Bankruptcy Mesa Attorney Clint Smith: Hostess Bankruptcy

By on 11-08-2012 in bankrupt companies

Hostess not playing nice

In the dog-eat-dog world of Chapter 11 bankruptcy, we should not be surprised when disputes arise between parties arguing about money. Kodak is trying to terminate pension/retirement benefits for its workers in its Chapter 11. Nevertheless, we can always hope for sweetness from the makes of Twinkies.

Until now. This week, the management/legal decision makers at Hostess gave an ultimatum to the bakers and their union: Agree to the terms we are proposing, or take your baking skills elsewhere. That’s a tough place for a baker to be in. Indeed, no one wants to be looking for job today.

Our country includes as a basic unassailable right, the sanctity of private contracts. The Constitution protects and allows for their enforcement. But bankruptcy laws allow for contracts to be modified or terminated in bankruptcy, where the same contract would be difficult to get relief from, outside of the bankruptcy. It’s a necessary power that bankruptcy courts use judiciously, that is, carefully and rarely.

In the Hostess case, the proposal is to cut wages and benefits. The bakers are threatening to strike. Stay tuned. Your favorite after lunch snacks may be disappearing from the shelves.

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