Motion To Reject CBAs

Case 19-12215-1-rel Doc 82 Filed 01/09/20 Entered 01/09/20 15:56:59 Desc Main
Document Page 1 of 33
STRADLEY RONON STEVENS & YOUNG, LLP

Deborah A. Reperowitz
100 Park Avenue, Suite 2000
New York, NY 10017
and
Brian P. Seaman
Daniel M. Pereira
Mischa S. Wheat
2005 Market Street, Suite 2600
Philadelphia, PA 19103
Proposed Attorneys for the Debtors

and Debtors-in-Possession
UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF NEW YORK
In re: Case No. 19-12215 (REL)

Chapter 11(Main Case)
GOOD SAMARITAN LUTHERAN Case No. 19-12216 (REL)
HEALTH CARE CENTER, INC. d/b/a
BETHLEHEM COMMONS CARE Jointly Administered
CENTER, et al.,1
Debtors.
DEBTORS’ MOTION SEEKING THE ENTRY OF

AN ORDER AUTHORIZING THE REJECTION OF
COLLECTIVE BARGAINING AGREEMENTS UNDER 11 U.S.C. § 1113
The Good Samaritan Lutheran Health Care Center, Inc. (“Good Samaritan”) and
Kenwood Manor, Inc. (“Kenwood”, and together with Good Samaritan, the “Debtors”), by and
through their undersigned proposed counsel, respectfully submit this motion seeking the entry of
an order substantially in the form attached hereto as Exhibit A (the “Order”) authorizing the
1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal
tax identification number, are: Good Samaritan Lutheran Health Care Center, Inc. d/b/a
Bethlehem Commons Care Center (0663) and Kenwood Manor, Inc. (8178).
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Debtors to reject certain collective bargaining agreements pursuant to 11 U.S.C. § 1113 related
relief (the “Motion”).
JURISDICTION AND VENUE
1. This Court has jurisdiction to consider this Motion under 28 U.S.C. §§ 157(b) and
1334. This is a core proceeding under 28 U.S.C. § 157(b).
2. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409.
3. The statutory predicate for the relief requested herein is section 1113 of chapter
11 of title 11 of the United States Code (the “Bankruptcy Code”).
FACTUAL BACKGROUND2
4. On December 12, 2019 (the “Petition Date”), each of the Debtors filed a
voluntary petition in this Court commencing a case (the “Chapter 11 Cases”) for relief under
the Bankruptcy Code.
5. The Debtors continue to operate and manage their businesses as debtors-in-
possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
6. No trustee, examiner or official committee of unsecured creditors has been
appointed in these Chapter 11 Cases.
7. Pursuant to Order entered on December 20, 2019, the Debtors’ cases are being
jointly administered under the above caption.
2
A detailed description of the Debtors’ businesses, capital structure, and the reasons for
commencing the Chapter 11 Cases, is set forth in the Declaration of Laraine Fellegra in
Support of First Day Relief, filed with the Court (Dkt. No.3) (the “First Day Declaration”).
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A. The Nature of the Debtors’ Businesses
8. Good Samaritan operates a 120-bed nonprofit skilled nursing facility (the “Good
Samaritan Facility”) certified by the New York State Department of Health (the “DOH”) under
Article 28 of the Public Health Law. As of the Petition Date, Good Samaritan employed 154
employees (the “Good Samaritan Employees”) and had an occupancy of 84%.
9. Kenwood operates a 66-bed DOH-certified adult home (the “Kenwood Facility”,
and together with the Good Samaritan Facility, the “Facilities”). As of the Petition Date,
Kenwood employed 42 employees (the “Kenwood Employees” and together with the Good
Samaritan Employees, the “Employees”) and had an occupancy rate of 71.2%.
10. The Facilities are located on one campus in Delmar, New York, known as the
Good Samaritan Village. Good Samaritan owns the building in which the Good Samaritan
Facility operates and the approximately 6.5-acre parcel on which the building sits (the “Good
Samaritan Real Property”). Kenwood owns the building in which the Kenwood Facility
operates and the approximately 1.7-acre parcel on which the building sits (the “Kenwood Real
Property”, and together with the Good Samaritan Real Property, the “Real Property”). The
Facilities and the Real Property constitute substantially all of the Debtors’ assets and shall be
referred to collectively hereinafter as the “Sale Assets.”
B. The Collective Bargaining Agreements
11. For over fifteen years, Good Samaritan has been party to a collective bargaining
agreement with 1199SEIU United Healthcare Workers East (the “Union”), which expired on
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December 31, 2018 (the “GS CBA”).3 The GS CBA covers: (a) all full-time and regular part-
time service and maintenance employees, including diet aides, ward clerks, transportation
aides/certified nursing assistants (“C.N.A.s”), nursing rehab aides/C.N.A.s, activities
aides/C.N.A.s, nurse aids, housekeepers, porters, environmental services assistants, support
aides, laundry workers, maintenance personnel, first cook, second cook, relief cook, licensed
practical nurses, and C.N.A. trainees; and (b) in most cases, any employee hired to work one-
fifth or more of the work week or a per diem employee who works more than fifty-two shifts
within a period of twenty-six weeks. The GS CBA originally was executed on April 15, 2015.
Through various extensions, the GS CBA was extended through December 31, 2018, and expired
at 11:59 p.m. on such date.
3
Although there is no binding case law on point, the only federal court of appeals to consider
whether section 1113 applies to expired collective bargaining agreements has answered in the
affirmative. See In re Trump Entertainment Resorts, 810 F.3d 161, 173 (3d Cir. 2016) (holding
that a debtor may reject an expired collective bargaining agreement under section 1113 and that
such conclusion is consistent with the purpose of the Bankruptcy Code to grant debtors wide
latitude to restructure their affairs). See also In re N.W. Holding Co., 533 B.R. 753, 758 (Bankr.
E.D. Mo. 2015) (holding that language and purpose of § 1113 supports conclusion that statute
applies to expired CBAs); In re 710 Long Ridge Road Operating Co., II, LLC, 518 B.R. 810,
830 (Bankr. D.N.J. 2014) (holding that § 1113(c) applies to agreements that have expired
prepetition); In re Karykeion, Inc., 435 B.R. 663, 675 (Bankr. C.D. Cal. 2010 (same); In re
Ormet Corp., No. 2:04-cv-1151, 2005 WL 2000704, at *2 (S.D. Ohio Aug. 19, 2005) (same); In
re Hoffman Bros. Packing Co., 173 B.R. 177, 184 (9th Cir. BAP 1994) (same).; but see In re
Hostess Brands, Inc., 477 B.R. 378, 382-83 (Bankr. S.D.N.Y. 2012) (holding that § 1113(c) is
only applicable to current collective bargaining agreements); In re San Rafael Baking Co., 29
B.R. 860, 866 (9th Cir. BAP 1998) (same); In re Sullivan Motor Delivery, Inc., 56 B.R. 28, 29, 31
(Bankr. E.D. Wis. 1985) (same). In addition, some courts have determined that it is unnecessary
for a debtor to seek rejection of an expired collective bargaining agreement. See In re Journal
Register Co., 488 B.R. 835 (Bankr. S.D.N.Y. 2013) (holding that debtor could sell substantially
all assets without transferring collective bargaining agreement where agreement was set to expire
prior to closing date); In re Charles P. Young Co., 111 B.R. 410, 413 (Bankr. S.D.N.Y. 1990)
(concluding that rejection of a collective bargaining agreement pursuant to § 1113(c) is a moot
issue if the agreement expires by its own terms before the bankruptcy court holds a hearing on
rejection).
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12. During the 2018 fiscal year, in accordance with the GS CBA, Good Samaritan
paid an average of approximately: (a) $267,000 per month in wages; (b) $61,000 per month in
welfare benefits; and (c) $27,000 per month in pension benefits. The welfare benefits provided to
Good Samaritan Employees pursuant to the GS CBA include medical, dental, and life insurance
benefits. Since the expiration of the GS CBA, Good Samaritan has continued to honor the
majority of its obligations under the GS CBA. As of the Petition Date, Good Samaritan was
current in its wage obligations but in arrears with respect to certain benefit obligations in the
approximate aggregate amount of $504,000.00.
13. For over fifteen years, Kenwood, like Good Samaritan, has been a party to a
collective bargaining agreement with the Union that expired as of December 31, 2018 (the
“Kenwood CBA”, and together with the GS CBA, the “CBAs”). The Kenwood CBA covers: (a)
all full-time and regular part-time service and maintenance employees, including diet aides,
housekeepers, clerical workers, courtesy associates, resident service aides, medical technicians,
courtesy car drivers, first cook, second cook and licensed practical nurses; and (b) any employee
hired to work one-fifth or more of the work week.
14. During the 2018 fiscal year, pursuant to the Kenwood CBA, Kenwood paid an
average of approximately: (a) $45,000 per month in wages; (b) $12,000 per month in welfare
benefits; and (c) $5,000 per month in pension benefits. The welfare benefits provided to
employees pursuant to the Kenwood CBA include medical, dental, and life insurance benefits.
Since the expiration of the Kenwood CBA, Kenwood has continued to honor the majority of its
obligations under the Kenwood CBA. As of the Petition Date, Kenwood was current in its wage
obligations, but in arrears with respect to certain benefit obligations in the approximate aggregate
amount of $91,786.00.
