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2007 NORTON BANKRUPTCY LAW SEMINAR MATERIALS

RECENT BANKRUPTCY DEVELOPMENTS

APPELLATE DECISIONS RELATED TO BANKRUPTCY
By William L. Norton III

1112(b)(2) Chapter 11 Dismissal

In re Midpoint Dev., LLC, 466 F.3d 1201 (10th Cir. Oct. 31, 2006) (The bankruptcy case of a debtor that no longer exists as a legal entity is subject to dismissal. An entity's ability to avail itself of the bankruptcy laws after the entity dissolves depends on state law. Under Oklahoma law, a limited liability company that has filed with the Secretary of State articles of dissolution ceases to exist as a legal entity, so the district court properly dismissed the case.)

In re Hedquist, 450 F.3d 801 (8th Cir. June 16, 2006) (Bankruptcy Court did not err in dismissing debtors' Chapter 11 case under § 1112(b)(2) based on the debtors' inability to effectuate a plan. Debtors admitted that the reason for their bankruptcy filing was to set aside a final, non-appealable state court judgment, which the Bankruptcy Court could not set aside.)

1113 Collective Bargaining Agreements

Northwest Airlines Corp. v. Association of Flight Attendants (In re Northwest Airlines Corp.), 483 F.3d 160 (2d Cir. Mar. 29, 2007) Debtor's rejection of collective bargaining agreement under § 1113 abrogated the agreement. In contrast to § 365, where rejection is treated as a breach, not termination, of a contract, under § 1113 rejection is the termination of a collective bargaining agreement, thus, allowing the debtor to impose new terms of employment. Although the rejection terminated the status quo under the Railway Labor Act, union continued to have the obligation to make an agreement with debtor, and that obligation justified district court injunction against a strike.)

In re UAL Corp., 443 F.3d 565 (7th Cir. March 31, 2006) (Retired airline pilots were not entitled to relief from bankruptcy court's approval of active pilots' modification of their collective bargaining agreement. Because the agreement, which left the retired pilots with no benefits, was approved as a post-petition contract outside the ordinary course of business pursuant to §363(b)(1) and not as a rejection of the former agreement pursuant to §1113, the retired pilots had a right to be heard by the bankruptcy court. In light of post-modification developments, however, vacating the agreement would be impermissibly disruptive.)

1116 Pension Plans

In re Kaiser Aluminum Corp., 456 F.3d 328 (3d Cir. July 26, 2006) (When a Chapter 11 debtor seeks to terminate multiple ERISA pension plans simultaneously, the court must determine the collective impact of the plans on the debtor's ability to continue in business. Under ERISA, a Chapter 11 debtor may terminate a pension plan if the debtor will be unable to continue in business and pay all its debts pursuant to its bankruptcy plan absent termination of the pension plan. The Pension Benefit Guaranty Corporation had argued that each plan the debtor sought to terminate must be analyzed individually. Although the text of

 

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