Yellow Corp. Resolves Pension Claims with $526 Million Settlement

Bankrupt Yellow Corp. settles remaining pension claims for up to $526 million

Defunct less-than-truckload carrier Yellow Corp. has reached settlement agreements with four multiemployer pension plans totaling up to $526 million, resolving the remaining withdrawal liability claims in its bankruptcy case.

The agreements, which still require approval from the U.S. Bankruptcy Court in Delaware, could bring an end to a legal dispute that began soon after Yellow filed for Chapter 11 protection on Aug. 6, 2023. Approval would also clear a major obstacle to final distributions from the company’s liquidating trust to creditors and former employees.

Yellow previously reached agreements with most of the multiemployer pension plans, or MEPPs, to which it contributed on behalf of its union employees. The four remaining plans include three Teamsters funds and one pension fund connected to the International Association of Machinists.

The largest claim comes from the New York State Teamsters Conference Pension and Retirement Fund, which is seeking approval for a claim of approximately $300 million. Other proposed settlements include nearly $126.4 million for the Western Conference of Teamsters Pension Trust Fund, $71.2 million for the Western Pennsylvania Teamsters and Employers Pension Fund, and nearly $5 million for the International Association of Machinists Motor City Pension Fund.

The agreements would reduce some of the amounts previously sought by the pension funds. The obligation to the New York Teamsters fund would be reduced by about $26.5 million. Additional reductions would apply to claims associated with the Teamsters’ New Jersey-based Local 617 and the International Longshoremen’s Association’s Local 1730.

MFN Partners, Yellow’s largest shareholder, supports the settlements. As part of the proposed resolution, MFN would withdraw pending appeals and waive its right to seek certain legal fees and expenses. MFN had previously purchased some claims from the pension funds as a hedge while challenging Yellow’s withdrawal liability.

Withdrawal liability is the amount an employer may owe a multiemployer pension plan when it stops contributing to the plan. Yellow’s abrupt shutdown left the company facing claims from the pension funds, which argued that the carrier remained responsible for its share of unfunded pension obligations.

Yellow and MFN disputed that position. They argued that federal bailout funding received by the pension plans in 2021 had fully funded the plans, meaning Yellow should not owe withdrawal liability. They also contended that, if liability existed, the calculations used by the pension plans and federal regulators were incorrect.

The legal fight continued throughout the bankruptcy case. The U.S. Supreme Court declined earlier this summer to review the dispute over Yellow’s pension withdrawal liability, leaving the parties to resolve the remaining claims through negotiations and the bankruptcy process.

For former Yellow drivers and other employees, the settlement is significant because unresolved pension claims have delayed the distribution of money from the bankruptcy estate. The company’s liquidating trust has been selling assets and resolving claims, but the pension litigation remained one of the largest outstanding issues.

If the bankruptcy court approves the agreements, the trust would be able to begin making meaningful distributions to general unsecured creditors and work toward final distributions. Employee claims for unused paid time off and sick time have been classified as priority claims and are expected to be paid under the bankruptcy process.

The settlement does not restore Yellow’s operations or resolve every issue connected to the company’s collapse. It addresses the remaining pension claims and provides a path for the bankruptcy estate to move forward without years of additional litigation.

Yellow’s shutdown affected thousands of transportation workers. The company terminated about 3,500 nonunion employees on July 28, 2023, followed by approximately 22,000 union employees two days later. The carrier filed for bankruptcy less than a week after those layoffs.

The cost of administering the bankruptcy has also grown during the prolonged case. Yellow’s June monthly operating report showed approximately $293 million in professional fees and expenses paid since the Chapter 11 filing. The company reported about $593 million in cash at that time.

A hearing on the proposed settlements was scheduled for Sept. 11. Until the court rules, the agreements remain subject to approval and the timing and amount of creditor distributions cannot be finalized.