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C. Absent Relief From the Overly Burdensome CBAs, the Debtors’ Assets
Cannot Be Sold
15. The Debtors have attempted unsuccessfully to sell the Sale Assets for several
years, and, in connection therewith, have engaged in intense, arms-length negotiations regarding
term sheets and sale documents with numerous interested purchasers.
16. A primary reason cited by potential purchasers for refusing to move forward with
their purchase of the Sale Assets is that the benefits afforded to workers under the CBAs are
excessive and materially inconsistent with the benefits afforded to workers at similar care
facilities in the Debtors’ geographic region. Several of these potential purchasers attempted to
negotiate with the Union to modify the employer obligations under the CBAs, but they were
unsuccessful. Similarly, the Debtors have had several meetings with the Union and attempted,
unsuccessfully, to negotiate modifications to the CBAs. Accordingly, despite their interest in
owning the Sale Assets, several potential purchasers refused to move forward with their purchase
due to what they expressed to be the Debtors’ overly burdensome CBAs.
17. Finally, in May 2019, the Debtors retained Blueprint Healthcare Real Estate
Advisors, LLC (“Blueprint”) on an exclusive basis to market the Sale Assets for a three-month
period. Blueprint has a national platform, and according to its website, was named the 2018
market leader in the seniors housing and care space. Within a week of its engagement, Blueprint
identified a buyer for the Debtors’ assets, and the parties engaged in extensive negotiations and
shared numerous drafts of sale documents throughout Blueprint’s engagement. Sometime in mid-
August 2019, negotiations between the potential purchaser and the Debtors turned to the CBAs
and broke down.
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18. At the expiration of Blueprint’s engagement in August 2019, the one interested
purchaser identified by Blueprint had not executed a term sheet or a contract to purchase the Sale
Assets, and the Debtors had incurred significant legal fees negotiating with the potential
purchaser on numerous draft sale documents.
D. The Proposed Sale of Debtors’ Assets
19. Once Blueprint’s contract expired, the Debtors began calling upon previously
interested purchasers to determine whether any of them remained interested in purchasing the
Sale Assets. Centers Health Care (“Centers”) stated that it remained interested in purchasing the
Sale Assets but would not assume the Debtors’ obligations under the CBAs.
20. Following approximately three months of negotiation, the Debtors and Centers
have agreed upon terms pursuant to which affiliates of Centers (collectively, the “Purchasers”)
will purchase the Sale Assets (the “Sale”). The Sale is subject to the approval of the DOH and
the Attorney General of the State of New York.
21. Importantly, a critical contingency to the closing of the sale is the rejection by
Debtors of the CBAs.
E. The Debtors’ Prepetition Efforts to Negotiate with the Union.
22. On May 20, 2019, the Debtors met with representatives of the Union in an effort
to negotiate modifications to the CBAs.
23. The Debtors hoped that when confronted by the dire financial condition of the
Debtors, the Union would negotiate reasonable concessions under the CBAs in good faith.
Unfortunately, this did not happen, and the Union dug in, offering to temporarily reduce the
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Debtors’ financial obligations under the CBAs for a limited duration of three years so long as the
CBAs were renewed. Such a proposal was simply a band aid that would guarantee the Debtors’
continued inability to sell the Sale Assets, and forestall the inevitable collapse of the Debtors’
businesses. Accordingly, the Debtors had no choice but to reject the offer.
24. After the potential purchaser identified by Blueprint walked away, the Debtors
again met with the Union on August 27, 2019 in an attempt to negotiate reasonable modifications
to the CBAs. At that meeting, the Union made no further offer.
F. The Debtors’ Post-Petition Efforts to Negotiate with the Union and the Purchasers.
25. In the days leading up to the Petition Date, counsel for the Debtors contacted
representatives for both the Union and the Purchasers seeking to set up a meeting immediately
following the Petition Date to negotiate modifications to the CBAs.
26. The Debtors were informed, however, apparently at the Union’s insistence, that
they were not welcome at a meeting to discuss the CBAs, since they would not be operating their
businesses for the long term. Nonetheless, the Union and the Purchasers met to negotiate the
CBAs on December 18, 2019, six days following the Petition Date. Beginning on December 19,
2019, the Debtors have been responding to requests for information from the Union and the
Purchasers. Until January 8, 2020,4 the day preceding the target date for the filing of this
Motion, the Debtors had produced every piece of information requested to aid the Union and the
Purchasers in their negotiations regarding the CBAs. Nonetheless, the Debtors have been
4
At approximately 5:40 p.m. on January 8, 2020, counsel for the Union sent voluminous
requests for information to Debtors’ counsel, via email. The Union had been advised that the
instant Motion was to be filed on January 9, 2020, at the hearing held in these cases on
December 16, 2019 and on two separate telephone calls following that hearing.
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advised that no further meetings between the Union and the Purchasers have been scheduled.
The Debtors were further advised that no offers beyond any that were discussed on December
19, 2019 had been made until January 8, 20205.
27. The Debtors essentially have been left in the dark as to the specific terms of the
conversations between the Union and the Purchasers because, to the best of the Debtors’
knowledge, the Union is taking the position that its negotiations with the Purchasers are strictly
confidential. Nonetheless, if the Debtors wish to comply with the timeline incorporated in their
debtor-in-possession loan documents and consummate the sale of the Sale Assets to the
Purchasers, they must seek relief from the CBAs from this Court now.
28. Accordingly, the Debtors find themselves in the unfortunate position of seeking
relief from the CBAs without a comprehensive understanding of the status of the negotiations
and without the ability to provide this Court with details that are necessary to allow the Court to
rule on this Motion. It is the Debtors’ intent to subpoena the representatives of the Purchasers
and the Union to appear and testify at the hearing on this Motion so that all relevant evidence to
support the relief the Debtors request herein can be brought before the Court.
29. Until January 8, 2020, the Debtors were advised by both the Union and the
Purchaser that they remain very far apart. Unless an agreement between the Purchasers and the
Union is reached regarding consensual modifications to the terms of the expired CBAs, the
Purchasers will not purchase the Sale Assets unless the CBAs are rejected by the Debtors.
5
During a telephone call between counsel to the Debtors and counsel to the Union at
approximately 5:10 p.m. on January 8, 2020, counsel for the Union advised the Debtors that
on January 8, 2020, the Union made an offer to the Purchasers. The terms of that offer were
not revealed to the Debtors.
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RELIEF REQUESTED
30. By this motion, the Debtors seek authority to reject the CBAs pursuant to section
1113 of the Bankruptcy Code, respectively. The anticipated sale of the Sale Assets to the
Purchasers is expressly contingent upon the Debtors’ rejection of the overly burdensome CBAs.
Absent the relief requested herein, an order approving the Sale cannot be entered. In light of the
Debtors’ dire financial condition and limited resources, the Debtors’ inability to consummate the
sale likely will result in the shuttering of the Facilities to the detriment of the Debtors’ residents,
creditors, and employees.
ARGUMENT
31. Section 1113 allows a debtor-in-possession to reject a collective bargaining
agreement if the bankruptcy court determines that rejection is necessary to the debtor’s
successful reorganization and the balance of equities favors rejection. In re Northwest Airlines
Corp., 483 F.3d 160, 166 (2d Cir. 2007) (citing 11 U.S.C. § 1113(a), (b)(1)(A) and (c)(3)).
32. In general, a bankruptcy court may approve rejection of a collective bargaining
agreement if the court finds that prior to moving for rejection: (1) the debtor made a proposal to
the authorized representative of its employees providing for modifications to the collective
bargaining agreement necessary for a reorganization; (2) the debtor provided the employees with
“such relevant information as is necessary to evaluate the proposal;” and (3) the authorized
employee representative refused the debtor’s proposal without good cause. Id.
33. The requirements of § 1113 frequently have been restated as a nine-part test
which requires that the following be met:
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(i) The debtor in possession must make a proposal to

