Yellow Disputes Pension Fund’s $6 Billion Claims, Citing Federal Bailout
As Yellow Corp. continues to dole out its real estate assets and fleet of vehicles, what’s left of the less-than-truckload (LTL) company is fighting its former pension fund over whether it owes $6 billion in liability claims.
On the heels of Yellow filing Chapter 11 bankruptcy in early August, the administrators of the Central States Pension Fund (CSPF) filed 45 claims asking the court to award them nearly $4.8 billion in withdrawal liabilities (because Yellow is no longer contributing to the fund) and another $900 million in participation guarantees.
More from Sourcing Journal
TuSimple to Voluntarily Delist from Nasdaq After 'Exhaustive' Review
Forward Air, Omni Logistics See 'Writing on the Wall,' Amend Merger
The trucking company rejected the claims last month, with Yellow’s attorneys saying a large pension fund shouldn’t be allowed to receive hundreds of millions of dollars from the company’s bankruptcy sales because the federal government already rescued the pension plan with $35.8 billion early in 2023.
“This is ‘free money’ that CSPF does not need,” Yellow attorneys wrote. “CSPF cannot attempt to penalize the debtors and recover hundreds of millions of dollars in damages it has not sustained.”
Sourcing Journal reached out to Yellow and Central States Pension Fund.
In response, the Teamsters-affiliated pension fund asked a federal court for permission to use arbitration instead of bankruptcy court to go after the pension liabilities allegedly owed by Yellow.
The fund argued in a filing in Delaware bankruptcy court that Yellow’s efforts to avoid liability are motivated my maximizing a return for a hedge fund, MFN Partners, that owns almost 43 percent of the company’s shares.
“By objecting to the [fund’s] claims, debtors are not promoting the reorganization of the companies, the creation or the maintenance of jobs, or the payment of hard-earned pension benefits to debtors’ former employees, but instead only serve to ensure that hedge fund MFN and its investors receive massive payouts,” the fund wrote. “This court should not indulge debtors’ or MFN’s efforts.”
Additionally, Central States argues that Yellow is in breach of collective bargaining agreements and other contracts it signed related to pensions because it has delinquent payments owed. The fund also claims a breach of contract clause allows damages, which are equal to 113 months of payments.
Yellow’s attorneys say a large pension fund shouldn’t be allowed to receive hundreds of millions of dollars from the company’s bankruptcy sales because the federal government rescued the pension plan with $36 billion early this year.
The trucking firm’s legal team argued that the more than 40 claims submitted by the Central States Pension Fund are “demonstrably, massively and improperly overstated” and should be thrown out.
At the very least, Yellow attorneys wrote, Judge Craig Goldblatt should massively reduce the scope of Central States’ demands because the pension plan was of the bailout from the Pension Guaranty Benefit Corp. (PGBC), which fell under the umbrella of the American Rescue Plan Act.
PBGC attorneys retorted that Yellow was wrong to view the bailout as letting companies in multi-employer pension funds off the hook for their debt obligations.
In addition, the PBGC legal team said Yellow’s challenge to Central States’ claims amounts to “efforts to convince the court to disregard a PBGC regulation that has the force of law.”
A hearing about the claims is scheduled for Feb. 14.
The Central States Pension Fund played a role in Yellow’s insolvency, having initially suspended $50 million in worker benefits and pension accruals for union employees after the trucking company missed a payment to the fund.
The missed payment resulted in the Teamsters ramping up rhetoric that they would go on strike, which ultimately resulted in more companies diverting their freight away from the LTL.
But while the strike was called off after the pension fund agreed to extend the benefits after all, it was too little, too late for Yellow, which shut down operations July 30 before filing bankruptcy within the week.
While the pension dispute lingers, Yellow was able to find a home for more of its leased terminals earlier this month.
On Jan. 12, the trucking firm was able to gain the approval to sell the 23 leased terminals it auctioned off for a combined $82.9 million. Rival trucking company Estes Express Lines was the largest buyer in the asset sale, picking up five leased properties for a price of $35.3 million.
