NEW YORK — The Leslie Fay Cos. scored a victory in its battle with the ILGWU Tuesday, when a bankruptcy judge here ruled the apparel manufacturer did not have to maintain 1,000 jobs at several plants through May 1995.
In a 23-page opinion, Bankruptcy Judge Tina L. Brozman ruled that Leslie Fay’s agreement with the union — reached after the firm filed Chapter 11 — guaranteeing jobs for the ILGWU workers in its Wyoming Valley, Pa., facilities was unenforceable because it fell outside the ordinary course of business and wasn’t approved by the court.
Under bankruptcy law, any post-petition agreement that is outside the normal course of business must receive bankruptcy court approval before it can go into effect.
The ILGWU and Leslie Fay have been battling since the manufacturer, in a move aimed at cutting manufacturing costs, announced March 30 that it planned to close all its U.S. manufacturing facilities.
The battle between the two sides intensified when they failed to reach an agreement on a new three-year labor contract and the ILGWU, on June 1, went out on strike.
Leslie Fay employs 2,320 ILGWU members at several Pennsylvania facilities. Leslie Fay filed a Chapter 11 petition on April 5, 1993, following an accounting scandal that overstated profits by $81 million over three years.
Last week, Leslie Fay said it had closed its Pennsylvania dress plants involved in the agreement and did not plan to reopen them unless a new contract with the union required the company to do so.
The 1,000-1,200 jobs, agreed to by both sides in an amendment to the 1991 three-year labor contract, became an issue when the union sought an arbitrator’s ruling solidifying the deal. In exchange for the job guarantees in the agreement with Leslie Fay, the union agreed to switch to a 35-hour work week from a 40-hour week.
The arbitrator ruled the agreement enforceable, but Judge Brozman overruled the arbitrator in Tuesday’s decision. Michael J. Babcock, Leslie Fay’s president and chief operating officer, said in a statement that the court “has made it clear that we are under no legal obligation to provide job guarantees.”
Babcock added that the decision “enables management to take the steps necessary to return Leslie Fay to profitability.”
Responding to the ruling, the ILGWU Tuesday called Judge Brozman’s decision “irrelevant” and promised that the jobs they are fighting to save “will be won with the strike and not by a bankruptcy court.” However, he said, the union was planning to prepare an appeal to the District Court in Manhattan.
“This is the kind of fight that has to be fought on every front,” the spokesman said.
Babcock said the company is convinced that the “painful but necessary decision to close our unprofitable plants in Pennsylvania will ultimately be to the benefit of our creditors, shareholders, customers, communities, and more than 1,500 union and non-union employees.”
The ILGWU spokesman also noted that the union will seek to win from an arbitrator back pay and damages based on Leslie Fay enforcing only the parts of the agreement that were favorable to Leslie Fay.
Meanwhile, the ILGWU said Tuesday it has again asked major retailers to stop selling Leslie Fay products and “to avoid the problems associated with doing business with Leslie Fay.”
The Leslie Fay spokesman described the union’s action as “a move of desperation.”
In a letter dated June 17 to 56 retailers, Jeff Hermanson, organizing director of the ILGWU, charged the strike has forced Leslie Fay to close major facilities, paralyzed critical distribution operation, slashed sales and has delayed fall deliveries. In a letter sent at the start of the strike, the union had also urged stores to stop selling the company’s products.
The latest letter said the boycott call against two targeted stores — Boscov’s, a department store chain primarily operating in Pennsylvania, and Saks Fifth Avenue — has been “highly effective.” But the retailers had a different spin on the situation.
At Boscov’s in Reading, Pa., chairman Edward Lakin said all Leslie Fay garments were removed from its Scranton store but placed in other stores. He said he did not know the amount or value of the merchandise that was transferred. Lakin said the decision to move the goods was made a couple of weeks ago.
“We thought many people in the Wilkes-Barre area [close to Scranton] were affected by the actions of Leslie Fay, so we decided to take the goods out of the area,” he said.
The ILGWU letter said “there are virtually no Leslie Fay garments left in Boscov’s stores.”
Lakin said Boscov’s management will continue to review the strike situation but no decision has been made to boycott Leslie Fay. He said the company has been speaking with the ILGWU, but he personally has not been involved with the discussions.
Although 20 Saks units have been leafleted by the union and, according to the union, the action has received “strong media attention,” Saks still carries some Leslie Fay merchandise in its stores, a spokeswoman said.
“We let our buying be dictated solely by the demands of our customers,” she said.
According to Hermanson’s letter, Chicago-based Montgomery Ward informed the union that it is no longer selling garments made by Leslie Fay or its Sassco division. But a spokeswoman said Montgomery Ward has not sold Leslie Fay products for the past two years.
“Clearly, the ILGWU lost a major battle in the courts today and they’re attempting to distract attention from that,” said a Leslie Fay spokesman. “It’s a move of desperation.