the union to modify the collective bargaining
agreement;
(ii) The proposal must be based on complete and

reliable information available at the time of the
proposal;
(iii) The proposed modifications must be “necessary to

permit the reorganization of the debtor;”
(iv) The proposed modifications must assure that all

creditors, the debtor and all of the affected parties
are treated fairly and equitably;
(v) The debtor must provide to the union such relevant

information as is necessary to evaluate the proposal;
(vi) Between the time of the making of the proposal and

the time of the hearing on approval of the rejection
of the existing collective bargaining agreement, the
debtor must meet at reasonable times with the
union;
(vii) At the meetings the debtor must confer in good faith

in attempting to reach mutually satisfactory
modifications of the collective bargaining
agreement;
(viii) The union must have refused to accept the proposal

without good cause; and
(ix) The balance of the equities must clearly favor

rejection of the collective bargaining agreement.
See In re Cary Transp., Inc., 50 B.R. 203, 207 n.3 (Bankr. S.D.N.Y. 1985) (citing
In re American Provision Co., 44 B.R. 907, 908 (Bankr. D. Minn. 1984)).
A. Section 1113 Applies to This Chapter 11 Case
34. As an initial matter, it should be noted that section 1113 applies to a liquidating
chapter 11 or a case such as this where a debtor proposes to sell substantially all of its assets
prior to confirmation of its chapter 11 plan.
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35. Numerous courts, including courts within the Second Circuit, have held that
Section 1113 applies to chapter 11 liquidations and chapter 11 cases involving the sale of
substantially all of a debtor’s assets. See In re Maxwell Newspapers, Inc., 149 B.R. 334 (1992)
(holding that section 1113 applied to chapter 11 case where the case did not involve the
reorganization of the debtor as a going concern, but instead, the sale of its assets); see also
United Food & Commercial Workers Union, Local 11 v. Family Snacks, Inc. (In re Family
Snacks, Inc.), 257 B.R. 884, 893 (8th Cir. BAP 2001) (“[E]ach court that has addressed the
meaning of the phrase ‘reorganization of the debtor,’ as found in § 1113(b)(1)(A), has held or
assumed that § 1113 applies in a case where the debtor will not be engaged in business because it
is selling its assets.”); In re Mission Coal Co., LLC, Case No. 18-04177-TOM11, 2019 WL
1024933 (Bankr. N.D. Ala. March 1, 2019) (holding that § 1113 applied where chapter 11 debtor
sought to sell substantially all of its assets to purchaser as a going concern); In re Walter Energy,
Inc., 542 B.R. 859, 879-80 (Bankr. N.D. Ala. 2015) (same); In re Chicago Const. Specialties,
Inc., 510 B.R. 205 (Bankr. N.D. Ill. 2014) (holding that § 1113 applied in chapter 11 where
debtor sold substantially all of its assets to purchaser).
36. Importantly, “when a Chapter 11 debtor is being sold or is liquidating rather than
reorganizing, courts apply the requirements for § 1113(c) relief ‘contextually, rather than
strictly,’ and ‘with the impending liquidating of the Debtor firmly in mind.’” Walter Energy, 542
B.R. at 879-80 (quoting Chicago Const. Specialties, 510 B.R. at 217-18). Thus, although the
requirements of § 1113 apply to cases such as this where a debtor seeks to sell substantially all of
its assets, the requirements must be applied flexibly to meet the circumstances of the given case.
37. As numerous courts have commented, § 1113 was not artfully drafted. See Family
Snacks, 257 B.R at 891 (noting that “[s]ection 1113 is certainly ‘not a masterpiece of
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draftsmanship’” and that “[c]ourts and scholars alike have commented extensively on how
poorly-drafted this statutory provision is.” (quoting American Provision, 44 B.R at 909, and
collecting cases)).
38. As a result, “the procedural requirements imposed by § 1113 appear ill-suited to a
liquidation proceeding.” Chicago Const. Specialties, 510 B.R. at 215. It is for this reason that in
a case involving a chapter 11 liquidation and/or going-concern sale, the requirements of § 1113
must be applied flexibly within the overarching context of the case. See id. at 216 (noting that in
such a case, a court “must not just consider the tests that have developed in the case law for
reorganizing cases” but must “also determine how, if any, those tests should be treated
differently in a liquidating case”).
B. The Debtors and Purchasers Made the Requisite Proposals to the Union to Modify
the CBAs.
39. Section 1113 first requires a debtor to provide its employees with proposed
modifications to an existing collective bargaining agreement prior to filing an application to
reject the agreement. 11 U.S.C. § 1113(b)(1)(A). “The bar for satisfying this requirement is low
because in most cases, this factor is a ‘routine formality.’” Walter Energy, 542 B.R. at 884
(quoting Chicago Constr. Specialties, 510 B.R. at 218).
40. Moreover, in the case of a liquidating chapter 11 or a sale of a debtor’s assets as a
going concern, the qualifying proposal to the union may come from the prospective purchaser.
See In re Maxwell Newspapers, Inc., 149 B.R. at 337-38 (“The corollary of the application of §
1113 to sales of an ongoing business, of course, is that § 1113 applies to the same extent and
with equal force to third-party purchasers as it does in the case of debtors in possession.”).
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41. In Maxwell Newspapers, the bankruptcy court concluded that it could consider the
prospective purchaser’s proposals to the unions as a “surrogate” for the debtors’, despite the fact
that the statute only references the trustee or the debtor. See In re Maxwell Newspapers, Inc.,
146 B.R. 920, 929 (Bankr. S.D.N.Y. 1992). Having determined that section 1113 applies when a
debtor seeks to sell its business as a going concern, the court rejected the union’s argument that a
prospective purchaser’s proposal to a union could not satisfy the requirements of section 1113.
The court acknowledged that, “section 1113 makes no reference to a sale and, as a result, does
not fit neatly into the sale context.” Id. Nevertheless, because “maintenance of a business as a
going concern is what chapter 11 is all about, it makes little sense . . . to hold that once the debtor
has identified a potential purchaser it forfeits the right to do what is necessary to cause a sale to
occur.” Id.
42. Thus, in Maxwell Newspapers, the court disagreed with the union that “a debtor
can only reject a collective bargaining agreement consistent with the debtor’s own needs while it
is in control of the business and cannot consider the needs of the purchaser.” Id. The court
observed that where the terms of the collective bargaining agreement “cause dire financial
consequences to the business, requiring the debtor to negotiate modifications to the agreement as
a prelude to a possible rejection could have the perverse effect of disabling the debtor from ever
selling the business if the modifications which it negotiates are not sufficient from the
perspective of a purchaser.” Id. Accordingly, because a purchaser’s needs must be taken into
account, the court held that a prospective purchaser’s proposals for modification to the collective
bargaining agreement may satisfy this element of section 1113. On appeal, the district court
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affirmed this aspect of the bankruptcy court’s decision but reversed on other grounds. 6 On
further appeal, the Second Circuit did not disturb but implicitly agreed with the lower courts’
determinations that proposals from a prospective purchaser may satisfy the requirements of §
1113. See In re Maxwell Newspapers, Inc., 981 F.2d 85, 91 (2d Cir. 1992).
43. This makes perfect sense. Where there is a sole prospective purchaser capable of
salvaging a debtor’s business as a going concern and that purchaser requires certain
modifications or even rejection of an existing collective bargaining agreement, rationality and
