Yellow’s Tuesday filing in a Delaware bankruptcy court said claims stemming from its failure to provide 60-day notices to employees ahead of mass layoffs should be thrown out, or at least materially reduced.
Counsel for the company said WARN Act requirements don’t apply as the defunct less-than-truckload carrier’s shutdown was abrupt and the result of the Teamsters union’s refusal to allow a second round of operational changes that were integral to its survival.
The turnaround plan dubbed One Yellow included consolidating its four LTL operating companies, closing redundant terminals and making some drivers work freight on the docks, among other changes. Yellow began pursuing the changes in 2022 and announced in June of last year that it would be out of cash in weeks if the Teamsters didn’t acquiesce. The union contended it had given enough in the past in the form of wage and benefits concessions and that it wasn’t going to keep bailing the company out.
Yellow (OTC: YELLQ) believes the WARN Act doesn’t apply as its closing was unforeseen. It said even in its final days it planned to keep running the business and had a private equity investor lined up to provide it needed capital. It said the union’s denial of the second round of operational changes, and the issuance of a strike notice over missed benefits payments, led to a rapid deterioration in its business.
The strike notice “scared off Yellow’s customers, leading to the sudden, unexpected collapse of Yellow in a matter of days,” the filing stated.
The carrier’s daily shipments declined from 44,550 on July 12 last year to 32,500 on July 19, two days after the strike notice. Shipments fell to 10,450 on July 21 and were nearly zero by July 26. Yellow ceased operations on July 30.
The company said it didn’t have time to plan for mass layoffs and the issuance of WARN Act notices was “neither feasible nor required.” It claims protection from the notification requirement due to the sudden decline in business and argued the requirement’s “faltering company exception” applies as it was still seeking business from customers and capital from investors in its last days. The notices would have scared off both, the filing said.
Of the roughly 1,300 claims referenced in filings, some were made on behalf of employees by pension or health and welfare funds, which “lack standing” to bring the claims, Yellow asserted. Also, some employees released the company from the claims in exchange for severance. A separate filing showed approximately $244 million in claims related to WARN Act violations but noted that many were duplicate claims filed by both employees and their unions or union-related funds.
“The reality is that the Debtors shut down their businesses on an extremely short time frame as the result of completely irrational behavior from the [Teamsters] that neither the Debtors nor any other rational employer would have expected or planned for. No WARN act [provision] provides for liability under these circumstances,” the filing said.
Yellow said it was ready for a hard fight with the union and that “give-and-take” often led to operational changes in the past.
“Based on this historical record, Yellow understood that the [union] would drive a hard bargain but never drive the Company to the brink of failure, which would risk losing 22,000 unionized jobs,” the filing read.
Yellow’s objection asked the court to grant the order with an April 4 deadline for claimants to respond and a hearing date of April 11.
Discovery will continue in Yellow’s $137M suit against Teamsters
A U.S. District Court in Kansas said discovery in Yellow’s $137 million breach-of-contract lawsuit against the Teamsters will continue. The union argued to stay the costly advanced stages of discovery for a case that may ultimately be thrown out. A separate motion from the Teamsters has called on the court to dismiss the case.
An order denying the stay showed that the union had produced less than 1% of its total expected document production. Unsurprisingly, the filing showed Yellow had “substantially completed their document production by the March 1 deadline.”
The suit claims the Teamsters intentionally blocked the proposed change of operations, which it didn’t have the authority to do.
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