on

behalf of the members of the bargaining unit that the

union represents does not extend to retired workers,

because they are not members of the unit. Allied Chemical

& Alkali Workers of America, Local Union No. 1 v. Pitts-

burgh Plate Glass Co., 404 U.S. 157, 166, 182 n. 20, 92

S.Ct. 383, 30 L.Ed.2d 341 (1971). The retirees do not argue

App. 7

that they are third-party beneficiaries .: the collective

bargaining agreement. The argument would be unlikely to

prevail, which may be why it hasn’t been made. The test

for whether someone is a third-party beneficiary is

whether the express parties to the contract intended the

third party to have the right to enforce the contract. A.E_I.

Music Network, Inc. v. Business Computers, Inc., 290 F.3d

952, 955 (7th Cir.2002); Vidimos, Inc. v. Laser Lab Ltd., 99

F.3d 217, 219-20 (7th Cir.1996). Generally, the test is

deemed satisfied if a member of the bargaining unit seeks

to enforce the collective bargaining “agreement. E.g.,

United Food & Commercial Workers Local 951 v. Mulder,

31 F.3d 365, 370 (6th Cir.1994). It is satisfied if the benefi-

ciary under a welfare plan established by a collective

bargaining agreement sues for benefits. Hazen v. Western

Union Tel. Co., 518 F.2d 766, 767-70 (6th Cir.1975). But

neither employer nor union would want to create a situa-

tion in which retirees, whose interests diverge from those

of the active employees, would be able to block modifica-

tion of the collective bargaining agreement.

ALPA adds, rather unhelpfully, that the Railway

Labor Act, 45 U.S.C. §§ 151 et seg., which governs labor

relations in the airline industry as well as the railroad

industry, does not permit an employer to engage in collec-

tive bargaining with any entity other than the union that

represents its employees. 45 U.S.C. §§$ 152 Fourth, Sev-

enth. That rule would not prevent the employer from

negotiating with retirees, who are no longer members of

the bargaining unit, if the retirees could derail or impede

the negotiations between the parties to modify the collec-

tive bargaining agreement. An agreement to modify or

abrogate a collective bargaining agreement doesn’t affect

tax-qualified pension rights created by the agreement

: App. 8

until those rights are terminated by a separate order

under ERISA. United needed that order for its negotia-

tions with ALPA to give it what it ultimately wanted,

namely the termination of the pension plans.

The plans have been terminated, as we said, subject to

appeal. The retired pilots are not complaining about the

termination in this appeal but about being cut out of an

opportunity to obtain replacement benefits, as the active

pilots were able to do by virtue of their representation by

ALPA, in the negotiations that resulted in the Letter

Agreement that the judge approved under 11 U.S.C.

§ 363(b)(1). The question presented by the retired pilots’

appeal boils down to whether the bankruptcy judge could

approve that agreement without giving any consideration

to the retired pilots’ interests.

What interest»? More precisely, what legally protected

interests? United points out that only “interested parties”

may participate in a hearing on the debtor’s proposal to

reject a collective bargaining agreement, 11 U.S.C.

§ 1113(d)(1), and we have held that “interested parties”

include only the parties to (or a guarantor of) the agree-

ment. In re UAL Corp. (IFS), 408 F.3d 847, 851 (7th

Cir.2005). It is true that Jn re Century Brass Products,

Inc., 795 F.2d 265, 274-76 (2d Cir.1986), had held that

retirees are “employees” within the meaning of section

1113(b), and so are entitled to be consulted about the

proposal that the employer is required to make as a

preliminary to moving the bankruptcy judge to reject the

collective bargaining agreement. But Century Brass had

not discussed whether the retirees were interested parties

under section 1113(d), entitling them to oppose the rejec-

tion of the agreement, which was the subsection in ques-

tion in JFS. At most, Century Brass injects some

App. 9

uncertainty concerning the retired pilots’ rights in a

section 1113 proceeding, and we shall see that despite the

abandonment of that proceeding by United this uncer-

tainty could have a bearing on our decision. For the

moment, however, the only relevant point is that United’s

argument puts the cart before the horse. There was no

section 1113 hearing.

United notes that section 1114, which governs give-

ups of medical benefits, expressly requires the appoint-

ment of a representative for the beneficiaries in negotia-

tions for such give-ups (corresponding to the pre-rejection

negotiations under section 1113). This implies, United

argues, that no representative need be appointed for

section 1113 negotiations. The argument is unpersuasive.

In enacting section 1114, Congress was reacting to a

particular issue, that of termination of medical benefits, in

a particular bankruptcy, that of the LTV corporation.

Susan J. Stabile, “Protecting Retiree Medical Benefits in

Bankruptcy: The Scope of Section 1114 of the Bankruptcy

Code,” 14 Cardozo L. Rev. 1911, 1926-27 (1993). There is no

indication that Congress was specifying or disallowing

procedures to be used in section 1113 proceedings. In any

event, the question presented by this appeal is not the

procedures required by section 1113, since no order was

ever issued under that section. It is what negotiating

rights if any the retired pilots should have had with

regard to the agreement that the bankruptcy judge ap-

proved under section 363(b)(1), an agreement that con-

firmed the receipt of replacement benefits by the active

pilots and the receipt of nothing by the retired ones.

Normally, as we said, the parties to a contract can

modify it freely without regard to the impact on the

financial interests of third parties who are not third-party

App. 10

beneficiaries. But the setting here is abnormal. The

modification of the collective bargaining agreement had to

be approved by the bankruptcy judge under section

363(b\1) because it involved payment from the debter’s

estate (the replacement benefits) other than in the ordi-

nary course of the debtor’s business. Jn re Kmart Corp.,

359 F.3d 866, 872 (7th Cir.2004). The reason for the

requirement of obtaining judicial approval in such a case

is that contracts made by a debtor in bankruptcy that are

not in the ordinary course may have an impact on the

other creditors in the bankruptcy proceeding. United

States v. Goodstein, 883 F.2d 1362, 1367 (7th Cir.1989); In

re Abbotts Dairies of Pennsylvania, Inc., 788 F.2d 143, 150

(3d Cir.1986); In re Continental Air Lines, Inc., 780 F.2d

1223, 1227-28 (Sth Cir.1986). The criteria for approval,

therefore, are whether the transaction makes good busi-

ness sense, in which event the creditors as a whole should

benefit, Jn .re Schipper, 933 F.2d 513, 515 (7th Cir.1991),

and whether it preserves the priorities among the credi-

tors. In re Kmart Corp., supra, 359 F.3d at 872-73.

