Trump Entertainment Resorts Inc. won bankruptcy court
approval to end union health-care and pension programs, increasing the odds that
the company can keep the Taj Mahal casino open.
U.S. Bankruptcy Judge Kevin Gross in Wilmington, Delaware,
ruled today that the company could impose the concessions, a move that may lead
to benefit cuts for other unionized casino employees in Atlantic City, New
Jersey. The judge said he will issue a written opinion next week explaining his
ruling.
Trump Entertainment is seeking to shift workers in Unite
Here Local 54, which represents more than 1,100 employees at the Taj Mahal,
from a traditional pension to a 401(k) program. It also wants to end the
health-care plan and move workers to a program under Affordable Care Act
sponsorship. Employees would get a $2,000 stipend to help pay for coverage.
After making his decision, the judge said he was
“concerned about health-care for the employees” and wanted to ensure there’s no
gap in coverage. Casino lawyers told Gross they believe the retirement plan
provides as long as 90 days of extended coverage, while union lawyers said it
runs out at the end of the month.
Avoid Closing
Trump Entertainment needed the concessions to avoid
liquidation, and would otherwise have to close the Taj Mahal, Kristopher
Hansen, a lawyer for the company, said at a hearing this week. The casino faced
shutdown as early as November, the company has said.
The judge today denied the union’s request to freeze his
order while it seeks an appeal, saying the balance of equities favored Trump
Entertainment, which needed the ruling to take effect immediately. His decision
will be retroactive from Sept. 26, when the company made the request. The
company filed for bankruptcy Sept. 9.
“The decision today will certainly enrage the workers who
have relied on and fought for their health care for three decades,” Unite Here
Local 54 President Bob McDevitt said in a statement. “We intend to continue to
fight this both in the courts and in the streets.”
Trump Entertainment shut the Trump Plaza last month as
Atlantic City loses gambling business to surrounding states. Casino revenue in
the city fell more than 40 percent to about $2.8 billion in 2013 from a peak of
more than $5 billion in 2006.
$20 Million
The company argued that the current union contract
imposed an unsustainable $20 million in annual costs and that cuts were needed
to induce lenders controlled by billionaire Carl
Icahn to invest $100 million. The lenders would also convert some of
the company’s $292 million in debt into equity.
Attorney Joseph Farelli, a partner at Pitta & Giblin
LLP in New York who represents unions in the hospitality industry, said the
ruling “opens the door” for other companies to look to President Barack
Obama’s health-care overhaul to cut labor costs.
While it “may not be a precedent now,” other Atlantic
City casino operators may look to do the same, Farelli said. “It will be fact
sensitive,” with poor financial condition being a key factor for such changes
to survive court scrutiny, he added.
“Obamacare has actually made it easier for employers to
get out of their contractual obligations,” he said.
Cuts at Trump Entertainment may open the way for most
other Atlantic City casinos to seek concessions from Unite Here under a
so-called most-favored-nation clause in their labor agreements, according to
court documents.
Judicially Imposed
Today’s ruling probably won’t trigger the clauses because
the concessions were judicially imposed, not negotiated, said Farelli, who has
had experience crafting such clauses.
Union members rallied against the proposed cuts last
week, protesting in front of Icahn’s Tropicana casino in Atlantic City. Several
hundred casino workers also blocked a highway in the city to protest the
concessions.
The union hasn’t set a meeting to take a strike vote,
according to Ben Begleiter, a spokesman with Unite Here. Members will hold an
informational picketing rally on Oct. 24 at the Taj Mahal, he said in a phone
interview.
“Tropicana’s major owner wants you to believe that the
demand to take away workers’ health insurance is necessary because of the
financial situation at the Taj Mahal and in Atlantic City,” McDevitt said in
the statement. “We believe it has nothing to do with either.”
State Incentives
The fight now turns to Republican Governor Chris Christie
and other New Jersey officials from whom Trump Entertainment is seeking as much
as $175 million in tax relief and incentives.
The contract modifications approved today will allow the
company to operate pending the outcome of discussions with state and local
authorities, Trump Entertainment said in a statement after the ruling.
“We look forward to working with our elected officials,”
Chief Executive Officer Robert Griffin said in the statement. “With bipartisan
leadership we believe we can take a collective step towards a brighter future
in Atlantic City.”
Donald Trump, the real-estate tycoon who founded the
company, has no involvement in Trump Entertainment now and has been seeking to
have his name removed from its properties.
The case is In re Trump Entertainment Resorts Inc.,
14-12103, U.S. Bankruptcy Court, District of Delaware (Wilmington).
Source: Bloomberg
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