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IN RE DUPLAN CORP.

July 31, 1978

In re the DUPLAN CORPORATION and Duplan Fabrics, Inc., Debtors


The opinion of the court was delivered by: DUFFY

OPINION & ORDER

On October 5, 1977 I signed an order in this reorganization proceeding under Chapter X of the Bankruptcy Act granting the Trustee's application to approve and authorize a collective bargaining agreement entered into by and between the Rochester Button Company ("Rochester"), a subsidiary of the debtor which is also in Chapter X, and the Rochester Joint Board Amalgamated Clothing Workers of America, AFL-CIO ("the Union"). The entry of this order was opposed by the Banks *fn1" and the Indenture Trustee, who objected to the inclusion in the contract of Article XV D, a severance pay provision. Apparently because no testimony was taken in connection with my approval of Article XV D, an appeal from my order was filed. Thereafter, counsel for all parties entered into a stipulation, which was "So Ordered" by two Court of Appeals judges, remanding the case to me "for all purposes." To allow the objecting parties an opportunity to proffer testimony concerning Article XV D, a hearing was held on June 1, 1978. The following constitutes my findings of fact and conclusions of law.

Prior to the instant agreement, which covers the employees at three of Rochester's plants from June 1, 1977 through September 30, 1980, Rochester and the Union were parties to other collective bargaining agreements, covering the employees at the Akron plant in one contract, and at the Rochester and Wellsville plants in another. The most recently expired agreements spanned June 1, 1974 through June 1, 1977 and contained a severance pay provision with the usual run-away shop clauses and further in the Rochester/Wellsville agreement:

 
D. In the event that operations of the Employer are liquidated at the Rochester or Wellsville, New York plants during the term of this Agreement, then and in that event the Employer agrees to pay such employee separated as a result of such liquidation, a sum equal to the amount he would have been paid had he not been so separated, said sum to be computed on the basis of an average work week of forty (40) hours for the remainder of the contract period.

 The most recently expired Akron agreement contained the following in its severance pay provision:

 
D. In the event that operations in the Employer's Akron, New York plant are liquidated during the term of this Agreement, for economic reasons resulting from the decline of casein and/or through products, the Employer covenants and agrees to offer all permanent employees of the Employer employed at its Akron plant immediate employment in the Employer's Rochester or Wellsville plants. Should any permanent employee of the Employer employed at Employer's Akron plant elect not to transfer to the Employer's Rochester or Wellsville plants as provided for herein, then and in that event the Employer agrees to pay severance pay to any such employee, the amount of such severance pay to be negotiated and mutually agreed upon between the Employer and the Union. In the event that the Employer and the Union are unable to mutually agree upon the amount of severance pay to be paid to such employees, then and in that event the amount of severance pay shall be determined by the arbitrator named in Article XIX of this Agreement and the determination of the arbitrator shall be final and binding.

 Article XV D of the instant agreement appears to combine these two expired provisions. It provides:

 
D. In the event that operations of the employer are liquidated at the Rochester, Wellsville or Akron, New York plants during the term of this agreement, the following provisions shall apply:
 
1. If the operations of the employer are liquidated prior to February 1, 1979 then and in that event, the employer agrees to pay each employee separated as the result of such liquidation, a sum equal to the amount he would have been paid had he not been so separated, said sum to be computed on the basis of an average work week of forty (40) hours for the remainder of the contract period.
 
2. If liquidation occurs on or after February 1, 1979, the parties shall negotiate the amount of severance pay due each employee. In the event that the Employer and the Union are unable to mutually agree upon the amount of severance pay to be paid to such employees, then and in that event, the amount of the severance pay shall be determined by an arbitrator selected from a panel proposed by the American Arbitration Association in accordance with the Association's rules and procedures and the determination of the Arbitrator shall be final and binding. In establishing the amount of the severance pay due each employee, the Arbitrator shall consider the age and length of service of each employee and the employer's above stated intention not to liquidate its Rochester, Wellsville and Akron, New York Facilities.

 In short, Article XV D includes a Rochester/Wellsville-like provision for liquidations at any of the three plants occurring prior to February 1, 1979 and an Akron-like provision for liquidations after that date.

 At the summary hearing held on September 27, 1977 on the Reorganization Trustee's original application to approve the instant agreement, counsel for the Trustee stated:

 
Now, the trustee does admit that this is an onerous provision, it is an onerous provision and a burdensome provision; however, this is the best he could do. The union has indicated to us at every negotiation that they would strike over this, a strike which would destroy the whole entire Rochester operation.

 Transcript, p. 13. That the severance pay provision contained in Article XV D was a "strike issue," that is, if the Union did not obtain the same, the Rochester employees would strike, was confirmed by Nicholas Del Vecchio, the Union's business representative who negotiated the present and most recently expired agreements. Mr. Del Vecchio also testified that, with respect to the Union's demands in the area of severance pay, the Union ultimately did not obtain all that it was seeking. Although the Banks called Arthur Rosenthal, the President of Rochester, as a witness on their behalf, he testified that he had no knowledge of the negotiations resulting in the instant agreement since at the time of the negotiations he was "competing" with Rochester. He also added ...


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