in Re: Allegheny Health, Education v. National Union of Hospital and Health Care Employees, Afscme, Afl- Cio, District 1199c

1
PRECEDENTIAL
UNITED STATES COURT OF
APPEALS
FOR THE THIRD CIRCUIT
_______________
Nos. 03-2085, 03-2193
_______________
IN RE: ALLEGHENY HEALTH,
EDUCATION
AND RESEARCH FOUNDATION;
ALLEGHENY UNIVERSITY OF
THE HEALTH SCIENCES;
ALLEGHENY UNIVERSITY
MEDICAL PRACTICES;
ALLEGHENY HOSPITALS;
CENTENNIAL AND ALLEGHENY
UNIVERSITY HOSPITALS-EAST
TENET HEALTHSYSTEM
PHILADELPHIA, INC.,
Appellant in No. 03-2193
v.
NATIONAL UNION OF HOSPITAL
AND HEALTH
CARE EMPLOYEES, AFSCME, AFL-
CIO,
DISTRICT 1199C,
Appellant in No. 03-2085
WILLIAM J. SHARFFENBERGER,
Trustee
On Appeal from the United States
District Court
for the Western District of Pennsylvania
(D.C. Civil No. 01-cv-01714)
District Judge: Honorable Donald E.
Ziegler
_____________
Argued: March 22, 2004
Before: FUENTES, SMITH and JOHN
R. GIBSON,* Circuit Judges.
(Filed: September 20, 2004)
For Appellee/Cross Appellant:
Beverly W. Manne (ARGUED)
Tucker Arensberg
1500 One PPG Place
Pittsburgh, PA 15222
Raymond W. Thomas
Richard S. Zuniga
Hill, Farrer & Burrill
300 South Grand Avenue
37th Floor
Los Angeles, CA 90071
For Appellant/Cross Appellee:
Gail Lopez-Henriquez (ARGUED)
Freedman & Lorry
400 Market Street
9th Floor
Philadelphia, PA 19106
*The Honorable John R. Gibson,
United States Court of Appeals for the
Eighth Circuit, sitting by designation.

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_______________________
OPINION OF THE COURT
_______________________
JOHN R. GIBSON, Circuit Judge:
District 1199C of the National
Union of Hospital and Health Care
Employees and Tenet HealthSystem
Philadelphia, Inc., each appeal from the
district court's1 order vacating an
arbitration order in part and dismissing
Tenet's suit to vacate the other part of the
arbitration order. We will affirm in part
and remand in part for entry of judgment
in favor of District 1199C.
This case arises at the intersection
of the bankruptcy and labor laws. The suit
was filed as an adversary proceeding in the
Chapter 11 bankruptcy of Allegheny
H ealth, Educ ation and R esearc h
Foundation and related entities,2 which
owned a number of hospitals in
Philadelphia. Employees at four of the
hospitals were represented by District
1199C and were covered by collective
bargaining agreements. Tenet purchased
substantially all the assets of these
hospitals in a transaction approved by the
bankruptcy court3 under 11 U.S.C. §§ 105,
363 and 365 (2000). Tenet and District
1199C now contest whether Tenet is
bound to pay sick leave benefits under the
collective bargaining agreements between
District 1199C and Allegheny.
After Allegheny filed bankruptcy,
Tenet and Allegheny entered an agreement
for Tenet to purchase Allegheny's assets
and, later, an amendment to the agreement,
with a closing date of November 10,
1998.4 Under the asset purchase
agreement, Tenet assumed some liabilities
of Allegheny and disclaimed other
liabilities, which remained the obligation
of the bankruptcy estate. In particular, the
agreement contained a list of "Assumed
Contracts" in Schedule 2.01(e), which
Allegheny, as debtor-in-possession, would
assume and assign to Tenet. The
collective bargaining agreements between
Allegheny and District 1199C were listed
on Schedule 2.01(e).5 The asset purchase
1The Honorable Donald E. Ziegler,
United States District Judge for the
Western District of Pennsylvania.
2The related entities are Allegheny
University of the Health Sciences,
Allegheny University Medical Practices,
Allegheny Hospitals, Centennial, and
Allegheny University Hospitals-East. We
will refer to the debtors collectively as
"Allegheny."
3The Honorable M. Bruce
McCullough, Bankruptcy Judge for the
Western District of Pennsylvania.
4The sale actually closed on
November 11, 1998.
5We have searched the record in
vain for a copy of the elusive Schedule
2.01(e). The asset purchase agreement is
reproduced in the record with a note
stating that schedules are attached to the