equity dictate that any proposal for modification must, at a minimum, include the purchaser’s
baseline terms and such proposal may, therefore, be made by the purchaser itself.
44. Here, the low bar for finding that a proposal was made has been satisfied. As an
initial matter, within months of the Petition Date, the Debtors had two in-person meetings with
the Union during which they attempted to negotiate relief under the CBAs at each meeting, the
Debtors made clear that it was extremely likely that if an agreement regarding the CBAs could
not be reached between the Debtors and the Union, the Debtors likely would file for relief under
chapter 11 of the Bankruptcy Code and seek to reject the CBAs. Early in their negotiations with
the Purchasers, in or about late September 2019, the Debtors advised the Union that a sale of the
Sale Assets to affiliates of Centers was a near-certainty and that, absent the consensual
modification of the Debtors’ obligations under the CBAs, the Debtors would be compelled to
commence cases under chapter 11 and seek to reject the CBAs. Several days prior to the Petition
6
Specifically, the District Court determined that the bankruptcy court incorrectly found that the
union had rejected the debtor’s proposal without good cause. Maxwell Newspapers, 149 B.R. at
337, 341. Among other things, the district court concluded that the purchaser’s proposal came
too late to provide the union a meaningful opportunity to fully consider it. Id. at 340-41. The
Second Circuit reversed the district court’s decision that the late timing of the purchaser’s
proposal provided the union with good cause to reject it.
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Date, the Debtors requested an in-person meeting with the Union and the Purchasers to negotiate
the terms of the CBAs. While, the Union and Purchasers refused to meet with the Debtors.
45. Throughout the Debtors’ negotiations with the Purchasers the Debtors have kept
the Union apprised of their progress and of the Purchasers’ requirement that either the
employers’ obligations under the CBAs be modified substantially or the CBAs be rejected in a
bankruptcy case. Rather than address these issues prepetition, and potentially avoid these
bankruptcies altogether, the Union chose not to negotiate beyond the offer it had made in May,
2019. See paragraphs 22-23, supra. In light of the exigencies and unique circumstances of this
case, such notice – particularly in conjunction with the First Day Declaration which
unequivocally states that the APA conditions the sale transaction on rejection of the CBAs –
should be sufficient to satisfy this requirement that a proposal be made under section 1113. See
In re Chicago Const. Specialties, Inc., 510 B.R. at 218 (holding that notice from debtor’s counsel
to union that debtor intended to reject CBA was sufficient to meet minimum standard for
proposal under § 1113).
46. Moreover, it is undisputed that subsequent to the Petition Date and prior to the
filing of this Motion, the Purchasers made at least one formal proposal to the Union. Within days
after the Petition Date, the Union and the Purchasers met to negotiate modifications to the CBAs.
47. Although the Debtors have not been made privy to the exact substance of those
negotiations, the Debtors understand that the Purchasers made a proposal to the Union which
would afford the Debtors’ Union -member employees with benefits similar to those afforded to
Union-member workers at the Schenectady Center for Rehabilitation and Nursing (the
“Schenectady Facility”). The Schenectady Facility is owned/operated by a Centers affiliate and
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operates under a collective bargaining agreement with the same Union as is party to the Debtors’
CBAs. The Schenectady Facility is located 19 miles away from the Debtors’ Facilities. Thus,
the Schenectady Facility is located in the same geographic area as the Debtors’ Facilities, has
collective bargaining agreements with the same Union, is owned and operated by an affiliate of
the proposed Purchasers, operates facilities providing substantially similar care to that provided
by the Debtors’ Facilities, and therefore, is an excellent basis for establishing reasonable terms
for the Debtors’ CBAs. It is the Debtors’ understanding that the Union has rejected this proposal
and made a counter-proposal, the specific terms of which are unknown to the Debtors, but which
is believed to be similar to the proposal made to the Debtors in May, 2019.
48. Accordingly, the low bar for establishing that a proposal was made to the Union
after the Petition Date is satisfied in this case.
C. The Proposal to the Union Was Based on the Most Complete and Reliable
Information Available and the Debtors Provided All Information Requested by the
Union
49. The second and fifth factors under the nine-part test address the information on
which the proposal was based and the information provided to the Union, respectively. See
Chicago Const. Specialties, Inc., 510 B.R. at 219.
50. With regard to both, a debtor “must gather ‘the most complete information at the
time and . . . base its proposal on the information it considers reliable.’” Id. (quoting In re AMR
Corp., 477 B.R. 384, 409 (Bankr. S.D. N.Y. 2012) (citing In re Karykeion, Inc., 435 B.R. 663,
678 (Bankr. C.D. Cal. 2010))).
51. “[T]he breadth and depth of the requisite information will vary with the
circumstances, including the size and complexity of the debtor’s business and work force; the
17
# 4384667 v. 2
complexity of the wage and benefit structure under the collective bargaining agreement; and the
extent and severity of modifications that the debtor is proposing.” AMR Corp., 477 B.R. at 409
(alteration in original) (quoting In re Mesaba Aviation, Inc., 341 B.R. 693, 714 (Bankr. D. Minn.
2006)).
52. “To satisfy the second and fifth procedural requirements, the debtor need only
provide that information within its power to provide.” Mission Coal Company, 2019 WL
1024933, at *19 (citing In re Pinnacle Airlines Corp., 483 B.R. 381, 411 (Bankr. S.D.N.Y.
2012)).
53. In regard to the second requirement, the court in Chicago Construction Specialties
noted that, in the context of a liquidation, “certain conclusions are tautological.” 510 B.R. at 219.
There, the debtor’s “proposal” to the union consisted of a letter from counsel that the debtor
intended to reject its collective bargaining agreements. Id. at 211. The court observed that the
debtor unquestionably had no ability to continue as a going concern, had sold its assets, and had
no prospect of continuing business. Id. at 219. Accordingly, the court concluded that under the
circumstances of the case, the debtor had based its proposal on “the most complete and reliable
information available at the time of the proposal.” Id.
54. In Walter Energy, the debtor, due to its dire financial situation, was faced with the
option of either selling its mining business to another party as a going concern or shutting down
operations altogether. 542 B.R. at 888. However, only one potential purchaser had expressed
interest in purchasing the business, and had refused to assume the debtor’s collective bargaining
agreements. Id. at 871. Similar to the case before the Court, the debtor in Walter Energy entered
into a stalking horse agreement with the prospective purchaser that expressly provided that the
18
# 4384667 v. 2
purchaser would not assume the collective bargaining agreements and required as a condition
precedent to the closing that the bankruptcy court issue an order rejecting the agreements. Id.
Prior to moving for rejection, the debtor made a final proposal to the objecting union with terms
that included deletion of the agreements’ successorship clause and/or termination of the
agreement altogether. Id. at 872-73.
55. The court concluded that the debtor had provided the union with “all of the
relevant information necessary to evaluate their proposals.” Id. at 886. To wit:
[T]he “relevant information” was simple and apparent for all to