United argues that allowing the retired pilots into the

negotiations that resulted in the Letter Agreement that

the bankruptcy judge approved could not have increased

the value of the estate because the retired pilots have no

right to enforce the collective bargaining agreement.

Which is true, but does not carry quite as far as United

thinks. Remember that the Letter Agreement provided

‘that ALPA would not oppose United’s effort to terminate

the pension plans. Well, the retired pilots could oppose too,

though probably not in a section 1113 proceeding (that is

tl.e uncertainty we mentioned earlier). The pension plans

could be terminated only by proceedings under 29 U.S.C.

§§ 1341 or 1342, and the retired pilots both participated in

App. 11

and argued against the PBGC’s application for involuntary

termination of the pension plans under 29 U.S.C. § 1342.

They lost — maybe; the case is on appeal. Surrendering the

right to oppose, which doubtless they, like the active pilots,

would have done in exchange for replacement benefits

(better the bird in the hand), might have been worth

something to the debtor’s estate, for example if it had

headed off the appeal from termination now pending in

the district court, with the possibility of a further appeal

to this court (and beyond).

Had United thought the retired pilots worth buying

off, it would have offered them something for a “no fight”

clause similar to the one in the Letter Agreement. The fact

that United aid not do this is evidence that the retired

pilots had nothing to “sell.” But it is not conclusive evi-

dence. Section 363(b)(1)’s requirement that the debtor

obtain judicial approval of agreements that are outside the

ordinary course of business signifies a degree of congres-

sional distrust of the contractual process in bankruptcy. Jn

re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir.1983). The

fear is that the debtor who steps out of the ordinary course

of business may be harming creditors as a whole or favor-

ing one creditor over the others without a valid ground.

But the criteria for approval — whether the transaction

makes good business sense and does not disturb the

creditors’ rights inter se — do not argue compellingly for

requiring the debtor to negotiate with creditors seeking

special consideration just because they may be in a posi-

tion to throw a monkey wrench into a transaction other-

wise highly advantageous to the debtor and the creditors

as a whole.

The fact that United is warning us that the retired

pilots are threatening to derail the reorganization and

App. 12

plunge United back into bankruptcy is hardly evidence

that getting the retired pilots “on board” the Letter

Agreement might indeed have been in the best interests of

the estate; it is forensic advocacy; it is the argument we

would expect to be made any time someone claimed

compensation for not having tried to derail the bankruptcy

proceeding. But what is true is that the already daunting

complexity of major corporate bankruptcies would be

multiplied if anyone with some potential blocking power,

yet whom the trustee or debtor in possession had not

thought it worthwhile trying to pay to buy peace with,

could insist on negotiating rights as a condition of the

bankruptcy judge’s approving a transaction out of the

ordinary course.

Even if, despite what we have just said, the bank-

ruptcy judge should have conditioned approval of the

section 363(b)(1) agreement on the retired pilots’ being

made negotiating partners with United and the union,

there is no longer any feasible remedy that a court could

order. To avoid the unraveling of the section 1342 proceed-

ing and perhaps of the entire bankruptcy (though that

seems unlikely), we would not order the Letter Agreement

vacated. That would be a “logical” rem edy but unnecessar-

ily disruptive. All we could do would be to direct the

bankruptcy judge on remand to determine what he would

have insisted that the retired pilots receive in the agree-

ment, as a condition of his approving it, had he realized

they had the same kind of interest as the active pilots,

namely the interest conferred by a right to mount an

opposition to the termination of the pension plans. But

there would be no objective basis for calculating the value

that such a right would command in a hypothetical nego-

tiation.

App. 13

We conclude that the denial of relief to the retired

pilots should be, and it is,

Affirmed.

App. 14

2005 WL 1528259 (N.D.II1.)

United States District Court,

N.D. Ulinois, Eastern Division.

In re: VAL CORPORATION, et al., Debtors.

UNITED RETIRED PILOTS BENEFIT PROTECTION

ASSOCIATION, Roger D. Hall, Dennis D. Dillon,

Gerard Terstiege, Eugene M. Cummings,

Raymond P. Fink, James M. Krasno, and

William L. Rutherford, Appellants,

UNITED AIR LINES, INC., et al., Appellee.

No. 05 C 1202. :

June 22, 2005.

Eric E. Newman, Jack J. Carriglio, James Gregory

Argionis, Meckler, Bulger & Tilson, Chicago, IL, Frank

Cummings, Lebeoeuf, Lamb, Greene & Macrae, LLP,

Washington, DC, for Appellants.

Marc Jason Carmel, David Richard Seligman, Erik

William Chalut, James H.M. Sprayregen, Marc Kiesel-

stein, Kirkland & Ellis LLP, Eugene Robert Wedoff,

Kenneth S. Gardner, Chicago, IL, for Appellee.

MEMORANDUM OPINION AND ORDER

DARRAH, J.

Appellee, United Air Lines, Inc. (“United”), entered

into an agreement with the Air Line Pilots Association (the

“Pilots Association) to modify the Pilots Association’s

collective bargaining agreement. As part of the agreement,

the Pilots Association agreed that United was not required

to maintain a defined benefit pension plan and that, under

certain circumstances, the Pilots Association would not

oppose United’s efforts to terminate the pension plan.

App. 15

Thereafter, United and the Pilots Association sought

bankruptcy court approval of the agreements. Appellants,

the United Retired Pilots Benefit Protection Association,

and certain individual retired pilots — Roger D. Hall,

Dennis D. Dillon, Gerard Terstiege, Eugene M. Cummings,

Raymond P. Fink, James M. Krasno, and William L.

Rutherford — objected to the agreement. Presently before

the Court is United’s Motion to Dismiss Appeal of Appel-

lants.

