In Re Lady H Coal Co., Inc.

MEMORANDUM OPINION AND ORDER DENYING THE DEBTORS’ MOTION TO REJECT UMWA AGREEMENT, GRANTING THE DEBTORS’ MOTION TO SELL SUBSTANTIALLY ALL ITS ASSETS SUBJECT TO THE RIGHT OF ITS UMWA EMPLOYEES TO FILE CLAIMS FOR POST PETITION BREACH OF CONTRACT, GRANTING THE DEBTORS’ REQUEST THAT SUCH SALE BE FREE AND CLEAR OF ANY INTERESTS WITH CLAIMS AND INTERESTS ATTACHING TO THE PROCEEDS FROM SALE, AND DENYING THE DEBTORS’ REQUEST FOR INJUNCTIVE RELIEF

INTRODUCTION

The Court has under consideration the Debtors’ Second Amended Motion for Au *236 thority to Sell Property Free and Clear of all Liens and Encumbrances, for Approval of Assignments of Leases and Executory Contracts, and for Related Section 1113 and In-junctive Relief (“the Debtors’ Motion”). These cases present difficult choices which must be balanced by the Court involving economic, tangible and emotional interests of important parties to the ease. The Court believes this Order represents the best combination of rights and remedies that can be tailored considering the issues presented and the limited choices that are available as a result of the Debtors’ precarious financial position which has turned even worse during consideration of the Debtors’ Motion.

This proceeding as it relates to the Debtors’ proposed rejection of the collective bargaining agreement, sale free and clear of any interest, and request for injunctive relief are core proceedings as provided in 28 U.S.C. § 1334(a) and 28 U.S.C. § 157(b)(2)(A) and (N) and clearly within the jurisdictional grant to this Court. The Court is of the opinion that the Debtors failed to comply with the substantive requirements of § 1113 of the Bankruptcy Code and therefore, the Court shall not reject the collective bargaining agreement. However, such a finding does not prevent the Court from authorizing the proposed sale of substantially all of the Debtors’ assets free and clear of any interest pursuant to 11 U.S.C. § 363 as such a sale is the only means by which funds are likely to become available to pay employee medical claims, unpaid post-petition wages and the claims of numerous secured and other creditors.

The Court need not make recommended findings of fact or conclusions of law to the District Court as to objections raising successor liability based on other bodies of federal law and such objections are deemed not ripe for adjudication. Although the Court believes a sale is authorized pursuant to 11 U.S.C. § 363, the Court shall not authorize injunctive relief, but reserves jurisdiction to resolve any disputes over claims relating to the property to be sold, claims against the sale proceeds or other issues related to the sale, some of which may require recommended findings of fact and conclusions of law.

PROCEDURAL HISTORY

On December 27,1995, the Debtors filed a Motion for Authority to Sell Property Free and Clear of Liens and Encumbrances, for Approval of Assignments of Leases and Ex-ecutory Contracts and for Other Relief which requested an expedited hearing. The Debtors entered into a letter of intent with AT. Massey Company, Inc. (“Massey”) to sell the majority of the Debtors’ assets to Massey or one or more its subsidiaries. At a hearing conducted on December 28, 1995, counsel for UMWA Health & Retirement Funds objected to the granting of the Motion for Expedited Hearing. After deliberation with the parties, the Court set the hearing on the Debtor’s Motion for Authority to Sell Property on January 17, 1996, which provided twenty (20) days notice, complying with Bankruptcy Rules 6004 and 2002. By Order entered January 12,1996 on the Debtors’ Motion to Convert Sale Motion to Adversary Proceeding, the Court found that the Debtors’ Motion is a contested matter pursuant to Bankruptcy Rule 9014 and further found that Bankruptcy Rule 7065 may apply as it relates to the Debtors’ request for in-junctive relief.

The UMWA 1992 Benefit Plan sought by motion to withdraw reference of this matter to the District Court for the Southern District of West Virginia. A hearing on such withdrawal motion was conducted on January 10, 1996 and by Order entered on January 11, 1996, the District Court denied the same but found that issues pertaining to the Coal Act were non-core related to proceedings pursuant to 28 U.S.C. § 157(e) requiring the Bankruptcy Court to submit recommended findings of fact and conclusions of law.

