United States Bankruptcy Judge Robert Drain issued an oral decision Monday evening denying for nowHostess’ motion to reject all Teamster labor contracts. This is a victory, and it means that, for the time being, all contracts with IBT local unions remain in effect.
In order to deny the motion, the court had to find that certain parts of the Hostess proposal did not meet the legal requirements for contract rejection under Section 1113. In ruling against the company, the court found that the Union had good cause to 1) stay with its last position on economics, 2) reject a proposal that did not allow a claim covering certain obligations owed to our members, 3) ask for a reasonable level of investment in the company’s products, facilities and equipment, 4) demand a viable capital structure, and 5) obtain the right to name a member of the board of directors.
We told you all along that we would vigorously oppose the imposition of unjust working conditions and we have done just that. It’s a rare day when a bankruptcy judge denies a company’s request to reject its union contracts. It happened here due to the resolve of Hostess members and to the team assembled to fight the company’s 1113 motion. The judge specifically noted that the Union and its advisors had accurately identified the company’s operational and business issues and were highly knowledgeable about the company.
While we agree with most of Judge Drain’s ruling, we recognize that it doesn’t solve Hostess’ problems.
Unfortunately Hostess pursued this path and bogged us down in this legal process instead of being solely focused on reaching a resolution that all parties could support. We believe the company and its senior lenders have been unnecessarily focused on changing your pensions.
Unfortunately, the judge rejected almost all our arguments and the arguments of Teamster pension funds about our proposal for the company to reenter in all those funds (while finding the Union had good cause to reject the company’s proposal to put new hires into a different plan than current employees). Judge Drain repeatedly emphasized his conclusion that there was risk for the company in participating in these funds, particularly those with troubled finances, and the Union did not have good cause to reject the company’s proposal to return to only two Teamster funds.
Judge Drain said that if company came up with new proposal with the same pension position but changes on issues like economics, a bankruptcy claim, and investment/capital structure, it could file a new 1113 motion and he would consider it very quickly.
As we have done throughout this case – we will continue to monitor it closely, vigorously defend our positions and keep you posted on any developments as we continue to seek a consensual agreement, if possible.
