Petition for Writ of Certiorari — Kauble v. Union Employee Discretionary Trust

Supreme Court, 6.5.

\) FILED

\ \

“96 ZODNWV 4 19%

No. sea, OF THE CLERK

IN THE

SUPREME COURT OF THE UNITED STATES

October Term 1996

IN THE MATTER OF:

PHIL KAUBLE, ET AL.,

Plaintiffs - Petitioners

Vv.

UNION EMPLOYEE DISCRETIONARY TRUST,

Defendant - Respondent.

Petition for Writ of Certiorari

PRO SE PETITIONERS

PHIL KAUBLE

1024 S. McCann St.

Kokomo, IN 46902

1-317-542-6538

I.D. BREDEN, SR.

2604 E. Boulevard

Kokomo, IN 46902

1-317-452-0968

BOB ANDREWS

1561 N. 1050 W.

Kokomo, IN 46902

1-317-566-3657

WADE KAUBLE

5713 Treaty Lane

Kokomo, IN 46902

1-317-4530443

MERON FEE NE ED . ——e wen, es

> ~ am > my NY PE SATE RIESE LINE HES TAR IS R esa ae oe

QUESTION PRESENTED FOR REVIEW

Can a U.S. Bankruptcy Court award

general awards for fees and compensation

to intervenors in a bankruptcy case from

the largess of the bankrupt estate?

LIST OF PARTIES

Plaintiffs ~ Petitioners:

Bob Andrews

1561 N. 1050 W. Co. Rd.

Kokomo, Indiana 46902

Tel: (317) 566-3657

I.D. Breeden, Sr.

2604 East Boulevard

Kokomo, Indiana 46902

Tel: (317) 452-0968

Phil Kauble

1024 South McCann Street

Kokomo, Indiana 46902

Tel: (317) 452-6538

Wade Kauble

5713 Treaty Lane

Kokomo, Indiana 46902

Tel: (317) 453-0443

Defendant -—- Respondent:

Union Employee Discretionary Trust Fund

By Counsel

John Wood, Esq.

4811 North Park Avenue

Indianapolis, Indiana 46205

TABLE OF CONTENTS

Page

Question Presented For Review .... i

DEOS OF PRSCTOS ‘so vierecisedts obee- At

SEwae OP CONUONOE ‘es eiccddsceuveweese 444

BODSe OF AUENOEIGIOSN scéciccéccdecce 49

Rules and Statutes ...... Seeove oe V = vi

Opiniones BOLOW scr cccesee iow eweers 1

Jurisdiction ..... PORCH OPE SHOR OO OO 2

WEBGE “EUV OLVEG ‘ceecicreceees ecovees 3 = 6

Deecemene CF COBO oes icsdseccovvvce 6 - 12

Reasons Why This Petition

For Writ of Certiorari

SROUIG Be Granted .scccecccececece 12~—24

EE us Cis bb elec ees ede we be 24-26

Precise Relief Requested ......... 27

|

iii

TABLE OF AUTHORITIES

Cases:

Allied Chemical & Alkali Workers,

Local 1 vs. Pittsburgh Plate

Glass Co., 404 U.S. 157, 30

L.-Ed.2d 341, 92 S. Ct.

383. (1971) ccccccccvevcvescs eevee

Barceloux, 74 F.2d 288

(9th Cir.- ) eoeeeeeeeeeeeee eee

Boggess vs. Hogan, 410 F.Supp.

433 (D.C. N.D. I11.-1975) *eeeeee

Booth vs. Prince George's County,

66 F.D.R. 466

(Bt. Md.-1975) eseeoeeevee oseeeeeeaee

In Re: Celotex Co., 13 F.Supp.

1011 (District Court-Del.) ......

Fletcher vs. Peck,

6 Cranch 87 ( Caen ae i ae wee

In the Matter of Lytton's

Appeal of Cluett, Peabody

and Company, 832 F.2d 395,

399-402 (7th Cir.-1987) ..ccceees

Michel & Lazarus vs. Prentice,

234 U.S. 263, 58 L.Ed. 1305,

34 S.Ct. 851 (1914) .ccrccesevene

Page

16, 17,

13, 14

Statutes and Rules: Page

oh ees’ GEG: 055 ve 0% veces 8s coe 15

BS WeSC BOGe eae vies cose 00 vs «ae

SS BeBe O. BOGE oe 555 04 0 Ce eo eke a8

11 U.S.C. §507 eee eee eevee eeeeeeenes 15

BS ies BI OW 6 5 4 bbe oa bbe lee eee 14

Sere Si S FZOCTS: chs ew ekS 14

oe U,8i.C. 226201): Vive va oeeees 2

Ruse: 25 FOG. Re. CIP. Peo oes ee a4 8

Rule 23(@) Fed. RB. Civ. PP. csece. 22

Section §101(14) Bkr Code ....... 6

Section §503 Bkr Code ....ccccscsce 6

Section §901 Bkr Code ......cce0- 5

Section §1109 Ber Code ...isccceces 4

Section §1164 Bkr Code .....csc0. 4-5

RELG: ZOLG Bie COGe iss .s ek os hes 15

Ruse: Z0iG Ber Coogee: 25. 6 045544 555% Se 82%

13

RUL@. 3500] Oe SOG. cieicurvaneceens 15

Rule 7001 e

ct

n

@

1e2)

Rule 7024 eeeeeeneee? eeeee#*enee#*7#e#ee#e#8e? eee 5

Chapter III Rule 8-210 *eeeee *eeree 4, 6

Chapter X Rule 10-210 ...nceceeees 4, 6

Advisory Committee Notes ......... 4

Bankruptcy Reform Act 1978 ......-. 25

vi

1

OPINIONS BELOW

The opinion of the of the United

States Court of Appeals for the Seventh

Circuit is unreported and unpublished,

which is reproduced in the Appendix

attached hereto. Appendix, pages 1-3.

The opinion of the U.S. District Court

for the Southern District of Indiana

referenced in the opinion of the U.S.

Seventh Circuit Court of Appeals is

unreported and unpublished and is

reproduced in the Appendix attached

hereto. Appendix, pages 4-16. The

opinion of the U.S. Bankruptcy Court for

the Southern District of Indiana is

reproduced in the Appendix attached

hereto at pages 17-25. References to

the Appendix are hereafter cited as

"App. " ‘

UR ON

The opinion of the Court of Appeals

was decided on August 14, 1996. App. 1.

No petition for rehearing was filed. This

petition for writ of certiorari is timely

filed. The jurisdiction of this Court is

invoked under 28 U.S.C. §1252(1).

3

RULES INVOLVED

RULE 2018

INTERVENTION; RIGHT TO BE HEARD

(a) Permissive Intervention. In a

case under the Code, after hearing on

such notices as the court directs and for

cause shown, the court may permit any

interested entity to intervene generally

or with respect to any specific matter.

(b) Intervention by Attorney General

or a State. In a chapter 7, 11, or 13

case, the Attorney General of a State may

appear and be heard on behalf of consumer

creditors if the court determines the

appearance is in the public interest, but

the Attorney General may not appeal from

any judgment, order, or decree in the

case.

