In re US Truck Co., Inc.

• Decision Date: 26 May 1988
• Docket Number: Bankruptcy No. 82-03561-R,Civ. A. No. 87-72319.
• Parties: In re U.S. TRUCK COMPANY, INC., Debtor. U.S. TRUCK COMPANY, INC., Plaintiff, v. TEAMSTERS NATIONAL FREIGHT INDUSTRY NEGOTIATING COMMITTEE, Defendant.
• Court: U.S. District Court — Western District of Michigan

89 B.R. 618 (1988)

In re U.S. TRUCK COMPANY, INC., Debtor.

U.S. TRUCK COMPANY, INC., Plaintiff, v. TEAMSTERS NATIONAL FREIGHT INDUSTRY NEGOTIATING COMMITTEE, Defendant.

Bankruptcy No. 82-03561-R, Civ. A. No. 87-72319.

United States District Court, E.D. Michigan, S.D.

May 26, 1988.

Patrick A. Moran, Simpson & Moran, Birmingham, Mich., for plaintiff.

James P. Hoffa, Hoffa, Chodak & Robiner, Detroit, Mich., for defendant.

MEMORANDUM OPINION AND ORDER

PHILIP PRATT, Chief Judge.

This appeal involves the final stages of a complicated Chapter 11 proceeding which has been litigated in the bankruptcy court of the Eastern District of Michigan. On February 4, 1985, this court confirmed the Fifth Amended Plan of Reorganization in this matter. As part of this plan, an order was entered providing that for the purposes of confirmation an unliquidated claim of the National Freight Industry Negotiating Committee (Committee) would be estimated at $2,000,000.00. The Committee's claim has been litigated before the bankruptcy court, which awarded the Committee over $1,500,000.00 in damages stemming from the rejection of a collective bargaining agreement. Now before the court is the appeal of defendant and reorganized debtor, U.S. Truck, Inc. (U.S. Truck). Among other contentions, U.S. Truck argues that the Committee does not have standing to make the claims upon which the damage award is based. U.S. Truck also argues that when a collective bargaining agreement is rejected because of the imminent failure of the debtor-in-possession, damages for lost wages after the time of rejection may not be recovered. Finding that these contentions do not warrant reversal of the judgment of the bankruptcy court, the court affirms the damages award as to the individual employees, but reverses as to the recovery of union dues.

This bankruptcy matter has a long history which need not be repeated in detail here. For the purposes of the matter now before the court, the following facts are relevant.

On June 11, 1982, U.S. Truck filed a petition for relief under Chapter 11 of the Bankruptcy Code. U.S. Truck operated a trucking company primarily engaged in the intrastate shipping of parts and supplies for the automotive industry. On July 15, 1982, U.S. Truck sought to reject its collective bargaining agreement with the International Brotherhood of the Teamsters, Chauffeurs, Warehousemen and Helpers of America (Union). The debtor alleged that it could no longer survive if it were required to comply with the terms of the National or Master Bargaining Agreement (Agreement). In granting this petition the bankruptcy court concluded:

Testimony presented at the ... hearings established that the debtor is incurring staggering losses; that measures undertaken to reduce expenses have proved insufficient to reverse the loss trend; that the debtor cannot survive given the wage requirements of the collective bargaining contract currently in effect. The Court therefore finds that rejection of the labor contract is absolutely necessary to save the debtor from collapse.

Memorandum Opinion and Order at 8 (Dec. 6, 1982) (Woods, J.).

Subsequently, the debtor and the Union entered into negotiations and in January of 1983 reached an agreement on the terms of a new labor contract. The new agreement contained several revisions including a change to owner-operated trucks and a ten percent reduction in the wage rate for employees. That contract was scheduled to expire in March of 1985, when the National or Master Agreement was to be renegotiated. Each participating local union agreed to recommend approval of the new contract. On January 11, 1983, the local union membership approved the new labor agreement by a vote of 90 to 39. On April 14, 1983, the Joint Area Rider Committee of the Union reached a deadlock on the validity of the new contract. Nonetheless, in January of 1983, the local union and the debtor implemented the terms of the new labor contract.

In addition to the rejection of the contract, U.S. Truck took various other measures to reduce costs. It eliminated certain positions and contracted their functions to other companies. New lease agreements were also entered into. The new labor contract, work force composition and favorable lease agreements between the debtor and other involved companies enabled the debtor to reverse the trend of overwhelming losses.

In August of 1984, the Committee filed an Amended Proof of Claim for damages which allegedly resulted from the rejection of the Agreement in the amount of $5,002,321.00. This claim was filed using Form No. 21. This form is a proof of "Multiple Claims" for wages, salary or commissions to be completed by an agent for the claimants. Attached to the submitted Form No. 21 were Form Nos. 21A and 21B which listed the names of employees the Committee was acting for, along with the amounts claimed by these employees.