Likewise, by Order entered January 25, 1996, this Court found that jurisdictional issues raised in the objection filed by the National Labors Relation Board (“NLRB”) to be non-core related to proceedings pursuant to 28 U.S.C. § 1334(a), under which this Court would make recommended findings of fact and conclusions of law to the United States District Court for the Southern Dis- *237 triet of West Virginia. The NLRB objects to the injunctive relief as requested by the Debtors but not to the proposed sale. The NLRB asserts that the jurisdictional grant to the District Court of all property of the debtor and property of the estate pursuant to 28 U.S.C. § 1334(e) is superseded by jurisdiction given the NLRB over alleged successor liability issues in connection to the sale of much of the Debtors’ property under 11 U.S.C. § 363. The NLRB basically asserts that since it has exclusive jurisdiction over the determination of unfair labor practices it also has exclusive jurisdiction over the successor liability claims.

Objections to the Debtors’ Motion, which were timely filed or accepted as late objections, include: Trustees of the UMWA 1992 Benefit Plan (“1992 Plan”), Trustees of the UMWA 1974 Pension Trust and UMWA Cash Deferred Savings Plan of 1988, Trustees of the UMWA 1993 Benefit Plan (collectively “UMWA Funds”), UMWA International (“UMWA”), Locals 8190 and 1352 and Frankie McCuteheon et al. (“Former Sewell Employees”), District 29 of the UMWA (“District 29”), New Gauley Coal Corporation (“New Gauley”), Genesis, Inc. (“Genesis”), Clarendon National Insurance Company (“Clarendon”) and Van-American Insurance Company (“Van-American”), jointly, Orix Credit Alliance, Inc. (“Orix”), Simmons-Rand Company (“Simmons-Rand”), AMCI Coal Sales, Inc. (“AMCI”), Aloe Mining Corporation (“Aloe”), Leckie Smokeless Coal Company (“Leckie”), Westmoreland Coal Company (‘Westmoreland”), Westvaeo Corporation (Westvaeo”), NLRB and Caterpillar Financial Services Corporation (“Caterpillar”).

Aloe’s motion to continue the hearing was on the grounds that it was not provided ample opportunity nor sufficient information to submit an upset bid, but at the hearing conducted on January 18, 1996 Aloe withdrew its objection and motion to continue. For reasons set forth in the Order entered January 16,1996, the objections of Simmons-Rand, Genesis, and Orix were overruled and the objection of District 29 was sustained. As to the remainder of the objections, it appears that the objections of Westmoreland, AMCI, Westvaeo, Leckie, Clarendon, New Gauley and Caterpillar are protective in nature rather than raising substantive issues of law and the Debtors will be given time to negotiate and advance an Order or Orders that protect the interest these creditors have in sale proceeds as required by § 363(f)(3) and § 365 of the Bankruptcy Code. The objections which have raised substantive issues of law include: UMWA, the 1992 Plan, UMWA Funds, NLRB and Former Sewell Employees.

Prior to the hearing initiated on January 17, 1996, the Court was presented with an alternative bid by Chicopee Coal Company (“Chicopee”) which was styled as “Alternative Purchase Offer of Chicopee Coal Company to the Motion of the Debtors for Authority to Sell.” The consideration offered by Chicopee was to indefinite to be considered an upset bid but it was in the nature of a proposed plan of reorganization. Accordingly, Chicopee and creditors were provided an opportunity to structure and file a plan of reorganization by February 5, 1996, which deadline has been informally extended .through the present date. To date, no creditor has filed a plan of reorganization or noticed intention to file a plan, incorporating the Chicopee proposal or otherwise.

By Order entered January 26, 1996 and based upon a status conference with counsel for all parties held on January 18, 1996, the Court found that the Debtors’ Motion contemplates the sale of “operations” as the term is used in Article I of the National Bituminous Coal Wage Agreement of 1993 (“NBCWA”), and therefore, the purchaser must consent to assume the NBCWA or the Debtors must otherwise modify or reject the collective bargaining agreement pursuant to 11 U.S.C. § 1113. 1 This section of the Bankruptcy Code requires the Debtors to conduct good faith negotiations with its bargaining representative to modify a collective bargaining agreement if the reorganization or rehabilitation of a debtor is dependent on such *238 modification, or request the Court to authorize rejection of said agreement. The Court observed that in the absence of the purchaser’s assumption of the NBCWA the requirements of 11 U.S.C. § 1113 are mandatory as the sale of substantially all of the Debtors’ assets constitutes a constructive reorganization of the Debtors.