(c) Chapter 9 Municipality Case. The

Secretary of the Treasury may, or if

requested by the court shall, intervene

in a chapter 9 case. Representatives of

4

the state in which the debtor is located

may intervene in a chapter 9 case with

respect to matter specified by the court.

(d) Labor Unions. [In a chapter 9 or

11 case, a labor union or employees'

association, representative of employees

of the debtor, shall have the right to be

heard on the economic soundness of a plan

affecting the interests of the employees

but it may not appeal from any judgment,

order, or decree in the case unless

otherwise permitted by law.

(e) Service on Entities Covered by

This Rule. The court may enter orders

governing the service of notice and

papers on entities permitted to intervene

or be heard pursuant to this rule.

Advisory Committee Note

This rule is derived from Rules

8-210, 9-15 and 10-210 and it implements

§§1109 and 1164 of the Code.

Pursuant to §1109 of the Code,

5

parties in interest have a right to be

heard and the Securities and Exchange

Commission may raise and be heard on any

issue but may not take an appeal. That

section is applicable in chapter 9 cases

(8901 of the Code and in chapter 11

cases, including cases under subchapter

IV thereof for the reorganization of a

railroad.

In a railroad reorganization case

under subchapter IV of chapter 11, §1164

also gives the right to be heard to the

Interstate Commerce Commission, the

Department of Transportation and any

state or local regulatory commission with

jurisdiction over the debtor, but these

entities may not appeal.

This rule does not apply in adversary

‘proceedings. For intervention in

adversary proceedings, see Rule 7024. The

rules do not provide any right of

compensation to or reimbursement of

6

expenses for intervenors or others

covered by this rule. Section 503(b)(3)

(D) and (4) is not applicable to the

entities covered by this rule.

Subdivision (a) is derived from

former Chapter III Rule 8-210 and former

Chapter X Rule 10-210. It permits inter-

vention of an entity (see §101(14), (21)

of the Code) not otherwise entitled to do

so under the Code or this rule. Such a

party seeking to intervene must show

cause therefor.

STATEMENT OF THE CASE

On November 25, 1985 Continental

Steel Corporation filed a Chapter 11

bankruptcy petition. App. 4. The

Appellants here were represented by the

United Steelworkers of America ("the

Union") as their exclusive bargaining

agent while they were employed by

Continental Steel. Id. The Union inter-

vened in this action about a week before

Se eT Se

Leite 4

7

the case was converted to a Chapter 7,

liquidation. Id.

After several years of negotiation, a

number of major players in the Contin-

ental Steel bankruptcy - the bankruptcy

trustee, the creditors of the estate, and

the attorneys for the Union - arrived at

a Settlement Agreement resolving the

disputes between the players. Id. App. 5.

In January, 1988, the bankruptcy trustee

moved the bankruptcy court to approve the

Settlement Agreement. The Settlement

Agreement provided that the interest

earned on Five Million and Five Hundred

Thousand Dollars ($5,500,000.00) would be

set aside and separately accounted for

and eventually be paid to various

employee trust funds. See, Notice to

Former Employees and SUMMARY OF SETTLE-

MENT AGREEMENT. App. 26-34. This money

would be available to pay expenses of

auditing medical claims and other

8

expenses and to add to the amounts dis-

tributable to former employees. App. 32

at @7.

After the bankruptcy trustee filed

the motion to approve the settlement

agreement, the bankruptcy trustee filed

an adversary proceeding Complaint pur-

suant to Rule 7001, et seg. of the Bank-

ruptcy Rules of Procedure naming Timothy

J. Cheek as class defendant representing

the class of former union employees. App.

5-6. Timothy J. Cheek was repre-

sented by the attorneys for the Union.

After service of process on Cheek, by

service to his attorneys, the Bankruptcy

Court recognized all former employees of

Continental Steel Corporation as a Class

as defined by Rule 23 of the Federal

Rules of Civil Procedure and "certified"

the class with a finding that the

attorneys for the Union were competent

ey ey

ere

9

and could fully and adequately represent

the class. App. 27 at 2.

A notice was sent out to all former

employees with a summary of the settle-

ment agreement and a hearing was held in

April, 1988. App. 6.

The bankruptcy judge overruled the

objections to the settlement of the

adversary proceeding on grounds that the

Settlement Agreement in the Chapter 7

case was fair and equitable to the

members of the class. App. 6-7.

The Bankruptcy Court also held that the

"Union adequately represented the former

employees" in resolving claims arising

from the collective bargaining agreements

between the Union and Continental Steel.

App. 7. On April 20, 1988, the Bank-

ruptcy Court approved the Settlement

Agreement.

From April, 1988, until August, 1994,

the Union Employee Discretionary Trust

10

received approximately $1,500,000.00 in

interest from the $5,500,000.00 set aside

for the former employee claims pursuant

to the Settlement Agreement. From this,

$572,000.00 was paid out of the Trust in

medical claims of the former employees,

leaving approximately $928,000.00 in the

Union Employee Discretionary Trust.

On August 8, 1994, the Trustees of

the Union Employee Discretionary Trust

("the Trust") filed an Application for

approval of expenses relating to process-

ing medical claims, for reimbursement

to the United Steelworkers of America and

for distribution of the remaining balance

to Trust beneficiaries. The Application

asked for $52,000.00 for Carla Sullivan,

an employee of the Union's attorneys,

$75,000.00 in accounting expenses,

$7,700.00 in legal expenses, $25,000.00

in prospective legal expenses in winding

up the Trust, and for authority to dis-

11

tribute to Trust beneficiaries the

remaining balance in the Trust.

The Petitioners herein, Phil Kauble,

et al, filed objections to the Applica-

tion by the Trustees of the Trust. The

objections were overruled by the Bank-

ruptcy Court on September 30, 1994. App.

22-23. The Bankruptcy Court approved the

requested reimbursement of expenses. App.

23. The Bankruptcy Court authorized the

Trust to pay any additional expenses or

reimbursements as approved by the

Trustees of the Trust in their discretion

without further approval of the Court.

App. 24. The Bankruptcy Court ruled

that the Trust is not required to file a

copy of its final accounting with the

Court or to obtain a further order

‘approving disbursement of its remaining

funds, $619,391.97. App. 24-25.

The Petitioners appealed the Bank-

ruptcy Court's approval of the Trust's

12

Application for reimbursement of

expenses to the U.S. District Court. App.

4-16. The District Court affirmed the

decision of the Bankruptcy Court. App.

16. The Petitioners appealed the

deci: ion of the District Court to the

U.S. Court of Appeals for the Seventh

Circuit which affirmed the District's

Court's ruling for the reasons stated by

the District Court. App. 1-3. The

Petitioners now petition this U.S.

Supreme Court for writ of certiorari.

REASONS WHY THIS

PETITION FOR WRIT OF CERTIORARI

SHOULD BE GRANTED

I. The Establishment of a Trust

From the Proceeds of the

Bankrupt Estate is not an

Important Reason to Allow

Evasion of the Bankruptcy

Code.

