The opinion of the court was delivered by: MISHLER
This is a consolidated appeal from two orders of the bankruptcy court, Parente, J., entered on October 15 and 21, 1976.
The facts of this case are set forth in the Second Circuit's opinion in Truck Drivers Local 807 v. Bohack, 541 F.2d 312 (2d Cir. 1976). To provide a proper framework for our discussion, we will summarize briefly the salient events of the Bohack Corporation's ("Bohack") recent, troubled past. In March 1973, Bohack and Truck Drivers Local 807 ("the union") entered into a three-year collective bargaining agreement. At that time, Bohack employed more than 120 members of the union. On July 30, 1974, Bohack filed a petition for arrangement under Chapter XI of the Bankruptcy Act, 11 U.S.C. § 701 et seq. An order issued that day allowed Bohack to continue business operations, which then included approximately 150 retail supermarkets, as a "debtor-in-possession." See 11 U.S.C. § 742. Four and one-half months later, on December 16, 1974, Bohack terminated produce, dairy and bakery operations at its Brooklyn warehouse in favor of a contract with an independent wholesaler, leaving 60 Bohack truckdrivers without work. The union filed a grievance alleging Bohack had violated a provision of the collective bargaining agreement that limited the employer's right to transfer to others work done by members of the local union. On May 16, 1975, the Grievance Committee ruled that Bohack had violated article 32 of the Master Agreement.
Nonetheless, that same month, Bohack changed grocery suppliers. The new suppliers had their own drivers and, consequently, more Bohack drivers lost their jobs. By July 18, 1975, the remaining workers were terminated and that same day Bohack moved to reject the collective bargaining agreement pursuant to § 313 of the Bankruptcy Act, 11 U.S.C. § 713. The union began an action in this court pursuant to § 301(a) of the Labor-Management Relations Act, 29 U.S.C. § 185(a), to compel Bohack to perform the collective bargaining agreement. The union also sought to confirm the grievance award, the subject of a state court proceeding that Bohack had removed to the federal court.
On November 19, 1975, this court dismissed the union's petition to confirm the arbitrator's award, and remanded to the bankruptcy judge "the issue of the advisability of granting the debtor leave to arbitrate." On appeal, the Second Circuit affirmed the remand, although it directed this court to vacate an order restraining the union from picketing Bohack. The bankruptcy judge was instructed to determine:
(1) whether to affirm the contract, or whether the debtor has so conformed to the contract as to make it binding, see In re Public Ledger, Inc., 161 F.2d 762, 767 (3d Cir. 1947), cited with approval in REA Express, Inc., supra, 523 F.2d at 170; (2) whether to grant the debtor's petition to reject the agreement as onerous, adhering to our admonition in Kevin Steel to "move cautiously in allowing rejection of a collective bargaining agreement," 519 F.2d at 707; and (3) whether to order arbitration under its terms in any event, and on what issues.
541 F.2d at 320-21 (footnote omitted).
Several months prior to the Second Circuit's decision, on May 28, 1976, Bankruptcy Judge Parente had entered an order rejecting the collective bargaining agreement, which had expired on March 31, 1976, as onerous and burdensome to the debtor. On October 15, 1976, acting pursuant to the Second Circuit's remand, Judge Parente directed the union to submit its grievances with the debtor-in-possession "to arbitration, in accordance with the procedure set forth in Section 26 of the Bankruptcy Act, to determine if [the debtor-in-possession] breached said collective bargaining agreement and to render a finding on damages, if necessary." On October 21, 1976, after hearing re-argument, Judge Parente signed a second arbitration order, directing the parties to submit the following issues to arbitration:
(a) The extent of damages to be recovered by the discharged employees upon the rejection of the labor contract between The Bohack Corporation and Truck Drivers Local Union No. 807 -- International Brotherhood of Teamsters.
(b) The amount and extent of pension, health insurance, welfare, vacation benefits and the value of seniority of each employee effected [affected] by said rejection of the employment contract.
(c) The amount of the mitigation of such damages by reason of the subsequent employment of each employee or the receipt of unemployment insurance paid to said employee.
(d) The issue of whether or not the contract rejected by the employer should be specifically enforced by the reinstatement of each employee notwithstanding the fact that the contract has expired . . .
In addition, this order provided that
issues determined by the arbitrators be subject to the further order of this Court, as to the status, amount and the validity of such arbitrator's award and it is
FURTHER ORDERED that the arbitrator shall proceed in accordance with the procedures set forth in Section 26, 11 U.S.C. Section 49.
Both Bohack and the union filed notices of appeal from the orders. On November 19, 1976, Judge Parente stayed arbitration pending the decision of this court.
Rejection of the Collective Bargaining Agreement
Local 807 argues that Bohack failed to establish that the labor contract was onerous and burdensome and, therefore, the bankruptcy court erred in granting the petition to reject the agreement. Moreover, aside from the question of burdensomeness, the union contends that the debtor-in-possession became a party to the agreement by expressly or implicitly adopting its terms.
In Shopmen's Local 455 v. Kevin Steel Prod., Inc., 519 F.2d 698 (2d Cir. 1975), the Second Circuit touched on the considerations that must inform the decision to allow ...