BACKGROUND

United sought to modify the collective bargaining

agreement with the Pilots Association. While United

attempted to obtain consensual modifications, it also filed

a motion under 11 U.S.C. § 1113 to reject the collective

bargaining agreement. The bankruptcy court ruled that

Appellants could not appoint an authorized representative

for the retired pilots to participate in the § 1113 proceed-

ings. Appellants filed an appeal concerning this issue; that

appeal was dismissed.

However, !‘nited did not reject the collective bargain-

ing agreement under § 1113. Instead, United and the

Pilots Association reached an agreement concerning the

modification of the co)’ective bargaining agreement. The

agreement provided that:

In the event [United] seeks judicial approval to

terminate the United Airlines Pilot Defined

Benefit Pension Plan (the “A Plan”) under 29

U.S.C. § 1341(c) following April 11, 2005, then,

on and after May 11, 2005, (i) the [Pilots] Asso-

ciation shall waive any claim it may have that

the termination of the A Plan would violate the

terms and conditions of the existing collective

App. 16

bargaining agreement between [United] and the

[Pilots] Association, and (ii) the [Pilots] Associa-

tion shall not otherwise oppose [United’s] efforts

to terminate the A Plan under 29 U.S.C. § 1341(c);

provided, however, that nothing in this Letter of

Agreement shall be construed, deemed, or char-

acterized by [United] as any agreement of any

form by the [Pilots] Association that the A Plan

should be terminated... .

(Letter of Agreement { 4(a)). The agreement further

provided that:

The A Plan shall remain in full force and effect

unless (i) the bankruptcy court issues an order

declaring that the Company has met the re-

quirements for plan termination under 29 U.S.C.

§ 1341(c\2)(B)ii), and (ii) any of the following

has occurred: (A) no timely notice of the appeal of

the order has been filed, (B) the order has been

affirmed following the exhaustion of all appeals;

or (C) the Exit Date has occurred and the Plan of

Reorganization has become effective without pro-

vision for the continuation of any such ap-

peals.~..

(Letter of Agreement J 4(c)).

The order approving the agreement stated that

“[plursuant to Section 363 of the Bankruptcy Code [11

U.S.C. § 363], the Revised [Pilots Association] Restructur-

ing Agreement is approved, and the Debtors are hereby

authorized to enter into and perform under the [Pilots

Association Collective Bargaining Agreement] as modified

by the Revised [Pilots Association] Restructuring Agree-

ment.” The order further provided that “[u]pon the occur-

rence of all the conditions to effectiveness in the Revised

[Pilots Association] Restructuring Agreement, [United]

App. 17

shall be deemed to have withdrawn, as to [the Pilots

Association], their pending motion to reject their collective

bargaining agreements pursuant to Section 1113(c) with-

out prejudice.”

Appellants objected to this agreement, contending

that they were wrongfully excluded from the § 1113

process which could lead to the termination of the contrac-

tually vested rights of the retired pilots. On May 11, 2005,

over Appellants’ objection, the bankruptcy court entered

an order approving an agreement between United and the

Pension Benefit Guaranty Corporation (the “PBGC”),

which allows the PBGC to terminate the Pilots Association

pension plan under 29 U.S.C. § 1342.

ANALYSIS

United seeks to dismiss Appellants’ bankruptcy appeal

of the order approving the agreement between United and

the Pilots Association. According to United, that order is

not appealable because: (1) it is not a final order, (2) no

exceptional circumstances exist to grant Appellants leave

to appeal an interlocutory order, and (3) the collateral

order doctrine is not applicable.

Section 158 of Title 28 provides that “[t]he district

courts of the United States shall have jurisdiction to hear

appeals from final judgments, orders, and decrees.” 28

U.S.C. § 158(a)(1). In bankruptcy proceedings, the review-

ing court looks at the finality of an order with a “relaxed

eye” and interprets the finality requirement more liberally

under § 158 than under 28 U.S.C. § 1291. See In re Forty-

Eight Insulations, Inc., 115 F.3d 1294, 1298 (7th Cir.1997).

Even without a formal termination of the case, a bank-

ruptcy court’s order is final and appealable if it (1) resolves

App. 18

all contested issues on the merits and leaves only the

distribution of the estate assets to be completed; (2)

ultimately determines a creditor’s position in the bank-

ruptcy proceeding, even though the administration of the

debtor’s estate continues; or (3) marks the conclusion of

what, but for the bankruptcy, would be the equivalent of a

stand-alone suit by or against the trustee.

BA Leasing Parties v. UAL Corp., 2003 WL 22176068,

at *4 (N.D.IIl. Sept.15, 2003) (“BA Leasing”) (internal

citations and quotations omitted). Appellants argue that

the order is a final order because: (1) it approved a settle-

ment agreement; (2) it is the last order concerning a § 1113

proceeding; and (3) the order was, for all practical pur-

poses, the equivalent of an order denying intervention

and, therefore, is appealable.

Appellants contend that orders approving settlement

agreements are final orders and cites In re McCoy, 260

B.R. 863, 867 (Bankr.N.D.I11.2001). However, that case

further states that “an order approving a settlement is

final because it determines the rights of the parties to the

settlement.” Jn re McCoy, 260 B.R. at 867 (citations omit-

ted). The court further stated that “[alfter entry of the

Order, there was no issue left for future adjudication by

the Court, and therefore the Order was indeed final.” In

contrast, the order approving the settlement in this case

leaves open other issues for future adjudication by the

bankruptcy court; specifically, whether the pilots’ pension

plan can be terminated under 29 U.S.C. § 1341.

Appellants also contend that the order was final

because it is the last order concerning the 11 U.S.C. § 1113

proceeding and thus resolved a discrete issue: whether the

bankruptcy court had authority to take away the retired

App. 19

pilots’ contract rights even though they could not partici-

pate in that proceeding. This order, though, was not

entered pursuant to § 1113 but, rather, was the result of

an agreement entered between United and the Pilots

Association. Therefore, even if § 1113 permitted Appellants

to be represented during the proceedings — which the

statute probably does not permit, see In re UAL Corp., No.

05-2061, 05-2093, _- F.3d __, 408 F.3d 847, 2005 WL

1243335, at *3 (7th Cir. May 24, 2005) — that section is

inapplicable to the present action.