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agreement defined "Assumed Liabilities"
as including (inter alia) "all obligations of
Sellers arising on or after the Closing Date
with respect to any period commencing on
the Closing Date under the Assumed
Contracts." Conversely, the asset purchase
agreement contained a list of "Excluded
Liabilities" for which Tenet would not
become liable; one item excluded was
"liabilities or obligations arising from any
Assumed Contract before the Closing Date
or resulting from any breach or default
prior to the Closing Date of any Assumed
Contracts or other Assumed Liabilities . .
. ." The asset purchase agreement also
contained a section labeled, "5.03,
Employee Matters," in which Tenet agreed
to bargain w ith unio ns currently
representing Allegheny's employees but
with the following proviso: "Employees
employed under written Contracts will not
be offered employment pursuant to this
Section, but employment of such
employees shall be governed by the terms
of the Assumed Contracts, if any, relating
to such employees."
Allegheny moved in the bankruptcy
court for an order approving the asset
purchase agreement under 11 U.S.C. §§
105, 363, and 365. District 1199C
received notice of the motion and the
hearing on the motion. In two sale orders
dated October 1 and 30, 1998, the
bankruptcy court approved the asset
purchase and assignment of the assumed
contracts to Tenet and ordered the non-
debtor parties to the assumed contracts to
assert any claims for existing defaults
against Allegheny in the bankruptcy or
else to be barred from asserting the claims.
The sale closed on November 11, 1998.
amended agreement, but they are not. The
bankruptcy court stated that District
1199C's collective bargaining agreements
were on the schedule: "Unfortunately for
Tenet, the Court concludes that the
[collective bargaining agreements] are
'Assumed Contracts' within the meaning of
the [asset purchase agreement], which
conclusion is dictated because (a)
'Assumed Contracts' is defined in the
[asset purchase agreement] as 'the
Contracts described in Schedule 2.01(e) as
the same may be amended by Buyer [(i.e.,
Tenet)] as permitted by the Court,' and (b)
the [collective bargaining agreements] are
described as Assumed Contracts in the
initial Schedule 2.01(e), the Amended
Schedule 2.01(e), and the Second
Amended Schedule 2.01(e)." Tenet
HealthSystem Philadelphia, Inc. v. Nat'l
Union of Hosp. & Health Care Employees,
AFSCME, AFL-CIO, District 1199C (In re
Allegheny Health, Educ. and Research
Found.), 265 B.R. 88, 102 (Bankr. E.D.
Pa. 2001) (citations omitted). Tenet does
not dispute this statement of a key fact.
Moreover, District 1199C attached to its
reply brief Tenet's proposed schedule of
executory contracts to be assigned to Tenet
as part of the asset purchase agreement,
which includ es sev eral co llective
bargaining agreements. Therefore, we can
only assume that the District 1199C
collective bargaining agreements are
indeed found on the relevant Schedule
2.01(e).

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After the sale closed, Tenet and
District 1199C took opposing positions
about what the terms of employment
would be for District 1199C members.
Tenet offered to credit the members with
40 hours of accrued sick leave, which it
later conditioned upon District 1199C
agreeing to eliminate leave pay
prospectively for the first day of any
absence. District 1199C rejected the
prospective elimination of pay for the first
day of an absence, and Tenet responded by
refusing to credit members with any
accrued sick leave.
District 1199C filed a grievance
accusing Tenet of refusing to abide by the
terms of the collective bargaining
agreements. The grievance proceeded to
arbitration on the following questions:
"Did the Employer violate the collective
bargaining agreements by refusing to pay
employees sick leave starting with the first
day of absence and by refusing to pay
employees accumulated sick leave? If so,
what shall be the remedy?" Tenet
maintained the position that the grievance
was not arbitrable, but it participated in the
hearing, preserving its objection for
judicial review. The arbitrator observed
that the issue of arbitrability was reserved
for judicial determination and that his
powers were limited to interpreting the
collective bargaining agreements signed by
Allegheny and District 1199C. He
concluded that those agreements provided
for accrued sick leave and payment for the
first day of leave, as requested by District
1199C. Accordingly, he ordered Tenet to
pay sick leave that had accumulated before
November 11, 1998, and to pay employees
sick leave for the first day of each absence.
Tenet notified Allegheny's trustee
that it considered Allegheny liable to
indemnify Tenet under the asset purchase
agreement for the cost of the arbitration
award. The asset purchase agreement
provided that Allegheny would indemnify
Tenet against any loss due to excluded
liabilities, and Tenet contended that the
liability for accrued sick leave was an
excluded liability.
Tenet then brought this suit in the
bankruptcy court. Count I sought vacatur
of the arbitration award on the grounds
that the dispute was not arbitrable and that
it fell within the exclusive jurisdiction of
the bankruptcy court. For convenience's
sake, we will refer to the part of Count I
concerning the accrued sick leave
obligation as Count IA and the part
concerning the prospective sick leave
obligation as Count IB.6 Count II sought
indemnity from the Allegheny bankruptcy
6The prayer for relief in the First
Amended Complaint does not explicitly
ask for relief from the award of
prospective sick leave under the collective
bargaining agreements. However, Tenet
characterizes its suit as seeking vacatur of
the arbitrator's prospective sick leave
ruling, the bankruptcy court so considered
it, and District 1199C does not object.
There is a general prayer for relief which
could be broad enough to include relief
from the award of prospective relief, and
we will so treat it.