see: the Debtors could not survive absent a sale in the near term,
the Proposed Buyer had emerged as the only viable bidder that
would purchase the Alabama Coal Operations as a going concern,
the sale of the Alabama Coal Operations as a going-concern
provides the best chance for future employment of the Debtors’
employees, and the Stalking Horse APA requires elimination of the
Successorship Provisions or rejection of the UMWA CBA.
Id. at 887.
56. The court concluded that “[u]nder these facts and circumstances, the [union]
received from the Debtors all the relevant information necessary for them to evaluate the Final
Proposal.” Id.
57. The court rejected the union’s argument that it was entitled to a thorough analysis
of all of the incidents of income and expense that would bear on the debtor’s ability to continue
as a going concern. Id. “By definition, in a going-concern sale, the Debtors are not emerging
from Chapter 11 in their current form, and the purpose of the proposed labor concession is to
enable the sale, not to fill some hypothetical financial void.” Id. at 888. Accordingly, where the
evidence was “irrefutable” that the debtors had no option but to sell their business and the sale
19
# 4384667 v. 2
was dependent on the rejection of the collective bargaining agreements, the debtors had provided
the union all of the information necessary to reject the collective bargaining agreements. Id.
58. The facts of the case before the Court are almost identical to those in the Walter
Energy case, but more compelling when the welfare of the Debtors’ residents is factored into the
analysis. Here, the Debtors find themselves in a dire financial condition with available funds
quickly running out and no real alternative but to sell their businesses as going concerns to the
sole prospective purchaser that has executed the Sale Agreements following extensive marketing
of the assets.
59. Despite years of effort, the Debtors have been unable to find a purchaser willing
to assume their businesses subject to the oppressive terms of the CBAs. Indeed, the Purchasers
have unequivocally conditioned their purchase of the Debtors’ assets on rejection of the CBAs.
60. Under the exigent and bleak circumstances of these cases, where the Debtors will
soon run out of funds and the only viable option to salvage the Debtors’ business and preserve
the quality of their residents’ care without interruption and disruption is a going-concern sale to a
purchaser that refuses to assume the CBAs, the proposals made to the Union were based on and
included sufficiently complete information.
61. In addition, despite being excluded from the negotiations between the Union and
the Purchasers, the Debtors have responded to each and every request for information and
provided every piece of information the parties requested to facilitate the negotiations. To the
extent the Union desires any additional information, the onus is on the Union to request such
information. See Chicago Const. Specialties, 510 B.R. at 220 (noting that to the extent the union
20
# 4384667 v. 2
did not receive adequate information from the debtors, it bore the blame for not engaging with
the debtors and requesting additional information during negotiations).
62. As a result of the circumstances of this case; namely, that absent a going-concern
sale, the Debtors’ prospects are dismal, and in light of the Debtors’ continued cooperation and
provision of all available information requested by the Union, the Debtors submit that they have
satisfied the second and fifth procedural requirements set forth in the nine-point test.
D. Rejection of the CBAs is Necessary to Permit a Going-Concern Sale of Debtors’

