BNA Bankruptcy Law Daily reports an amazing exchange on Capitol Hill yesterday. The House Judiciary Committee Subcommittee on Commercial and Administrative Law conducted a hearing called "American Workers in Crisis: Does the Chapter 11 Bankruptcy Law Treat Workers Fairly?" Based on the hearing title, it should be no surprise that the witnesses, primarily labor union spokespersons, uniformly concluded that current bankruptcy law is unfair to labor unions. Only Michael L. Bernstein, a bankruptcy and workout specialist with Arnold & Porter, LLP spoke in support of the statutory treatment of collective bargaining and employee benefit contracts in chapter 11 reorganization cases under the Bankruptcy Code. Bernstein explained that Bankruptcy Code sections 1113 and 1114 balance the interest of employees in collective bargaining and employee benefit plans "against the need of a Chapter 11 debtor to achieve a cost structure that enables it to reorganize and emerge as a viable business that is able to compete in the marketplace."
Representative Melvin Watt (D. N.C.) asked Bernstein how a bankruptcy court can effectively toss out a collective bargaining agreement but cannot alter in any way the terms of a home mortgage obligation. Bernstein explained that the Bankruptcy Code permits the former but not the latter. Watt, a graduate of Yale Law School, retorted that Bernstein had given a "lawyers' answer" to his question. Watt acknowledged that he understood the law made distinctions, but demanded of Bernstein: "How in the world can you rationalize that?"
In fairness, Watt may have been absent on the day federal statutory law was covered at the Law School. His training in constitutional law, however, clearly made a lasting impression. Watt told Bernstein that he had taken Constitutional Law at Yale from Robert Bork and that some of what Bork said in class "sounded about as bizarre as what you just said."