On January 23, 1996, the Debtors filed a Second Amended Motion and Notice for Authority to Sell Property Free and Clear of All Liens and Encumbrances, for Approval of Assignments of Leases and Executory Contracts and For Related Section 1113 and Injunctive Relief. Further, a Motion to Alter and Amend the January 26, 1996 Order was filed by the Debtors on January 29,1996 with subsequent objections filed by the UMWA and Chicopee. The Court finds that the January 26,1996 Order was interlocutory in nature and therefore, the Court has not ruled on the Debtors’ motion or respective objections, but has considered such motion and objections within this Memorandum Opinion.

This Court conducted evidentiary hearings on January 17-18,1996 and February 5,1996 to consider the Debtors’ Motion and respective objections, in addition to a hearing on February 2,1996 to consider the jurisdictional objection of the NLRB. Prior to the final hearing, the Debtors filed a proposed plan of reorganization which provided payment in full of secured claims.

The Court conducted a negotiation session on February 8, 1996 to attempt a negotiated resolution of the major legal issues within the case. The primary parties involved in such negotiations included the Debtors, UMWA, UMWA Funds and Massey. Such negotiations did not result in any resolution. Final arguments and responses to the Debtors’ Motion were required to be filed by February 12, 1996 in writing with appropriate citation to legal authority, with any response due on February 13,1996.

A final status conference was conducted by the Court on February 15, 1996 between counsel for the Debtors, Massey and the UMWA in order to attempt to reach a negotiated settlement between these parties. During the status conference, the Debtors informed the Court that operations had been idled and that the companies were unable to make payroll due on February 15, 1996. Subsequent to the conference, Massey submitted a stipulation to employ a minimum of 25% existing employees of the Debtors and an offer to cover $100,000 of unpaid wages. The Court was informed by counsel for the UMWA that such proposal was rejected.

On February 21, 1996, an expedited hearing to consider the Debtors’ Motion for Authority to Treat Utility Service as Administrative Expense with Super-Priority Standing was conducted in order to allow the Debtors to continue to receive electric power. The Debtors and Appalachian Power Company were able to reach a negotiated settlement which permitted continued power to the mines for a short time.

FINDINGS OF FACT

The Debtors in this procedurally consolidated case include Consolidated Sewell, Inc. (“Consolidated”), parent corporation of Lady H Coal Company (“Lady H”) and Sewell Coal Co. (“Sewell”), and Lady H’s two subsidiaries, Leivasy Mining Corporation (“Leiv-asy”) and Eastwood Construction, Inc. (“Eastwood”). The Estate of Mr. Post, Clyde See and John Leaberry equally own one-third (%rd) of the parent corporation, Consolidated. Petitions for relief under Chapter 11 of the Bankruptcy Code were filed on:

Lady H: July 20, 1994

Eastwood: November 7,1994

Leivasy: December 2,1994

Consolidated and Sewell: December 22,1994

The Debtors are involved in coal mining operations primarily in Nicholas, County, West Virginia, employing approximately 220 employees, including approximately 180 employees covered by the NBCWA. Although the other remaining 40 employees have not raised an objection to the Debtors’ Motion, they face similar uncertainties as the Union employees on a sale to a new party.

According to the monthly operating reports filed with the Court, the Debtors’ post-petition losses are substantial, with $8.6 million in losses for the fiscal year ended June 30, 1995 on sales of $21.8 million and $2.1 million in losses for the four months ended *239 October 31, 1995 on sales of $7.7 million. The Court finds that the financial circumstances of the Debtors were dire at the time the Debtors’ Motion was filed. The Debtors had long since gone beyond the point of being able to meet necessary daily expenses. Operating funds needed to eliminate bottlenecks in shipments and production at the cleaning plant and the loadout site were unavailable and the financial emergencies that the Debtors faced on a daily basis were so substantial that existing management had little time to focus on anything but such emergencies. Since the filing of the Debtors’ Motion, the Debtors have lost the ability to fond continuing operations and have ceased all active coal production, and the mines are in danger of having power terminated.

The operating and financial difficulties of the Debtors are in some part attributable to the illness and ultimate death of the Chief Executive Officer, William Post. However, the most serious problems that created negative cash flow in this business were the high costs and low production of coal. The Debtors do not have the needed management, money or time to correct the present operating problems.

