Yellow’s $137M-plus lawsuit against Teamsters revived

A federal appeals court has reinstated defunct Yellow Corp.’s $137-million-plus lawsuit against the International Brotherhood of Teamsters. The decision overturns a previous dismissal by a lower court, allowing the former less-than-truckload carrier to pursue its breach-of-contract case.

A Wednesday decision from the U.S. Court of Appeals for the Tenth Circuit remanded the case back to a federal district court in Kansas. Yellow can now amend its complaint against the union, which it claims deliberately blocked a restructuring dubbed “One Yellow,” a plan the company aserts was required for its survival.

Running out of cash, Yellow sued the union in June 2023, saying the labor organization didn’t have the authority to stop a proposed change of operations. Phase 2 of One Yellow would have allowed the company to merge its four LTL operating companies, consolidate terminals and alter work rules.

The union agreed to Phase 1 of the plan in 2022, which Yellow hailed as a success. Yellow, however, blamed the union’s “stonewalling” of Phase 2 as the cause of its “death spiral.” The suit alleged Sean O’Brien, Teamsters general president, used the blockade as leverage to “extract wage increases,” and that he was willing to let the company fail “as a show of strength” ahead of labor negotiations with larger companies like UPS (NYSE: UPS).

The Teamsters called the claims “unfounded and without merit,” at the time of the suit. It accused Yellow of using the union as a “scapegoat for the company’s inevitable demise,” according to the Wednesday filing. The union maintained that the proposed changes in Phase 2 violated the collective bargaining agreement.

Yellow closed its doors on July 30, 2023, a month after it filed the lawsuit, leaving 30,000 people, including 22,000 Teamsters, unemployed.

The U.S. District Court for the District of Kansas dismissed the lawsuit in March 2024, siding with the union’s argument that Yellow failed to follow the internal grievance procedures mandated by the National Master Freight Agreement before initiating legal action.

The three-judge appeals panel ruled Wednesday that the district court “erred” by denying Yellow’s subsequent request to amend its complaint to include additional facts, which came to light during discovery. The appeals court’s decision centered on the legal principle of repudiation, which exempts a party from exhausting grievance procedures if the other party has refused to participate.

The ruling cited allegations that the union categorically refused to support the change of operations, with O’Brien publicly stating the Teamsters “are done making concessions” and would “go after [Yellow] with everything we’ve got.”

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The decision also said O’Brien allegedly told the Teamsters’ board that its “position is that we do not in any way support Yellow’s proposed change of operations” and “will therefore not adhere to any such changes and will reject, up to and including striking, any proposals of such.”

The case will now return to the district court where Yellow will be permitted to file an amended complaint to include new evidence. Yellow’s suit initially sought $137 million in lost adjusted earnings before interest, taxes, depreciation and amortization, and at least $1.5 billion in lost enterprise value if the company were to shut down.

FreightWaves has reached out to the IBT for comment.

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