ILWU Files for Chapter 11 Bankruptcy While Still Handling Massive ICTSI Lawsuit

In a surprising move, the International Longshore and Warehouse Union (ILWU) has filed for Chapter 11 bankruptcy in a San Francisco court, a significant development in the ongoing legal battle that could have severe consequences for the union and the shipping industry.

Legal Showdown with ICTSI

At the heart of this bankruptcy filing is a massive lawsuit brought against ILWU by an affiliate of International Container Terminal Services Inc. (ICTSI), a Philippines-based maritime company. The lawsuit alleges that ILWU organized illegal work slowdowns and stoppages at the Port of Portland, intentionally damaging ICTSI's business. The National Labor Relations Board (NLRB) supported these claims, adding weight to the lawsuit.

Chapter 11 Protection

The ILWU's decision to file for Chapter 11 bankruptcy is primarily a defensive move. The union faced the possibility of a substantial verdict against them, which could have depleted their already strained cash reserves. Chapter 11 protection allows ILWU to put the lawsuit on hold temporarily while they work to mitigate liability and stabilize their financial situation.

Union's Financial Struggles

ILWU's financial struggles were exacerbated by the impending lawsuit verdict. The union cited its inability to sustain mounting legal fees as one of the reasons for the bankruptcy filing. Additionally, ILWU expressed concerns that any potential damages awarded in the lawsuit could surpass their financial capacity to pay. As of now, ILWU's most significant asset is the $9.5 million in cash on hand, which they plan to use to settle the dispute with ICTSI and establish a working capital reserve to continue their operations.

Continued Operations During Reorganization

Despite the bankruptcy filing, ILWU intends to continue its operations as usual. They are expected to request that the bankruptcy court preserves their cash management system, which would enable them to meet their payroll obligations and maintain essential employee services.

End of a Long-Running Legal Saga

The lawsuit between ILWU and ICTSI has been ongoing for nearly a decade. It traces back to 2012 when ILWU was found liable for unfair labor practices. The dispute centered on ILWU's efforts to secure work related to handling refrigerated shipping containers, known as reefer work. The NLRB report also alleged that ILWU coerced the Port of Portland into awarding the reefer work to ILWU longshoremen, a job traditionally held by electricians from the port's union, IBEW Local 48.

Mounting Damages Dispute

Initially, ICTSI Oregon, the company's branch involved in the lawsuit, was awarded $93.6 million in damages. However, this amount was later reduced to $19 million by a court ruling, offering ICTSI an opportunity for retrial solely to determine the extent of damages, a chance the company has opted to take. The ongoing legal dispute over the cost of damages has prolonged the case for several years, with ICTSI estimating its losses between $42 million and $142 million, a figure vehemently disputed by ILWU.

Union's Defense

Throughout the case, ILWU has consistently denied using unfair labor practices and argued that other factors contributed to the issues faced by ICTSI in Portland. They pointed to market fluctuations and the bankruptcy of Hanjin Shipping, the port's largest customer in 2016, as significant contributing factors.

ILWU President Willie Adams has criticized ICTSI's relentless litigation strategy as a "scorched-earth litigation tactic" aimed at wearing down the union.

The bankruptcy filing marks a critical juncture in this high-stakes legal battle, with the fate of ILWU and the broader implications for the shipping industry hanging in the balance.

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