The Debtors seek to sell a substantial portion of their assets and assign leases of mineral reserves and other executory contracts to Massey under terms and conditions detailed in the Debtors’ Motion and Letter of Intent as executed by Massey, Consolidated, Sewell and Lady H. The agreement between the Debtors and Massey was negotiated by broker, David Callaghan, who was engaged by the late Chief Executive Officer of Lady H, William Post. Mr. Callaghan’s engagement as a professional broker in the case was not noticed to creditors and did not receive court approval at any time, pursuant to the provisions of 11 U.S.C. § 327. However, from the testimony of Mr. Callaghan, it is clear that Mr. Callaghan sought to interest other potential purchasers to no avail, including certain NBCWA signatory operators, Pittston and Consolidated Coal.

The Court finds that little effort was made by the Debtors’ officers or broker prior to filing this motion to explore the possibility of Massey or any other purchaser agreeing to assume the Debtors’ collective bargaining agreement or enter into a collective bargaining agreement with the bargaining representative for employees, and that such was not consistent with the requirements of Article I of the NBCWA. The sales agreement negotiated by the Debtors with Massey require the Debtors to terminate its mining operations and deliver an idle operation to the purchaser. The recent shutdown of the Debtors’ operations is a result of operating and cash flow problems and the Court does not believe the Debtors’ shutdown was contrived by the Debtors and Massey in order to enhance the possibility of the potential sale.

The proposal to purchase substantially all the Debtors’ assets would bring substantial value to creditors in this case, especially the secured, landlord, and employee creditors. If power to the mines is cut off and mines flood or other damage occurs, the Court believes the value of the Debtors’ property would greatly diminish. Further, the Debtors have coal contracts of some value which will diminish over a short period of time. Despite the assertions of the UMWA, the Court finds that no party has offered evidence that the value of the sale to the bankruptcy estates is not fair and reasonable nor has anyone raised any serious question with respect to the alternatives available to the Debtors to continue its operations. In fact, Austin Caperton testified and provided a “fairness opinion” as to the reasonableness of Massey’s offer based upon review of certain records and financial information of the Debtors including coal reserve and cash flow estimates of the properties if operating problems were resolved. Mr. Caperton’s view as to the limited value of the Debtors’ preparation plant and mining equipment was based on equipment downtime reports and reports as to the production problems at the preparation plant. The Court finds that such observations are credible and consistent with testimony of other professionals and the assertions of secured creditors throughout the duration of these cases. Even though Mr. Caperton worked for Massey several years ago, the Court believes his testimony is credible as it relates to the fairness of the $7,000,000 offer.

*240 The total value to be received by the bankruptcy estates could be as much as $7,000,000 plus the assumption of major environmental liabilities. The purchase price consists of $8,500,000 to be paid upon closing and the remaining $3,500,00, subject to offsets, to be paid over twenty-four equal monthly installments with interest on the outstanding balance at five and one-half percent (5jé%) per annum. Prior to filing the motion to sell, an agreement of continued employment for the two remaining officers of the Debtors in the form of one year consulting agreements with Massey was negotiated in the amount of $150,000 for each officer. In addition, the Estate of William Post is selling land to Massey in conjunction with this transaction, but the testimony of Mr. Callaghan revealed that Mr. Post’s estate is only receiving an amount equal to what Mr. Post paid for the property.

CONCLUSIONS OF LAW

A. Debtors’ Request for Rejection of Collective Bargaining Agreement is Denied as the Debtors have Failed to Meet the Substantive Requirements of § 1113 of the Bankruptcy Code.

The provisions of 11 U.S.C. § 1113 require a debtor in possession to honor the terms of collective bargaining agreements and provides a process for courts to approve modification or rejection of those agreements if said modification or rejection is necessary to preserve the reorganizing opportunities of debtors. By previous Memorandum Opinion and Order, this Court found that a collective bargaining agreement (“CBA”) may be rejected in contemplation of the sale of a substantial portion of a debtor’s assets as such sale is effectively the reorganization plan of a debtor. See In re Maxwell Newspapers, Inc., 146 B.R. 920 (Bankr.S.D.N.Y.), aff'd in part and rev’d in part, 149 B.R. 334 (S.D.N.Y.), aff'd in part and rev’d in part, 981 F.2d 85 (2d Cir.1992).

