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In re Performance Transportation Services Inc.

June 3, 2008

IN RE PERFORMANCE TRANSPORTATION SERVICES INC., ET AL., DEBTORS.


The opinion of the court was delivered by: Honorable Richard J. Arcara Chief Judge United States District Court

DECISION AND ORDER

INTRODUCTION

Debtors, Performance Transportation Services, Inc., et al., filed a voluntary bankruptcy petition under Chapter 11 of the Bankruptcy Code, which is currently pending in bankruptcy court. After Debtors filed a motion in bankruptcy court seeking interim relief from a collective bargaining agreement under 11 U.S.C. § 1113(e), the Teamster National Automobile Transportation Industry Negotiating Committee ("Teamsters Committee"), and its affiliated Local Unions and their members, who are parties to that agreement, brought a motion in this Court seeking mandatory withdrawal of the bankruptcy reference under 28 U.S.C. § 157(d). For the reasons stated, the Court finds that mandatory withdrawal is unwarranted because resolution of the § 1113(e) application will not require consideration of non-bankruptcy statutes.

BACKGROUND

The Debtors and the International Brotherhood of Teamsters and their members are parties to a collective bargaining agreement, known as the National Master Automobile Transporters Agreement (NMATA). The Debtors are also members of a multi-employer bargaining association known as the National Automobile Transporters Labor Division. On February 22, 2008, the National Automobile Transporters Labor Division gave notice of its intent to terminate or modify the NMATA, which was scheduled to expire on May 31, 2008.*fn1

On May 29, 2008, while in the midst of negotiating the successor agreement to the NMATA, Debtors filed a motion for interim relief from the NMATA under 11 U.S.C. § 1113(e). That motion, which was filed in bankruptcy court, seeks certain interim changes to the terms of the NMATA, including a temporary 15% wage reduction for all work performed under the NMATA after June 4, 2008.

On May 30, 2008, the Teamster Committee moved for mandatory withdrawal of the bankruptcy reference under 28 U.S.C. § 157(d) as to all matters relating to modification or rejection of the NMATA. Debtors filed a response in opposition alleging that mandatory withdrawal under § 157(d) is unwarranted, and the Teamsters Committee filed a reply in support of its motion. The Court deemed the matter submitted without oral argument.

DISCUSSION

The Teamsters Committee argues that withdrawal of the bankruptcy reference is mandatory under the second sentence of 28 U.S.C. § 157(d).*fn2 That section provides:

The district court may withdraw, in whole or in part, any case or proceeding referred under this section, on its own motion or on timely motion of any party, for cause shown. The district court shall, on timely motion of a party, so withdraw a proceeding if the court determines that resolution of the proceeding requires consideration of both title 11 and other laws of the United States regulating organizations or activities affecting interstate commerce. 28 U.S.C. § 157(d). "Because [the second] sentence of Section 157(d), if read literally, would eviscerate much of the work of the bankruptcy courts, the 'courts are admonished by the legislative history to construe this sentence narrowly.'" In re Adelphi Institute, Inc., 112 B.R. 534, 536 (S.D.N.Y. 1990)(quoting 1 Collier on Bankruptcy ¶ 3.01 at 3-59 (15th ed. 1987)). Mandatory withdrawal is warranted only when resolution of the matter would require the bankruptcy judge to "engage in significant interpretation, as opposed to simple application," of federal non-bankruptcy statutes. City of New York v. Exxon Corporation, 932 F.2d 1020, 1026 (2d Cir. 1991); see also In re Adelphi Institute, Inc., 112 B.R. at 536 (mandatory withdrawal not warranted where resolution of the matter would not entail "substantial and material consideration" of federal non-bankruptcy statute); In re Chateaugay Corp., 108 B.R. 27, 28 (S.D.N.Y.1989) (same). Courts have imposed the "substantial and material consideration" standard so as to ensure that § 157(d) does not become an "escape hatch" for matters that are properly before the bankruptcy court. As then-District Judge Leval explained:

It would seem incompatible with congressional intent to provide a rational structure for the assertion of bankruptcy claims to withdraw each case involving the straightforward application of a federal statute to a particular set of facts. It is issues requiring significant interpretation of federal laws that Congress would have intended to have decided by a district judge rather than a bankruptcy judge.

In re Johns-Manville Corp., 63 B.R. 600, 603 (S.D.N.Y.1986) (emphasis in original). Accordingly, where resolution of the issue before the bankruptcy court involves simply the straightforward application of non-bankruptcy federal statutes, mandatory withdrawal is improper. Mandatory withdrawal under § 157(d) is proper only if resolution of the disputed issue would require the bankruptcy judge to engage in substantial and material interpretation of the non-bankruptcy statutes. The party seeking to invoke the mandatory withdrawal provision bears the burden of persuading this Court that it applies. See Matter of Vicars Ins. Agency, Inc., 96 F.3d 949, 953 (7th Cir. 1996).

The Teamsters Committee argues that mandatory withdrawal is appropriate because resolution of the Debtors' motion for interim relief under § 1113(e) would require the bankruptcy court to determine issues exclusively within the jurisdiction of the National Labor Relations Board, specifically, whether the Debtors may permissibly withdraw from the multi-employer bargaining unit. Debtors counter that they are not seeking to withdraw from the multi-employer bargaining unit. Instead, they are simply requesting interim relief from certain provisions of the NMATA.

To the extent that Debtors are merely seeking interim relief from various provisions of the NMATA, resolution of that issue will not require the bankruptcy court to engage in significant interpretation of federal labor statutes. In enacting § 1113(e), Congress was cognizant of the tension between bankruptcy law and labor policies. Indeed, § 1113(e) was enacted in response to the Supreme Court's decision in NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984)(holding that a collective bargaining agreement was subject to unilateral rejection by a debtor-in-possession under 11 U.S.C. ยง 365), which "placed federal ...


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