In a recent ruling, the Ninth Circuit concluded that a settlement agreement which resolved an employer’s withdrawal obligation to a multiemployer pension fund was not an assumable, assignable, executory contract that could be transferred to a third-party in the event that the employer filed for bankruptcy. The case in question is Svenhard’s Swedish Bakery v. United States Bakery, Bk. No. 19-15277, 2023 WL 5541420 (9th Cir. Aug. 29, 2023).
This determination is of crucial importance for multiemployer funds, as well as employers that have been involved in settlement negotiations pertaining to these issues. The verdict could potentially influence future decisions and, therefore, represents a critical shift in how these agreements are viewed under the law.
The circumstances of the case hinge on Svenhard’s Swedish Bakery, an employer with obligations to a multiemployer pension fund, who negotiated a settlement agreement to resolve its liabilities. However, when the bakery later filed for bankruptcy, the question arose as to whether this agreement could be regarded as an executory contract which could be taken over and delegated to a third party.
The Ninth Circuit’s judgment centered on the nature of settlement agreements rather than focusing on the specific terms of the contract in this case. Their verdict was that such agreements do not typically fulfil the conditions necessary to be considered an executory contract, particularly in cases of bankruptcy filings. They stated that these agreements are not subject to assumption and assignment to another party.
This determination has a broad range of potential implications for multiemployer funds and employers who negotiate settlement agreements of this nature. It will serve as a precedent for the subsequent treatment of such agreements under the law.
For more detailed legal interpretation of this ruling, take a look at Proskauer’s article on the subject.