A federal appeals court on Friday ruled against Atlantic City’s casino-workers union in a dispute over health and pension benefits eliminated at Trump Taj Mahal — a judgment that sets the stage for Wall Street mogul Carl Icahn to take over the resort as it exits bankruptcy.
Icahn, who did not return a call for comment, insists he will invest tens of millions of dollars to revive the property.
David Licht, co-chairman of the board of Taj’s owner, Trump Entertainment Resorts, said in a statement that the ruling “ensures that Trump Taj Mahal will be in business for the foreseeable future.”
In October 2014, a U.S. Bankruptcy judge gave Trump Entertainment permission to stop funding health care and pensions for about 1,100 unionized Taj workers. The move incensed UNITE-HERE Local 54, which later that year appealed the ruling, took to the Boardwalk in protest and threatened a strike at the property.
The company’s reorganization plan, which calls for its main lender — firms controlled by Icahn — to take ownership of the casino-hotel, was premised on the union losing its case in the Third U.S. Circuit Court of Appeals.
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Local 54 President Bob McDevitt said in a statement Friday that union staff will meet with Taj workers early next week “and evaluate all our options and next steps, including legal ones.”
“As I have said time and again, the Taj Mahal will never turn around and be successful without the full participation and involvement of its workers,” he said.
Friday’s ruling can be appealed to the U.S. Supreme Court, though there’s no guarantee it will be accepted for consideration.
In a letter to the appeals court earlier this month, an attorney for Trump Entertainment implored judges for a ruling, writing that “the extended delay in issuing a decision — regardless of the outcome — has left the Trump Taj Mahal with an uncertain future.”
Friday’s ruling comes as the union, which represents about 10,000 Atlantic City hospitality workers, prepares to renegotiate its contracts with at least six of eight Atlantic City casinos. McDevitt has said the new low set by Taj could affect negotiations with other properties.
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“Most-favored nation” clauses, a fixture in Local 54’s labor contracts, generally require unions to offer similarly favorable deals to competing local employers. It’s a way for employers to equalize union contracts and prevent one company from gaining a labor advantage in a market. Trump Entertainment’s decision to strip health and pension benefits from Taj workers could therefore erode benefits at other resorts in Atlantic City, where unionized workers have for decades received health insurance bankrolled in large part by casino operators.
At issue in Local 54’s appeal was whether U.S. Bankruptcy Judge Kevin Gross, in Wilmington, Delaware, had the authority to approve the benefit cuts.
Trump Entertainment argued that bankruptcy code allowed the company to nix its expired labor contract with the union and cut benefits to save costs. The union argued that because the contract had expired, it was the National Labor Relations Board, not U.S. Bankruptcy Court, that had jurisdiction over the dispute.
When a collective bargaining agreement expires, federal law requires its core terms to remain in effect as the union and employer hammer out a new labor contract. But when the terms of the expired contract “will undermine ... (a bankrupt company’s) ability to reorganize and remain in business,” bankruptcy judges can approve changes needed to keep the business open, U.S. Circuit Judge Jane Roth wrote for a three-judge panel.
A plan to pave the way for North Jersey casinos was passed by a state senate committee Thursday.
“Under the policies of bankruptcy law, it is preferable to preserve jobs through a rejection of a CBA, as opposed to losing the positions permanently by requiring the ... (bankrupt company) to comply with the continuing obligations set out by the CBA. Moreover, it is essential that the Bankruptcy Court be afforded the opportunity to evaluate those conditions that can detrimentally affect the life of” the company, Roth wrote.