The present relief sought by the Debtors’ Motion to reject the CBA seeks Court authority to permit the Debtor to close the sale negotiated with Massey and save it from the consequences of a potential breach of its existing contract with the UMWA. Further, the present motion to reject the CBA lacks certain substantive requirements which are a predicate for the Court to grant a rejection of a CBA. The Bankruptcy Code in § 1113(b) provides:

(1) Subsequent to filing a petition and pri- or to filing an application seeking rejection of a collective bargaining agreement, the debtor in possession ... shall—

(A) make a proposal to the authorized representative of the employees covered by such agreement, based on the most complete and reliable information available at the time of such proposal, which provides for Those necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably; and

(B) provide ... the representative of the employees with such relevant information as is necessary to evaluate the proposal.

(2) During the period beginning on the date of the making of a proposal provided in paragraph (1) and ending on the date of the hearing provided for subsection (d)(1), the trustee shall meet, at reasonable times, with the authorized representative to confer in good faith in attempting to reach mutually satisfactory modifications of such agreement.

In this case, after hearings conducted on January 17th and 18th, the Debtors filed its Second Amended Motion on January 22, 1996 which included a provision to reject the CBA. The evidence from the February 5, 1996 hearing revealed that the Debtors requested a modification of the CBA by letter to the UMWA International and District 29 on January 19,1996 [Debtors’ Exhibit No. 3]. Negotiations, including counter-proposals and a nine (9) hour meeting between the Debtors and Union, were conducted up until the hearing on February 5,1996. The Court finds that the Debtors procedurally satisfied the requirements of 11 U.S.C. § 1113(b) by making proposals and meeting with UMWA representatives in order to reach agreement to modify the CBA prior to seeking its rejee *241 tion. However, the requirements imposed by § 1113(b) prior to rejection of a CBA are both procedural and substantive. In re Pierce Terminal Warehouse, Inc., 133 B.R. 639, 646 (Bankr.N.D.Iowa 1991).

In this case, it is not clear from the evidence presented that the late proposal made by the Debtors was fair and equitable to the union employees as is required by § 1113(b)(1)(A) and that the Debtors negotiated in good faith pursuant to § 1113(b)(1)(B). Not until the Debtors were obligated to Massey, subject only to bankruptcy court approval, did the Debtors seek a modification of the CBA. This modification was first sought following the filing of the Second Amended Motion to Sell and was apparently sought to comply with the procedural requirements of § 1113.

Many courts utilize a nine part test as developed in In re American Provision Co., 44 B.R. 907 (Bankr.D.Minn.1984) to determine if a debtor has satisfied the requirements of § 1113(b) of the Bankruptcy Code. In re Appletree Markets, Inc., 155 B.R. 431, 438 (S.D.Tex.1993); In re Carey Transp., Inc., 50 B.R. 203, 207 (Bankr.S.D.N.Y.1985), aff'd, 816 F.2d 82 (2d Cir.1987); In re Walway Co., 69 B.R. 967, 972 (Bankr.E.D.Mich.1987); In re Indiana Grocery Co. Inc., 136 B.R. 182, 191 (Bankr.S.D.Ind.1990); In re Express Freight Lines, Inc., 119 B.R. 1006, 1011 (Bankr.E.D.Wis.1990); In re Blue Diamond Coal Company, 131 B.R. 633, 643 (Bankr.E.D.Tenn.1991); In re GCI, Inc., 131 B.R. 685, 690 (Bankr.N.D.Ind.1991); In re Alabama Symphony Ass’n, 155 B.R. 556, 573 (Bankr.N.D.Ala.1993). The test includes the following factors:

1. The debtor in possession must make a proposal to the Union to modify the collective bargaining agreement.

2. The proposal must be based on the most complete and reliable information available at the time of the proposal.

3. The proposed modifications must be necessary to permit the reorganization of the debtor.

4. The proposed modifications must assure that all creditors, the debtor and all of the affected parties are treated fairly and equitably.

5. The debtor must provide to the Union such relevant information as is necessary to evaluate the proposal.

6. Between the time of the making of the proposal and the time of the hearing on approval of the rejection of the existing collective bargaining agreement, the debt- or must meet at reasonable times with the Union.

7. At the meetings the debtor must confer in good faith in attempting to reach mutually satisfactory modifications of the collective bargaining agreement.

8. The Union must have refused to accept the proposal without good cause.

9. The balance of the equities must clearly favor rejection of the collective bargaining agreement.

In re American Provision Co. at 909.

As the Court finds that the Debtors have not met elements (4), (7) and (9) above for the reasons set forth below, it is not necessary to address any of the other elements. Based upon this finding, this Court cannot reject the CBA under § 113 of the Bankruptcy Code as the Debtors have failed to make a proposal that satisfies the requirements of subsection (b)(1) and the balance of equities does not favor the rejection of the CBA.