Appellants next argue the order was final because it

was equivalent to a denial of a motion to intervene in the

§ 1113 proceedings. However, “[n]o appellate opinion holds

that a bankruptcy judge’s decision whether a given par-

ticipant in the proceedings is an ‘interested party’ under

§ 1113 is equivalent to the denial of intervention. .. .” Jn re

UAL Corp., 408 F.3d 847, 2005 WL 1243335, at *1.

Under 11 U.S.C. § 158(a)(3), district courts may, at

their own discretion, grant parties leave to appeal non-

final orders under exceptional circumstances. Courts in

the Seventh Circuit apply the standards set forth in 28

U.S.C. § 1292(b) in determining whether to exercise their

discretion under § 158(a)(3). BA Leasing, 2003 WL

22176068, at *5. Section 1292(b) provides for appellate

review of interlocutory orders when “the order involves a

controlling question of law as to which there is substantial

ground for difference of opinion and that immediate

appeal from the order may materially advance the ulti-

mate termination of the litigation.” “Generally speaking,

leave to appeal an interlocutory order will not be granted

absent exceptional circumstances.” BA Leasing, 2003 WL

22176068, at *5 (internal quotations omitted).

App. 20

Appellants argue that there is a controlling question

of law as to which there is substantial ground for a differ-

ence of opinion concerning the interpretation of 11 U.S.C.

§ 1113. However, as discussed above, the order was not

entered pursuant to § 1113; and Appellants, therefore,

have no rights under that section. Furthermore, even if

the order was entered pursuant to § 1113, there is no

difference of opinion as to Appellants’ rights under that

statute. An interested party for purposes of Section 1113 is

a “‘party to that collective bargaining agreement’ or a

guarantor of that contract.” Jn re UAL Corp., 408 F.3d 847,

2005 WL 1243335, at *3. Because of this interpretation,

Labor and management are free to change their

agreements without any complaint by individual

workers or pensioners — or for that matter by

other third-party beneficiaries, including pension

fiduciaries. What labor and management may do

voluntarily, the court may accomplish in a § 1113

proceeding. There is no reason to include in the

§ 1113 proceeding any person or entity whose

consent would be unnecessary to a voluntary

change in the agreement.

In re UAL Corp., 408 F.3d 847, 2005 WL 1243335, at *3.

Accordingly, no exceptional circumstances exist which

warrant an interlocutory appeal.

Appellants next argue that the bankruptcy court’s

order is also appealable under the “collateral order”

doctrine. Under that doctrine, an order is reviewable if “it

is important, not subject to reconsideration in the trial

court, distinct from the merits, and unreviewable as a

practical matter later.” In re UAL Corp., 408 F.3d 847,

2005 WL 1243335, at *2. If this appeal only implicated the

propriety of allowing Appellants to participate in a § 1113

App. 21

proceeding, then the collateral order doctrine would

provide jurisdiction over the appeal. Jn re UAL Corp., 408

F.3d 847, 2005 WL 1243335, at *2-3. Again, as discussed

above, this appeal does not arise from an order modifying

a collective bargaining agreement under § 1113; instead,

United and the Pilots Association collectively bargained to

reach their agreement. Furthermore, even if the issues

arise under § 1113, Appellants and other retirees are still

receiving their pension benefits and will continue to do so

until United seeks to terminate the benefits under 29

U.S.C. § 1341. The Appellants would be entitled to partici-

pate in that proceeding and seek review of that decision

and, therefore, be able to obtain consideration of the key

issue ~ whether the retirees are entitled to pension bene-

fits. Accordingly, the collateral order doctrine is inapplica-

ble.

CONCLUSION

For the foregoing reasons, United’s Motion to Dismiss

Appeal of Appellants is granted.

App. 22

12/14/2004 United Hearing Transcript

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

United Airlines, Inc., et al, ) No. 02 B 48191

Chicago, [llinois

9:30 a.m.

Debtor. December 14, 2004

TRANSCRIPT OF PROCEEDINGS BEFORE THE

HONORABLE EUGENE R. WEDOFF

APPEARANCES:

For Debtors: Mr. David Seligman;

Mr. Chris Heck;

For URPBPA: Mr. Jack Corrigilio [sic];

For LAM: Mr. Tom Redburn;

For Assoc.

Flight Attendants: Mr. Robert Clayman;

For Airline

Pilots Assoc.: Ms. Babette Ceccolti [sic];

Court Reporter: JACKLEEN DE FINI, CSR, RPR

U.S. Courthouse

219 South Dearborn

Room 661

Chicago, I]. 60604.

(2} THE CLERK: UAL Corporation, 02 B 48191.

MR. CARRIGILIO: Good morning, Your Honor.

Jack Carrigilio for the United Retired Pilots Benefit —

App. 23

THE COURT: You need to speak directly into a

microphone, Mr. Carrigilio, to be heard on the telephone.

Then as long as you've started, let’s have the other

appearances by counsel in the courtroom.

MS. CECCOLTI [sic]: Good morning, Your Honor.

Babette Ceccolti [sic] for the Airline Pilots Association.

THE COURT: Miss Ceccolti [sic], perhaps you

are not able to hear me. What I was asking for first,

because Mr. Carrigilio started, I asked for appearances in

the courtroom first.

MS. CECCOLTI [sic]: [I’m sorry, Your Honor. I

couldn’t hear you.

THE COURT: That’s what I was afraid of. If you

have problems hearing what’s going in the court, please let

us know.

MS. CECCOLTI [sic]: All right.

THE COURT: Mr. Seligman, go ahead.

[3] MR. SELIGMAN: David Seligman on behalf

of the debtors.

MR. HECK: Chris Heck on behalf of the debtors.

THE COURT: And the appearances by tele-

phone, please.

MR. REDBURN: Tom Redburn for the Interna-

tional Association of Machinists. Good morning, Your

Honor.

THE COURT: Good morning.

App. 24

MR. CLAYMAN: Robert Clayman, Your Honor,

for the Association of Flight Attendants.

THE COURT: Are there any other appearances

by telephone?

Okay. Two matters before the court this morning, the

first is a motion — and both brought by the United Retired

Pilots Benefit Protection Association, the first is a motion

to be appointed as section 1113 authorized representa-

tives. If I’m not mistaken, there’s no such thing. Section

1114 calls for the appointment of an authorized represen-

tative for retirees who are not being represented by their

union in connection with the change in retiree medical

benefits. But there’s no parallel provision in section 1113.

