In re Allied Holdings, Inc.

• Decision Date: 09 February 2007
• Docket Number: No. 1:06-cv-1416-WSD.,1:06-cv-1416-WSD.
• Citation: 376 B.R. 351
• Parties: In re ALLIED HOLDINGS, INC., et al.
• Court: U.S. District Court — Northern District of Georgia

376 B.R. 351

In re ALLIED HOLDINGS, INC., et al.

No. 1:06-cv-1416-WSD.

United States District Court, N.D. Georgia, Atlanta Division.

February 9, 2007.

OPINION AND ORDER

WILLIAM S. DUFFEY, JR., District Judge.

This matter is before the Court on the Teamsters'¹ ("Appellants" or "the Teamsters") Motion for Leave to Appeal. (Mot. for Appeal [2].)

I. BACKGROUND

This matter arises from Chapter 11 bankruptcy proceedings pending in the Bankruptcy Court for the Northern District of Georgia, where Allied Holdings, Inc. and affiliated debtors (collectively "Allied" or "Appellees") are debtors in possession. Allied is a specialized trucking company whose main business is transporting vehicles, principally new cars produced by automobile manufacturers. It is the largest transporter of new motor vehicles in North America. The Teamsters are, the collective bargaining representatives for approximately 4800 of Allied's employees. A single collective bargaining agreement ("CBA"), the National Master Automobile Transporters Agreement ("NMATA"), covers Allied's union employees.

On July 31, 2005, Allied commenced its Chapter 11 bankruptcy reorganization. Shortly after the case was filed, Allied obtained post-petition, also known as debtor-in-possession ("DIP"), financing from a consortium of lenders. In connection with the DIP financing, Allied provided projections of its expected results of operations during the eighteen-month term of the loan. It also agreed to financial covenants regarding the minimum earnings level Allied would maintain on a rolling twelve month basis.

In early 2006, Allied realized it was unable to meet its financial projections, and had breached the financial covenants it made in connection with its DIP financing. Allied determined that the amount it could borrow under the DIP financing, assuming the financing was not terminated by default, was insufficient for it to operate through July 2006.

Accordingly, in March 2006, Allied proposed, pursuant to 11 U.S.C. § 1113(b), to negotiate with the Teamsters regarding changes in the parties' collective bargaining agreement.² The negotiations were not immediately successful, and faced with Allied's perceived cash flow shortfall in July, on April 13, 2006, Allied filed an emergency motion for interim relief from its wage payment obligation to its Teamsters employees.³ In its emergency motion Allied claimed that a two month wage reduction of 10%, effective until June 30, 2006, was required to preserve its viability and thus avoid irreparable harm to the estate. Allied also asked the court for permission to defer a 2% wage increase and cost of living adjustment that were scheduled to go into effect on June 1, 2006. Allied expected the interim relief to save it $4 million over the two-month period. These savings were to be combined with a $1 million savings it intended to obtain from a reduction in non-union employee compensation. In April 2006, Allied and its DIP lenders agreed on an amendment to their financing agreement in which the DIP lenders would provide Allied with an advance of $5 million. The maturity date for the advance could be extended by one month if, among other things, Allied obtained the interim relief it sought in its § 1113(e) emergency motion.

On April 26-27, 2006, the bankruptcy court held a hearing on the emergency motion. Allied presented evidence intended to demonstrate that it required emergency relief for it to continue operating past July 30, 2006. The Teamsters argued that Allied's financial evidence made improper assumptions and was insufficient to grant the interim relief requested. After hearing Allied's evidence, the bankruptcy court allowed a representative from the DIP lenders to present its position regarding the DIP financing. On May 1, 2006, the bankruptcy court found that Allied had satisfied the requirements of § 1113(e) and granted Allied's request for interim relief.

On June 13, 2006, the Teamsters filed this Motion for Leave to Appeal the bankruptcy court's order. Appellants argue that it was improper for the bankruptcy court to enter interim relief under § 1113(e) because Allied had not filed an application to reject the collective bargaining agreement pursuant to § 1113(b) of the Bankruptcy Code. Appellants argue the bankruptcy court's order was a final order appealable as of right, and if not, this Court should grant the Teamsters' leave to file an interlocutory appeal. The initial question before the Court is whether the bankruptcy court's interim order is a final order or one which the Court in its discretion should allow to be appealed. The Court finds the order is not final and declines to exercise its discretion to allow an interlocutory appeal.