The Union was an intervenor in a

bankruptcy case pursuant to Rule 2018 of

the Bankruptcy Rules of Procedure. App.

eee a ee

——

13

5 and App. 18. As stated in the Advisory

Committee Note to Rule 2018, "the rules

do not provide any right of compensation

ta or reimbursement of expenses for

intervenors or others covered by this

rule." This statement is plain with a

plain meaning.

The District Court confirmed that

this is exactly what the Advisory

Committee Note states. App. 11-12.

Nonetheless, the District Court found

Petitioners' reliance on the rules flawed

for several reasons. App. 12-16. Id. The

District Court stated, "Most importantly,

the Union is not receiving funds from the

bankruptcy estate, but instead from the

Trust." App. 12.

However, all the funds in the Trust

are direct proceeds from the bankrupt

estate. It is impermissible to use a

"shell" to do what is expressly

prohibited by law. In Re: Celotex Co.,

14

13 F.Supp. 1011 (District Court-Del.)

Here, the District Court finds a most

important reason in the avoidance of the

rules, the fact that a "shell" was

created, the Union Employee Discretionary

Trust, to do what is prohibited by lav,

to wit, the reimbursement and awards of

compensation to an intervenor in a bank-

ruptcy case.

Petitioners' second objection to the

Application of the Trust and their second

argument on appeal was not entirely clear

to the District Court. App. 13. However,

the law is quit clear as to the procedure

for disbursements from a bankrupt estate.

The scheme and intent of the U.S.

Bankruptcy Code is plain. The distribu-

tion of property of an estate "shall" be

made as provided by 11 U.S.C. §726. If

the entitlement to property of the estate

is for administrative expenses as

provided by 11 U.S.C. §726(1) and 11

15

U.S.C. §507, there needs to be an applic-

ation for compensation or reimbursement

pursuant to 11 U.S.C. §330 with an

itemized and detailed statement as

required by Rule 2016 of the Bankruptcy

Rules. If the entitlement is for a claim

against the estate, it has to be a claim

as defined by 11 U.S.C. §$§501, 502 and

Rule 3001, et seq., of the Bankruptcy

Rules.

In the normal operation of the Bank-

ruptcy Code, every penny of the bankrupt

estate, and the rightful entitlement of

the recipients of the property, is

accounted for in the public record of the

bankrupt estate. Nothing like that here.

Instead, the Bankruptcy Court authorized

$619,391.97 to be distributed by the

Trust in the discretion of the Trustees

without further necessity of public

record or court approval. App. 24-25.

Again, the Bankruptcy Court is using

16

the "shell" of the Union Employee Discre-

tionary Trust to do things that are

prohibited by law. An order of a bank-

ruptcy court authorizing a bankruptcy

trustee to make disbursements from the

bankrupt estate within his discretion,

without court approval or public

scrutiny, and with blind faith that all

parties holding money have "duties to

clients, to beneficiaries and the courts"

[App. 14] is a far departure from the

laws which defeat the purpose of the

Bankruptcy Code. And yet, that is

exactly what we have here with the

creation of the Union Employee Discre-

tionary Trust two years after the

employer closed to distribute the

proceeds of the bankrupt estate in the

discretion of the Trust's trustees that

were appointed by the Union who legally

represented no one in the action two

years after the employer closed. Allied

17

Chemical & Alkali Workers, Local 1 vs.

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

30 L.Ed.2d 341, 92 S.Ct. 383 (1971). App.

37. Absent a specific contractual provi-

sion, labor unions do not represent

former employees and retirees. There was

no contractual provision anywhere that

permitted the Union to continue repre-

senting the former Continental employees

under the National Labor Relations Act or

any other law during the Chapter 7 case.

Allied Chemical, supra. In sum, there is

absolutely nothing showing how the Union

retained for over two years the right to

be involved in the Continental bankruptcy

to become a beneficiary of the Trust the

Union created without authority. passim.

Petitioners' final argument on appeal

was that the Settlement Agreement did not

bar Petitioners from making an objection

to the Application of the Trust for

compensation, reimbursement and distribu-

18

tion. App. 16. In the opinion of the

Bankruptcy Court and the District Court,

the objections of the Petitioners herein

raise "a number of issues that should

have been appealed long ago." App. 10.

In other words, the issue of compensation

and reimbursement of the Union were

raised in the Settlement Agreement in

1988 and the Petitioners are barred from

relitigating the issue now. App. 6-7 and

App. 20.

However, it is well settled law that

any application for compensation or re-

imbursement in a bankruptcy court is a

"final" decision that can be appealed.

Michel & Lazarus vs. Prentice, 234 U.S.

In the Matter of Lytton's Appeal of

Cluett, Peabody and Company, 832 F.2d.

395, 399-402 (7th Cir.-1987); In Re:

Barceloux, 74 F.2d 288 (9th Cir.- })«

Thus, the opinion that the Application

19

for compensation was "merged" in the

Settlement Agreement and "binding" on

the Petitioners is without authority in

law.

It is interesting to note that the

far departures from law here are so vast

that the District Court has difficulty

reciting the facts that appear from the

record and opinions below. The District

Court states: "After several years of

negotiation, a number of major players in

the Continental Steel bankruptcy - the

estate and trustee ... and the former

Continental Steel employees [emphasis

added] arrived at a Settlement Agreement

---". App. 5. Of course, what appears on

the record is that the lawyers for the

Union represented the former employees in

negotiating the Settlement Agreement, the

same Union that "The bankruptcy court

also held that the Union had adequately

represented the former employees ..."

20

App. 7. And, of course, since the

lawyers for the Union negotiated the

Settlement Agreement, they are the ones

to get all of the money to distribute in

their absolute discretion without any

right, title, or interest in the property

existing in the law.

The Petitioners are also concerned

about the "adequacy" standard used by the

Bankruptcy Court to determine that the

Union adequately represented the former

employees. In this case, the Union

actively participated in breaches of

the Labor and Pension Agreements pursuant

to having a seat on the employer's Board

of Directors and did not ever file

a grievance over the breaches before

the case was converted to a chapter 7.

The Union then hired attorneys to

represent the Union "itself" - not the

former employees - in the legal proceed-

ings to hide its questionable activity.

21

And it is well-settled law that labor

unions do not represent former employees

whose work has ceased with no expectation

of return. Allied Chemical, supra.

This is why the District Court

opinion had such difficulty in accurately

reciting the facts as to who the major

players were in the Continental Steel

bankruptcy. A negotiated Settlement

Agreement between the major players was

agreed to and filed in the Bankruptcy

Court in January, 1988. The bankruptcy

trustee filed a class-action lawsuit

without a "case or controversy" between

the parties, whose sole purpose was to

bind the former employees to the Settle-

ment Agreement. A lawsuit requires a

"Case or controversy." Fletcher vs.

Peck, 6 Cranch 87 ( ). The bankruptcy

trustee and the attorneys for the Union

worked out a settlement agreement and

agreed to file a collusive lawsuit to

22

bind third parties who did not partici-

pate in its negotiation. A case or a

controversy must exist for a class-action

lawsuit just like any other lawsuit.

Booth vs. Prince George's County, 66

F.R.D. 466 (D.C. Md.-1975).