[4] Is that right?

MR. CARRIGILIO: Not in 1113 itself, Your

Honor. We are relying on the rational of the Century Brass

case and similar cases where they've encountered this type

of rather unusual situation where, as we have here, all of

the umions except ALPA are representing their retirees.

ALPA is not representing their retirees.

THE COURT: Okay. I think the situation is

really simple: To the extent that you have authorization

from the parties in interest, that is the Retired Pilots that

you represent to participate in the proceeding, go ahead

and participate in the proceeding. But there is no point in

my giving you some kind of official status that’s not called

for by the code. The question that I think underlies your

motion is a desire to participate, and I don’t take it that

there’s any objection from parties about your participating

to some extent.

App. 25

As with any party that is participating in the proceed-

ings, I would hope that we not have duplication of ques-

tioning and unnecessary delay. But if you are representing

parties who have an interest in the proceeding and [5]

because of the potential for a de facto issue preclusion, I

think I have already made a determination that parties

whose ultimate interest is in the distressed termination

proceeding that’s anticipated would have a right to par-

ticipate in this collective bargaining matter. But that

would be the basis for your participation, not any kind of

official appointment by the court.

MR. CARRIGILIO: The only thing I would say

on that, Your Honor, is the extent of the participation is

really the issue. There’s no one in the mix right now who's

in a position to bargain with the debtor on the good faith

proposals that are supposed to be going back and forth as

to the retired pilots’ rights.

THE COURT: There’s no requirement now for

the debtor to be negotiating with the retired pilots. The

matter in dispute right now is a collective bargaining

agreement. The parties to the collective agreement are the

debtor and the union. So as far as negotiations are con-

cerned, those are the only two parties that are appropri-

ate. When the question comes up as to whether there is a

necessity for terminating pensicen plans, that may be one

of the issues that’s involved in 1113 process, you would [6]

have a right to represent the interests of your members

insofar as those interests are affected by that determina-

tion. But you don’t have a right to participate in negotia-

tions regarding a collective bargaining agreement to which

your members are not a party.

App. 26

MR. CARRIGILIO: Our only position on that,

Your Honor, was the same position in Century Brass.

Since we don't have the proposals, we don’t really know

whether — just like in Century Brass, ALPA is saying that

because they don’t represent retirees, they will not bargain

away retiree rights. Or perhaps ALPA is doing just that,

that in order to get better wage concessions for their active

members they’re agreeing to a termination or modification

of the retiree pension plan.

THE COURT: Or [sic] course they're perfectly

free to do that. If they were negotiating a new collective

bargaining agreement, this one terminated, your members

would have no right to participate in those negotiations. -

MR. CARRIGILIO: Well, Your Honor, for the

vested rights we believe that we do. If they negotiated —

THE COURT: Excuse me. On that point [7] you

and I simply have a difference of opinion. I believe that the

parties to the contract, that is to say the unions on one

hand and United on the other, are the ones who are

appropriately engaged in negotiations at this point. And

were it not for the fact that there is a distressed termina-

tion proceeding in prospect as to which there might be

some impact on account of determinations that I would

make in the 1113 process, you would have no standing to

participate in the 1113 process at all. But because there is

this potential overlap of issues, I have indicated that I

thought it was -appropriate to expand the concept of

standing for the purpose of adjudicating contested issues

regarding the necessity of terminating pension plans.

MR. CARRIGILIO: I understand.

App. 27

THE COURT: So you're certainly entitled under

that ruling that I have already made to participate in a

contested hearing on the question of whether it’s necessary

to terminate the pension plans. That doesn’t give you a

right to participate in negotiation over a collective bar-

gaining agreement to which you are not a party.

MR. CARRIGILIO: The only additional point,

Your Honor, we raised it in the memo, and I [8] also

confirmed it yesterday with PBGC’s counsel, is that there’s

a qualified and a nonqualified component to the retired

pilots’ pension plan. And as we raised in our brief, and as

was confirmed to me yesterday by the PBGC’s counsel,

they do not — the PBGC does not believe that it will be in a

position, or should be in a position to defend the nonquali-

fied portion of the pilots plan at a distressed termination

hearing. They do not believe that would be appropriate.

THE COURT: Fine.

MR. CARRIGILIO: So it could effectively then

be bargained away within the context of this 1113 by a

representative, by a union that does not represent its

retirees. That’s an additional reason why we believe that it

would be appropriate to have someone in the mix now to

negotiate, especially as to that nonqualified component of

the plan.

THE COURT: Again on this subject, we simply

have a disagreement. You believe that your clients have a

right to negotiate a collective bargaining agreement with

the debtors and I disagree because they're not parties to

the collective bargaining agreement. So on that one we'll

simply [9] have to register that disagreement. And on that

basis I’m going to deny the motion for official appointment

without prejudice to your participating in the hearing to

App. 28

determine whether it is necessary to terminate these

pension plans under the collective bargaining agreement.

And, again, the reason why that participation is

allowed is solely because it might have an impact on the

later determination that the court would be required to

make in a distress termination proceeding where your

clients would unquestionably have standing to participate.

Now that brings us to the second motion, which is the

discovery motion. As I understand it from the debtors’

reply, there were four items of information that you were

seeking in discovery. The first two of which have already

been resolved.

MR. CARRIGILIO: Well, they’ve been resolved,

but we haven’t received them.

THE COURT: But there’s an agreement by the

debtors to provide them.

How long will that take to provide?

MR. HECK: Your Honor, I think for providing

the business plan, we can do that as soon [10] as we have a

confidentiality agreement in place.

As far as the actuarial information, that’s too vague of

a term to figure out what the retired pilots want. We have

asked than to be more specific in the information they’re

looking for. Once they do that, the confidentiality agree-

ment in place, we'll be turning over those two categories of

documents.

THE COURT: Well, do you have any reason to

believe that that can’t be done by Friday?

App. 29

MR. HECK: No, Your Honor. I think we should

be able to do that by Friday.

THE COURT: That’s what I would have ex-

pected.

MR. HECK: Depending on once they specify the

actual actuarial information, the volume of what they’re

looking for.

