Trump Entertainment Wins Approval to Scrap Union Benefits

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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).