Businesses.
63. The third factor addresses the necessity of the proposed modifications. Under
§1113, “[e]mployers may only propose ‘those necessary modifications in the employees benefits
and protections that are necessary to permit’ the effective reorganization of the debtor.” Maxwell
Newspapers, Inc., 981 F.2d at 89 (quoting § 1113(b)(1)(A)).
64. What constitutes “necessary” is dependent on the circumstances of a given case.
65. As discussed above, courts have rejected arguments that § 1113 relief is
unavailable in cases such as this – where a debtor is liquidating or selling all of its assets as a
going concern – because the debtor is not “reorganizing.” See, e.g., Chicago Const. Specialties,
510 B.R. at 220.
66. “While ‘reorganization’ is not a statutorily defined term, it is generally understood
to include all types of debt adjustment, including a sale of assets, piecemeal or on a going
concern basis, under § 363 followed by a plan of reorganization which distributes the proceeds of
the sale to creditors in accordance with the Bankruptcy Code’s priority scheme.” In re Family
Snacks, Inc., 257 B.R. at 895.
21
# 4384667 v. 2
67. “In the context of a liquidation or sale of substantially all of a debtor’s assets, the
phrase ‘necessary to an effective reorganization’ means necessary to the Debtor’s liquidation.”
Walter Energy, 542 B.R. at 888 (quoting Chicago Const. Specialties, 510 B.R. at 221) (internal
quotation marks omitted); see also Karykeion, 435 B.R. at 678-79 (finding rejection of collective
bargaining agreement was “necessary to permit the debtor’s reorganization” where “the only
reorganization option for the debtor is the sale of [its hospital] to [buyer] and that sale is
contingent on the court approving the debtor’s rejection of these CBAs”); Ionosphere Clubs, 134
B.R. 515, 522 (Bankr. S.D.N.Y. 1991) (discussing inability to apply literally § 1114’s analogous
“necessary to permit the reorganization of the debtor” language to a debtor liquidating in chapter
11).
68. Further, some courts have held that where the debtor is running out of funds and
the sole prospective purchaser makes the transaction contingent upon rejection of the debtor’s
collective bargaining agreements, rejection itself may be the necessary modification to permit the
debtor’s reorganization. See, e.g., Karykeion, Inc., 435 B.R. at 678 (holding that where debtor
was quickly running out of money and only prospect for maintaining hospital as a going concern
was sale to purchaser who refused to assume collective bargaining agreements, rejection was
necessary for reorganization); Walter Energy, 542 B.R. at 889 (holding that where sole
prospective purchaser and stalking horse asset purchase agreement made rejection a condition
precedent to sale closing, rejection of collective bargaining agreements was a necessary
modification under § 1113); Chicago Const. Specialties, 510 B.R. at 221 (holding that rejection
was necessary to debtor’s liquidation and concluding that union could not wield § 1113 as sword
by refusing to negotiate on the basis that negotiations would be pointless in light of the debtor’s
22
# 4384667 v. 2
anticipated liquidation and simultaneously arguing that because no negotiations occurred debtor
should remain bound by agreements).
69. In Walter Energy, the bankruptcy court concluded that the debtor’s business could
not be sold subject to its collective bargaining agreements. 542 B.R. at 889. As in the present
case, the debtors had for years unsuccessfully attempted to sell their assets but were unable to
find a purchaser that was willing to assume the onerous obligations under the debtor’s collective
bargaining agreements. Id. Only one prospective purchaser emerged who refused to assume the
CBAs. Id. at 890. Absent a sale to that purchaser, the debtors would be forced to convert to a
chapter 7 and proceed with a piecemeal liquidation. Id. at 890.
70. The union in Walter Energy had engaged in some negotiations with the
prospective purchaser and argued that the debtors could not show rejection was necessary until
those negotiations were concluded. Id. The court, however, pointed out that the stalking horse
purchase agreement required rejection and that unless the debtors obtained an order authorizing
them to reject the agreements, there would be no purchaser with which to consummate a sale. Id.
The court found that § 1113 does not require debtors to ensure that a union can negotiate the best
possible deal with a purchaser. Id. Unions are “not entitled a veto power over a going concern
sale when the undisputed evidence establishes that it is the best way to maximize value for all
creditors and provide the best chance for future employment for the Debtors’ employees,
including, but not limited to [union] employees.” Id.at 890.
71. In Walter Energy, the debtors provided uncontroverted evidence that at the
purchaser’s insistence, the contemplated transaction would not proceed unless the collective
bargaining agreements were rejected or the agreements’ successorship provisions were deleted
23
# 4384667 v. 2
so that the sale could proceed without a transfer of the agreements. Id. at 891. The “wisdom” of
the prospective purchaser’s position was irrelevant. Id. All that mattered was that the debtors’
rejection of the agreements or termination of the successorship provisions was necessary to a
going-concern sale. Id. Accordingly, the court approved the debtors’ rejection of the agreements.
7
72. Similarly, in Karykeion, the debtor, owner of a hospital facility, was quickly
running out of funds and only one prospective buyer had emerged who refused to consummate a
sale unless the debtor’s collective bargaining agreements were rejected. 435 B.R. at 678-79. The
court noted the debtor’s extensive but unsuccessful efforts to locate a buyer who would assume
the agreements. Id. at 679. Satisfied that the only transaction available would be thwarted if the
court did not authorize rejection of the collective bargaining agreements, the court opined that it
was not the court’s role to question the wisdom or accuracy of the purchaser’s position. Id. The
court’s only consideration was whether rejection was necessary to save the transaction and the
court found that it was. Id.
73. Similarly, here the Debtors are quickly running out of money and, indeed, without
the Purchasers’ involvement, will not even have sufficient funds to sustain operations during the
interim period between this Court’s entry of a sale order and the closing date of the Sale. The
Purchasers have been unequivocal that the rejection of the CBAs is a necessary prerequisite to
7
In the case before the Court, in addition to considering the best interests of creditors and
employees, the Court must consider the continued welfare of the Debtors’ residents. Without
rejection of the CBAs, there will not be a sale of the Debtors’ assets and it is likely that the
Facilities will be shuttered, or at best, control over the Facilities will be assumed by the State of
New York, causing, at best, significant disruption in the care of the residents.
24
# 4384667 v. 2
their acquisition of the Sale Assets and have incorporated this requirement into the Sale
Agreements.
74. For months, the Debtors and the Purchasers have made it clear to the Union that,
absent modifications acceptable to the Purchasers, rejection of the existing CBAs is an absolute
precondition to a going-concern sale of Debtors’ assets.
75. The propriety or wisdom of the Purchasers’ demands in this regard is not at issue.
Afterall, neither the Debtors nor this Court can control the terms under which the Purchasers are
willing to consummate the sale. The test is whether rejection is necessary to permit the Debtors’
reorganization. Indisputably, it is. Accordingly, factor number three is satisfied.
E. A Going-Concern Sale Will Result in the Fair and Equal Treatment of All Affected
Parties.
76. The fourth factor under section 1113 requires that proposed modifications to a
collective bargaining agreement treat all affected parties fairly and equitably. 11 U.S.C. § 1113
(b)(1)(A). “Courts take a flexible approach in considering what constitutes fair and equitable
treatment due to the difficulty in comparing the differing sacrifices of the parties in interest.”
AMR Corp., 477 B.R. at 408. The purpose of this provision “is to spread the burdens of saving
the company to every constituency while ensuring that all sacrifice to a similar degree.” In re
Century Brass Products, 795 F.2d 265, 273 (2d Cir. 1986).
77. A debtor can meet this requirement “by showing that its proposal treats the union
fairly when compared with the burden imposed on other parties by the debtor’s additional cost-
cutting measures and the Chapter 11 process generally.” Northwest Airlines Corp., 346 B.R. at
326 (citing In re Carey Transportation, 816 F.2d 82, 90 (2d Cir. 1987)).
25
# 4384667 v. 2
78. Here, all interested parties must make sacrifices to some degree to maintain the
Debtors’ businesses as a going concern.
79. Although the Debtors have not been privy to any specific proposals put forward
by the Purchasers in their negotiations with the Union, under the circumstances of this case, it is
evident that all affected parties will shoulder the burden of salvaging the Debtors’ businesses.
80. Certainly, the Debtors’ unsecured creditors likely will not receive payment in full
of their allowed claims. Although the exact outcome is not clear at this point, it is highly likely
that priority unsecured creditors will not receive payment in full of their allowed claim and it is
highly likely that general unsecured debtors will receive no distributions if the proposed sale to
the Purchasers is not consummated. On the other hand, it is highly likely that priority unsecured
creditors will be paid in full and general unsecured creditors will receive a distribution on
account of their allowed claims if the sale to the Purchasers is consummated. Indeed, depending
on the administrative costs incurred in these cases, and the allowed aggregate amount of
unsecured claims, upon the consummation of the sale to the Purchasers, general unsecured
creditors could receive a substantial distribution on account of the allowed claims. Non-union
employees will also have to make sacrifices to help save their jobs.
81. Moreover, if the Facilities cannot continue to operate, all of the Debtors’ residents
will require relocation and their quality of care may be diminished, at least in the short term.
Moreover, in the absence of a sale, not only will the terms of the CBAs become a moot point, but
all of Debtors’ employees, union and non-union alike, will not just lose the benefits under the
CBAs, but are likely to lose their jobs.
26
# 4384667 v. 2
82. In light of the Debtors’ precarious financial situation, it is unlikely that there is
any outcome in which all interested parties will not share the pain of the Debtors’ financial