MR. CARRIGILIO: May I speak to that? I talked

with Mr. Hagan from their office, Your Honor. On that one

I have been waiting for the name of their actuary, because

just like what we went through on the 1114 process when

we were exchanging actuarial information, we had our

actuary contact their actuary and say what we needed,

items that I think they have termed would be “on the

shelf,” that [11] have been provi:ied to other parties within

the 1113 process.

THE COURT: What I'm going to 4o is simply

continue these matters to the Friday omnibus with the

expectation that they'll be resolved.

Now, on the third and fourth items, the third item

being settlement discussion information between the

debtor and one of the unions.

MR. CAPRIGILIO: May I speak to that, Judge,

for a moment?

THE COURT: Im just going to tell you, you’re

not entitled to it. It basically flows from the same discus-

sion we had earlier. If your members were properly parties

to the negotiation of a collective bargeining agreement, they

might well be entitled to the kind of information that you are

seeking, but they're not. The parties to this process of

App. 30

negotiation under section 1113 are the unions on one hand

and United on the other. And your members are not

parties to that negotiation. Since they’re not parties to the

negotiation, they’re not entitled to what are confidential

settlement discussions between the parties. And I don’t see

any way around that.

The issue again that you have standing [12] to pursue

at the contested hearing has to do with the necessity of

terminating the pension plan. And on that question you

are entitled to reasonable discovery. And I think that’s

acknowledged by the debtors in their agreement to provide

you with the first two categories of information that you

were seeking. But as to settlement negotiations, you would

not be entitled.

MR. CARRIGILIO: The only item there, Your

Honor, is as part of the 1113 we should have a say in

whatever 1113 result there is is fair and equitable as to all

affected parties. And where we are going with this request

for the proposals between ALPA and United, Your Honor,

is to make a determination as to whether they are fair and

equitable as to the retired pilots. For instance, if ALPA in

order to get a better wage concession out of United is

bargaining away retiree benefits to our detriment, we

believe we should know about that and be able to point

that out to Your Honor, that they made X dollars in wage

benefits for themselves by bargaining away benefits of the

retirees.

THE COURT: My obligation under 1113 is to

have a hearing on termination of a collective bargaining

agreement in the event that the parties to [13] the collec-

tive bargaining agreement are not able to reach agree-

ment. I don’t know anything in 1113 that requires me to

App. 31

allow other parties who are affected by an agreement to

object to the agreement. If that’s a requirement, I don’t see

it in 1113.

Again, if there’s a contested hearing, you're perfectly

permitted to participate. And the issue in the collective

hearing may very well be the need to terminate the pen-

sion plan. But if there’s an agreement reached, we're not

talking about an 1113 hearing. At most, we'd be talking

about some kind 363 hearing, in which case another notice

would go out and you'd have an opportunity to be heard on

that matter. But it would not be an 1113 process. And if |

am mistaken about that, I will certainly look for someone

to correct me. But that’s my understanding of the way

1113 works. I have hearings in the absence of agreement,

not hearings in the presence of agreement.

So, again, the agreement process, the negotiation

process is one that is to be conducted between the debtor

and the unions that are parties to the collective bargaining

agreement, not third parties who might be affected by

those discussions. So as to that aspect the motion is

denied.

[14] Now the final aspect has to do with this Bridge

report.

MR. CARRIGILIO: Yes, sir.

THE COURT: That is a difficult issue. The

parties who created the Bridge report did so with an

understanding between themselves that the Bridge report

would be held confidential. But if the Bridge report con-

tains information that’s discoverable, how does a private

agreement among the parties who generated the Bridge

report prevent discovery?

App. 32

MR. HECK: Well, Your Honor, I think the first

point on that is that Your Honor entered an order approv-

ing all the terms of the Bridge report, and that motion to

approve was noticed up. The confidentiality provisions

were in that motion. If someone had wanted to object to

them at the time, they could have done so before this court

entered that order.

THE COURT: Well, did I enter an order that

said that the provisions of this report are going to be

immune from discovery?

MR. HECK: No, Your Honor. You entered an

order approving —

THE COURT: Approving the agreement be-

tween the parties.

[15] MR. HECK: Yes, Your Honor.

THE COURT: The parties were going to agree to

hold the contents confidential. Parties enter into confiden-

tiality agreements all the time that are overridden by

discovery in lawsuits.

MR. HECK: Correct, Your Honor.

To clarify, you approved — in terms of the engagement

letter with Bridge, which included the confidentiality

provision within it.

THE COURT: So, again, my question stands:

What we have is an agreement among the parties who

sought the Bridge report that it be held confidential. That

agreement certainly bound the parties. So neither the

unions nor the debtor could voluntarily disclose that

report. But if the report is sought in discovery, and if the

App. 33

report’s relevant in discovery, then I would suppose that it

ought to be discoverable. It may very well be that a confi-

dentiality obligation could be imposed on the party that’s

seeking the discovery. But I’m not aware of any rule of law

that would allow a private agreement between parties,

even if it’s approved by a court, to preclude discovery of

relevant information.

TELEPHONICALLY: Your Honor —

MR. CARRIGILIO: -— confidentiality [16] agree-

ment, Your Honor, I do want to make that point.

THE COURT: Mr. Clayman.

MR. CLAYMAN: This is Robert Clayman.

THE COURT: Yes.

MR. CLAYMAN: We join in the IM’s position

regarding this. The fact is is that part of the benefit of the

bargaining between the parties was confidentiality, just as

a matter — whether you call it public policy or not, the

interests of the parties in reaching agreement that a court

approving those agreements would seem to be that they

actually are meaningful. Amd if there’s an agreement of

confidentiality that’s simmiy going to be breached every

time there’s discovery, them there may not have been an

agreement of this kind.

THE COURT: What I’m going to do is, since I’m

continuing this motion, or at least portions of the motion

until Friday anyway, and given that there’s very little time

for the parties opposing this particular request by the

retired pilots to respond to it, I will continue the motion

with respect to the Bridge report as well to Friday on the

omnibus.

. App. 34

But what I would need if I’m going to deny this

request for discovery is some authority for [17] the propo-

sition that an expectation among parties that information

will be kept confidential is sufficient to preclude discovery.

MR. REDBURN: Your Honor, Thomas Redburn

from the IM. Can I just throw out one additional point for

the court’s consideration?