Section 1113(c) of the Bankruptcy Code states:

The court shall approve an application for rejection of a collective bargaining agreement only if the court finds that—

(1) the [debtor in possession] has, prior to the hearing, made a proposal that fulfills the requirement of subsection (b)(1);

(2) the authorized representative of the employees has refused to accept such proposal without good cause; and

(3) the balance of the equities clearly favors rejection of such agreement.

A debtor is required to demonstrate to the court that “all creditors, the debtor and all affected parties are treated fairly and equitably.” The Bankruptcy Code under § 327 requires that Chapter 11 debtors are required to disclose the engagement of a broker or other professional, it either *242 engages or authorizes to conduct sale negotiations on its behalf. These requirements are for the purpose of giving creditors an opportunity to learn of the duty undertaken by the professional broker or sales agent and provide an opportunity for creditors to investigate the disinterestedness of such person. It further provides creditors with notice and an opportunity to participate in whatever process a debtor engages in to find a suitable buyer. Failure of the Debtors to notice creditors or seek approval of the engagement of David Callaghan by its late Chief Executive Officer, William Post, was a violation of the Debtors’ duties under Chapter 11 of the Bankruptcy Code and inequitable to the creditors at large in these bankruptcy cases, including, and most importantly, the employee creditors.

Inequitable treatment of employee creditors is also demonstrated by the future compensation negotiated by the officers in the form of consulting and non-compete agreements which totals $150,000 per officer. The Court is sympathetic to the potential personal liabilities of the officers created by certain corporate obligations but believes the structuring of a transaction to attempt to minimalize such liabilities at the cost of the rights of the represented employees is unjust. Such compensation is far greater than the court authorized post-petition salaries. This compensation, in light of the officers total disregard for other employees of the Debtors, is unacceptable, although the Court does not dispute the fact that the purchaser is entitled to hire management as it chooses. For these reasons, the Court finds that any compensation to be paid under the consulting and noncompete agreements appear to be property of the estate and shall be held in trust by counsel for Debtors on the condition that any officer, creditor or purchaser may submit motion or application to the Court for release of such funds by showing a legal right to such.

Other courts reviewing the issue of fair and equitable treatment between employees, creditors, and the debtor have generally found that equitable treatment does not mean equivalent dollar for dollar treatment, but means fairness depending upon the facts of the situation. In In re Indiana Grocery Co., Inc., the bankruptcy court was faced with the issue of the debtor’s top management taking no reduction in salaries and receiving bonuses while at the same time attempting to reject the CBA. The court found that, in light of the serious financial problems, the debtor failed to demonstrate that managers and creditors were bearing their share of the burden in the debtor’s reorganization, and accordingly, the court disallowed rejection of the CBA. Id. at 195.

“The equities relate to the success of the reorganization” as burdens must be shared by workers, management and creditors with no group favored over the other. In re Express Freight Lines, Inc., 119 B.R. at 1017. This Court has found that the Debtors’ motion to sell substantially all assets is essentially the Debtors’ plan of reorganization. This form of reorganization does not mean a debtor can shortcut its duties or take unfair advantage of any particular group, as in this case, the employees.

The Court finds that a debtor has a duty under § 1113 to not obligate itself prior to negotiations with its union employees, which would likely preclude reaching a compromise. “Good faith bargaining is conduct indicating an honest purpose to arrive at an agreement as the result of the bargaining process”. Matter of Walway Co., 69 B.R. at 973. In this case, the Debtors could not have bargained in good faith as the Debtors were, prior to any negotiations with the union, locked into at an agreement where the purchaser was not assuming the NBCWA. Also, see Matter of GCI, Inc., 131 B.R. at 693. Further, there is evidence in this case that the officers did not pursue a possible sale to another buyer who was willing to assume the NBCWA.

The “balancing of equities” factor derives from the standard enunciated in NLRB v. Bildisco, 465 U.S. 513, 104 S.Ct. 1188, 79 L.Ed.2d 482 (1984). One such equitable consideration by courts is the “good or bad faith of the parties in dealing with the debtor’s financial dilemma”. Truck Drivers Local 807 v. Carey Transp. Inc., 816 F.2d 82, 91 (2d Cir.1987). For the reasons set forth above, the balancing of equities favors not rejecting *243 the CBA. Accordingly, this Court has no alternative but to deny the Debtors’ motion for rejection of its collective bargaining agreement.

