A federal court in Kansas has dismissed defunct Yellow Corp.’s $137 million breach-of-contract lawsuit against the Teamsters union and its negotiating arm. The court cited the company’s failure to exhaust the grievance process established under its collective bargaining agreement with the union as the reason for closing the case.
“The Court is guided by the language of the NMFA [National Master Freight Agreement]. Article 8, Section 1(a) is clear that ‘all’ factual grievances, or questions of interpretation, arising under the NMFA or supplemental agreements must first go through the grievance process of the applicable supplemental agreement. This provision applies to all parties,” a Monday order from the U.S. District Court for the District of Kansas stated.
In its suit, Yellow (OTC: YELLQ) alleged the Teamsters union had breached the collective bargaining agreement by not approving a second phase of operational changes, and by trying to tie any approval of the change of operations to wage increases.
The less-than-truckload carrier told the union last year that a second round of changes, which included the consolidation of its four LTL operating companies, closing redundant terminals and redefining work rules for some drivers, would be required for the company to survive. In the lawsuit, it claimed the union didn’t have the authority to reject the changes and that it “knowingly and intentionally triggered a death spiral for Yellow” by refusing to comply.
The union rejected Yellow’s proposed changes one year ago after agreeing to a similar plan in the Western portion of the carrier’s network in 2022. It said the employees it represented at the company had already given billions in wage, benefits and pension concessions in prior years and that it wouldn’t go along with another bailout.
Yellow ceased operations on July 30 and filed for bankruptcy a week later.
In the lawsuit against the Teamsters, Yellow said it wasn’t required to go through with the normal grievance process because its claims didn’t involve a work stoppage and because it was seeking monetary damages. It also described the grievance process as “futile,” even if fully exhausted, as it didn’t expect the Teamsters to participate and it didn’t think it could get a “final and binding decision.”
The court’s ruling said NMFA interpretations, disputes and grievances are to be directed to a regional joint area committee, which then can be immediately referred to the national grievance committee.
The court also denied a request from Yellow to amend its pleading should the court rule to dismiss the case. Yellow previously tried to have the case moved to the Delaware bankruptcy court overseeing its Chapter 11 liquidation.
The Teamsters union on Tuesday called the lawsuit “frivolous” and an abuse of the legal system.
“After years of corporate mismanagement, Yellow still never misses an opportunity to embarrass itself or bring further shame to what used to be one of America’s strongest freight carriers. As the Teamsters expected, the court saw right through Yellow’s PR stunt of a lawsuit,” stated Sean O’Brien, Teamsters general president.
The bankruptcy court is soon expected to rule on a venue for hearing billions of dollars in withdrawal liability claims from pension funds. The pension funds have asked that the dispute be settled through arbitration while Yellow is hoping to keep the matter before the bankruptcy court. A Monday filing from Yellow asked the court to disallow $257 million of such claims from the Western Conference of Teamsters. It said the claims are invalid and that it had never been notified of the liability since withdrawing from the fund in 2009.
Representatives from Yellow had not responded to a request for comment by the time of this publication.
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