THE COURT: Certainly.

MR. REDBURN: And that is that it’s not clear

to me that this document is relevant to the 1113(c) process.

This document was created after the debtor had already

developed its business plan. And it’s my understanding

that it was not created for use in connection with the

debtors’ formulation of its proposals to the unions. So it’s

not clear to me that this is a document that the retired

pilots need in connection with this proceeding.

I would also point out that the underlying source

documents that were analyzed by the Bridge report,

particularly the debtors’ business plan, those are going to

be made available to all the interested parties in the

course of discovery. So it’s not clear to me that the pilots

have made any showing that this document is either

relevant or that it is necessary for them to obte:n in order

to participate in the 1113(c) proceeding.

[18] THE COURT: Well, | think you have ig-

nored the fairly broad standard for production of discovery,

which is not only documents that are likely to be admissi-

ble as relevant in themselves, but also documents that are

likely to lead to the discovery of relevant, admissible

information.

App. 35

Given that the hearing is anticipated to involve

questions of the necessity of terminating pension plans in

order for a successful reorganization to occur, a document

that analyzes the condition of the debtor financially would

certainly seem to me to bear on that question and hence be

discoverable. It may be that it’s produced after the plan

that United is proposing right now, but that doesn't

change the fact that it may bear on the necessity for

termination of pension plans.

MR. REDBURN: Well, Your Honor, as the IM

indicated in its limited objection, we are willing to agree to

the circulation of an executive summary summarizing the

core findings of the report, which I think is all that the

retired pilots wouid need. But that would protect from

disclosure the confidential aspects ef this report which,

you know, echoing Mr. Clayman’s statements that the

confidentiality which was a critical material term of the

agreement [19] settling the trustee motion.

THE COURT: I will continue this to Friday. And

if any party would like to file any additional memoranda

in opposition to the motion, I can consider that to the

extent that there’s time to do it. But, again, what I under-

stand the situation to be is one in which parties to the

preparation — the commissioning, I should say, of a finan-

cial report agree among themselves that the report would

be held confidential. And the question is whether if the

report is relevant for purposes of discovery, that agree-

ment among the parties can preclude disclosure. And,

again, my understanding is that an agreement among

parties that a document be held confidential does not

immunize the document from disclosure. But if there is

special circumstances, or if my understanding of the law in

App. 36

this regard is incorrect, I will be happy to hear what you

have to say about it.

MR. CLAYMAN: Thank you, Your Honor.

MR. REDBURN: Thank you, Your Honor.

THE COURT: So to summarize then, the re-

quests in this motion insofar as it seeks disclosure of

settlement discussion between the unions and United is

denied. And other respects, the [20] motion is continued to

Friday for a report on production pursuant to the first and

second items of discovery, and for potential further argu-

ment with respect to the final one.

MR. CARRIGILIO: Very well, Judge. Thank you.

MR. SELIGMAN: Your Honor — Your Honor, I’m

sorry. I just wanted to give the court also just one update,

which doesn’t bear directly to this, but we, the debtors,

have reached a tentative agreement with a negotiating

committee for the pilots. The terms haven’t been disclosed

yet, and there are a bunch of conditions that have to occur.

Because we are here, I wanted to at least advise Your

Honor of that. And I am sure we'll be talking more about

that at Friday’s omnibus hearing.

THE COURT: Thank you.

MR. CARRIGILIO: May I just get a clarification

on that? Is the negotiating committee, is that ALPA?

MR. SELIGMAN: Of the pilots.

MR. CARRIGILIO: Thank you, Judge.

THE COURT: Just so it’s clear, we had two

motions today. I just outlined the disposition of the second

App. 37

of those two. The first I think I [21] already made clear is

denied for reasons | stated earlier.

MR. HECK: Yes, Your Honor. Thank you.

(Which were all the proceedings had in the above-

entitled cause, December 14, 2004, 9:30 a.m.)

I, JACKLEEN DE FINI, CSR, RPR, DO HEREBY CER-

TIFY THAT THE FOREGOING IS A TRUE AND ACCU-

RATE TRANSCRIPT OF PROCEEDINGS HAD IN THE

ABOVE-ENTITLED CAUSE.

App. 38

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

Hearing

Honorable Eugene R. Wedoff Date December 14, 2004

Bankruptcy Adversary

Case No. 02B48191 No.

Title of Case UAL Corporation, et al.

Brief ~ Motion of The United Retired Pilots Benefit

Statement Protection Association to appoint section 1113

of Motion authorized representative in connection with

debtor’s motion for authority to reject their

collective bargaining agreement

(Docket entry #9212)

Names and

Addresses

of moving

counsel

Representing

ORDER

It is hereby ordered that the above-stated mo-

tion is denied for the reasons stated in open

court

/s/ Eugene R. Wedoff

App. 39

THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

In re: ) Chapter 11

UAL CORPORATION, et al., ’ Case No. 02-B-48191

(Jointly Administered)

Debtors.

) Honorable Eugene R. Wedoff

ORDER APPROVING AGREEMENT

MODIFYING THE DEBTORS’ COLLECTIVE

BARGAINING AGREEMENT WITH THE

AIR LINE PILOTS ASSOCIATION

The Debtors in the above-captioned Chapter 11 cases

have filed a Motion’ seeking entry of an order authorizing

and approving Debtors’ entry into the Revised ALPA

Restructuring Agreement attached as Exhibit Al to the

Motion. Upon reviewing such Motion, the Court finds that

the relief requested as it applies to ALPA is in the best

interests of the Debtors’ estates, their creditors and other

parties in interest; that this Court has jurisdiction over

this matter pursuant to 28 U.S.C. §§ 157 and 1334; that

this proceeding is a core proceeding within the meaning of

28 U.S.C. § 157(b)(2); that venue is proper in this District

pursuant to 28 U.S.C. § 1408 and 1409; that all proper and

adequate notice having been given as is practicable under

the circumstances, and that no other notice need be given

pursuant to Rules 1001, 2002(a) and 9006(c). After due

deliberation and sufficient cause appearing therefore,

' All capitalized terms not defined herein shall be as defined in the

Motion.

