A Delaware bankruptcy judge indicated he will likely issue a decision on more than $1 billion in disputed pension claims in the Yellow Corporation bankruptcy case, potentially disrupting settlement negotiations but upholding creditor rights to have objections adjudicated.
In a detailed 27-page letter dated March 31, 2025, Judge Craig T. Goldblatt of the U.S. Bankruptcy Court for the District of Delaware outlined his "tentative determination" to proceed with issuing a ruling on summary judgment motions affecting multiemployer pension plan claims against the bankrupt trucking company, despite pleas from the debtors and the creditors' committee to delay the decision.
"The Court's tentative determination is that issuing its decision, while likely to cause near-term disruption in the consensus that many of the key constituencies have worked hard to forge, will ultimately facilitate a more orderly confirmation process than would withholding the decision," Judge Goldblatt wrote.
The case centers on Yellow Corporation, once a leading trucking company that failed in summer 2023 amid a labor dispute. The company conducted what the court described as a "tremendously successful" auction of its terminals and trucking assets, generating approximately $2 billion in cash. After paying secured debt in full, hundreds of millions of dollars remain available for unsecured creditors, with multiemployer pension plans holding the largest claims.
At issue are complex calculations of withdrawal liability under the Employee Retirement Income Security Act (ERISA) that Yellow owes to pension plans after withdrawing. The court has been asked to resolve seven significant legal questions affecting these calculations through summary judgment motions argued on January 28, 2025.
While those motions were pending, Yellow and the Official Committee of Unsecured Creditors developed a new plan of reorganization filed on March 28, 2025, incorporating settlements with many of the pension plans. In a jointly written letter dated March 27, 2025, they urged the court to delay issuing its summary judgment ruling to avoid disrupting the emerging consensus.
Judge Goldblatt noted that MFN Partners, a holder of equity in the debtor that had joined in objections to the pension claims, opposed the delay and argued for resolution of the legal disputes.
The core legal issue explored in the letter is whether a bankruptcy court can approve settlements of claims (incorporated into a plan) using a deferential standard under Bankruptcy Rule 9019 when another creditor has filed objections to those claims. Judge Goldblatt indicated that recent Supreme Court and Third Circuit decisions likely require a more exacting standard than simply determining if settlements fall "within the range of reasonable."
"The Court believes that this scrutiny will necessarily be informed by the legal conclusions contained in the summary judgment opinion that are today known to the Court but not the parties," the judge wrote.
In particular, Judge Goldblatt cited the Supreme Court's 2024 decision in Truck Insurance Exchange v. Kaiser Gypsum Co. and the Third Circuit's 2024 ruling in In re FTX Trading Ltd. as establishing that statutory references to "party in interest" and "shall" in the Bankruptcy Code must be given their full meaning, likely requiring courts to more thoroughly evaluate settlements opposed by objecting creditors.
The judge rejected the argument that MFN's "joinder" in the debtors' claim objections should be treated differently than a standalone objection, stating that such a rule would merely incentivize duplicative filings that would not "make the world a better place or promote the efficient resolution of bankruptcy disputes."
The letter sets a status conference for April 7, 2025, where parties can address the court's tentative conclusions before the summary judgment opinion is issued. However, Judge Goldblatt indicated his intent to issue the ruling following that hearing unless persuaded otherwise.
"Out of respect for the hard work of many parties, however, the Court believes it appropriate to give those parties the opportunity to be heard before it issues its summary judgment decision," the judge concluded.
The case highlights tension between facilitating settlement negotiations in complex bankruptcies and upholding the statutory rights of creditors to have their objections determined by the court.
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