Defunct less-than-truckload carrier Yellow Corp. has reached settlement agreements with four multiemployer pension plans (MEPPs) totaling up to $526 million, resolving the remaining withdrawal liability claims against its estate. The agreements are backed by Yellow's largest shareholder, MFN Partners, and would end a legal battle that began shortly after the company filed for bankruptcy in August 2023. The case has been one of the largest trucking bankruptcies in U.S. history and a test of how withdrawal liability—one of the biggest financial exposures for unionized carriers—is resolved when an employer exits multiemployer plans.

Yellow had previously agreed to terms with most of the MEPPs it once contributed to on behalf of its employees.

The New York State Teamsters Conference Pension and Retirement Fund, the Western Conference of Teamsters Pension Trust Fund, and the Western Pennsylvania Teamsters and Employers Pension Fund would receive the bulk of the settlement funds. The New York Teamsters fund is seeking approval for a $300 million claim.

A federal bankruptcy court in Delaware has been asked to approve the plan, which "will bring the current multi-year long MEPP litigation in these cases to an end … thus allowing the Liquidating Trust to begin making meaningful distributions to general unsecured claimants."

As part of the deal, MFN has agreed to drop its pending appeals and will waive its right to file certain legal fees and expenses. If the settlements are approved, the liquidating trust would be able to make final distributions to creditors. Employee claims for paid time off and sick time have been classified as priority claims and will be paid.

During the litigation, Yellow and MFN had argued that the MEPPs were fully funded after receiving federal bailout money in 2021, leaving Yellow with no withdrawal liability. Yellow also contended that if any liability existed, the calculations used by the pension funds and federal regulators were incorrect. The 2021 federal assistance Yellow referenced was the special financial aid program for troubled multiemployer pension plans, which became a central point of dispute over whether a fund receiving that support could still claim withdrawal liability from a departing employer.

MFN had purchased some claims from the pension funds—claims it had previously objected to—as a hedge. That position became a point of contention throughout the three-year legal fight over what Yellow owed after it abruptly stopped contributing to the pension plans.

According to the filing, the agreements before the court would "save the estates years of continued litigation and allow creditors to receive meaningful distributions in a timely manner."

Yellow's monthly operating report for June showed the company had paid out $293 million in professional fees and expenses since the Chapter 11 case began, and held $593 million in cash.

Earlier this summer, the U.S. Supreme Court declined to take up Yellow's pension withdrawal liabilities case.

Yellow terminated 3,500 nonunion employees on July 28, 2023, followed by 22,000 union employees two days later. The company filed for bankruptcy on Aug. 6, 2023. Its collapse removed one of the nation's largest LTL carriers from the market and displaced roughly 30,000 workers, reshaping freight capacity and employment across the sector.

The settlement resolves the outstanding pension fund claims, ending three years of legal disputes that followed Yellow's August 2023 bankruptcy. It also paves the way for the liquidating trust to distribute payments to creditors and former employees. The next step to watch is the Delaware bankruptcy court's decision on approval of the settlements, which determines when distributions can begin.

Source: FreightWaves