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estate for $4,500,000, which Tenet
estimated as the cost to it of complying
with the arbitrator's award. District 1199C
counterclaimed, seeking enforcement of
the arbitration award, both as to accrued
and prospective sick leave obligations.
The bankruptcy court held that the
terms of the asset purchase agreement
were binding on District 1199C by
collateral estoppel because "the Union,
although it received notice of the [asset
purchase agreement] and the hearings to
approve the same, failed to object at such
hearings to the Court's approval of the
[asset purchase agreement] and, in
particular, to the Court's approval of
Tenet's incomplete assumption [of the
collective bargaining agreements]." Tenet
HealthSystem Philadelphia, Inc. v. Nat'l
Union of Hosp. & Health Care Employees,
AFSCME, AFL-CIO, District 1199C (In re
Allegheny Health, Educ. and Research
Found.), 265 B.R. 88, 112 (Bankr. E.D.
Pa. 2001). The bankruptcy court construed
the asset purchase agreement to include a
partial assignment of the District 1199C
collective bargaining agreements to Tenet.
District 1199C argued that the asset
purchase agreement could not have
contemplated a partial assignment, because
a partial assignment would not have been
legal. The court reasoned that under the
common law of assignment of contracts,
the assignor and assignee can divide
among themselves responsibility for
performing the duties to the obligee. The
bankruptcy court held that Allegheny
could assign the benefits of the collective
bargaining agreements to Tenet without
assigning all of the obligations, in which
case Allegheny as debtor-in-possession
would remain liable for the obligations.
Id. at 113-14.
Notwithstanding the common law,
the bankruptcy court acknowledged that 11
U.S.C. § 1113 governs rejection of
collective bargaining agreements by a
debtor-in-possession. The bankruptcy
court considered the partial assignment of
the collective bargaining agreements in
connection with the sale of Allegheny's
assets to be a possible violation of 11
U.S.C. § 1113(f) by Allegheny (not by
Tenet). 265 B.R. at 116-17. However, the
bankruptcy court held that this possible
violation of § 1113(f) would not render
Tenet liable for the accrued sick leave
because District 1199C did not raise a §
1113 objection when the court was
deciding whether to approve the asset
purchase agreement, and even if District
1199C had objected, the appropriate relief
would not have been to impose such
liability on Tenet. Id. at 117.
The bankruptcy court found that
under the asset purchase agreement, Tenet
assumed the collective bargaining
agreements, but only the obligations that
arose after November 10, 1998. Id. at 105.
Therefore, Tenet was not liable for the
accrued sick leave obligation, but it was
liable for the prospective sick leave
obligation. Id. at 118. Accordingly, the
bankruptcy court granted Tenet summary
judgment as to Count IA, vacating the
arbitration award of accrued sick leave
benefits. Id. at 94. As to Count IB, which
sought vacatur of the award of prospective

