Justices Pass on Trump Casino Bankruptcy, Labor Dispute

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By Jay-Anne B. Casuga

May 31 — The U.S. Supreme Court declined to hear an appeal filed by a union representing workers at the Trump Taj Mahal in New Jersey who alleged that the casino's bankrupt operators unlawfully rejected obligations that arose from an expired labor contract ( UNITE HERE Local 54 v. Trump Entm't Resorts, Inc., U.S., No. 15-1286, cert. denied 5/31/16 ).

By denying review, the justices let stand a U.S. Court of Appeals for the Third Circuit ruling of first impression that the federal bankruptcy code permits Chapter 11 debtor-employers such as Trump Entertainment Resorts Inc. and related companies to reject or modify employee benefits established in a collective bargaining agreement even after the agreement has expired (810 F.3d 161, 205 LRRM 3201 (3d Cir. 2016)) (10 DLR AA-1, 1/15/16).

In its petition for high court review, UNITE HERE Local 54 argued that Section 1113 of the bankruptcy code provides for only court-approved rejection of a contractual bargaining agreement. It doesn't apply to statutory duties under the National Labor Relations Act to keep some employment terms and conditions in effect pending negotiations, the union said.

Trump Entertainment contended, among other things, that the case doesn't warrant review because no circuit split exists on the issue and the Third Circuit's ruling doesn't conflict with high court precedent.

Donald Trump, the presumptive Republican presidential nominee, no longer owns Trump Taj Mahal and its adjacent hotel or the entertainment company. Trump Entertainment is now a subsidiary of billionaire Carl Icahn’s Icahn Enterprises LP.

Petition Challenges Third Circuit

The union's petition argued that the Third Circuit, in failing to apply Section 1113's plain language, incorrectly subordinated bargaining agreements and post-contract obligations to the bankruptcy code's general preference for allowing debtors to reorganize their businesses.

It said the Third Circuit “obliterates” the role of the National Labor Relations Board in addressing unfair labor practices of employers in bankruptcy by improperly elevating bankruptcy law and bankruptcy courts above the NLRA and the board.

The union added that the justices must resolve a conflict between the Third Circuit's ruling and the Fourth Circuit's decision in Gloria Manufacturing Corp. v. International Ladies Garment Workers Union, 734 F.2d 1020, 116 LRRM 2567 (4th Cir. 1984).

In that case, the Fourth Circuit held that an expired bargaining agreement isn't subject to rejection under a bankruptcy law provision on “executory contracts” (11 U.S.C. § 365(a)), which predated the enactment of Section 1113.

Case Doesn't Warrant Review, Casino Argues

Opposing review, Trump Entertainment argued that the union fails in its attempt to create a circuit split based on Gloria Manufacturing.

The Fourth Circuit's case “involved a different and distinct statutory provision with different and distinct terms” and is “only authority for the proposition that section 365 does not apply to expired collective bargaining agreements,” the company said.

Additionally, it said, the Third Circuit's ruling does not conflict with Supreme Court precedent because the justices have never interpreted Section 1113.

Davis, Cowell & Bowe, James & Hoffman and Cleary, Josem & Trigiani represented the union. Dechert represented Trump Entertainment.

To contact the reporter on this story: Jay-Anne B. Casuga in Washington at jcasuga@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com