condition to some degree. However, any proposal which facilitates a going-concern sale will
minimize the burdens imposed upon the Debtors’ residents, creditors and employees.
F. The Debtors Offered to Meet with the Union in Good Faith but Were Rebuffed.
83. The sixth and seventh factors are intended to ensure that debtors negotiate with
their employees in good faith. Section 1113 requires that a debtor “meet, at reasonable times” to
confer “in good faith in attempting to reach mutually satisfactory modifications to [their
collective] bargaining agreement. 11 U.S.C. § 1113(b)(2).”
84. Here, this requirement is easily satisfied despite the fact that the Union has
refused to negotiate with the Debtors.
85. Just prior to the Petition Date, counsel for the Debtors contacted the Union and
the Purchasers requesting that the parties meet immediately after the Petition Date to negotiate
modifications to the CBAs. The Debtors were rebuffed and informed that not only was the
Debtors’ participation not needed, but the Debtors’ participation was not welcome.
86. Thereafter, despite being excluded from the negotiations, the Debtors have made
themselves available and have responded to each and every request from the Union and
Purchasers for information needed to facilitate negotiations. Additionally, the Debtors’ counsel
has, on more than one occasion, reached out and spoken separately with counsel to the
Purchasers and counsel to the Union regarding the status of their negotiations.
27
# 4384667 v. 2
87. The Union cannot be permitted to preemptively thwart the Debtors’ attempts to
comply with the procedural requirements of § 1113 by refusing to engage with the Debtors
regarding the CBAs.
88. Simply put, the Debtors, in good faith, have made themselves fully available to
meet and confer at any reasonable time with both the Union and the Purchasers and nothing else
is required.
G. The Union, Without Good Cause, Has Rejected All Proposals and the Debtors’
Efforts to Negotiate.
89. The eighth factor looks to the conduct of the Union. “Where a proposal is
necessary for the debtors’ viability and the other [section 1113] requirements are met, no good
cause[] exists to reject the proposal, even if the proposal requires sacrifices by the union.”
Walter Energy, 542 B.R. at 8965.
90. “‘Good cause’ does not include demands that are not economically feasible or
alternatives that would not permit the debtor to reorganize successfully.” Northwest Airlines
Corp., 346 B.R. at 328 (citing In re Maxwell Newspapers, Inc., 981 F.2d 85 (2d Cir. 1992)).
91. The “good cause” requirement is “intended to ensure that a continuing process of
good faith negotiations will take place before court involvement.” Carey Transportation, 816
F.2d at 92. Although a debtor has the burden of showing that a union lacked good cause, “[a]
union must articulate and discuss in detail with a debtor during the prehearing negotiations its
reasons for declining to accept the debtor’s proposal in whole or part. If prehearing, a union has
assigned no reason for its refusal to accept a debtor’s proposal, it has perforce refused to accept
28
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the proposal without good cause under Code § 1113(c)(2). In re Royal Composing Room, Inc.,
62 B.R. 403, 408 (Bankr. S.D.N.Y. 1986).
92. Accordingly, where a debtor shows that a union has refused to even meet with the
debtor regarding negotiations, the debtor has established that the union has refused to accept its
proposal without good cause. See In re 710 Long Ridge Road Operating Company, II, LLC, 518
B.R. 810, 837-38 (Bankr. D.N.J. 2014).
93. “Bluntly stated, a stonewall by the union favors the grant of the debtors’ motion
for rejection.” Royal Composing Room, 62 B.R. at 408.
94. Here, in light of the circumstances, it is apparent that the Union has rejected all
proposals and has refused to negotiate with the Debtors without good cause.
95. It is evident that absent a rejection or at least a substantial renegotiation of the
CBAs, the Debtors will not be able to proceed with a going-concern sale of their assets because
the Purchasers have made the consummation of the sale expressly contingent upon rejection of
the existing CBAs.
96. The Union refused to negotiate with the Debtors prepetition and have refused to
meet with the Debtors post-petition though the Union is aware that rejection of the CBAs is a
necessary precondition to the Debtors’ sale to the Purchasers. The Union also had been aware
for months, if not more than a year, of the bleak alternatives to a sale and their negative impact
on the Debtors’ residents and employees.
97. Absent an agreement between the Purchasers and the Union which does not
appear to be imminent, or the rejection of the CBAs, there will be no going-concern sale of the
29
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Debtors’ assets and the Debtors’ reorganization efforts will fail – to the detriment of the Debtors’
residents, creditors and employees.
98. The Union would apparently prefer that the Debtors liquidate in piecemeal
fashion rather than negotiate – even if it means that the Debtors’ employees will all lose their
jobs.
99. Based upon the foregoing, and the limited information the Debtors have regarding
the negotiations between the Purchasers and the Union, the Union has rejected any and all
proposals for modification of the CBAs without good cause.
H. The Balance of Equities Clearly Favors Rejection of the CBAs.
100. The final requirement of § 1113(c) is that the Court must find that “the balance of
equities clearly favors rejection” of the CBAs.
101. Equitable considerations must be examined in relation to the “ultimate goal” of
chapter 11 – the debtor’s efforts to reorganize – and “[t]he Bankruptcy Code does not authorize
freewheeling consideration of every conceivable equity, but rather only how the equities relate to
the success of the reorganization.” AMR Corporation, 477 B.R. at 410 (quoting Bildisco, 465
U.S. 513, 527, 104 S. Ct. 1188 (1984)).
102. An important consideration is “whether imposing the requested pay cuts or other
concessions would still be preferable to the loss of everyone’s jobs, those of union members and
non-union members alike.” Pinnacle Airlines Corp., 483 B.R. at 410.
103. Here, the balance of equities clearly favors rejection where the Debtors’ inability
to reject the CBAs will likely result in a cessation of operations and a piecemeal liquidation.
30
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Such a result will lead to the loss of jobs by all of the Debtors’ employees. Of particular
significance is the fact that as of the Petition Date, approximately 43% of Good Samaritan’s
employees were non-Union and approximately 67% of Kenwood’s employees were non-Union.
Accordingly, the Union is not representing a significant number of the Debtors’ employees and
these non-Union employees would lose their jobs as a consequence of the Union’s conduct.
104. Based upon all of the foregoing, including the Debtors efforts to sell their assets,
the fact that no prospective purchasers have been willing to take on the onerous terms of the
CBAs, the Debtors’ dire financial condition, the Union’s steadfast rejection of modification
proposals regarding the CBAs and the devastating consequences if the proposed sale to the
Purchasers is not consummated, the equities unequivocally weigh in favor of authorizing the
rejection of the CBAs.
105. Moreover, any victory by the Union would “be both temporary and pyrrhic.” See
In re Kentucky Truck Sales, Inc., 52 B.R. 797, 806 (Bankr. W.D. Ky. 1985), since if the sale of
the Debtors’ assets does not close, the Debtors likely will be liquidated, and “[c]ontracts with a
liquidated company [only] offer hollow promises.” Id. (alteration in original) (quoting remarks of
Sen. Hatch, 130 Cong. Rec. S6091 (daily ed. May 21, 1984)).
106. If the Debtors are not permitted to reject the CBAs, the contemplated transaction
with the Purchasers – at this point the only avenue to salvage the Debtors’ businesses as going
concerns – will not proceed, with fatal consequences to the Debtors’ reorganization efforts. It
follows that the only equitable resolution is to permit the Debtors to reject the CBAs and prevent
the loss of the very jobs the Union is charged with protecting, while preserving resident care and
maximizing value for the Debtors’ creditors.
31
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107. Importantly, a rejection of the CBAs will “not mark an end but rather a new phase
in the negotiations between these parties.” See id. at 806. Following rejection, the parties,
relieved of the impasse created by the Union’s refusal to negotiate the terms of the CBAs in good
faith, will be free to commence negotiations in earnest. Significantly, the Purchasers have
advised that their goal is not to eliminate the Union altogether, but rather, to obtain reasonable
terms, consistent with the terms their affiliates have with facilities similar to the Debtors’
facilities that are located in the same geographic area as the Debtors’ Facilities.
NO PRIOR REQUEST
108. No previous request for the relief sought herein has been made to this or any other
court.
NOTICE
109. Upon this Court’s scheduling of a hearing on the Motion,8 the Debtors will
provide notice of this Motion and such hearing to: (a) Suzanne Hepner, counsel for the Union,
1199SEIU United Healthcare Workers East, and 199SEIU Employer Child Care Fund, 199SEIU
Health Care Employees Pension Fund, 1199SEIU League Job Security Fund, 1199SEIU League
Training & Upgrading Fund, and 1199SEIU National Benefit Fund for Health and Human
Service Employees; (b) counsel for the Purchasers; (c) the Office of the United States Trustee for
the Northern District of New York; (c) the Office of the Attorney General of the State of New
York; (c) the New York State Department of Health; (e) the Debtors’ twenty largest unsecured
creditors on a consolidated basis; (f) counsel to Amalgamated Bank; (g) counsel to the Lutheran
8
11 U.S.C. §1113 (d) provides that “[u]pon the filing of an application for rejection the court
shall schedule a hearing to be held not later than fourteen days after the ate of the filing of
such application.”
32
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Care Network; (h) the Internal Revenue Service; (i) the Department of Medicaid, Department of
Health, and Division of Health Services Regulation in the State of New York; and (j) all parties
filing Notices of Appearance and requests for service of papers in these cases. In light of the
nature of the relief requested herein, the Debtors submit that no further notice is required.
WHEREFORE, the Debtors respectfully request the entry of the Order granting the
relief requested herein and such other and further relief as the Court may deem just and proper.
Dated: January 9, 2020 Stradley Ronon Stevens & Young, LLP
By: /s/ Deborah A. Reperowitz