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leave benefits, the bankruptcy court held
that Tenet had assumed liability under the
asset purchase agreement for the
prospective sick leave obligation. This
being so, the bankruptcy court reasoned
that Tenet's indemnity claim was
unfounded and should not result in
recovery from the bankruptcy estate. The
court reasoned that if the claim could not
affect the bankruptcy esta te, the
bankruptcy court therefore lacked subject
matter jurisdiction over Count IB. Id. at
118-19. On this reasoning, the court
dismissed Count IB. Id.
The resolution of Count II, the
indemnity count, followed from the
resolution of Count I. As to the part of
Count II seeking indemnity for the accrued
leave obligation, the bankruptcy court
dismissed Tenet's claim without prejudice
as moot, because the court's holding on
Count IA eradicated Tenet's claim for
indemnification. Id. at 127. As to the part
of Count II seeking indemnification for the
prosp ective leave oblig ation, th e
bankruptcy court reasoned that since Tenet
assumed the prospective obligation, the
bankruptcy estate was not liable for it;
accordingly, the bankruptcy court entered
summary judgment for the trustee and
against Tenet on that part of Count II. Id.
at 128.
The district court affirmed the
bankruptcy court. Both District 1199C
and Tenet appeal.
I.
Appellate jurisdiction over this
appeal is founded on 28 U.S.C. §§ 158(d)
and 1291 (2000). Because this case was
decided on summary judgment, it involves
only questions of law, which we review de
novo. American Flint Glass Workers
Union v. Anchor Resolution Corp., 197
F.3d 76, 80 (3d Cir. 1999).
As a threshold matter, District
1199C contends that the bankruptcy court
lacked core subject matter jurisdiction, but
appears to concede that the bankruptcy
court had non-core, or "related to,"
jurisdiction.7 A bankruptcy court may hear
7Whether or not District 1199C
concedes the existence of "related to"
jurisdiction, such jurisdiction exists
because Tenet names the trustee as
defendant in Count II, seeking contractual
indemnification for District 1199C's claim
against it. See Copelin v. Spirco, Inc., 182
F .3d 174 , 179 (3d Cir. 1999)
("[J]urisdiction is a threshold issue
determined by speculating whether the
ultimate outcome of the litigation could
conceivably affect the bankrupt estate.").
A defendant's assertion of a claim for
indemnity against a debtor does not always
result in "related to" jurisdiction over the
claim against the defendant. See Pacor,
Inc. v. Higgins, 743 F.2d 984, 994-96 (3d
Cir. 1984) (no "related to" jurisdiction for
products liability claim in which defendant
had impleaded debtor that manufactured
product), overruled on another ground,
Things Remembered, Inc. v. Petrarca, 516
U.S. 124, 129 (1995); In re Federal-Mogul
Global, Inc., 300 F.3d 368, 379-84 (3d Cir.
2002), cert. denied, 537 U.S. 1148 (2003).
However, in this case the outcome of the

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both core and non-core matters, see 28
U.S.C. §§ 157(b) and (c), and "[w]hether a
particular proceeding is core represents a
question wholly separate from that of
subject-matter jurisdiction." In re
Marcus Hook Dev. Park, Inc., 943 F.2d
261, 266 (3d Cir. 1991). The significance
of the distinction between core and non-
core jurisdiction is that in core proceedings
the bankruptcy court can enter a final
j u d g m e n t , w h e r e a s i n n o n -c o r e
proceedings the bankruptcy court's power
is limited to submitting proposed findings
of fact and conclusions of law to the
district court for entry of a final order after
de novo review (unless the parties consent
to adjudication by the bankruptcy judge).
Id.; 28 U.S.C. §§ 157(b) and (c). Because
the district court considered this case
under both the standard appropriate for
appeals of core-matter decisions and the de
novo standard, in the alternative, District
1199C's argument about the core/non-core
distinction has little practical import in this
case. However, in order to clarify
procedure on remand, we hold that the
bankruptcy court correctly determined that
the suit was a core proceeding because it
required the court to interpret and give
effect to its previous sale orders. See In re
Marcus Hook, 943 F.2d at 267 (motion to
enforce bankruptcy sale order is core
proceeding).
However, we must conclude that
the bankruptcy court erred in determining
that it had no jurisdiction over Tenet's
Count IB to vacate the arbitration award
concerning the prospective sick leave
obligation or over District 1199C's
counterclaim to enforce that part of the
arbitration award. The bankruptcy court
reasoned:
[I]f, and to the extent that,
the Sales Orders and the
[asset purchase agreement]
are construed such that
Tenet . . . assumed liability
f o r t h e S i c k L e a v e
Obligations, then (a) such
liability is not that of . . . the
Trustee and the instant
debtor's bankruptcy estate,
(b) Tenet cannot recover on
a claim for indemnification
against the instant debtor's
bankruptcy estate, and (c)
the debtor's bankruptcy
e s t a t e t h u s c a n n o t
conceivably be impacted by
the outcome of litigation
regarding whethe r the
Arbitration Award should be
set aside or enforced.
265 B.R. at 97. In other words, the court
suit between District 1199C and Tenet
could have an immediate effect on the
bankruptcy estate since Tenet's indemnity
claim, if it is meritorious at all, has already
matured. The asset purchase agreement
requires Allegheny to defend Tenet or else
pay for its defense of third-party claims
covered by the indemnity agreement, and
Tenet has already made demand on
Allegheny to defend it against District
1199C's claim on the arbitration award.

