Delaware Bankruptcy Court Approves Most but Not All of Yellow Corporation's $1.44 Billion Pension Plan Settlements

Yellow Corporation, once one of the nation's largest trucking companies, received a mixed ruling from the United States Bankruptcy Court for the District of Delaware on its motion to approve approximately $1.44 billion in settlements with 16 multiemployer pension plans. In a 78-page Memorandum Opinion filed on April 2, 2026, the Court approved the majority of the proposed settlements but denied three of them, finding they fell outside the range of reasonable. The pension plans' original withdrawal liability claims totaled approximately $7.4 billion.

Company Background and the Withdrawal

Yellow Corporation participated in numerous multiemployer pension plans while operating as one of the country's largest trucking companies. The company discontinued business operations in July 2023 and filed for Chapter 11 bankruptcy shortly thereafter. Under ERISA, that cessation of business constituted a complete withdrawal from all of its multiemployer pension plans, triggering withdrawal liability claims totaling approximately $7.4 billion across 16 plans. Central States, Southeast and Southwest Areas Pension Fund additionally asserted a claim of approximately $917 million under a 2014 contribution guaranty agreement, and the New York State Teamsters Conference Pension & Retirement Fund asserted a liquidated damages claim for $76 million.

The claims triggered years of complex litigation. The Court issued multiple partial summary judgment rulings between 2024 and 2025 on contested ERISA calculation issues, including the validity of PBGC regulations, the application of ERISA's 20-year cap, the enforceability of contractual undertakings to pay enhanced withdrawal liabilities, and the proper interest rate for calculating unfunded vested benefits. The Third Circuit affirmed the Court's November 2024 rulings in September 2025. A petition for certiorari was filed in February 2026.

The Five-Step Settlement Methodology

The settlements were structured around a five-step methodology applied uniformly across most of the pension plans. In the first step, the parties determined unfunded vested benefits using an interest rate weighted 60 percent to the minimum funding rate and 40 percent to the rate originally selected by the plan's actuary. This represented a compromise of the Court's February 2025 ruling, which had followed three circuits in holding that the rates must be similar. The second step determined annual payments conforming with the Court's rulings on the effect of 2014 ERISA amendments. The third step capped each claim at the lesser of total unfunded vested benefits or 20 years of annual payments.

The fourth step differentiated between plans that received special financial assistance under the American Rescue Plan Act and those that did not. Plans without special financial assistance had their claims discounted at five percent, a compromise figure. The fifth step reduced each claim by 25 percent to account for ERISA's insolvency cap under § 1405(b), which the Court had ruled would require a 50 percent reduction if the debtors proved insolvency.

The Standard of Review

The opinion devoted substantial analysis to the standard applicable to settlement approval when a party in interest has objected to the underlying claims. The Court adopted an intermediate standard drawn from In re DVR, affording the debtor in possession some deference while still conducting a searching inquiry into reasonableness. The Court rejected the most deferential "business judgment" approach and the strictest approach that would require full claims adjudication before settlement. The Court noted that recent decisions, including Truck Insurance Exchange v. Kaiser Gypsum Co. from the Supreme Court and the Third Circuit's In re FTX Trading Ltd., effectively eliminated the most deferential approach.

The Court emphasized that the familiar language about the "lowest point in the range of reasonable" does not support rubber-stamping settlements. A bankruptcy court must hear out objections and satisfy itself that the settlement is in fact reasonable, while still recognizing that the debtor in possession's business judgment is entitled to some measure of deference.

Settlements Approved

The Court approved settlements with 13 of the 16 pension plans, finding the five-step methodology reasonable in light of the risk that the Court's prior rulings could be reversed on appeal.

On the interest rate compromise, the Court noted that the 60/40 weighting effectively ascribed a 40 percent likelihood of reversal. The Court's own assessment placed that probability closer to 33 percent, but found 40 percent within the range of reasonable. On the five percent present value discount rate, the Court found the resolution modest given the enormous potential variation in total claims. On the 25 percent insolvency reduction (half of the 50 percent the Court had ruled applicable), the Court found the legal arguments for reversal on the ordering of caps to be weak but acknowledged factual uncertainty about the debtors' solvency as of the July 2023 withdrawal date, noting that the debtors' equity traded for positive value post-petition.

The Court also approved the settlement of Central States' guaranty claim. The $917 million claim, which the Court had found to be an unenforceable penalty clause under Illinois law, was settled for $165 million, approximately 18 percent of the asserted amount. The Court concluded there was roughly an 18 percent chance an appellate court might reverse that ruling. The Court separately approved the Local 710 settlement, finding that a hypothetical "fresh start" accounting issue did not warrant departing from the common methodology.

The Court further approved the settlement's gifting provision, under which the settling pension plans agreed to contribute approximately $7.4 million (referenced elsewhere in the opinion as $7.5 million) to compensate creditors holding non-joint-and-several claims for the dilutive effect of the settlements. Following In re Nuverra Environmental Solutions, the Court read Third Circuit precedent in In re Armstrong World Industries to permit horizontal gifting. The Court rejected the objection that this violated the Supreme Court's reasoning in Czyzewski v. Jevic Holding Corp., finding the gift would not violate existing law even if included in the plan itself.

Settlements Denied

The Court denied approval of three settlements.

New York Teamsters. The proposed settlement of $326.5 million was denied. The five-step methodology yielded a withdrawal liability claim of $250.8 million. The remaining $75.7 million was attributable to liquidated damages, but the fund's own policies capped liquidated damages at 10 percent of withdrawal liability, which would produce a maximum of $25.1 million. The Court also gave weight to the objector's argument that ERISA § 1451(a) requires an enforcement action as a predicate for liquidated damages, finding it warranted at least a 20 percent further reduction. The Court offered the parties an alternative: a revised settlement at $270.8 million ($250.8 million in withdrawal liability plus $20 million in liquidated damages). The Official Committee of Unsecured Creditors joined in the objection to this settlement.

Locals 617 and 1730. Both settlements departed from the five-step methodology with no justifying rationale. For Local 617, the methodology yielded $0.1 million but the settlement was $3.0 million. For Local 1730, the methodology yielded $2.3 million but the settlement was $7.5 million. Even accounting for Local 1730's mass withdrawal exception (which removes the 20-year cap), the maximum claim was only $5.1 million. The debtors' financial advisor acknowledged at the evidentiary hearing that these settlements were notably less favorable than others and were not rooted in the settlement methodology. The Court suggested the parties either settle at the amounts the methodology yields or pursue § 502(c) estimation for prompt resolution.

Settlement Comparison

Path Forward

The Court noted that the settlements with each pension plan are severable, independent agreements. The parties may submit a proposed order approving the settlements the Court found reasonable, allowing that order to become final and appealable while further proceedings continue on the denied settlements. For the New York Teamsters, the Court offered the alternative of a revised settlement at $270.8 million or a scheduling order to resolve remaining factual and legal issues. For Locals 617 and 1730, the Court offered the alternative of settlement at the five-step methodology amounts or prompt briefing on a § 502(c) estimation motion.

The case continues before the United States Bankruptcy Court for the District of Delaware, Case No. 23-11069 (CTG), before Judge Craig T. Goldblatt.

This article was prepared using Research Suite by Stretto, the gold standard for bankruptcy research. Research Suite by Stretto was able to create this summary of a 78-page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Research Suite by Stretto may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.