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Delaware Bankruptcy Court Walks “Interpretive Tightrope” Between Automatic Stay And The Norris-La Guardia Act

In re Trump Entm’t Resorts, Inc., No. 14-12103 (KG) (Bankr. D. Del. July 21, 2015)

Aligning itself with Sixth and Second Circuit law, the Delaware Bankruptcy Court ruled that activities described in, and protected by, the Norris-La Guardia Act (“NLA”) do not constitute violations of the automatic stay under Bankruptcy Code section 362.  Although wrestling to reconcile the two statutes, an anti-injunction labor law on the one hand and a broad bankruptcy-based injunction statute on the other, the Bankruptcy Court relied on the uncontroverted congressional intent that the automatic stay cannot enjoin certain NLA protected activities, and instructed the Debtors to “lodge their complaint” with Congress.  Op. at 23.

This instant dispute arises out of UNITE HERE Local 54’s (the “Union”) post-petition contact with potential customers of Trump Entertainment Resorts, Inc. (along with its affiliated debtors, the “Debtors”) to discuss the Union’s ongoing collective bargaining dispute with the Debtors and to encourage these customers to boycott the Debtors.  The Court had previously described the Union’s actions as “egregiously[] communicating with customers who had scheduled conferences at the [Debtors] to urge them to take their business elsewhere.”  In re Trump Entm’t Resorts, Inc., 519 B.R. 76, 82 (Bankr. D. Del. 2014).  Indeed, the Union’s efforts were partially successful, causing at least one organization to cancel its contract with the Debtors and move its event elsewhere.  The Debtors filed a motion to enforce the automatic stay of Bankruptcy Code section 362, seeking a finding that, among other things, the Union’s actions willfully violate the stay.  The Union countered that their actions are protected by the NLA.

The NLA provides, in part, that “[n]o court of the United States . . . shall have jurisdiction to issue any restraining order or temporary or permanent injunction in a case involving or growing out of a labor dispute . . . .”  29 U.S.C. § 101.  Protected activities under the NLA include giving publicity to the existence of any labor dispute, whether by advertising, speaking, patrolling, or by any other method not involving fraud or violence.  29 U.S.C. § 104.  The Court easily found that the present dispute between the Debtors and the Union qualifies as a “labor dispute” under the NLA and that the Union’s activities are protected thereunder.  Thus, absent the bankruptcy filing, no federal court could enter an order enjoining the Union’s actions.

The Debtors argued that the NLA only applies to court issued injunctions and is inapplicable to the Bankruptcy Code’s automatic stay, a statutory injunction, but the Court disagreed.  While it conceded that some case law (albeit in a different context) supports this distinction, two circuit level cases exist directly construing the NLA in the bankruptcy context and hold that the automatic stay does not supersede the NLA.  See In re Crow & Assocs., Inc., 713 F.2d 211, 214 (6th Cir. 1983); In re Petrusch, 667 F.2d 297, 299-300 (2d Cir. 1981).  Moreover, the Third Circuit has observed in dicta that the anti-injunction provisions of the NLA were not superseded by the subsequently enacted bankruptcy laws.  See Elsinore Shore Assocs. v. Local 54, Hotel Emps. & Restaurant Emps. Int’l Union, 820 F.2d 62, 67 n.5 (3d Cir. 1987).  Additionally, in further support of its finding, the Court recognized the strong policies both in favor of protected actions under the NLA and the automatic stay, but astutely recognized the reality of the dispute:  “[T]he Debtors are attempting to use the automatic stay to shift bargaining power with respect to a new collective bargaining agreement in their favor.”  Op. at 20.  Indeed, the Court observed that outside of bankruptcy, the Debtors would not have this leverage as the NLA vests unions with significant bargaining power.  Ultimately, despite its previous sharp words against the Union’s actions, the Bankruptcy Court found that the Union is not violating the automatic stay.