Defunct trucking company Yellow Corp. has reached settlement agreements with four multiemployer pension plans covering up to $526 million in remaining withdrawal liability claims, potentially bringing a long-running legal dispute to a close.
The agreements have the backing of Yellow’s largest shareholder, MFN Partners, and would resolve litigation that began after the less-than-truckload carrier filed for bankruptcy in August 2023.
Yellow had previously reached agreements with most of the multiemployer pension plans to which it had contributed on behalf of its employees.
Under the latest settlements, the New York State Teamsters Conference Pension and Retirement Fund, Western Conference of Teamsters Pension Trust Fund, and Western Pennsylvania Teamsters and Employers Pension Fund would receive the largest portions of the settlement proceeds. The New York Teamsters fund is seeking approval of a $300 million claim.
A federal bankruptcy court in Delaware is being asked to approve the agreements. According to the filing, the settlements would “bring the current multi-year long MEPP litigation in these cases to an end,” allowing the Liquidating Trust to begin making meaningful distributions to general unsecured creditors.
The agreement also provides concessions from MFN Partners. The investment firm has agreed to withdraw its pending appeals and waive its right to seek certain legal fees and expenses.
If the court approves the settlements, the Liquidating Trust will be positioned to make final distributions to creditors. Employee claims related to paid time off and sick leave have been classified as priority claims and will be paid.
The pension dispute has centered on whether Yellow was still responsible for withdrawal liabilities after the pension plans received federal bailout funding in 2021. Yellow and MFN had argued that the multiemployer pension plans were fully funded following the federal assistance, meaning Yellow should not have been subject to withdrawal liability.
The company also maintained that, even if some liability existed, the calculations used by the pension funds and federal regulators were incorrect.
MFN had previously purchased certain pension claims to which it had objected, using those purchases as a hedge. That move became another point of contention during the nearly three-year legal battle over how much Yellow owed after it abruptly stopped making contributions to the pension plans.
The settlements now before the bankruptcy court are intended to avoid years of additional litigation. The filing said the agreements would “save the estates years of continued litigation and allow creditors to receive meaningful distributions in a timely manner.”
The financial cost of the bankruptcy proceedings has already been substantial. Yellow’s monthly operating report for June showed that the company had paid $293 million in professional fees and expenses since the Chapter 11 case began. At the same time, the company held $593 million in cash.
The pension dispute also reached the U.S. Supreme Court, which declined earlier this summer to hear Yellow’s case concerning its pension withdrawal liabilities.
Yellow’s collapse resulted in the loss of tens of thousands of jobs. The company terminated 3,500 nonunion employees on July 28, 2023, followed by 22,000 union employees two days later. Yellow then filed for bankruptcy on Aug. 6, 2023.
Why it matters
The settlement clears the remaining pension fund claims against Yellow, and may finally clear the legal battles that have followed the company’s August 2023 bankruptcy.
The Liquidating Trust would be able to proceed with distributions to creditors and former employees, a major step in concluding Yellow’s bankruptcy proceedings, with the potential end of the pension litigation.
