Judge denies Hostess' motion to reject contracts
May 15, 2012
by Eric Schroeder
WASHINGTON — Judge Robert Drain on Monday denied a request by Hostess Brands, Inc. to reject the Irving, Texas-based company’s contract with its biggest union, the Teamsters. The news comes a week after Judge Drain said Hostess could reject agreements with its second biggest union, the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union (BCTGM).
According to Dow Jones, Judge Drain’s oral decision to deny the request boiled down to a few issues, including a 1% difference between the pre-tax earnings projected under the company’s proposal and compared to the union’s proposal, and Hostess’ intention to shift only existing employees into more stable multiemployer pension plans. Judge Drain said he wanted new hires to be included in the pension plans, and he also urged Hostess to increase its proposed contributions to the pension plans to a level that would close the 1% gap, Dow Jones said.
Following the judge’s decision, the Teamsters issued a statement calling the move a “victory for Hostess workers.”
“We told our Hostess members all along that we would vigorously oppose the imposition of unjust working conditions since Hostess first filed bankruptcy, and we have done just that,” said Ken Hall, general secretary-treasurer of the Teamsters. “It’s a rare day when a bankruptcy judge denies a company’s request to reject its union contracts, and I attribute it to the resolve of our members and the team we assembled to fight the company’s 1113 motion.
“The judge specifically noted that the union and its advisers had accurately identified the company’s operational and business issues and were highly knowledgeable about the company.
“While we agree with most of Judge Drain’s ruling, we recognize that it doesn’t solve Hostess’ problems. Unfortunately, we’ve been bogged down in this legal process instead of trying to reach a resolution that all parties could support. We remain committed to finding a solution and urge the company and its lenders to do the same.”
The Dow Jones article did note that Judge Drain was impressed with Gregory Rayburn, who recently took over as chief executive officer of Hostess Brands, saying he has acted “responsibly and affectively in stepping into the breach left by (Brian) Driscoll.” Judge Drain called the turnaround plan put in place by Mr. Rayburn “an improvement” on earlier plans announced in February.