Deborah A. Reperowitz
100 Park Avenue, Suite 2000
New York, NY 10017
and
Brian P. Seaman
Daniel M. Pereira
Mischa S. Wheat
2005 Market Street, Suite 2600
Philadelphia, PA 19103
Proposed Counsel for Debtors and

Debtors-in-Possession
33
# 4384667 v. 2
Case 19-12215-1-rel Doc 82-1 Filed 01/09/20 Entered 01/09/20 15:56:59 Desc
Proposed Order Page 1 of 3
Exhibit A
Proposed Order
# 4384667 v. 2
UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF NEW YORK

Case No. 19-12215 (REL)
In re: Chapter 11 (Main Case)
Case No. 19-12216 (REL)
GOOD SAMARITAN LUTHERAN
HEALTH CARE CENTER, INC. d/b/a
BETHLEHEM COMMONS CARE Jointly Administered
CENTER, et al. 1
Debtors.

ORDER PURSUANT TO 11 U.S.C. § 1113 AUTHORIZING DEBTORS
TO REJECT THE COLLECTIVE BARGAINING AGREEMENTS
WITH 1199SEIU UNITED HEALTHCARE WORKERS EAST

Upon the Debtors’ Motion Seeking the Entry of an Order Authorizing the Rejection of
Collective Bargaining Agreements Under 11 U.S.C. § 1113 (the “Motion”), all as more fully
described in the Motion and the pleadings filed by the Debtors in connection therewith; and the
Court having jurisdiction to consider the Motion and the relief requested therein in accordance
with 28 U.S.C. §§ 157 and 1334; and consideration of the Motion and the relief requested therein

1
The Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification
number, are: Good Samaritan Lutheran Health Care Center, Inc. d/b/a Bethlehem Commons Care Center (0663) and
Kenwood Manor, Inc. (8178).
being a core proceeding pursuant to 28 U.S.C. § 157(b); and due and proper notice of the Motion
having been provided and it appearing that no other or further notice need be provided; and a
hearing (the “Hearing”) having been held to consider the relief requested in the Motion and to
consider all the pleadings filed in response thereto; and upon the record of the Hearing, and the
Court having found and determined that the relief sought in the Motion as it relates to the collective
bargaining agreements between the Debtors and 1999SEIU United Healthcare Workers East is in
the best interests of the Debtors, their estates, creditors, and all parties in interest, and that the legal
and factual bases set forth in the Motion establish just cause for the relief granted herein; and after
due deliberation and sufficient cause appearing therefore; it is
ORDERED that the Motion is granted as provided herein for the reasons stated at the
Hearing; and it is further
ORDERED that pursuant to section 1113 of the Bankruptcy Code, the Debtors are
authorized to reject the collective bargaining agreements with 1999SEIU United Healthcare
Workers East, effective as of the date of this Order; and it is further
ORDERED that the Debtors are authorized to take any and all actions that may be
reasonably necessary or appropriate to implement and effectuate the terms of this Order; and it is
further
ORDERED that this Court shall retain jurisdiction to hear and determine all matters arising
from or related to this Order.
###
2

Motion To Reject CBAs

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Motion To Reject CBAs

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Case 19-12215-1-rel Doc 82 Filed 01/09/20 Entered 01/09/20 15:56:59 Desc Main

STRADLEY RONON STEVENS & YOUNG, LLP

Proposed Attorneys for the Debtors

UNITED STATES BANKRUPTCY COURT

In re: Case No. 19-12215 (REL)

DEBTORS’ MOTION SEEKING THE ENTRY OF

relief (the “Motion”).

JURISDICTION AND VENUE

1334. This is a core proceeding under 28 U.S.C. § 157(b).

11 of title 11 of the United States Code (the “Bankruptcy Code”).

the Bankruptcy Code.

5. The Debtors continue to operate and manage their businesses as debtors-in-

possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.

6. No trustee, examiner or official committee of unsecured creditors has been

appointed in these Chapter 11 Cases.

jointly administered under the above caption.

A. The Nature of the Debtors’ Businesses

employees (the “Good Samaritan Employees”) and had an occupancy of 84%.

9. Kenwood operates a 66-bed DOH-certified adult home (the “Kenwood Facility”,

Samaritan Employees, the “Employees”) and had an occupancy rate of 71.2%.

referred to collectively hereinafter as the “Sale Assets.”

B. The Collective Bargaining Agreements

aides/certified nursing assistants (“C.N.A.s”), nursing rehab aides/C.N.A.s, activities

aides/C.N.A.s, nurse aids, housekeepers, porters, environmental services assistants, support

at 11:59 p.m. on such date.

approximate aggregate amount of $504,000.00.

hired to work one-fifth or more of the work week.

term sheets and sale documents with numerous interested purchasers.

unsuccessfully, to negotiate modifications to the CBAs. Accordingly, despite their interest in

due to what they expressed to be the Debtors’ overly burdensome CBAs.

and broke down.

purchaser on numerous draft sale documents.

D. The Proposed Sale of Debtors’ Assets

the Attorney General of the State of New York.

Debtors of the CBAs.

E. The Debtors’ Prepetition Efforts to Negotiate with the Union.

to negotiate modifications to the CBAs.

to the CBAs. At that meeting, the Union made no further offer.

following the Petition Date to negotiate modifications to the CBAs.

19, 2019 had been made until January 8, 20205.

creditors, and employees.

31. Section 1113 allows a debtor-in-possession to reject a collective bargaining

32. In general, a bankruptcy court may approve rejection of a collective bargaining

which requires that the following be met:

(i) The debtor in possession must make a proposal to

(ii) The proposal must be based on complete and

(iii) The proposed modifications must be “necessary to

(iv) The proposed modifications must assure that all

(v) The debtor must provide to the union such relevant

(vi) Between the time of the making of the proposal and

(vii) At the meetings the debtor must confer in good faith

(viii) The union must have refused to accept the proposal

(ix) The balance of the equities must clearly favor

In re American Provision Co., 44 B.R. 907, 908 (Bankr. D. Minn. 1984)).

A. Section 1113 Applies to This Chapter 11 Case

prior to confirmation of its chapter 11 plan.

debtor sold substantially all of its assets to purchaser).

38. As a result, “the procedural requirements imposed by § 1113 appear ill-suited to a

differently in a liquidating case”).

modifications to an existing collective bargaining agreement prior to filing an application to

(quoting Chicago Constr. Specialties, 510 B.R. at 218).

40. Moreover, in the case of a liquidating chapter 11 or a sale of a debtor’s assets as a

modifications or even rejection of an existing collective bargaining agreement, rationality and