App. 46

IT IS HEREBY ORDERED THAT:

1. The Motion is granted.

2. To the extent required, all findings of fact shall be

treated as conclusions of law and all conclusions of law

shall be treated as findings of fact.

3. Pursuant to Section 363 of the Bankruptcy Code,

the Revised ALPA Restructuring Agreement is approved,

and the Debtors are hereby authorized to enter into and

perform under the ALPA CBA as modified by the Revised

ALPA Restructuring Agreement.

4. The Motion does not seek, and this Order does not

constitute, an assumption of any agreement described

herein, including without limitation, the Revised ALPA

Restructuring Agreement and the ALPA CBA as modified

by the Revised ALPA Restructuring Agreement. Therefore,

except as otherwise specifically set forth in the Revised

ALPA Restructuring Agreement, this Order or approval of

the Revised ALPA Restructuring Agreement shall not, in

and of themselves, create administrative expense or

priority claims pursuant to Sections 507, 1113, 1114 or

otherwise that would not otherwise (but for the execution

or approval of the Revised ALPA Restructuring Agree-

ment) be entitled to such levels of priority.

5. Notwithstanding anything to the contrary con-

tained in the Revised ALPA Restructuring Agreement,

approval of the Revised ALPA Restructuring Agreement

shall constitute approval and allowance of the ALPA

Administrative Claim and shall otherwise have the same

meaning and effect as this Court’s approval of the 2003

Pilot Agreement on April 30, 2003.

App. 41

6. Upon the occurrence of all of the conditions to

effectiveness in the Revised ALPA Restructuring Agree-

ment, the Debtors shall be deemed to have withdrawn, as

to ALPA, their pending motion to reject their collective

bargaining agreements pursuant to Section 1113(c) with-

out prejudice.

7. This Order approving the Revised ALPA Restruc-

turing Agreement is without prejudice to any issues of fact

or law that may come before the Court in connection with

further Section 1113(c) proceedings or a motion for distress

termination of Debtors’ pension plans.

8. This Court retains jurisdiction with respect to all

matters arising from or related to the implementation of

this Order.

9. Any and all computations of or other matters

related to time in connection with this Order shall be

governed by Federal Rule of Bankruptcy Procedure 9006.

Notwithstanding any provision contained in this Order or

the possible applicability of Bankruptcy Rules 6004(g),

7062, 9014, or otherwise, (a) the terms and conditions of

this Order shall be immediately effective and enforceable

upon its entry, (b) all of the provisions of this Order shall

be self-executing, and (c) the automatic stay of orders

authorizing the sale, use, or lease of property of the estate,

to the extent applicable, shall not apply to the Order.

Dated: JAN 31, 2005

/s/ Eugene R. Wedoff

United States

Bankruptcy Judge

App. 42

11 U.S.C.A. § 1113. Rejection of collective bargaining

agreements

(a) The debtor in possession, or the trustee if one has

been appointed under the provisions of this chapter, other

than a trustee in a case covered by subchapter IV of this

chapter and by title I of the Railway Labor Act, may

assume cr reject a collective bargaining agreement only in

accordance with the provisions of this section.

(b)(1) Subsequent to filing a petition and prior to filing

an application seeking rejection of a collective bargaining

agreement, the debtor in possession or trustee (hereinafter

in this section “trustee” shall include a debtor in posses-

sion), shall —

(A) make a proposal to the authorized representa-

tive of the employees covered by such agreement,

based on the most complete and reliable information

available at the time of such proposal, which provides

for those necessary modifications in the employees

benefits and protections that are necessary to permit

the reorganization of the debtor and assures that all

creditors, the debter and all of the affected parties are

treated fairly and equitably; and

(B) provide, subject to subsection (d)(3), the repre-

sentative of the employees with such relevant infor-

mation as is necessary to evaluate the proposal.

(2) During the period beginning on the date of the

making of a proposal provided for in paragraph (1) and

ending on the date of the hearing provided for in subsec-

tion (d)(1), the trustee shall meet, at reasonable times,

with the authorized representative to confer in good faith

in attempting to reach mutually satisfactory modifications

of such agreément.

App. 43

a collective bargaining agreement only if the court finds

that -

(1) the trustee has, prior to the hearing, made a

proposal that fulfills the requirements of subsection

(b)(1);

(2) the authorized representative of the employees

has refused to accept such proposal without good

cause; and

(3) the balance of the equities clearly favors rejec-

tion of such agreement.

(d)(1) Upon the filing of an application for rejection the

court shall schedule a hearing to be held not later than

fourteen days after the date of the filing of such applica-

tion. All interested parties may appear and be heard at

such hearing. Adequate notice shall be provided to such

parties at least ten days before the date of such hearing.

The court may extend the time for the commencement of

such hearing for a period not exceeding seven days where

the circumstances of the case, and the interests of justice

require such extension, or for additional periods of time to

which the trustee and representative agree.

(2) The court shall rule on such application for rejection

within thirty days after the date of the commencement of

the hearing. In the interests of justice, the court may

extend such time for ruling for such additional period as

the trustee and the employees’ representative may agree

to. If the court does not rule on such application within

thirty days after the date of the commencement of the

hearing, or within such additional time as the trustee and

the employees’ representative may agree to, the trustee

may terminate or alter any provisions of the collective

App. 44

bargaining agreement pending the ruling of the court on

such application.

(3) The court may enter such wrotective orders, consis-

tent with the need of the authorized representative of the

employee to evaluate the trustee’s proposal and the appli-

cation for rejection, as may be necessary to prevent disclo-

sure of information provided to such representative where

such disclosure could compromise the position of the

debtor with respect to its competitors in the industry in

which it is engaged.

(e) If during a period when the collective bargaining

agreement continues in effect, and if essential to the

continuation of the debtor’s business, or in order to avoid

irreparable damage to the estate, the court, after notice

and a hearing, may authorize the trustee to implement

interim changes in the terms, conditions, wages, benefits,

or work rules provided by a collective bargaining agree-

ment. Any hearing under this paragraph shall be sched-

uled in accordance with the needs of the trustee. The

implementation of such interim changes shall not render

the application for rejection moot.

(f) No provision of this title shall be construed to permit

a trustee to unilaterally terminate or alter any provisions

of a collective bargaining agreement prior to compliance

with the provisions of this section.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.