Appeals Court Revives Yellow’s Suit Against Teamsters
Carrier Sued for Breach of Contract Before Bankruptcy Filing
Key Takeaways:
- The 10th Circuit on Nov. 5 reversed a Kansas district court ruling that dismissed Yellow Corp.’s breach-of-contract suit against the Teamsters and gave the union until Nov. 19 to appeal.
- The appeals court said the lower court improperly denied Yellow’s bid to amend its complaint, citing newly discovered evidence and delays in discovery attributed to the Teamsters.
- If the union does not appeal, the case will return to the Kansas district court by Nov. 26 while Yellow’s bankruptcy estate continues to face unresolved claims including a $6.5 billion pension liability.
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An appeals court reversed a ruling that blocked Yellow Corp.’s efforts to sue the International Brotherhood of Teamsters for breach of contract.
The union has until Nov. 19 to appeal the Nov. 5 U.S. Court of Appeals for the 10th Circuit decision.
Otherwise, the case will be sent back to the U.S. District Court for the District of Kansas — Wichita by Nov. 26.
Teamsters representatives did not respond to multiple requests for comment or details on the union’s intentions.
The case began when Yellow sued the union in the weeks leading up to the then-No. 3-ranked less-than-truckload carrier’s bankruptcy filing in August 2023. The Teamsters had balked at the second phase of a proposed terminal network restructuring.
Yellow argued the restructuring, known as One Yellow, was needed to save the company.
So, prior to Nashville, Tenn.-based Yellow closing its doors, the carrier filed suit against the Teamsters and Kansas-based union locals, alleging breach of contract under the Labor Management Relations Act for failing to hold meetings to discuss the second phase of One Yellow.
However, the impasse between the already troubled carrier and union, alongside the court case, precipitated a dramatic downturn in business for Yellow and led the company to seek court protection. As a result, 30,000 employees were put out of work.
Kansas Court Ruled Against Yellow
In the breach-of-contract case, the Wichita district court granted a Teamsters motion to dismiss the complaint, finding that Yellow failed to exhaust internal grievance procedures mandated by its collective bargaining agreement. The Kansas court also rejected Yellow’s request for post-judgment relief to amend its complaint, including adding further facts.
Yellow requested a post-judgment motion on April 22, 2024, arguing a reassessment was required because of “manifest errors of fact and law” by the district court and because “Yellow has discovered new evidence” that the Teamsters and locals had refused to meet their obligations.
The motion was denied by the district court, which found Yellow’s arguments for legal error were duplicative of earlier arguments.
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In the Nov. 5 ruling authored by Judge Richard Federico, however, the appeals court said the lower court erred in denying the relief request, sending the case back to Kansas absent a union appeal.
Federico wrote that because the district court entered judgment at the same time it granted the motion to dismiss, Yellow had limited opportunity to correct its complaint.
In addition, by failing to produce documents before a March 1, 2024, deadline, and then filing a motion for a stay on that date, the Teamsters “needlessly” delayed the discovery process and prevented Yellow from having a reasonable chance to amend its complaint earlier, he wrote.
Also, the district court abused its discretion in denying the post-judgment motion, Federico ruled, arguing that newly discovered evidence would be a permissible basis for granting leave to amend.
Previously, phase one of the restructuring — involving Yellow’s western operations — had been approved by the Teamsters. The western operations comprise 20% of Yellow’s network.
Court Cases Still Ongoing
Since Yellow filed for bankruptcy, the carrier’s real estate and rolling stock have been auctioned off by the administrators of its estate.
About 11 of the 325 terminals Yellow owned or leased when filing for bankruptcy remained unsold in September, a court filing showed. The real estate sales generated more than $2 billion in revenue.
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The estate received net proceeds of $175.74 million from rolling stock sales that generated gross proceeds of $236.42 million, according to an Aug. 29 filing.
However, the U.S. Court of Appeals for the Third Circuit ruled in September that Yellow remains on the hook for $6.5 billion in claims by pension funds.
When Yellow sought court protection, the carrier withdrew from plans that secured retirement benefits for unionized employees. The pension funds objected, arguing Yellow must pay a “withdrawal liability” for halting payments into the retirement plans.
