Federal court dismisses Yellow’s lawsuit against the Teamsters

A federal court dismissed Yellow Corp.’s nine-figure lawsuit against the International Brotherhood of Teamsters, which accused the union of sabotaging the trucking company’s attempt to restructure.

Judge Julie Robinson of the U.S. District Court in Kansas recently granted the Teamsters’ motion to dismiss, effectively putting an end to Yellow’s lawsuit alleging a breach of contract cost the company $137 million and, ultimately, the business itself.

At the center of the lawsuit was the collective bargaining agreement and Yellow’s attempt to save its business through an overhaul of operations called One Yellow. The trucking company alleged that the Teamsters breached the agreement by blocking the second phase of the restructuring plan and holding it hostage by demanding higher wages.

In an effort to compete with nonunion competitors and refinance more than $1 billion in debt, Yellow’s One Yellow plan included merging YRC, Holland, New Penn and Reddaway into a “super-regional carrier.” The restructuring was to occur over three phases.

In September 2022, Yellow completed Phase 1, which consolidated YRC Freight operations with Reddaway operations in the West and accounted for 20% of Yellow’s network. However, problems began in implementing Phase 2, which would consolidate operations with Holland and New Penn in the Northeast, Midwest and Southeast and account for 70% of the entire network.

According to the lawsuit, the Teamsters had no right to impede the One Yellow restructuring. Rather, the collective bargaining agreement obligated the union to resolve employee seniority issues that may come up as a result of the restructuring, which the Teamsters did during Phase 1.

In January 2023, Yellow alleged that Teamsters General President Sean O’Brien used the change of operations process during Phase 2 to demand higher wages for union employees.

The company claimed the Teamsters breached the contract by tying wage increases to the change of operations process and unilaterally cancelling contract-required hearings for the process. After failing to reach an agreement, Yellow filed a lawsuit against the union last June.

“We do not take this action lightly, but the Union’s leadership has left us with no choice,” Yellow management said in a statement. “For many months, we have made good faith efforts to meet with the IBT to propose a path forward that works for all parties, but they refuse even to meet, let alone engage in honest talks.”

Yellow’s lawsuit attempted to bypass the collective bargaining agreement’s grievance procedures. The company claims that the grievance procedure does not apply because it seeks money damages not available through that procedure. Additionally, Yellow’s issues at hand do not involve a work stoppage. The Teamsters argued that the lawsuit should be dismissed for failure to exhaust the required grievance procedure. The federal court agreed with the Teamsters.

Judge Robinson found that the language of the agreement states that all factual grievances or questions of interpretation must undergo the grievance process.

There is no language precluding the grievance committees from awarding damages.

The court order effectively ends Yellow’s heated dispute with the Teamsters unless the now-defunct company decides to appeal. Yellow filed for bankruptcy one month after filing the lawsuit.

“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,” said Teamsters General President Sean M. O’Brien. “Yellow’s greedy executives drove this company into the ground despite enormous, selfless sacrifice from its workforce for decades. This lawsuit represented management’s desperate, last-ditch attempt to save face — and they failed yet again.” LL