Furthermore, due process requires

that a notice of settlement proposal

under Rule 23(e) must reasonably apprise

members of the class of the terms of

settlement and include best available

information concerning fees and expenses.

Boggess vs. Hogan, 410 F.Supp. 433 (D.C.

N.D. I11.-1975). There was no notice to

the former employees of Continental that

the Union was representing them in the

negotiation and settlement of their

rights and interests, notwithstanding the

substantial compensation to the Union for

this activity. App. 26-28.

The difficulty of the former

employees actually "appearing" in the

23

Class-action lawsuit and being heard on

the negotiation of their rights and

property is illustrated by the litigation

over their pension rights. There, the

Pension Benefit Guaranty Corporation

commenced an adversary proceeding to

terminate the former employees' pension

plan. The Union purportedly intervened

in the adversary proceeding "[i]n an

effort to protect its members' pension

rights ..." App. 5. However, what the

lower courts have failed to take into

account is the fact that the sole

employer in this instance ceased to exist

and all remaining employees were termin-

ated long before the negotiation and

settlement agreements in either the

related pension case or the bankruptcy

litigation. As such, the Union has no

statutory authority, nor has any ever

been cited, to support that it was. re-

presenting either Continental Steel

24

"employees" or "members" of the Union in

any forum after the sole employer closed

its doors forever on February 25, 1986

pursuant to chapter 7 of the U.S. Bank-

ruptcy Code. Thus, until the issue of

how the "Union" - instead of attorneys -

represented the former employees after

their work had ceased is resolved, there

can be no factual holding that the Union

"adequately" represented anyone to bind

"former employees" to agreements in

1988. Such is the case here over the

Claims to property of the estate. The

class-action lawsuit was filed in

January, 1988, and closed in April, 1988,

in olympic record time.

CONCLUSION

The far departures from the law for

which Petitioners seek review raises

extremely important issues concerning the

integrity of the judiciary and the public

perception of the judiciary. In 1978,

25

Congress enacted the Bankruptcy Reform

Act in part to curb the historic abuse

and corruption in the bankruptcy courts.

This U.S. Supreme Court promulgated the

Bankruptcy Rules of Procedure, complete

with concise and plain Advisory Notes,

consistent with the Bankruptcy Reform Act

of 1978 to implement the provisions and

reforms. Here, we have the dismal

problems of bankruptcy courts in all

their glory - large sums of money going

to entities protecting hidden agendas

without any statutory authority in the

record for this activity.

The Continental Steel Corporation

bankruptcy and pension plan termination

cases leave the public with the percep-

tion that the judiciary hasn't the

foggiest idea of what a labor union is

and what its limitations are under the

U.S. Constitution, National Labor Rela-

tions Act and the Bankruptcy Code. Here,

26

this U.S. Supreme Court held in 1971 that

labor unions do not represent retirees

and the Agency (NLRB) enforced that hold-

ing in this case. However, the lower

courts held that the Union adequately

represented the "former employees"

contrary to this Court's holding and

Agency policy affirming said holding as

the standard of representation of former

employees by a labor union in a court of

law once the employer is extinguished.

The far departures from the law and

the callousness with the truth in the

opinions below in achieving the intended

result elaborate the twists and turns

that are made to defeat the purposes of

the Bankruptcy Code, the National Labor

Relations Act and well-settled law to get

large sums of money out of bankrupt

estates and into the hands of persons who

have no right, title or interest to the

property found in the laws of the United

States or its Constitution.

27

PRECISE RELIEF REQUESTED

For the foregoing reasons demonstra-

ting far departures from the laws of the

United States, Petitioners pray that

petition for Writ of Certiorari shall

issue and such other and further relief

as proper in the premises.

28

Bob Andrews

Pro Se Petitioner

1561 N. 1050 W. Co. Rd.

Kokomo, Indiana 46901

Tel: (317) 566-3657

NP) Badin, I.

I.D. Breeden, Sr.

Pro Se Petitioner

2604 East Boulevard

Kokomo, Indiana 46902

Tel: (317) 452-0968

PERE ka

Phil Kauble

Pro Se Petitioner

1024 South McCann Street

Kokomo, Indiana 46902

Tel: (317) 45246538

ad,

Wade Kauble

Pro Se Petitioner

5713 Treaty Lane

Kokomo, Indiana 46902

Tel: (317) 453-0443

App. 1

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

Submitted July 26, 1996*

Decided August 14, 1996

Before

Hon. Kenneth F. Ripple, Circuit Judge

Hon. Daniel A. Manion, Circuit Judge

Hon. Michael S. Kanne, Circuit Judge

IN THE MATTER OF:

CONTINENTAL STEEL Appeal from the

CORPORATION, United States

formerly known as District Court

PENN-DIXIE STEEL for the Southern

CORPORATION, District of

formerly known as Indiana,

PENN-DIXIE Indianapolis

INDUSTRIES, INC., Division.

Debtor

APPEAL OF: PHIL KAUBLE, No. 94 C 1485

BOB ANDREWS, I.D. S. Hugh Dillin,

BREEDEN, SR., and WADE Judge.

KAUBLE.

No. 95-2227

ORDER

The appellants, four former Continental

Steel employees proceeding pro se,

challenged a 1994 bankruptcy court ruling

that approved a final accounting and

App. 2

distribution of union employee trust

funds. For the reasons stated in the

order of the district court affirming the

bankruptcy court's ruling, we AFFIRM.

* After preliminary examination of the

briefs, the court notified the parties

that it had tentatively concluded that

Oral argument would not be helpful to the

court in this case. The notice provided

that any party might file a "Statement as

to Need of Oral Argument." See Fed. R.

App. P. 34(a); Cir. R. 34(f). No such

statement having been filed, the appeal

is submitted on the briefs and the

record.

ee a ™

App. 3

United States Court of Appeals

For the Seventh Circuit

Chicago, Illinois 60604

Judgment-Without Oral Argument

Date: August 14, 1996

BEFORE:

Hon. Kenneth F. Ripple, Circuit Judge

Hon. Daniel A. Manion, Circuit Judge

Hon. Michael S. Kanne, Circuit Judge

No. 95-2227

IN THE MATTER OF :

CONTINENTAL STEEL CORPORATION,

formerly known as PENN-DIXIE STEEL

CORPORATION, formerly known as

PENN-DIXIE INDUSTRIES, INCORPORATED,

Debtor

APPEAL OF: PHIL KAUBLE, BOB ANDREWS,

I.D. BREEDEN, SR., et al.,

Appeal from the United States District

Court for the Southern District of

Indiana, Indianapolis, Division No. 94 ¢

1485, S. Hugh Dillin, Judge

The judgment of the District Court is

AFFIRMED, with costs, in accordance with

the decision of this court entered on

this date.

App. 4

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS, DIVISION

Bob Andrews, I.D.

Breeden, Sr., Phil

Kauble, and Wade Kauble.

IN RE:

CONTINENTAL STEEL ) IP94-1485

CORPORATION f/k/a ) C-D/F

PENN-DIXIE STEEL )

CORPORATION f/k/a ) Bankruptcy

PENN-DIXIE INDUSTRIES, ) Case No. IP85

INC., ) 5415-L-V-7A

Debtor.

