Yellow Corp., a defunct less-than-truckload company, is still on the hook for billions in debt claims.
That was the ruling of the U.S. Court of Appeals for the Third Circuit in a case involving the bankrupt company and its pension funds.
In an opinion issued on Sept. 16, a three-judge panel upheld a previous ruling from a Delaware bankruptcy court that Yellow was liable for $6.5 billion in debt claims made by its pension funds.
“Yellow offers no good reason why we should not enforce its own contract against it, instead pointing us to an array of cases in which a plan imposed, without consent, a higher contribution rate on a withdrawing employer’s liability calculation,” Judge Thomas L. Ambro wrote in the opinion. “That is not the case here, where Yellow contracted for this result. We know of no convincing statutory case against holding Yellow to its end of the bargain. Seeking to re-enter these pension plans, it bargained for a discount on its contributions by offering to pay full freight on its withdrawal liability if the time came. It is here.”
Background
Yellow Corp., which was based in Overland Park, Kan., and was once one of the largest transportation companies in the nation, filed bankruptcy in 2023. The company then withdrew from several pension plans that secured retirement benefits for its union workforce.
As part of the bankruptcy, the pension plans filed claims against the estate for Yellow’s withdrawal liability, which is what a company must pay to the plans for an early exit.
Last year, a federal bankruptcy judge ruled that the estate of Yellow must pay out the withdrawal liability claims to the 11 multi-employer pension plans.
During the COVID-19 pandemic, Congress granted billions of dollars to struggling pension plans through the American Rescue Plan Act of 2021. However, the Pension Benefit Guaranty Corporation imposed regulations on how the pension plans would account for and use that money.
Yellow Corp. argued that the regulations violate PBGC’s statutory authority.
However, the Third Circuit disagreed.
“Every clue from the regulatory and statutory text points us to the conclusion that ARPA and the PBGC’s regulations are directed at the plans, not the employers,” Ambro wrote. “As the PBGC said in its brief to us, Yellow’s argument ‘rests on the unfounded assumption’ that Yellow has a claim to the special financial assistance funds. It does not. Before ARPA was passed, Yellow was obligated to pay withdrawal liability to the (pension plans). These regulations merely preserve the status quo and prevent ARPA funds from being redirected to participating employers by reducing their withdrawal liability.” LL
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