Section 1113 of the Bankruptcy Code governs the modification or rejection of a collective bargaining agreement (“CBA”) by a chapter 11 trustee or debtor-in-possession. To modify or reject a CBA, a trustee or debtor-in-possession must (1) make a proposal to the union which provides the “necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor”; (2) provide the union with relevant information as is necessary to evaluate the proposal; and (3) meet with the union and confer in good faith. For the modification or rejection to take place, the union must refuse to accept the trustee’s or debtor-in-possession’s proposal without good cause and the balance of the equities must clearly favor the modification or rejection of the agreement.
While it is clear that section 1113 applies in chapter 11 cases in which the debtor’s reorganizing, it is unsettled as to whether section 1113 applies in chapter 11 cases in which the debtor is liquidating. Moreover, in chapter 11 liquidations it is also unclear as to how a court should apply section 1113.