Appeal of: )

)

)

)

)

)

ENTRY

On November 25, 1985, Continental Steel

filed a Chapter 11 bankruptcy petition.

Realizing that its financial condition

was too bleak to allow for mere

reorganization, Continental Steel closed

its Kokomo plant on February 24, 1986 and

converted its bankruptcy to a Chapter 7

liquidation the next day. The appellants

here - four Kokomoans - worked at the

Kokomo plant and were members of the

App. 5

United Steelworkers of America, Local No.

1054. In an effort to protect its

members' pension rights, the Union had

intervened in this action about a week

before the case was converted to a

Chapter 7 liquidation.

After several years of negotiation, a

number of major players in the

Continental Steel bankruptcy - the estate

and Trustee, the U.S. Environmental

Protection Agency, the Indiana Department

of Environmental Management, the Pension

Benefit Guaranty Corporation, and the

former Continental Steel employees -

arrived at a Settlement Agreement

resolving disputes between the parties

and dealing with the liquidation and

distribution of the debtor's assets.!

In January 1988, the Trustee moved the

bankruptcy court to approve this

Agreement and filed an adversary

proceeding against a class of former

App. 6

Continental Steel employees in an effort

to bind all the former employees to the

Settlement Agreement. All of the former

employees - including the appellants here

- were given notice of a hearing on a

proposed settlement of the adversary

proceeding. The hearing was held in

April 1988, and Breeden, an appellant

here, filed objections to the proposed

settlement of the adversary proceeding,

which settlement would bind him to the

Settlement Agreement in the Chapter 7

case.

The bankruptcy judge overruled the

objections to the settlement of the

adversary proceeding on the grounds that

the Settlement Agreement in the Chapter 7

case was fair and equitable to the

1 Appended to the Settlement Agreement

is a Distribution Agreement. For

convenience, we'll generally call these

agreements collectively the "Settlement

Agreement." |

App. 7

members of the class. The bankruptcy

court also held that the Union had

adequately represented the former

employees in resolving claims arising

from the collective bargaining agreements

between the Union and Continental Steel.

On April 20, 1988, the bankruptcy court

approved all pertinent provisions of the

Settlement Agreement. None of the

appellants here timely appealed that

decision, and the time for doing so has

long since passed. However, it is

primarily the terms of the Settlement

Agreement and the bankruptcy judge's

decision seven years ago overruling

objections to the settlement of the

adversary proceeding that form the heart

of the present appeal. 2

The Settlement Agreement (and

Distribution Agreement appended to it),

binding on these appellants by virtue of

the settlement of the adversary

App. 8

proceeding, created the Union Employee

Discretionary Trust and provided for

detailed duties and responsibilities of

the Trust with respect to settlement

proceeds placed in the Trust. The

proceeds placed in this Trust were

designed largely to handle medical claims

of the former employees during the

pendency of the bankruptcy, and indeed

the Trust effectively processed the

Claims by former employees for several

years.

Eventually, pursuant to § 4(q) of the

Distribution Agreement, the Trust applied

in August 1994 for approval of a final

accounting and distribution of the

2 This is not these appellants' first

attempt to bring a tardy challenge to the

events of Spring 1988. See Kauble v.

United Steelworkers of America, No.

IP-93-331-C-H/G, slip op. at 1 n. 1 (S.D.

Ind. Dec. 27, 1994) (cataloging much of

these appellants’ journey through the

courts).

App. 9

remaining funds of the Trust. The

appellants here filed objections to the

application on several grounds. While

these appellants did not find fault with

the Trust's accounting or with the

Trustee's performance of their duties,

they objected to the Union receiving any

money concomitant to the winding down of

the Trust. Indeed they stated several

times at the hearing on their objections

that their main goal was to block the

Union from getting any money from the

Trust. The bankruptcy court overruled

these objections on September 30, 1994

and approved the application. This

ruling recognized the validity of Trust

expenses related to processing medical

Claims and administering the Trust,

approved reimbursement of the Union for

medical processing expenses the Union had

paid before the Trust had taken over that

task, and allowed for a final

fa i i 8

App. 10

distribution of funds remaining in the

Trust without additional approval of the

of the bankruptcy court.

The present appeal apparently seeks to

stop the Trust from reimbursing the Union

$250,000 the Union had spent on medical

Claims processing before the Trust was

established. The appeal also seeks to

reverse the bankruptcy court's approval

of an allocation and pre-authorization of

$25,000 to be spent on professional fees

incurred in winding down the trust. Since

these former employees have fought the

settlement agreement zealously and

creatively for the past seven years, it's

not surprising that the appellants here

also continue to take issue with a number

of issues that should have been appealed

long ago. Appellants designate five

grounds for reversing the bankruptcy

court. As we shall see, these five

collapse into three: that reimbursing the

App. 11

Union is contrary to law, that allocating

money for future professional expenses is

contrary to law and the settlement

agreement, and that the settlement

agreement in not binding on the

appellants. 3

Appellant's first argument concerns the

reimbursement of the Union from Trust

funds. Appellants contend that the

bankruptcy court lacked the authority to

approve the Trust's reimbursement is

contrary to the Bankruptcy Code. The idea

here is that the Union is an intervenor

and as such may not receive reimbursement

from the estate for its professional

costs under 11 U.S.C. §330 and Rule 2018.

Sure enough, the Advisory Committee Note

3 It is well-known that we review the

bankruptcy court's factual findings for

clear error, its legal conclusions de

novo, and its exercises of discretion for

abuse. Mixed questions of law and fact

are subject to the clearly erroneous

standard of review.

App. 12

to Bankruptcy Rule 2018 states that

"(t]he rules do not provide any right of

compensation to or reimbursement of

expenses for intervenors." Nonetheless,

appellants’ first argument is flawed for

several reasons. Most importantly, the

Union is not receiving funds from the

bankruptcy estate, but instead from the

Trust. The expenses for which the Union

will be reimbursed are explicitly

authorized in the settlement agreement.

Moreover, the expenses and compensation

that the note to Rule 2018 references

relate to money spent participating in

the bankruptcy proceeding. The expenses

for which the Union will be reimbursed

relate to medical claims processing - not

to any legal or accounting fees incurred

solely by intervening in the bankruptcy

proceeding. In short, appellants' first

argument gives us no reason to overturn

the bankruptcy court's determination that

App. 13

the Trust may properly reimburse the

Union for these expenses.

Appellants' second argument is not

entirely clear, but apparently appellants

feel that the bankruptcy judge

contravened 11 U.S.C. §§ 330, 501, 502,

and 726 when he approved the application

for final accounting, and with it

allocation of $25,000 for legal and

accounting costs to be incurred in

winding down the Trust and filing the

Trust's last tax return.

Appellants are bothered 1) that the

bankruptcy court authorized future

expenditures (the $25,000) without first

being presented with precise accounting

for the expenses and 2) that the

bankruptcy court has largely terminated

{ts oversight in the case - that has made

no provisions to guarantee that the

distribution approved ever actually

occurs. To the extent that appellants’

App. 14

concern is merely a disagreement with how

much money various parties are to receive

relative to one another, their problems

are with the Settlement Agreement and

should have been raised long ago.