Therefore, the UMWA employees or any other party with the right to assert claims based on a breach of a CBA will be given twenty (20) days from the date of the sale to file a damage claim for breach of the NBCWA and such claim shall be a post-petition administrative claim. It does not appear that Former Sewell Employees are entitled to damages upon the same basis as existing employees because no evidence has been presented that the Former Sewell Employees are a party to the NBCWA. For these reasons, the Debtors’ request for rejection of the CBA is denied, and objections of the UMWA, UMWA Funds and Former Se-well Employees to the rejection of the CBA are sustained.

B. Debtors’ Motion Sale Free and Clear of Any Interest is Granted as it Provides the Only Means to Provide Payment of Creditor and Employee Claims and Will Serve the Community Interest in Protecting the Possibility of Employment at These Mines.

The Court believes that a sale free and clear of any interest should be granted as the pre-confirmation sale represents the only viable alternative and the sale may occur free of any interest pursuant to § 363(f) of the Bankruptcy Code. Parties-in-interest who submitted final arguments in support of the Debtors’ motion to sell include: United Coal Company, Westvaeo, New Gauley, Caterpillar and Clarendon. Parties-in-interest who object to the sale include the UMWA, the 1992 Plan, UMWA Funds and Former Sewell Employees.

(1)Pre-Confirmation Sale of Substantially All of the Debtors’ Assets is Permissible and Provides the Only Assurance of Payment to Employee, Secured and Other Creditors.

The Debtors have proposed a sale of substantially all assets pursuant to 11 U.S.C. § 363(b)(1), which states “the [debtor in possession], after notice and hearing, may use, sell or lease, other than in the ordinary course of business, property of the estate.” Even though the Court found it not proper to permit rejection of the CBA, it does not follow that the Court is required or permitted to deny the Debtors’ motion to sell. Events subsequent to the filing of the Debtors’ motion and the interest of other creditors require consideration based upon the standards of § 363(b). Most importantly the Court must consider the relative equities to all parties-in-interest, especially in light of the fair and reasonable offer presented by Massey. The Court believes that sales under § 363(b) provide protection to objecting parties as such objections or claims may attach to the proceeds of such sale. Employee creditors are protected by the right to file claims for breach of the NBCWA with such damages to be satisfied by payments from the proceeds of sale.

Sales such as the proposed transaction in this case may occur pre-confirmation if “a sound business purpose dictates such action.” In re Lionel Corp., 722 F.2d 1063, 1071 (2d Cir.1983). Such test is satisfied if the following elements are demonstrated by the debtor: “(1) a sound business reason or emergency justifies a pre-confirmation sale; (2) a sale has been proposed in good faith; (3) adequate and reasonable notice of the sale has been provided to parties-in-interest; and (4) the purchase price is fair and reasonable.” In re WBQ Partnership, 189 B.R. 97 (Bankr.E.D.Va.1995), citing, In re Delaware & Hudson Railway Co., 124 B.R. 169, 176 (D.Del.1991).

It is undisputed that the Debtors’ post-petition losses are enormous with the only viable options being a sale of the assets or infusion of working capital from a third party. Post-petition losses have culminated in a cash flow emergency for the Debtors which finally resulted in the shutdown of mining operations a little over a week ago. As is true in most corporate reorganizations, there is no single reason why a business fails. In the coal industry, there are many reasons and those that contributed to failure in these cases are typical of the reasons that contribute to the failure of many coal businesses. As a review of the claims register and docket *244 will reveal, the Debtors have been unable to keep current with a variety of accounts payable, notes payable, fees and taxes. Low productivity and an inefficient preparation plant finally took its toll on the Debtors. In addition to the normal operating problems, the Debtors were facing unusual weather interruptions and unavailability of railroad cars. In hearings unrelated to the present motion, the Debtors have informed the Court they have had to seek an emergency order to keep the electric power on in the mines and have ceased all coal production. The Debtors are now attempting to collect receivables to maintain the electric power. Without power to the mines, flooding or other damage of valuable mining equipment will occur and may make reentry into the mines uneconomical. For the reasons set forth above, the Court finds that the Debtors’ business judgment is justified in seeking a sale of the major portion of assets as any hope of eliminating losses and rehabilitating operations appear unrealistic.

