Collective Bargaining Agreements in Corporate Reorganizations

Congress enacted § 1113 to the Bankruptcy Code in 1984 in order to establish a standard for the rejection of Collective Bargaining Agreements. But the statute's ambiguous language has caused a split between the Second and Third Circuits, and has precipitated a lengthy academic debate largely centered on the interpretation of one word: “necessary.” This debate has focused on proper statutory interpretation as well as deeper concerns regarding the policy goals behind the Bankruptcy Code. The present study reports data that indicate that the different interpretations are irrelevant in practice. No matter how “necessary” is defined, the result is always the same: debtors are able to reject their collective bargaining agreements. This article concludes that § 1113's ambiguities need to be clarified such that courts have a clearer standard as to what “necessary” means and how that necessity is to be measured