Security Farms v. General Teamsters, Warehousemen & Helpers Union, Union, Local 890 (In re General Teamsters, Warehousemen & Helpers Union, Local 890)

Security Farms, Inc., and other Central California growers (“Growers”), all unsecured creditors, seek review of the bankruptcy court’s approval of a Chapter 11 reorganization plan submitted by Local 890 of the International Brotherhood of Teamsters (“Local”). The principal issue is whether the Local’s international parent union (“International”) has an equity interest in the Local by virtue of the provision in the contract between the Local and the International that upon the Local’s liquidation, its assets will escheat to the International for two years or until the Local is reorganized. If the provision does indicate an equity interest, then the International would have to provide new value to the Local to prevent its liquidation. See 11 U.S.C. § 1129 (b)(2)(B)(1998).

There is also an issue as to whether the collective bargaining agreement itself and the future dues owed the Local should be considered as “assets” that would be distributed in a Chapter 7 liquidation. If so, the plan would violate the best interests of the creditor rule codified at 11 U.S.C. § 1129 (a)(7)(A)(ii)(1993). The creditors also attack the bankruptcy court’s determination that the debtor proposed the…