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reasoned that if the court decided to
interpret the asset purchase agreement to
place responsibility on Tenet for the
prospective leave obligation, then
Allegheny could not be liable to indemnify
Tenet and the claim for prospective leave
would not have any potential to affect
Allegheny's estate. If the claim could have
no effect on the estate, there should be no
bankruptcy jurisdiction. Accordingly,
when the court decided that Tenet had
assumed liability for the prospective sick
leave obligation, it held:
[B]ecause the Sales Orders
do not operate to preclude
the Union from pursuing
Tenet for payment of the
Prospective Sick Leave
Obligation, the Court lacks
even noncore subject matter
jurisdiction over Tenet's 1st
Count and the Union's
counterclaim to the extent
that the same seek to set
aside or enforce the
Arbitration Award as it
pertains to the Prospective
Sick Leave Obligation.
265 B.R. at 118. Thus, the bankruptcy
court's holding that it lacked jurisdiction
was based on its resolution of the merits of
the claim.
The existence of subject matter
jurisdiction is determined before, not after,
adjudication of the merits and depends on
the nature, not the validity, of the
plaintiff's claim. See Steel Co. v. Cit. for
a Better Env't, 523 U.S. 83, 88-102 (1998).
Because the bankruptcy court correctly
determined that Tenet's suit to vacate the
arbitration award and District 1199C's
counterclaim to enforce it required the
court to interpret and enforce the sale
orders, 265 B.R. at 96, it was error then to
hold that jurisdiction disappeared once the
court construed the asset purchase
agreement and sale orders to bind Tenet to
the collective bargaining agreement. The
bankruptcy court had subject matter
jurisdiction over the entire suit and
counterclaim.
II.
On the merits, District 1199C
argues that Tenet is bound by the
collective bargaining agreements in their
entirety because Tenet assumed them in
the asset purchase agreement with
Allegh en y, notwithstand ing T enet's
attempt to limit its liabilities under that
agreement. District 1199C argues that this
obligation follows from our opinion in
American Flint Glass Workers Union v.
Anchor Resolution Corp., 197 F.3d 76 (3d
Cir. 1997), which District 1199C interprets
to mean that a party that assumes any part
of a contract's obligations automatically
assumes all of them.
This is a misreading of American
Flint Glass. American Flint Glass held
that in order to effect a novation by
operation of law under 11 U.S.C. § 365(k),
a bankruptcy debtor-in-possession must
assign the old contract cum onere, with all
rights and obligations intact. Id. at 80. A
partial assignment does not suffice to