II. DISCUSSION

a. Law of Collective Bargaining Agreements — 11 U.S.C. § 1113

Bankruptcy Code 11 U.S.C. § 1113 allows a debtor to reject collective bargaining agreements during bankruptcy but also provides protection to those employees covered by a collective bargaining agreement proposed to be rejected. Under § 1113, a bankruptcy trustee may not "unilaterally terminate or alter any provisions of a collective bargaining agreement prior to compliance with the provisions of [§ 1113]." 11 U.S.C. § 1113(f). The statute requires that "[t]he debtor in possession, or the trustee ... may assume or reject a collective bargaining agreement only in accordance with [the] provisions [of § 1113.]" 11 U.S.C. § 1113(a). The section sets out a required process a debtor must follow to reject or modify a collective bargaining agreement:

§ 1113(b)(1) — Subsequent to filing a petition [of bankruptcy] and prior to filing an application seeking rejection of a collective bargaining agreement, the debtor in possession or trustee (hereinafter in this section "trustee" shall include a debtor in possession), shall —

(A) make a proposal to the authorized representative of the employees covered by such agreement ... which provides for those necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably; and

(B) provide, subject to subsection (d)(3), the representative of the employees with such relevant information as is necessary to evaluate the proposal.

(2) During the period beginning on the date of the making of a proposal provided for in paragraph (1) and ending on the date of the hearing provided for in subsection (d)(1), the trustee shall meet, at reasonable times, with the authorized representative to confer in good faith in attempting to reach mutually satisfactory modifications of such agreement.

11 U.S.C. § 1113(b). Subsection (d) further requires that after the filing of an application for rejection, the Court must schedule a hearing where "[a]ll interested parties may appear and be heard" 11 U.S.C. § 1113(d)(1).

The court must rule on the application for rejection within 30 days after the hearing, and the court may enter protective orders to prevent disclosure of information provided by the debtor to the authorized representative of the employees. 11 U.S.C. § 1113(d)(2), (3).

Section 1113(e) specifically provides for emergency interim relief in appropriate circumstances:.

If during a period when the collective bargaining agreement continues in effect, and if essential to the continuation of the debtor's business, or in order to avoid irreparable damage to the estate, the court, after notice and a hearing, may authorize the trustee to implement interim changes in the terms, conditions, wages, benefits, or work, rules provided by a collective bargaining agreement .... The implementation of such interim changes shall not render the application for rejection moot.

11 U.S.C. § 1113(e).

b. Finality of Interim Order

A final order of a bankruptcy court is appealable as of right. The Teamsters contend that the bankruptcy court's May 1, 2006 order under § 1113(e) is "arguably" final and, therefore, appealable to this Court. They argue that because Allied has not applied to reject the collective bargaining agreement pursuant to § 1113(d), the order will not be subsumed in any future order regarding rejection of the collective bargaining agreement. That is, the Teamsters argue that as a practical matter, the May 1, 2006 order may never become final or incorporated in a final order, and the interim relief should be appealable now because it is "effectively" final.

District courts have "jurisdiction to hear appeals from final judgments, orders, and decrees of bankruptcy judges." In re Charter, 778 F.2d 617, 621 (11th Cir.1985) (citing 28 U.S.C.A. § 158(a)). A final decision is generally one which "ends the litigation on the merits and leaves nothing for the court to da but execute the judgment." Anastasia Cruises, Inc. v. Exxon Mobil Corp., 331 F.3d 1257, 1259 (11th Cir.2003). "In bankruptcy proceedings, it is generally the particular adversary proceeding or controversy that must have been finally resolved rather than the entire bankruptcy litigation." Id. Courts "take a more liberal view of what constitutes a separate dispute for purposes of appeal in bankruptcy cases, [but] the separate dispute being assessed must have been finally resolved and leave nothing more for the bankruptcy court to do." In re Charter, 778 F.2d at 621. The Eleventh Circuit has explained:

The statutory requirement of finality is a flexible concept, grounded, in the practicalities of the situation. This accommodative approach is vital in the context of bankruptcy. Viewed realistically, a bankruptcy case is simply an aggregation of controversies, many of which would constitute individual lawsuits had a bankruptcy petition never been filed. While the goal of the bankruptcy process is to bring all present and potential contestants together and decide all the claims at the same time, a truly simultaneous resolution is impossible....