I'm not entirely certain that I fully understand your question, but here goes, anyway....
A DIP cannot modify or terminate a CBA without following a detailed Code
procedure. See 11 USCA § 1113.
The fact that a collective bargaining agreement (CBA) requires the debtor in possession (DIP) to maintain specific benefits (wages
and retirement benefits, etc.) may be used as a rationale for authorizing continued payment of the benefits postpetition. See In re Arlene's Sportswear, Inc. (BC D MA 1992) 140 B.R. 25, 26-28--permitting postpetition payments to holiday trust fund as required by CBA; Adventure Resources, Inc. v. Holland (4th Cir. 1998) 137 F.3d 786, 795-796--debtor must honor all terms of CBA until properly rejected; but see In re Moline Corp. (BC ND IL 1992) 144 B.R. 75, 77-80--motion to compel debtor to pay prepetition medical benefits and vacation pay under CBA denied (DIP not obligated to make such payments unless and until CBA assumed in bankruptcy).
Now, if the CBA does not require the maintenance of such payments, or the DIP/City rejects the entire collective bargaining agreement, then you have a big problem, because the City doesn't have to do something that was never agreed to at all. The absence of the required health care payments in the CBA could be grounds to sue the union leaders for breach of loyalty, and/or the attorneys who drafted the CBA for malpractice -- but, ultimately, the cost of health care is probably so great than no one other than Uncle Sam could prop up any entity that was successfully sued to cover retirement health care fees.
The CBA itself cannot be rejected in bankruptcy, except on a showing of necessity after balancing the equities
of the parties. But, it can be rejected, terminated or modified by the court -- so, some sort of settlement is highly likely, due to the very costly litigation expenses of fighting this sort of issue.
But, again, if the CBA flatly does not require maintaining health care, then there is nothing to stop the City as DIP from ceasing its payments -- and, in fact, it really has little choice, because the alternative would be to provide one unsecured credit inequitable treatment which also violates the bankruptcy code.
Note: You cannot reasonably expect to be able to make a credible defense in bankruptcy court
against an adversary like the City, without a competent lawyer. So, I hope you are one, or you intend to get one in a hurry, because this is simply way
too big a deal to try to "do-it-yourself."
For a Chapter 11 bankruptcy attorney referral, see this link.
Hope this helps.
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