Notice of the proposed sale is in full compliance with Bankruptcy Rule 6004 as notice has been provided to all parties-in-interest. The Court has provided additional time beyond the original deadline of January 16, 1996 for objecting parties to attract buyers who may be interested in submitting an upset bid or filing a plan of reorganization that would assume the NBCWA or negotiate with the Debtors’ union employees.

The UMWA argues that the purchase price is unfair and unreasonable, but has not been able to entice Chicopee or any other party to purchase the Debtors’ assets on any terms. The Court finds that the Debtors presented sufficient evidence as to the value of these assets on a going concern basis and the existing offer of Massey is greater than the liquidation value of the assets. The UMWA did not present any independent appraisers or appraisals that the value of assets being sold is greater than the offer of Massey. Therefore, the Court finds that the purchase price for these assets as offered by Massey is fair and reasonable and that the Court would subject other creditors-to risk of complete or substantial loss by failure to approve the proposed sale.

The “good faith” element under § 368(b) requires a bankruptcy court to make a finding with respect to the “good faith” of the purchaser. In re Abbotts Dairies, Inc., 788 F.2d 143 (3d Cir.1986). The Third Circuit found:

Unfortunately, neither the Bankruptcy Code nor the Bankruptcy Rules attempts to define ‘good faith’_ ‘The requirement that a purchaser act in good faith ... speaks to the integrity of his conduct in the course of the sale proceedings. Typically, the misconduct that would destroy a purchaser’s good faith status at a judicial sale involves fraud, collusion between the purchaser and other bidders or the trast-ee, or an attempt to take grossly unfair advantage of other bidders.’

Id. at 148, quoting, In re Rock Indus. Mach. Corp., 572 F.2d 1195, 1198 (7th Cir.1978).

There is nothing in this record that Massey, as a proposed purchaser of substantially all of the Debtors’ assets, did not provide its offer in good faith. Objecting creditors have failed to demonstrate that Massey’s offer was motivated by fraud, collusion or attempt to take unfair advantage of other bidders. In fact, it appears that Massey performed its due diligence, without regard or influence of other potential bids, by determining the amount of fixed capital investment, estimating the amount of remaining coal reserves and potential additional coal reserves, formulating economic projections, and making a proposal to the Debtors in the form of a letter of intent.

The Debtors’ business broker marketed the Debtors’ assets to other major coal companies, including those who are signatories under the NBCWA, Pittston and Consolidated Coal. However, such companies declined to submit bids on the assets. Additionally, although the officer of Chicopee, Paul Moran, testified that the officers of the Debtors did not fully cooperate in providing information as requested, the Court granted Chicopee additional time to submit an offer, required updated financial information to be provided, and gave notice to all creditors who have objected to the Massey sale of the right they have to propose a plan for a sale of the assets. Therefore, this Court must now dis *245 count such testimony as it relates to consideration of a sale under § B63 of the Bankruptcy Code, as Chicopee has not made an offer which the Court can consider nor have objecting creditors joined with Chicopee to file a plan of reorganization or competing purchase offer.

The Debtors have not been presented with any viable alternative offers despite marketing the properties for approximately four to five months. If the employee or other objecting creditors had been able to submit a purchase offer or file a plan of reorganization in connection with Chicopee, the Court would have other alternatives to consider other than the sale to Massey. However, there is only one alternative on the table and this Court finds that this sale is proposed in “good faith” as required by § 363 of the Bankruptcy Code.

One of the overwhelming themes throughout bankruptcy law is providing the maximum opportunity for Chapter 11 debtors to reorganize their business affairs so as to continue operations and preserve employment. Neither the creditors or shareholders of the Debtors are able to invest the necessary capital to recapitalize these mines, and the only other alternative to this sale is the piecemeal liquidation of assets which is unlikely to yield the same return to these estates. Further, Massey has stated that it expects to operate the mines, employ people in the community, and make substantial capital expenditures to improve the productivity of the property. Massey has further committed to consider all existing employees for hire and to retain no fewer than 25% of the existing work force. See “Stipulation of Massey.” This is not the commitment existing employees want but it is a commitment that is within the rights of a purchaser who will have invest several million dollars to resume production.

Accordingly, the Court finds that the pre-confirmation sale of substantially all of the Debtors’ assets is justified, meets the business judgment test and is the only viable alternative. A sale to Massey provides the only opportunity for future employment as it relates to these coal reserves and a substantial capital infusion into the facilities being acquired that could reach $15 million. If the Debtors conv