To the extent the appellants’ are

bothered by the possibility that no one

is actually going to pay over any money,

we note that all of the parties holding

the remaining money have duties to

clients, to beneficiaries, and to the

courts. If it should happen that those

holding the money fail to pay money over

according to the pietribution Agreement

and the bankruptcy court's orders (or pay

over too much), and instead as appellants

speculate make "love gifts" to their

"mothers-in-law," then the appellants

might have a claim. The bankruptcy court

retained limited jurisdiction over the

case to hear future objections to the

final disbursement and allowed for the

-

App. 15

filing of a final report on the

implementation of disbursement if anyone

objects to the process. Despite the

appellants' worries, we see no basis for

reversing the bankruptcy court.

As for the $25,000 allocation,

pre-authorized for future professional

expenses and taxes, it is clear that a

cut-off date for the Trust must be

established in order to determine amounts

payable to beneficiaries. The Trust will

incur costs after this cut-off date.

Costs for administering the Trust are

payable out of the Trust pursuant to § 4

(m) of the Distribution Agreement. The

bankruptcy court did not abuse its

discretion by approving allocation and

pre-authorizing disbursement of $25,000

for professional fees and taxes incurred

in the winding down of the Trust, nor is

this approval contrary to law or the

settlement agreement. With the

App. 16

continuing jurisdiction to hear

objections to the implementation of

disbursement of funds noted above, the

bankruptcy court can hear and decide

disputes if it appears that the $25,000

is not spent on legitimate activities.

The final argument that appellants

advance is meritless and simply reasserts

that the Settlement Agreement is not

binding on the appellants. As noted, the

adversary proceeding - if nothing else

did - made it binding, and the appellants

did not appeal that. That has been

explained to appellants several times and

in several prior law suits, and we need

not go through it again.

The decision of the bankruptcy court is

AFFIRMED.

So ordered this 14th day of April, 1995.

S. Hugh Dillin, Judge

App. 17

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

IN RE: ) BANKRUPTCY NO.

) 85-5415-RWV-7

CONTINENTAL STEEL )

CORPORATION, f/k/a )

Penn-Dixie Corporation )

and Penn-Dixie )

Industries, Inc., )

)

)

DEBTOR.

ORDER APPROVING APPLICATION OF

TRUSTEE OF UNION EMPLOYEE DISCRETIONARY

TRUST FOR APPROVAL OF EXPENSES AND

DISTRIBUTION OF REMAINING

BALANCE IN TRUST FUND

This matter is before the Court on the

"Application of Trustees of Union

Employee Discretionary Trust for Approval

of Expenses Relating to Processing

Medical Claims and Administration of

Trust, for Reimbursement to United

Steelworkers of America, and for

Distribution to Trust Beneficiaries of

Remaining Balance in Trust Fund" (the

"Application"), filed on August 5, 1993,

by Dennis J. Hein, Randy McKay and Sharon

App. 18

Robinson, as Trustees of Union Employee

Discretionary Trust (the "Trust").

Pursuant to notice dated August 16, 1994,

given to all creditors and parties in

interest herein, this Court held a

hearing on the Application on September

29, 1994, at 9:00 a.m.

Objections to the Application were filed

by Phil Kauble, Wade Kauble, Bob M.

Andrews, and I.D. Breeden Sr., former

employees of Continental Steel

Corporation, pro se (the "Objections").

The objectors were present in person at

the hearing and stated, as the only

ground asserted for objection to the

relief requested in the Application, that

United Steelworkers of America (the

"Union"), an intervenor in the bankruptcy

case, had no legal authority to enter

into agreements settling the claims of

the former employees of Continental Steel

App. 19

who were members of the Union's

collective bargaining unit, or to be

reimbursed for any expenses thé Union

incurred in assisting the Trust or the

trustees in bankruptcy in administering

the allowance and payment of individual

employee claims from the settlement

funds. No objections were stated, either

in written form or Orally, to the final

report and accounting submitted by the

Trust pursuant to Section 4(q) of the

"Agreement on Method and Procedure for

Distribution of Settlement Agreement

Funds to Former Employees of Continental

Steel Corporation" (the "Distribution

Agreement"), as approved by this Court on

April 20, 1988.

The Court, having reviewed the

Application and its exhibits and the

objections, and being duly advised, finds

and concludes that the Objections are

App. 20

without merit and should be overruled,

and that the Application should be

approved and the Trust authorized to make

final distribution of the funds from its

portion of the proceeds of the Settlement

Agreement in regard to the employee

Claims, and to terminate its operations.

The Court now makes the following

findings and conclusions:

1. The receipts and distributions of the

Trust, and the proposed final

distributions as set forth in the

Application, were computed pursuant to

the provisions of seckion:A of the

Distribution Agreement.

2. The Distribution Agreement was

approved by this Court on April 20, 1988,

following notice to all affected

Claimants and hearing thereon, by a final

order which was not appealed by any of

the employee claimants.

App. 21

3. The trustee in bankruptcy and the

Trust sent notice to all former employees

entitled to receive final distribution of

the remaining funds from the bankruptcy

estate under the Settlement Agreement

together with proposed final

distributions from the Trust, with an

opportunity to submit any objection to

the Court for consideration.

4. No objection was filed by any of the

committees established under the

Distribution Agreement to oversee the

operations of the Trust or make

determinations concerning eligibility and

amounts distributable to individual

Claimants from the funds of the Trust.

5. Proper, timely, adequate and

sufficient notice of the Application and

the relief requested therein was provided

in accordance with Bankruptcy Rule 2002.

No further notice of the Application, the

App. 22

proposed final distribution of the

remaining funds of the Trust, or any

other matters addressed in the

Application, or the entry of this Order,

is necessary or required.

6. The receipts, disbursements and

proposed final distribution of the funds

of the Trust, derived from the Settlement

Agreement and the liquidation of debtor's

assets, as set forth in the Application

and its exhibits, have been or will be

made in accordance with the applicable

provisions of the Distribution Agreement,

which details the method of allocating,

calculating and determining the amounts

payable and the expenses allowable to the

Trust in regard to the allowance and

payment of medical claims of the former

employees.

It is therefore ORDERED as follows:

I. The Objections filed by Phil Kauble,

App. 23

Wade Kauble, Bob M. Andrews and I.D.

Breeden, Sr., are hereby OVERRULED.

II. The Application, including the

accounting of receipts and disbursements

of the Trust attached to the Application;

the payment or reimbursement of

additional trust expenses; the allocation

of receipts, disbursement and funds

remaining for distributions to Trust

beneficiaries, including the Union and

the Trust additions to the trustee's

Chapter 11 employee distribution fund,

conforms to the applicable provisions of

the Settlement Agreement and Distribution

Agreement and is hereby APPROVED.

