[Congressional Record (Bound Edition), Volume 160 (2014), Part 9]
[Extensions of Remarks]
[Pages 12349-12350]
[From the U.S. Government Publishing Office, www.gpo.gov]




 INTRODUCTION OF THE ``PROTECTING EMPLOYEES AND RETIREES IN MUNICIPAL 
                       BANKRUPTCIES ACT OF 2014''

                                  _____
                                 

                         HON. JOHN CONYERS, JR.

                              of michigan

                    in the house of representatives

                        Thursday, July 17, 2014

  Mr. CONYERS. Mr. Speaker, when a municipality files for bankruptcy, 
its employees and retirees who have devoted their lives to public 
service--such as police officers, firefighters, sanitation workers and 
office personnel--risk having their hard-earned wages, pensions and 
health benefits cut or even eliminated.
  This is why I am introducing the ``Protecting Employees and Retirees 
in Municipal Bankruptcies Act of 2014.'' This legislation strengthens 
protections for employees and retirees under chapter 9 municipality 
bankruptcy cases by: (1) clarifying the criteria that a municipality 
must meet before it can obtain chapter 9 bankruptcy relief; (2) 
ensuring that the interests of employees and retirees are represented 
in the chapter 9 case; and (3) imposing heightened standards that a 
municipality must meet before it may modify any collective bargaining 
agreement or retiree benefit.
  While many municipalities often work to limit the impact of budget 
cuts on their employees and retirees, as was recently demonstrated in 
the chapter 9 plan of adjustment recently approved by Detroit's public 
employees and retirees, other municipalities could try to use current 
bankruptcy law to set aside collective bargaining agreements and 
retiree protections.
  My legislation addresses this risk by requiring the municipality to 
engage in meaningful good faith negotiations with their employees and 
retirees before the municipality can apply for chapter 9 bankruptcy 
relief. This measure would also expedite the appellate review process 
of whether a municipality has complied with this and other 
requirements. And, the bill ensures employees and retirees have a say 
in any plan that would modify their benefits.

                     Section-by-Section Explanation

       Sec. I. Short Title. Section 1 of the bill sets forth the 
     short title of the bill as the ``Protecting Employees and 
     Retirees in Municipal Bankruptcies Act of 2014.''
       Sec. 2. Determination of Municipality Eligibility To Be a 
     Debtor Under Chapter 9 of Title II of the United States Code. 
     A municipality can petition to be a debtor under chapter 9, a 
     specialized form of bankruptcy relief, only if a bankruptcy 
     court finds by a preponderance of the evidence that the 
     municipality satisfies certain criteria specified in 
     Bankruptcy Code section 109. In the absence of obtaining the 
     consent of a majority of its creditors, section 109 requires 
     the municipality, in pertinent part, to have negotiated in 
     good faith with its creditors or prove that it is unable to 
     negotiate with its creditors because such negotiation is 
     impracticable.
       Section 2(a) of the bill amends Bankruptcy Code section 109 
     in three respects. First, it provides clear guidance to the 
     bankruptcy court that the term ``good faith'' is intended to 
     have the same meaning as it has under the National Labor 
     Relations Act at least with respect to creditors who are 
     employees or retirees of the debtor. Second, section 2(a) 
     revises the standard for futility of negotiation from 
     ``impracticable'' to ``impossible.'' This change ensures that 
     before a municipality may avail itself of chapter 9 
     bankruptcy relief it must prove that there was no possible 
     way it could have engaged in negotiation in lieu of seeking 
     such relief. Third, the amendment clarifies that the standard 
     of proof that the municipality must meet is ``clear and 
     convincing'' rather than a preponderance of the evidence. 
     These revisions to section 109 will provide greater guidance 
     to the bankruptcy court in assessing whether a municipality 
     has satisfied the Bankruptcy Code's eligibility requirements 
     for being granted relief under chapter 9.

