NLRB v. Bildisco & Bildisco

In NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984), the Supreme Court held that collective bargaining agreements were executory contracts for purposes of 11 U.S.C. section 365, but that due to the special nature of such agreements, the rejection of a collective bargaining agreement should be governed by a standard more strict than that applicable to other kinds of contracts. See id. at 522 & n.6, 526. The Court suggested that the rejection of a collective bargaining agreement would result in a general unsecured claim against the bankruptcy estate. Id. at 530-31 & n.12. In Bildisco, the Supreme Court held that rejection of a collective bargaining agreement was permitted if the "debtor can show that the collective-bargaining agreement burdens the estate, and that after careful scrutiny, the equities balance in favor of rejecting the labor contract." 465 U.S. at 526. The Court also held that "before acting on a petition to modify or reject a collective-bargaining agreement . . . the Bankruptcy Court should be persuaded that reasonable efforts to negotiate a voluntary modification have been made and are not likely to produce a prompt and satisfactory solution." Id.