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effect a novation, releasing the original
obligor from its duties under the contract.
The result in American Flint Glass of the
employer-debtor's attempt to make a
partial assignment was that the debtor
remained liable for the entire collective
bargaining agreement. The decision in
American Flint Glass bound the debtor
only; it did not hold that the partial-
assignee became obliged to perform duties
it never agreed to undertake and which it
expressly disavowed in the asset purchase
agreement. Therefore, American Flint
Glass might be authority for holding
Allegheny liable on the collective
bargaining agreements, but it does not
provide authority for holding Tenet liable
for the parts of the collective bargaining
agreements that it declined to assume.8
District 1199C argues that unless
we interpret American Flint Glass to bind
Tenet to terms of the collective bargaining
agreement that it was not willing to
assume, we will have "disenfranchise[d]"
the Union by allowing the successor
employer to discard burdensome terms
without bargaining. We do nothing of the
kind. To the extent that Tenet has been
able to enjoy the benefits of the collective
bargaining agreements without having to
pay for sick leave that accrued under them,
District 1199C has itself to blame. The
division of responsibility between Tenet
and Allegheny was ordained by the asset
purchase agreement. At the time the
bankruptcy court was considering the
motion to approve the asset purchase
agreement, District 1199C neither objected
to the proposed agreement nor
affirmatively endorsed it. Deciding
whether District 1199C became bound by
the terms of the asset purchase agreement
under such circumstances would require us
to consider difficult questions of
bankruptcy and labor law. However this
inquiry has been rendered unnecessary
because in the briefs before us, District
1199C has conceded that the asset
purchase agreement binds it. The
bankruptcy court held, "[T]he Sales
Orders, which approved the [asset
purchase agreement] . . . are final orders,
which fact, when coupled with the notice
to the Union as just described, means that,
by virtue of collateral estoppel . . . the
Union can no longer press, and the Court
is not now free to entertain, collateral
attacks upon said orders . . . ." 265 B.R. at
112. District 1199C does not contest this
holding that it is bound by the terms of the
8American Flint Glass also held
that when a debtor-in-possession makes a
partial assignment of a collective
bargaining agreement in connection with
a sale of substantially all its assets, this
amounts to an attempt to reject the
collective bargaining agreement, and
compliance with 11 U.S.C. § 1113 is
required. Under § 1113, before a debtor-
in-possession can reject a labor
agreement, there must be negotiations
and a hearing. §§ 1113(b), (c), and (d).
In American Flint Glass there was no
attempt to comply with § 1113. The
remedy was that the debtor remained
liable under the collective bargaining
agreement, not that the assignee became
liable. 197 F.3d at 82.

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asset purchase agreement, as enshrined in
the sale orders:
[T]he Union is not objecting
to the approval of the [asset
purchase agreement] or
seeking to make a collateral
attack upon it. Rather, the
Union is arguing that the
[asset purchase agreement]
did not, and should not be
construed as if it did,
establish an incomplete
assumption of the collective
bargaining agreements.
Thus, District 1199C does not dispute that
it is bound by the asset purchase
agreement; instead, it only argues about
how to interpret the asset purchase
agreement. We will therefore assume that
the asset purchase agreement is binding on
both Tenet and District 1199C.
III.
We now turn to the proper
interpretation of the asset purchase
agreement. Tenet says the asset purchase
agreement excludes liability for the
accrued sick leave and allows Tenet to set
the initial terms of employment and to
bargain with District 1199C for a new
collective bargaining agreement. District
1199C says the asset purchase agreement
does not exclude liability for accrued sick
leave and requires Tenet to abide by the
collective bargaining agreements with
regard to prospective sick leave
obligations.
A.
The asset purchase agreement
excludes from Tenet's obligations any
liability for "liabilities or obligations
arising from any Assumed Contract before
the Closing Date." Conversely, Tenet
assumed Allegheny's obligations "arising
on or after the Closing Date with respect to
any period commencing on the Closing
Date under the Assumed Contracts." The
collective bargaining agreements provide
for the accrual of leave upon completion
of specified periods of employment; the
leave accumulates and is then available for
employees to use in case of illness or
injury. Most of the collective bargaining
agreements provide that the employees
who retire will be paid for some
accumulated sick leave.
District 1199C contends that the
asset purchase agreement's exclusion of
"liabilities or obligations arising from any
Assumed Contract before the Closing
Date" does not exclude accrued sick leave
claims because the employees did not have
a claim for the accrued sick leave until
they became sick or retired and tried to use
the leave. Our review of the collective
bargaining agreements shows that once the
employees had accumulated sick leave,
they had a right to the leave, albeit a right
contingent on future illness, injury or
retirement. A contingent obligation is,
nonetheless, an obligation. See Avellino
& Bienes v. M. Frenville Co. (In re M.
Frenville Co.), 744 F.2d 332, 336 & n.7
(3d Cir. 1984). The accrued sick leave
obligation was an obligation arising before
the closing date.

