Fairmont General Hospital, Inc. and Fairmont Physicians, Inc.

OCR transcription for search; preserved printed pages are authoritative

No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 1 of

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Patrick M. Flatley
United States Bankruptcy sulee

Dated: Monday, May 19, 2014 1:04:32 PM
IN THE UNITED STATES BANKRUPTCY COURT
FOR THE NORTHERN DISTRICT OF WEST VIRGINIA

IN RE:

FAIRMONT GENERAL HOSPITAL, Case No. 13-1054

INC., et al.,

)

)

)

) Chapter 11
Debtors. )
)

Jointly Administered

MEMORANDUM OPINION
Fairmont General Hospital, Inc. (the “Debtor’), and District 1199 West

Virginia/Kentucky/Ohio, Service Employees International Union (“District 1199”), request a
declaration from the court that their November 1, 2013 Collective Bargaining Agreement (the
“CBA”) was executed in the ordinary course of the Debtor’s business under 11 U.S.C. § 363(c)(1)
and is consequently an effective agreement under the Bankruptcy Code.!

UMB Bank, N.A., as successor indenture trustee with respect to certain hospital revenue
bonds (the “Indenture Trustee’), objects on the basis that that the CBA requires court approval
because the Debtor is in Chapter 11 and seeks to sell substantially all its assets. The Indenture
Trustee asserts that court approval of the CBA should be denied on the grounds that the existence

of the CBA may result in a lower sales price for the Debtor’s business as potential purchasers may

| The Debtor originally sought court approval of the CBA pursuant to 11 U.S.C. § 363(b)(1) as a transaction outside
of its ordinary course of business. The Debtor stated that this was done because Appendix R to the CBA states: “the
Hospital agrees to seek approval of the new collective bargaining agreement by the Bankruptcy Court.” (Exhibit 4).
At the May 12, 2014 hearing, however, both the Debtor and District 1199 asserted their belief that the CBA was
executed in the ordinary course of the Debtor’s business under § 363(c)(1) and did not need court approval under §
363(b)(1). The court received evidence and testimony on whether the CBA required court approval under the
standards of § 363(b)(1), or if the court could approve the agreement under § 363(c)(1) as being in the ordinary course
of the Debtor’s business. The court also allowed the parties a period of time to brief the issue following the
evidentiary hearing. Because the court finds that the execution of the CBA is in the Debtor’s ordinary course of
business under § 363(c)(1), the court will not address the standards for approving the agreement pursuant to §
363(b)(1) or the arguments of the parties concerning that issue.

AUTHENTICATED
U.S. GOVERNMENT
INFORMATION

GPO

No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 2 of
10

not desire to purchase a business with a unionized workforce. In addition, the Indenture Trustee
states that the CBA constitutes a settlement agreement under Fed. R. Bankr. P. 9019 which must
be approved by the court.

For the reasons stated herein, the court finds that the CBA was executed in the ordinary
course of the Debtor’s business and is effective under § 363(c)(1) without obtaining court approval.
The court also finds that the CBA does not constitute a settlement as contemplated under Rule
9019.

I. BACKGROUND

The Debtor operates a 207-licensed bed acute care hospital in Fairmont, West Virginia. It
has approximately 731 full and part-time employees and 28 physicians. Nearly 340 of these
employees are represented by District 1199.

The Debtor and District 1199 executed a collective bargaining agreement on November 1,
2010, which was set to expire on April 30, 2013. By agreement of the parties, the November 1,
2010 Collective Bargaining Agreement was extended to October 31, 2013.

The Debtor filed its Chapter 11 bankruptcy petition on September 3, 2013. On October 3,
2013, the Debtor and District 1199 negotiated a “Settlement Agreement” that set forth the general
terms of the parties’ labor agreement following October 31, 2013. The October 3, 2013
Settlement Agreement contained better terms for the Debtor as compared to the November 1, 2010
Collective Bargaining Agreement. The October 3, 2013 Settlement Agreement served as the
bridge between the contractual termination of the November 1, 2010 Collective Bargaining
Agreement and the memorialization of a new collective bargaining agreement that was to be
finalized after November 1, 2013, but made effective as of that date:

This SETTLEMENT AGREEMENT constitutes a full and complete collective
bargaining agreement between the parties, which shall commence at 12am on
November 1, 2013, and shall remain in full force and effect until midnight on the
31% day of October, 2016.

The parties will later execute a reformatted “clean copy” of this collective
bargaining agreement; however, it is agreed that this Settlement Agreement and the

provisions incorporated herein constitute the terms of the Agreement.

(Exhibit 3).



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No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 4 of
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No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 5 of
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No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 6 of
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No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 7 of
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No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 8 of
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No. 1:13-bk-01054 Doc 704 Filed 05/19/14 Entered 05/19/14 13:33:53 Page 9 of
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