A Delaware bankruptcy court ruled Wednesday that Teamsters union General President Sean O’Brien could be deposed regarding the events leading up to Yellow Corp.’s shutdown a year ago. Counsel for Yellow successfully argued that O’Brien has firsthand knowledge and that his testimony could be vital in deciding if the company should be on the hook for up to $244 million in WARN Act claims.
Various classes of employees have alleged the defunct less-than-truckload carrier didn’t provide them with a 60-day notification ahead of mass layoffs last summer as required by the Worker Adjustment and Retraining Notification Act. However, Yellow has asserted in the past that the notice was “neither feasible nor required,” saying “unforeseeable business circumstances” led to its abrupt demise and preempted the need for notifications.
Yellow has claimed a “faltering company” exemption from the WARN notices, saying that such notification would have scared off customers and potential lenders. It said it was working with a private equity fund to arrange additional financing in the weeks leading up to its July 30, 2023, closure. It also blames the Teamsters for denying a second phase of a restructuring called “One Yellow,” which it claims would have delivered significant cost savings through terminal closures and changes to work rules, as the reason for its failure.
In addition, Yellow said the union’s issuance of a strike notice over missed benefits payments to Central States Funds forced customers to flee. While Central States eventually allowed the payments to be deferred, Yellow said the damage had been done. It said it didn’t know until July 26 of last year that a shutdown was probable, well after the required late-May notification date.
Judge Craig Goldblatt denied a protective order on Wednesday that would have kept O’Brien from having to answer questions regarding correspondence he had with Yellow CEO Darren Hawkins. Yellow has said letters and conversations between the two show Yellow had a reasonable basis to believe it had a chance to get a deal done with the Teamsters’ negotiating arm, Teamsters National Freight Industry Negotiating Committee (TNFINC), and prove that the company is not liable for the WARN Act claims.
“I’m satisfied that here Mr. O’Brien had sufficient direct personal involvement in the precipitating events that it’s reasonable to give the debtors the opportunity to take his deposition,” Goldblatt said in court on Wednesday.
Goldblatt stopped short of specifically referencing any of the public jabs O’Brien threw at Hawkins during last year’s very public dustup, including a social media post of “Yellow” on a tombstone.
Goldblatt limited the inquiry to three hours and called on both parties to agree to boundaries of the in-person question-and-answer session. He also said he didn’t want to “open the door to a grudge match” and acknowledged that the line of questioning shouldn’t be constructed to assist Yellow in its breach-of-contract lawsuit against the Teamsters in a Kansas court.
Counsel for TNFINC argued Wednesday that O’Brien shouldn’t be subject to a deposition as TNFINC does not plan to call him as a witness at trial. TNFINC attorneys also argued that while O’Brien is the chairman of TNFINC, which negotiated with Yellow on the change of operations, other members like John Murphy, the committee’s co-chair and Teamsters national freight director, have equal or better knowledge on the matter.
The union has said it was Yellow’s decision to stop picking up shipments from customers that did it in. It said the company had the liquidity and a pathway to restore its daily shipment counts when the strike was called off. It also alleges Yellow wasn’t actively in talks to secure financing at the end of May, which it believes discredits a faltering company defense.
The union contends the company knew its failure was foreseeable.
Yellow and the Teamsters agreed to negotiate everything, including reopening national master freight agreement negotiations a year ahead of schedule, last year. The union said Yellow knew that in order to come to terms with the union and get a second change of operations approved, it would also have to agree to a wage increase, which it wasn’t in position to do without lender approval, and the lenders weren’t budging until One Yellow was fully in place.
Hawkins was deposed on the matter on Aug. 13.
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