Donald Steckroth’s Decision in a Nursing Home Case Was Key in the Trump Taj Mahal Benefits Case in October 2014
Donald Steckroth has been appointed as a negotiator in talks between Atlantic City’s state-appointed emergency managers and economic leaders in trying to broker a recovery deal that would help in the overall turnaround of the city. The Wall Street Journal reported that Mr. Steckroth had told their publication of his appointment.
Mr. Steckroth spent 14 years working for the U.S. Bankruptcy Court in New Jersey, rendering decisions which affected Atlantic City’s casino industry. He is also a partner with the Cole Schotz firm, a law practice which handles bankruptcy and corporate restructuring.
Emergency Managers Point-of-View
On one side of the negotiations are Kevin Lavin and Kevyn Orr, the emergency managers appointed to oversee Atlantic City’s financial future by Governor Chris Christie. Orr and Lavin took over when the state loaned Atlantic City $40 million in January 2015, to avoid the struggling city having to borrow money on the capital markets, where its bonds are listed as junk bonds.
Business and Union Concerns
On the other side of the negotiations are the business and union leaders of Atlantic City. Those myriad interests themselves have wildly different motivations. Many of the business interests are in the casino gaming industry. Atlantic City is a city of only 40,000 people, but it has 8 casino-resorts which generate up to 70% of the property taxes for the city.
The business operators need low taxes and a stable regulatory environment to continue their turnaround, but the city and state are loathe to offer too many concessions, because giving away too many tax revenues undercuts the reason for supporting such businesses in the first place.
Workers Role in the Turnaround
The union leaders are trying to preserve as many jobs as possible, while also preserving the benefits each of those jobs offer. For instance, Carl Icahn wanted the workers of the Trump Taj Mahal to give away their health and pension benefits in order to keep the casino open–and therefore maintain their incomes at all. In 2014, Atlantic City lost 9,000 jobs, including 8,000 in the casino industry.
Kevin Lavin and Kevyn Orr
Meanwhile, Mr. Lavin and Mr. Orr have called for a retrenchment effort by the city government itself, cutting out an additional $10 million from the $10 million already cut by Mayor Don Guardian. Such cuts would mean the loss of additional jobs to a local population with an unemployment rate edging up into depression-like numbers. Recently, a job fair offering 100 jobs attracted thousands of job-seekers.
In March 2015, Lavin and Orr issued a report to the government which recommended that the city needs additional “cost cuts, layoffs, and longer bond maturities” in order to end its economic free fall. Despite or perhaps because of those recommendations, the Wall Street credit rating agencies and the class of U.S. municipal bond investors are concerned that the New Jersey might be changing its long-held policy of strong support for cities which are struggling with debt and budget deficits. If such policy changes occurred, it would be hard to see how bond investments would pay off. Wall Street and investors need to see a way out for the capital markets to be of any help to Atlantic City’s leaders.
In all, Atlantic City faces a budget shortage of up to $100 million this year alone. All sides have lost plenty in the past 16 months, but some or all of them must make concessions if an economic turnaround is to happen. Under the circumstances, nerves are frayed and no one is going to want to make additional concessions. That is the milieu Donald Steckroth walks into.
About Donald Steckroth
Donald Steckroth ended his 14-year career as one of the nation’s 350 bankruptcy judges in February 2015, quickly joining the prestigious Cole Schotz PC. Judge Steckroth spent 28 years as a bankruptcy lawyer at Gibbons PC, a New Jersey law firm, before becoming a bankruptcy judge.
In recent years, Judge Steckroth’s caseload had including oversight for Chapter 11 cases for women’s retailers Dots and Mandee’s. He also oversaw the bankruptcy for Kid Brands, a baby and toddler product manufacturer.
Labor Law Decisions
The former Judge Steckroth’s decisions have affected the state of casino bankruptcy and worker benefits in the recent past. In 2013, he penned a decision which modified union contracts in bankruptcy, during a nursing-home case. That Steckroth decision was cited in an October ruling which allowed Trump Entertainment to cancel pension and healthcare benefits for workers at the bankrupt Trump Taj Mahal casino.
Given his recent decisions, one might expect Steckroth’s appointment to be a good sign for the casino companies and other business leaders in Atlantic City, as well as a bad sign for the labor unions affected by the coming decisions by the economic turnaround team. Steckroth’s decisions in the past 2 years have given the advantage to business over labor.