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District 1199C also argues that
Allegheny was not in default on the
accrued sick leave and was not liable to
pay such amounts as "cure" under 11
U.S.C. § 365(b). This may be true, but we
are determining Tenet and Allegheny's
contractual division of liabilities in the
asset purchase agreement, not ascertaining
what their statutory liabilities would be in
the absence of such a contract. We
therefore interpret the asset purchase
agreement to exclude from Tenet's
liabilities the obligation to pay for sick
leave that accrued before the closing date.
B.
Tenet claims that the asset purchase
agreement does not purport to bind Tenet
to the terms of the District 1199C
collective bargaining agreements, but
leaves Tenet free to set initial terms of
employment and to bargain for new
collective bargaining agreements. In the
definition of "assumed liabilities," Tenet
agreed to be responsible for "all
obligations of Sellers arising on or after
the Closing Date with respect to any
period commencing on the Closing Date
under the Assumed Contracts." The
District 1199C collective bargaining
agreements were included in the list of
assumed contracts. See note 5, supra.
Inclusion of the District 1199C collective
bargaining agreements as "assumed
contracts" would seem to be conclusive
evidence that Tenet indeed assumed them
(with respect to obligations that accrued
after the closing date, that is), not that it
reserved the right to set them aside and
bargain for new terms.
Tenet argues that this obvious
conclusion is rendered problematic by
language in section 5.03 of the asset
purchase agreement, in which Tenet
agreed that it would bargain with unions
representing employees of Allegheny.
Section 5.03 provided:
Subject to the foregoing and
subject to the right of
[Tenet] to set the initial
terms and conditions of
employm e n t of u nio n
employees, Bu yer will
recognize all existing unions
at the Hospitals and will
bargain in good faith the
subsequent terms and
conditions of employment
for emp loyees in th e
bargaining units represented
by those unions, to the
extent required by law.
Employees employed under
written Contracts will not be
o f f e r e d e m p l o y m e n t
pursuant to this Section, but
e m p l o ym e n t o f s u c h
e m p l o y e e s s h a l l b e
governed by the terms of the
Assumed Contracts, if any,
relating to such employees.
Thus, Tenet agreed to bargain with union
employees generally, but employees
covered by a written contract were taken
out of the class of employees with whom
Tenet agreed to bargain. This exemption
makes sense, since employees who already
had a contract would presumably have
nothing left to bargain over. This

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exemption would seem to apply to the
District 1199C employees, who were
covered by an "Assumed Contract," and
who therefore had no need to bargain for a
new contract.
However, Tenet argues that the
exemption for "written Contracts" should
not apply to District 1199C's collective
bargaining agreements. Tenet contends
that "all employees in bargaining units
represented by unions at [Allegheny] were
covered by written collective bargaining
agreements." Tenet argues that if "written
collective bargaining agreements" were
synonymous with "written Contracts"
under section 5.03, then there would only
be one class of employees, those covered
by written contracts. It contends that
under such a reading, the part of section
5.03 agreeing to bargain would not apply
to anybody, which is an absurd
interpretation of the asset purchase
agreement.
Tenet's assertion that all union
employees were covered by written
collective bargaining agreements is
unsupported by citation to the record. But
even if all unions had contracts with
Allegheny, Tenet does not allege that it
assumed all those collective bargaining
agreements. Since a successor employer is
not automatically bound by its
pred ec essor's collective bargaining
agreements, see NLRB v. Burns Int'l Sec.
Servs., Inc., 406 U.S. 272, 281-91 (1972);
Ameristeel Corp. v. Int'l Bhd. of
Teamsters, 267 F.3d 264, 273-77 (3d Cir.
2001), unions that had a collective
bargaining agreement with Allegheny
would not necessarily have had a "written
Contract" with Tenet. Those unions would
still have to bargain with Tenet. The
District 1199C collective bargaining
agreements, however, were expressly
assumed by Tenet. They were "written
Contracts" to which Tenet became a party.
Thus, it still makes sense for section 5.03
to exempt District 1199C from the need to
bargain even if all the unions did have
collective bargaining agreements with
Allegheny.
In sum, we reject Tenet's argument
that the asset purchase agreement did not
bind it to performance of District 1199C's
coll ective b a r g a i n in g a g r e e m e n ts
prospectively, beginning on the closing
date.
IV.
In accordance with the foregoing
opinion, we will affirm the judgment of
the district court entering summary
judgment for Tenet on its claim to vacate
the arbitrator's award of accrued sick leave
benefits and entering judgment against
District 1199C on its suit to enforce that
part of the award. We will reverse the
dismissal of District 1199C's claim to
enforce the arbitration award with regard
to the prospective sick leave obligation
and the dismissal of Tenet's suit to vacate
that part of the arbitration award. We will
remand with instructions to the bankruptcy
court to enter judgment in favor of District
1199C on its claim to enforce the award of
prospective benefits and against Tenet on
its claim to vacate the award of
prospective benefits.

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