Appeals court revived Kansas-based trucking company’s $137M lawsuit against Teamsters

Yellow Corp. trucks sit idle at a company facility on July 31, 2023 in Hayward, California. Yellow is closing its doors on the verge of bankruptcy after years of financial struggle. The closure will cost 30,000 jobs, including those of 22,000 Teamsters union members. (Photo by Justin Sullivan/Getty Images)

TOPEKA — A formerly Kansas-based trucking company that tried to sue its unionized employees for blocking modernization efforts will return to court to attempt to extract millions, or potentially billions, of dollars in damages from the union.

A federal court in Kansas initially dismissed the case from Yellow Corp., formerly known as Yellow Trucking, which was plagued by extreme debt before declaring bankruptcy and ceasing to exist. But a panel of federal appeals judges found errors in the original decision and remanded the case to district court, allowing new evidence from Yellow to be considered.

The lawsuit came weeks before Yellow’s downfall in August 2023, when it filed for bankruptcy after attempting to shift its operations and change employees’ job descriptions to overcome years of debts and increasing competition from non-union freight carriers. The company, which was one of the largest trucking companies in the country,  was in “dire financial straits,” the appeals court decision said.

Judge Richard Federico of the Tenth Circuit Court of Appeals wrote in the 28-page Nov. 5 decision that the district judge who dismissed Yellow’s complaint and simultaneously denied it the opportunity to add new evidence was wrong.

The International Brotherhood of Teamsters represented 22,000 of Yellow’s 30,000 employees at the time. It argued that Yellow, which was headquartered in Overland Park before moving its executive offices to Nashville, didn’t exhaust its internal grievance processes, which were required under the collective bargaining agreement between Yellow’s subsidiaries and local Teamsters chapters.

“The Teamsters defeated Yellow’s baseless complaint and look forward to defeating their baseless Amended Complaint,” said Kara Deniz, spokesperson for the International Brotherhood of Teamsters, in an emailed statement.

The Teamsters have roughly two weeks to challenge the Tenth Circuit’s decision.

Yellow was pleased with the Tenth Circuit’s decision, said Ron Rossi, a partner at Kasowitz law firm in New York who has been involved with the case, representing Yellow since the beginning.

“Yellow was a great company,” he said in an interview Friday. “Yellow provided good-paying jobs to 30,000 people.”

He said what happened to Yellow “is an absolute American tragedy.”

Yellow’s original complaint was filed in June, just more than a month before filing for Chapter 11 liquidation. If the allegations that the Teamsters “knowingly schemed to destroy Yellow” succeed, Rossi said, “arguably the Teamsters would be responsible for the costs of that bankruptcy.”

That includes the initial claim for $137 million in damages, tens of millions in administrative costs, pension costs triggered by the bankruptcy, and Yellow’s complete loss in enterprise value, Rossi said.

If all of those costs are found in court to be attributable to breach of conduct, the total could well exceed $1 billion, he said.

“Yellow is going to do its level best to hold the Teamsters to account for the consequences of their actions,” Rossi said.

He specifically mentioned Teamsters president Sean O’Brien, who has been a target in the case, and Teamsters leadership.

Yellow’s amended complaint refers to new evidence uncovered after the initial lawsuit was filed. That evidence has never had its day in court.

A record of minutes from a Teamsters board meeting reflected, as Yellow’s attorneys have alleged, “the Teamsters’ refusal to cooperate in any way with the then-ongoing restructuring efforts at Yellow,” Rossi said.

To the Teamsters, the initial $137 million lawsuit was frivolous and undermined the rights of workers. To Yellow, the modernization efforts that prompted the dispute were a matter of survival. In its lawsuit, Yellow alleges “the Teamsters intended to fully walk away from the table and force Yellow out of business.”

Yellow says the Teamsters “intentionally triggered a death spiral for Yellow,” a claim the Teamsters “vigorously dispute,” the appeals court decision said.

Yellow’s debts and financial troubles did not begin in 2023. They had been years in the making. Before its shutdown, the company had only had three profitable quarters since 2009, according to reporting from The Wall Street Journal.