Hostess Does Not Liquidate, Set to Mediate With Union

by Cadwalader, Wickersham & Taft LLP

[authors: Jeffrey H. Taub]

Reports of Twinkie the Kid’s death have been exaggerated. Despite widespread mainstream media reports of Hostess’ impending liquidation, the court has not yet approved liquidation. To the contrary, on November 19, 2012, after a brief hearing on Hostess’s emergency motions to begin the wind down of its operations, Hostess and its two main unions agreed to attend a confidential mediation session. At the mediation, Bankruptcy Judge Robert Drain intends to determine if the parties can avoid liquidation.

The mediation marks the latest turn in the years long saga. Restructuring Review has covered Hostess’ negotiations with its unions here, here, and here.

Proposed Liquidation

Last week, Hostess filed motions seeking court authorization to begin liquidating its assets in an orderly fashion by selling groups of related assets that could be operated on a going concern basis. Hostess’s motions are available here and here.

Hostess intends to sell groups of related assets that can be operated on a going concern basis, and anticipates completing the sale of substantially all of its assets in approximately one year. The motion includes little detail on the substance of the liquidation process – a point raised by the union in opposition to the proposed sale.  Hostess initially intends to continue employing approximately 3200 employees. Within four months, Hostess anticipates that it will only require approximately 200 employees. The anticipated cost of the liquidation is approximately $17.58 million.

Hostess also requested implementation of an employee retention plan that would pay up to $6.1 million in bonuses to certain management employees if the managers remain employed with Hostess during the liquidation or meet various performance metrics. Specifically, non-senior managers would receive a bonus for staying with Hostess through the liquidation and senior managers would receive performance targeted bonuses based on the successful completion of various metrics for the manager’s group and for spending less than the budgeted amount during the liquidation.

Hostess is also requesting the bankruptcy court’s approval to unilaterally modify its CBAs in a manner that would allow Hostess to implement the liquidation. Specifically, Hostess is requesting authorization to:

  • Stop making payments to multi-employer pension plans;
  • Ignore seniority and other job classification restrictions that limit Hostess’s ability to assign work to specific employees or to hire temporary employees;
  • Pay the remaining employees in accordance with the terms of the last best and final offers; and
  • Prohibit the remaining employees from using accrued vacation, sick days or personal holidays.

The Latest Developments

At today’s hearing, Judge Drain noted that the Bakery, Confectionary, Tobacco and Grain Workers International Union had chosen an “unusual, perhaps illogical, odd approach” by choosing not to object to Hostess’s motions to reject and modify its CBAs and initiating a strike after Hostess implemented the changes to the CBAs.

The court noted that although it did not have jurisdiction to enjoin a strike, a debtor could choose to bring claims for damages against a union that initiates an improper strike. Because the Bakers’ Union’s actions would likely result in the termination of 6000 of its employees and lead to lower recoveries for all of Hostess’s creditors, the propriety of the strike would likely end up in litigation. The court noted that although it had not authorized depositions of the Bakers’ Union principals earlier in the case, discovery in a potential litigation could encompass whether the Bakers’ Union had engaged in discussions with Hostess’s competitors. The court therefore afforded the parties one last chance to work out their differences in private.

After a brief adjournment, the court announced that the parties had agreed to participate in a mediation session, presided over by the judge, on November 20, 2012. Judge Drain noted that it was unusual for a judge hearing a case to simultaneously act as a mediator, however, given the looming loss of 18,000 jobs and the time constraints, he found it appropriate under the circumstances.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Cadwalader, Wickersham & Taft LLP | Attorney Advertising

Written by:

Cadwalader, Wickersham & Taft LLP

Cadwalader, Wickersham & Taft LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.