III. The Trust is authorized to pay,

from its reserve fund set aside in the

final accounting for expenses incurred or

to be incurred subsequent to the

accounting period incident to final

accounting and distributions required to

App. 24

complete administration of the Trust, and

from any additional receipts which have

accrued to the Trust subsequent to

February 28, 1994, any expenses or

reimbursements properly chargeable to the

Trust, as approved by the Trustees in

their discretion, and without further

approval of the Court.

IV. Those funds available to the Trust

for final expenses need not be paid over

to, or approved by, the trustee in

bankruptcy.

V. The trustees of the Trust may submit

to the Union and representatives of the

various employee committees having

interest in this matter any appropriate

final accounting showing disbursement of

all remaining funds in the Trust pursuant

to the Application and this Order. The

Trust is not required to file a copy of

its final accounting with the Court or to

eer

App. 25

obtain a further order approving

disbursement of its remaining funds as

authorized in this Order, but may do so

in response to any objections submitted

in writing by any party in interest. Any

objection must be limited solely to the

implementation of the payments and

distributions as set forth in the

Application and as approved in this

Order.

VI. There being no just reason for

delay, this Order is hereby deemed to

constitute a final judgment of this

Court.

ENTERED: 9/30/94

Larry Lessen, Judge,

United States Bankruptcy Court

App. 26

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF INDIANA

INDIANAPOLIS DIVISION

IN RE:

CONTINENTAL STEEL ) CASE NO.

CORPORATION f/k/a PENN- ) IP85-5415-V

DIXIE STEEL CORPORATION )

and PENN-DIXIE

INDUSTRIES, INC.

Debtor.

N. WAYNE ETTER, Trustee,

Plaintiff,

ADVERSARY

PROCEEDING NO.

88-43

vs.

TIMOTHY J. CHEEK and

GLYNDA J. CROUSORE, on

Behalf of themselves and

all other Former

Employees of Continental

Steel Corporation,

de ee ee ee ee ee ee ee a a

Defendants.

NOTICE

TO ALL FORMER EMPLOYEES OF CONTINENTAL

STEEL CORPORATION:

YOU ARE HEREBY NOTIFIED that N. Wayne

Etter, Trustee in Bankruptcy for

Continental Steel Corporation, has filed

his Application for Approval of and

Authority to Enter into Settlement

Agreement with United States

Environmental Protection Agency, Indiana

App. 27

Department of Environmental Management,

Pension Benefit Guaranty Corporation and

all former employees of Continental Steel

Corporation ("proposed Settlement"). A

capy of said Settlement Agreement is on

file with the Court. A summary of the

Proposed settlement is attached.

YOU ARE FURTHER NOTIFIED that in

Adversary Proceeding No. 88-43 by Court

Order dated the 23rd day of February,

1988, the Court recognized all former

employees of Continental Steel

Corporation as a Class as defined by Rule

23 of the Federal Rules of Civil

Procedure for the purpose of approval and

implementation of the proposed

settlement.

YOU ARE FURTHER NOTIFIED that the Court

will conduct two hearings with respect to

the approval of the proposed settlement:

1. A hearing for the purpose of

determining whether the proposed

settlement is fair and reasonable for the

former employees pursuant to Rule 23 of

the Federal Rules of Civil Procedure will

be held on April 5, 1988 in Room 322

Federal Courthouse Indianapolis, Indiana,

at 2:00 P.M. (Indianapolis time).

2. A hearing for the purpose of

determining whether the proposed

settlement is in the best interests of

the estate and its creditors generally

and whether or not the Trustee should be

authorized to enter into the proposed

settlement will be held on April 12, 1988

in Room 322 Federal Courthouse,

Indianapolis, Indiana, at 2:00 P.M.

App. 28

(Indianapolis time).

YOU ARE ALSO NOTIFIED the any objections

with respect to the question of whether

or not the proposed settlement is fair

and reasonable for the former employees

must be filed in writing with the Court

on or before the 4th day of April, 1988,

with a copy served upon Ancel & Dunlap,

P.C., attorneys for the Trustee.

YOU ARE ALSO NOTIFIED that any

objections with respect to the question

of whether or not the proposed settlement

is in the best interests of the estate

and creditors generally must be filed in

writing with the Court on or before the

7th day of April, 1988, with a copy

served upon Ancil & Dunlap, attorneys for

the Trustee.

DATED March 9, 1988 _.

RICHARD W. VANDIVIER, JUDGE

UNITED STATES BANKRUPTCY COURT

App. 29

SUMMARY OF SETTLEMENT AGREEMENT

Former employees of Continental Steel

Corporation ("Continental"), state and

federal environmental authorities, and

the Pension Benefit Guaranty Corporation

(PBGC") assert secured or priority claims

in the bankrpuptcy proceedings against

the assets of the Continental bankruptcy

estate.

The Settlement Agreement resolves those

Claims and Pending lawsuits. Under the

Settlement Agreement, state and federal

environmental agencies will receive

$1,500,000.00 and a Chapter 11

administrative claim of $1 Million. The

PBGC will receive an assignment of

Continental's interest in leased office

space in New York City and the profits

therefrom and a Chapter 11 administrative

in the amount of $200,000.00 subordinate

to all other Chapter 11 administrative

Claims which the Court may approve. Also,

the Trustee will dismiss a pending

preference suit against the PBGC.

The former employees of Continental will

receive $5,500,000.00 in cash and a

Chapter 11 claim for $1 million, which

will be paid to the extent there are

funds available at the conclusion of the

bankruptcy administration. These amounts

will constitute the total payment from

the assets of Continental to former

employees for all of their claims. Former

employees through their representatives

will be required to complete an agreement

not to assert additional claims against

the bankruptcy estate and the Court will

enter an order releasing all their liens

App. 30

from the assets of Continental.

The estate has approximately

$9,700,000.00 in the bank and it is

estimated that the estate will receive

additional funds approximating

$1,650,000.00 upon final sale of all

remaining assets, including real estate.

The funds remaining after payments under

the Settlement Agreement will be used to

partially pay claims of other creditors.

In the first distribution to former

employees, the $5,500,000.00 will be

distributed as follows:

(1) $450,000.00 will be placed ina

Medical Fund for payment on claims for

medical expenses incurred by employees

and retirees before February 25, 1986,

payable under Continental's health care

plan and not paid by Continental.

(2) $200,000.00 will be paid to a Union

Employees Trust which can loan money for

payment of additional amounts of approved

medical expense claims of union employees

Or retirees who assign their medical

Claims to the trust. This trust will

assist claimants in settling outstanding

bills with health care providers. It may

also attempt to recover additional funds

from third parties, who may be

responsible for payment of medical claims

under the Continental health plan, on

behalf of claimants who request

assistance. Salaried claimants and union

Claimants who do not assign their claims

to the union employee trust will receive

their pro rata share on allowed medical

Claims. Those union persons who receive

App. 31

a pro rata payment directly will be

responsible for resolving and/or settling

their medical debts. Any additional

funds recovered by the union employee

trust from third parties will go first to

the repayment of loans made from the

$200,000.00 fund and then pro rata among

all medical claimants. Those union

employees and retirees who have paid all

their medical from other funds will be

paid directly their pro rata share of the

$450,000.00 plus a share of additional

money recovered up to the full amount

owing under Continental's health plans to

the extent sufficient funds exist. Any

funds remaining in the trust after

settlement of medical claims and payment

of designzted expenses will be paid pro

rata to the Kokomo and Joliet union

employees funds and added to the final

distribution.

