Rod Fritz is fired

Garrett Wollman
Sat Mar 31 10:10:58 EDT 2018

<<On Sat, 31 Mar 2018 08:20:44 -0400, "Brian Vita" <> said:

> Can you enforce a union contract on a company that is in bankruptcy?

IANAL, and especially IANABL, but I've spent some time reading
financial statements, especially back during the auto bailout, so
here's what I think I understand about the process:

Contractual disputes generally get wrapped up into the bankruptcy
proceeding (there's a technical word for that that I don't know).  The
bankrupt is generally allowed to "reject" contracts that impede its
reorganization, but I don't know how this affects labor contracts.
But it's a two-way street: the bankrupt is released from its obligaton
to pay, but so is the other party, thus the bankrupt no longer
receives whatever benefit they were enjoying.  As a result, there's a
really big difference between, say, an equipment provider -- you sold
them purpose-built equipment on unsecured credit? join the back of the
line! -- and a service provider or a landlord who provides an ongoing
benefit (tower space, payroll processing, music licensing) without
which the bankrupt simply could not operate.  The bankruptcy court
does have the authority to modify those contracts in certain
circumstances, and the court can even require the other party to
perform when it has little chance of getting paid in full.

The really complicated situations happen when you get a domino effect,
where the loss of a key customer sends downstream suppliers into
bankruptcy -- since the creditor groups may be quite different and
have conflicting interests.  This was a big part of the rationale
behind the 2009 auto bailout: the networks of suppliers in that
industry are so intricate, and there are so few alternative markets
for the specialized goods and services being sold, that the bankruptcy
of a "big three" automaker would bankrupt many of its suppliers and
create protracted bankruptcy litigation that would take a decade or
more to resolve.  (As it was, GM's principal technology and parts
supplier, Delphi Automotive, did go into bankruptcy at the same time,
and the result was that several Delphi plants ended up under New GM's
ownership because GM couldn't operate without them.)

iHeart and Clear Channel before it had a practice of acquiring
companies which were critical suppliers, like automation vendors
Prophet Systems and RCS, so this is less likely to be an issue for
them, but they certainly will have an issue with service providers
like Nielsen.  Typically suppliers will demand that a bankrupt
customer pay cash up front for anything that will be provided in the
future, which is why one of the first things a company filing for
Chapter 11 does is arrange for high-interest-rate
"debtor-in-possession financing" from one or more major banks.  (The
first thing they do is get permission from the court to pay their
employees and taxes.)


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