[[Page 12350]]

       Bankruptcy Code section 921(e), in relevant part, prohibits 
     a bankruptcy court from ordering a stay of any proceeding 
     arising in a chapter 9 case on account of an appeal from an 
     order granting a municipality's petition to be a debtor under 
     chapter 9. Section 2(b) strikes this prohibition thereby 
     allowing a court to issue a stay of any proceeding during the 
     pendency of such an appeal. This ensures that the status quo 
     can be maintained until there is a final appellate 
     determination of whether a municipality is legally eligible 
     to be a chapter 9 debtor.
       Typically, an appeal of a bankruptcy court decision is 
     heard by a district or bankruptcy appellate panel court. 
     Under limited circumstances, however, a direct appeal from a 
     bankruptcy court decision may be heard by a court of appeals. 
     Until a final determination is made as to whether a 
     municipality is eligible to be a debtor under chapter 9 of 
     the Bankruptcy Code, the rights and responsibilities of 
     numerous stakeholders are unclear. To expedite the appellate 
     process and promote greater certainty to all stakeholders in 
     the case, section 2(c) of the bill allows an appeal of a 
     bankruptcy court order granting a municipality's petition to 
     be a chapter 9 debtor to be filed directly with the court of 
     appeals. In addition, section 2(c) requires the court of 
     appeals to hear such appeal de novo on the merits as well as 
     to determine it on an expedited basis. Finally, section 2(c) 
     specifies that the doctrine of equitable mootness does not 
     apply to such an appeal.
       Sec. 3. Protecting Employees and Retirees. The chapter 9 
     debtor must file a plan for the adjustment of the 
     municipality's debts that then must be confirmed by the 
     bankruptcy court if it satisfies certain criteria specified 
     in Bankruptcy Code section 943. Section 3 of the bill makes 
     several amendments to current law intended to ensure that 
     interests of municipal employees and retirees are better 
     protected. With respect to plan confirmation requirements, 
     section 3 amends Bankruptcy Code section 943 to require 
     consent from such employees and retirees to any plan that 
     impairs--in a manner prohibited by nonbankruptcy law--a 
     collective bargaining agreement, a retiree benefit, including 
     an accrued pension, retiree health, or other retirement 
     benefit protected by state or municipal law or as defined in 
     Bankruptcy Code section 1114(a).
       Such consent would be conveyed to the court by the 
     authorized representative of such individuals. Subject to 
     certain exceptions, section 3 specifies that the authorized 
     representative of individuals receiving any retirement 
     benefits pursuant to a collective bargaining agreement is the 
     labor organization that signed such agreement unless such 
     organization no longer represents active employees. Where the 
     organization no longer represents active employees of the 
     municipality, the labor organization that currently 
     represents active employees in that bargaining unit is the 
     authorized representative of such individuals.
       Section 3 provides that the exceptions apply if: (1) the 
     labor organization chooses not to serve as the authorized 
     representative; or (2) the court determines, after a motion 
     by a party in interest and after notice and a hearing, that 
     different representation is appropriate. Under either 
     circumstance, the court, upon motion by any party in interest 
     and after notice and a hearing, must order the United States 
     Trustee to appoint a committee of retired employees if the 
     debtor seeks to modify or not pay the retiree benefits or if 
     the court otherwise determines that it is appropriate for 
     that committee be comprised of such individuals to serve as 
     the authorized representative.
       With respect to retired employees not covered by a 
     collective bargaining agreement, the court, on motion by a 
     party in interest after notice and a hearing, must order the 
     United States Trustee to appoint a committee of retired 
     employees if the debtor seeks to modify or not pay retiree 
     benefits, or if the court otherwise determines that it is 
     appropriate to serve as the authorized representative of such 
     employees. Section 3 provides that the party requesting the 
     appointment of a committee has the burden of proof.
       Where the court grants a motion for the appointment of a 
     retiree committee, section 3 requires the United States 
     Trustee to choose individuals to serve on the committee on a 
     proportional basis per capita based on organization 
     membership from among members of the organizations that 
     represent the individuals with respect to whom such order is 
     entered. This requirement ensures that in a case where there 
     are multiple labor organizations, the committee fairly 
     represents the interests of the members of those various 
     organizations on a proportional basis.
       Finally, section 3 of the bill imposes a significant 
     threshold that must be met before retiree benefits can be 
     reduced or eliminated. Current law has no such requirement. 
     In a case where the municipality proposes in its plan to 
     impair any right to a retiree benefit, section 3 permits the 
     committee to support such impairment only if at least two-
     thirds of its members vote in favor of doing so.

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