(3) The sum of $2,000.00 per union

retiree claimant, up to a maximum of

$900,000.00 will be put into a Union

Retiree Fund. Kokomo union retirees will

receive a paid-up life insurance policy

in the face amount of $1,000.00 plus a

cash payment up to $1,000.00. Joliet

union retirees will receive a cash

payment to a maximum of $2,000.00 each.

(4) The sum of $5,000.00 will be paid to

settle the claim of Thomas Sigler, the

former president of Continental.

(5) The sum of $797,500.00 will be set

aside in salaried employees funds

consisting of a Salaried Retirees Fund of

up to $50,000.00, a Kokomo Salaried Fund

of $661,700.00, a Joliet Salaried

App. 32

Employee Fund of $85,000.00 and the

balance to a Salaried Employees

Settlement Fund. Former salaried

employees will be paid from the

respective funds pro rata share of their

allowed claims for vacation and severance

pay, after payment of specified legal

fees and expenses. Retirees will be paid

a flat sum which amount will be

determined by the number of ciaims made

against that fund, but will not exceed

$500.00 per claimant.

(6) A minimum of $3,021,600.00 shall be

set aside in the Kokomo Union Employees

Fund and $125,900.00 in the Joliet Union

Employee Fund. Distribution from these

funds will be made on the basis of

seniority computed by crediting the

employee with one unit for each month of

continuous service with Continental

accrued as of February 25, 1986. This

formula is expected to pay approximately

$47.00 per year of service to union

employees at Joliet and approximately

$200.00 per year of service for the union

employees at Kokomo.

(7) From the date of the filing of

Trustee's Application to Approve

Settlement until the date of distribution

by the Trustee, the interest earned on

the $5,500,000.00 will be separately

accounted for and eventually paid to

various employee funds on a basis

representing that group's shares. This

money will be available to pay expenses

and to add to the amounts distributable

to employees.

(8) A second and final distribution will

iceeeeeeeneis initia

App. 33

be made at the end of the bankruptcy case

of up to $1 Million as payment of the

approved Chapter 11 administrative Claims

to the extent the Trustee has funds

available in the estate, to pay the

Chapter 11 administrative Claims, after

paying his Chapter 7 liquidation

expenses. In addition, any money

remaining in the employee claim

settlement funds will be included in this

final distribution. The money will be

divided among the former employees (other

than retirees), salaried and union, in

.approximate proportion to the share

received by each of those groups from the

initial $5,500,000.00 settlement fund

(excluding medical Claims). Salaried

retirees received their money in the

first distribution. Union retirees will

participate in the final distribution to

the extent necessary to fund the maximum

payments per claimant intended to be paid

in the first distribution.

The Trustee shall calculate amounts to

be withheld for taxes in relation to the

payments made under the Settlement

Agreement and withhold the appropriate

amount.

The plant guard workers will be treated

in a manner similar to that of the Kokomo

union employees.

A person will be considered to be a

retiree, for purposes of distribution

under the Agreement, if the Claimant's

application for retirement was approved

pursuant to a provision of the pension

Plan under which eligibility was not

contingent upon plant Shutdown and the

App. 34

Claimant began to receive monthly pension

checks no later than February 25, 1986.

If a claimant has died before

distribution of the settlement funds, his

estate or beneficiaries will be entitled

to the amount payable on his claim.

App. 35

UNITED STATES GOVERNMENT

NATIONAL LABOR RELATIONS BOARD

Washington, D.C. 20570

March 24, 1995

The Honorable Richard G. Lugar

The Honorable Dan Coats

United States Senators

1180 Market Tower

10 West Market Street

Indianapolis, IN 46204-2964

Re: Continental Steel Corporation

Case 25-CA-17996

United Steelworkers of America

Case 25-CB-6582, 25-CB-6650

and 25-CB-7306

Dear Senators Lugar and Coats,

This is in response to your February

14, 1995 inquiry to Chairman Gould. Mr.

Joseph Moore, Acting Executive Secretary,

referred your inquiry to me for response.

Your correspondence attached

correspondence from Mr. Phil Kauble of

Kokomo, Indiana regarding litigation in

bankruptcy court involving Continental

Steel Corporation. Specifically, there

was correspondence dated November 25 and

28, 1994 from Mr. Kauble raising

questions regarding the NLRB's dismissal

of charges filed against the United

Steelworkers. Mr. Kauble also attached a

March 19, 1986 communication from the

Chapter 7 Trustee regarding the status of

the trustee and argues that this

communication establishes that the NLRB

App. 36

"missed the mark." Since that time, you

have received correspondence dated March

16, 1995, from the Regional Director

Saundria Bordone responding to similar

inquiries.

Hopefully your review of Ms. Bordone's

response, as well as the numerous

attachments to her letter cataloging

previous inquires and responses involving

this matter, will resolve the questions

raised by Mr. Kauble. The gravamen of

Mr. Kauble's correspondence appears to be

that charges filed against the Union

should not have been dismissed and that

actions taken by this Agency are

inconsistent with the proceedings in

bankruptcy court. Region 25 has

thoroughly investigated all charges filed

by Mr. Kauble as well as others related

to the Continental Steel situation. Mr.

Kauble exercised his right to appeal the

Region's dismissal of charges filed

against the United Steelworkers. In some

situations he filed for reconsideration

of his appeals. All the Région's

dismissals were affirmed by the Agency's

Office of Appeals for the reasons set

forth in correspondence attached to Ms.

Bordone's letter.

The Honorable Richard G. Lugar

The Honorable Dan Coats

Page Two

To the extent that Mr. Kauble argues

that actions taken by the bankruptcy

court are inconsistent with the Agency's

determinations dismissing charges filed

against the United Steelworkers, as noted

by Ms. Bordone, we do not see the

App. 37

inconsistency of which Mr. Kauble writes.

The Agency's determinations are based,

inter alia, on Supreme Court precedent

established in Allied Chemical & Alkali

Workers Local 1 v. Pittsburgh Plate Glass

Co., 404 U.S. 157 (1971). Simply stated,

the National Labor Relations Act

designates labor organizations as

representatives of employees. In

Pittsburgh Plate Glass, the court found

because retirees did not come within the

meaning of "employee" in the National

Labor Relations Act, the NLRB has no

jurisdiction over a union's actions in

representing retirees. Because Mr.

Kauble was a retiree at all pertinent

times wherein he alleged that the union

has failed to represent him, the Agency

has determined that it does not have

jurisdiction over those matters and

dismissed the charges. If, however, upon

review of this correspondence, you have

any questions about the Agency's

determinations please feel free to

contact me or Ms. Bordone and we will

attempt to assist you in any way we can.

Thank you for your inquiry. If I can

be of any further assistance to you in

this or any other matter, please do not

hesitate to contact me.

Sincerely,

Fred Feinstein

General Counsel