After the confirmation of the Fifth Amended Plan by this court, the Committee's rejection damages claim was tried before Judge Rhodes of the Bankruptcy Court. The trial and related motions consumed 11 days, generated over 1,200 pages of transcripts and concluded in a detailed 62-page opinion. In Re U.S. Truck, 74 B.R. 515 (Bankr.E.D.Mich.1987). The court held that the Committee had standing to represent the members of the Union employed by U.S. Truck. Oral Ruling (May 7, 1986). The court disallowed rejection damages for any person not listed as a claimant on Form No. 21 and its attachments. Id. at 17. The court further held that the rejection damages for lost wages of the union members who continued to work for U.S. Truck after rejection were equal to the difference between the wage levels in the Agreement and the wages actually paid after the rejection. 74 B.R. at 537. The court also held that the contracting out of certain positions violated the Agreement, and those claimants whose positions were eliminated were entitled to the wages they would have earned under the Agreement had they continued to work for U.S. Truck. Id. at 535-36. As to other employees who were released, but were not replaced by a contractor, no rejection damages were allowed. Id. at 536.

Now before the court is defendant U.S. Truck's appeal from Judge Rhodes' opinions. The questions presented in this appeal may be summarized as follows:

1) Whether the Committee has standing to present the individual claims of the Union\'s members in a bankruptcy case after rejection of a collective bargaining agreement.

2) Whether lost wages may be recovered as rejection damages as a matter of law where the wages were lost after the rejection of the collective bargaining agreement.

3) Whether lost wages may be recovered as rejection damages, where the wages were lost after the rejection of a collective bargaining agreement, and without rejection, the rejecting company would have terminated all employment.

4) Whether 11 U.S.C. § 502(b)(7) bars the recovery of lost wages where the wages were lost more than one year after the rejection of the collective bargaining agreement.

5) Whether rejection of the Agreement terminated the provision authorizing U.S. Truck to deduct Union dues from the employees wages and whether U.S. Truck waived its right to refrain from making such deductions.

To the extent that these arguments require examination of factual findings by the court below, those findings may only be overturned if they are clearly erroneous. Bankr.R. 8013. The district court must independently reach the ultimate legal conclusions adopted by the bankruptcy judge on the basis of the facts found. In the Matter of Bufkin Brothers, Inc., 757 F.2d 1573, 1577-78 (5th 1985).

I.

The court first turns to the threshhold issue of the Committee's standing to assert the Union members' claims.

Federal courts are courts of limited jurisdiction. Among the restrictions on jurisdiction is the requirement that all disputes be actual cases or controversies. U.S. Const. art. 3, § 1. One element of an actual case or controversy is that a litigant have "standing" to challenge the actions sought to be adjudicated in the lawsuit.

At an irreducible minimum, Art. III requires the party who invokes the court\'s authority to "show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct of the defendant," Gladstone, Realtors v. Village of Bellwood, 441 U.S. 91, 99 99 S.Ct. 1601, 1608, 60 L.Ed.2d 66 (1979), and that the injury "fairly can be traced to the challenged action" and "is likely to be redressed by a favorable decision," Simon v. Eastern Kentucky Welfare Rights Org., 426 U.S. 26, 38, 41 96 S.Ct. 1917, 1924, 1925, 48 L.Ed.2d 450 (1976).

Valley Forge College v. Americans United, 454 U.S. 464, 472, 102 S.Ct. 752, 758, 70 L.Ed.2d 700 (1982). A party may not convert the judicial process into "no more than a vehicle for the vindication of the value interests of concerned bystanders." United States v. SCRAP, 412 U.S. 669, 687, 93 S.Ct. 2405, 2415, 37 L.Ed.2d 254 (1973).

U.S. Truck contends that once the Agreement was rejected, the only claims that arose were claims under the Bankruptcy Code. Therefore, U.S. Truck argues, the Committee had no standing to raise the individual claims of its members. According to U.S. Truck, the individual members of the Union should have filed claims.

A collective bargaining agreement is an "executory contract" within the meaning of § 365(a) of the Bankruptcy Code, 11 U.S.C. § 365(a), and is therefore subject to rejection by the debtor-in-possession under appropriate circumstances. N.L.R.B. v. Bildisco, 465 U.S. 513, 517, 104 S.Ct. 1188, 1191, 79 L.Ed.2d 482 (1984). Section 365(g) provides that "the rejection of an executory contract ... of the debtor constitutes a breach of contract ... if such contract ... has not been assumed under this section or under a plan confirmed under Chapter 9, 11, 12 or 13 of this title, immediately before the date of the filing of the petition."...