Claims that defunct less-than-truckload carrier Yellow Corp. failed to provide appropriate notification to employees ahead of mass layoffs last summer may not be resolved until later this year, a Thursday hearing in a Delaware bankruptcy court revealed.
Judge Craig Goldblatt proposed a timeline that allows for fact discovery through mid-August, with summary judgment motions likely being filed in October. If needed, a trial could occur in December at the earliest. Counsel from all parties involved are expected to agree on a final schedule in the coming days.
Prior court filings showed WARN Act claims against Yellow (OTC: YELLQ) could total as much as $244 million, although some have been flagged as duplicates. The filings say the company failed to provide 60-day layoff notices to employees as required by law.
Yellow has maintained its July 30, 2023, closure was abrupt and that the regulation doesn’t apply. In past filings, Yellow claimed various exemptions due to “unforeseeable business circumstances” as it was “a faltering company.” It has also invoked “a liquidating fiduciary” label, meaning it wasn’t an employer at the time of the layoffs and therefore was not required to provide advance notice.
It said it wasn’t until July 26 that it became clear it may be “wiped from the face of the earth,” and that approximately 60 days prior — in late May and early June — it was still negotiating with the Teamsters union to implement a change of operations that it asserts would have saved the company. Yellow said it was also seeking financing from lenders and a private equity fund during that time frame and not contemplating a shutdown.
The company blames union leadership for its demise and said conditions rapidly deteriorated following an “ill-fated strike threat.” It said the union’s refusal of operational changes and its issuance of a strike notice over missed benefits payments resulted in the company’s abrupt shutdown. It said it “delivered WARN notices promptly thereafter,” fulfilling any requirement it had.
The Teamsters union said last summer that it had bailed out Yellow multiple times, costing members billions in lost wages and benefits, and that it wasn’t going to do it again.
The court said Thursday it would certify claims from 3,200 nonunion employees as a class, allowing them to pursue legal action alongside claims by roughly 21,000 Teamsters. Most of the Teamsters are being represented by the union’s counsel. Approximately 2,700 of the nonunion employees signed releases when they were terminated from the company last summer.
Counsel from Central States Health and Welfare Fund said Thursday the WARN Act claims are of interest as Yellow was required to make benefit contributions to the fund for the periods the employees received pay. If plan members are entitled to WARN Act pay, the fund expects to recoup contributions from Yellow for those weeks.
Yellow’s discovery request on withdrawal liability litigation approved
Goldblatt also said Thursday that he would rule in favor of Yellow’s discovery motion requesting access to internal communications between Central States Pension Funds and pension insurer Pension Benefit Guaranty Corp. (PBGC). Yellow wants to see the math behind the pension fund’s $4.8 billion withdrawal liability claims against the estate as well as any other discussions surrounding Central States’ application for special financial assistance, which was earmarked under the American Rescue Plan Act.
Yellow also wants to see any communications PBGC may have had with other governmental entities or Central States when establishing the regulation stipulating that financial assistance received by the pension funds would not be recognized as a lump sum. Phasing in recognition of the bailout funds keeps employers on the hook for withdrawal liabilities.
“We have reason to believe that there was substantial influence from, among others, these folks, in the change of the regulations,” said Michael Slade, counsel to Yellow and partner at Kirkland & Ellis, during the hearing on Thursday.
Goldblatt outlined a plan for a focused discovery, or a “quick look.” He said a protective order would be approved to protect sensitive information and that privileged items wouldn’t have to be produced. He asked the parties to work out discovery parameters and seek his help as needed.
Yellow participated in roughly 20 multiemployer plans, which have presented claims to the court totaling $7.8 billion, of which it says it owes little if anything as the plans are now fully funded.
Central States received $35.8 billion under the roughly $80 billion rescue plan.
A hearing for the pension withdrawal claims is scheduled for August.
