Yellow-Teamsters Lawsuit Won’t Head to Bankruptcy Court

Glenn Taylor
·4 min read
9

Yellow Corp.’s $173.3 million legal battle with the International Brotherhood of Teamsters will stay put in Kansas, dashing the insolvent less-than-truckload (LTL) company’s hopes of moving the case to a Delaware bankruptcy court.

U.S. District Court Judge Julie Robinson said the issues in Yellow’s suit were not essential to administering the bankruptcy estate, which includes the company’s terminals and rolling stock, among other assets—and therefore should stay in Kansas.

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Yellow sued the Teamsters in June, contending that the union breached contract by preventing the company from implementing the second phase of its One Yellow restructuring plan. The trucking company has insisted that this ultimately accelerated its demise, noting that the plan could have driven upwards of $675 million in additional annual revenue.

Sourcing Journal reached out to Yellow for comment on the legal decision.

The Teamsters, which represented 22,000 of the 30,000 employees that were out of a job when Yellow shut down, has denied any blame for the trucking company’s financial problems. The union cited years-long mismanagement as the reason for Yellow’s problems. The union has often pointed to the $700 million Paycheck Protection Program (PPP) loan that Yellow received during the Covid-19 pandemic as an example of its inability to pay off debts. Additionally, the 1.2-million-member union claims it conceded more than $5 billion in wages and benefits cuts over the past 14 years to keep Yellow in business.

After the union’s strike threat over the summer due to $50 million in missed pension and payments benefits, major customers including Walmart and The Home Depot began to divert their freight to other carriers, resulting in a rapid loss of liquidity that effectively forced Yellow out of business.

The union filed a motion to dismiss Yellow’s lawsuit on July 20, days before the company ceased operations. Yellow was supposed to respond by Aug. 24, but the judge issued a stay on Sept. 11 when the trucking firm countered with a motion to transfer the case to bankruptcy court.

In denying the transfer motion, Judge Robinson ordered Yellow to respond to the Teamsters’ motion to dismiss by Nov. 1.

The Teamsters have appealed to the U.S. Senate to reform national bankruptcy law in the wake of the Yellow collapse. The union called for new regulations to protect existing collective bargaining agreements, and to guarantee that contracts will be honored even after a company goes bankrupt.

One such issue the Teamsters had was with Yellow’s approval of $4.6 million in executive retention bonuses, which were initially made despite the missed benefits payments. The union wants lawmakers to establish legal safeguards protecting earned pension credits and retirement benefits and ensuring workers get the severance they’re owed.

While Yellow and the Teamsters continue to draw out their litigation, the trucking business still has to find a home for its assets.

On Friday, Yellow extended both the bidding and auction deadlines for its rolling stock, which consists of roughly 12,000 trucks and 35,000 trailers, to a later date and time to be determined.

The bid deadline for when companies must submit their offers for the assets was initially set for Friday at 5 p.m. ET. The rolling stock auction was slated to take place on Oct. 18 before the pushback.

Judge Craig Goldblatt, who has resided over the Yellow bankruptcy case, will oversee the hearing for approval of the winning bid and auction, if necessary.

Allyson Smith, legal counsel for Yellow, told Goldblatt in a September hearing that the trucking company had garnered “significant interest” in the rolling stock. At the time, the company said in a court filing that 540 potential buyers contacted the company asking about the equipment and property assets.

The rolling stock hasn’t gotten as much attention as Yellow’s approximately 170 terminals. These are currently under the control of Estes Express Lines, which last month earned the right to set the floor price when it won a $1.525 billion stalking horse bid.

But an Estes victory is not guaranteed. Bankrupt Yellow can accept offers higher than the Estes price as the process unfolds, with its terminal portfolio going either to a higher bidder, or carved up into bundles and sold to several bidders if multiple companies join forces in a bid.

The deadline to bid for the terminals is Nov. 9, and the auction is scheduled for Nov. 28 if needed.

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