Yellow Corporation

UNITED STATES BANKRUPTCY COURT

DISTRICT OF DELAWARE

CRAIG T. GOLDBLATT (see 824 N. MARKET STREET

JUDGE 4, WILMINGTON, DELAWARE

(302) 252-3832

ey

□□□

March 31, 2025

VIA CM/ECF

Re: Inre Yellow Corporation, et al., No. 23-11069

Dear Counsel:

In a jointly written March 27, 2025 letter, the debtors and the Committee urge

the Court to reconsider its earlier statement that it would issue its decision on the

pending summary judgment motions on April 4, 2025.1 By contrast, MFN contends

that the Court should issue its decision and proceed to resolve the various claim

objections on their merits.?

For the reasons described below, 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. That

judgment is premised on the Court’s conclusion that the pending MFN claim

1D.I. 5982. Yellow Corporation and its affiliated debtors are referred to as the “debtors.”

The Official Committee of Unsecured Creditors is referred to as the “Committee.”

2MEN Partners, along with its affiliate, Mobile Street Holdings, is referred to as “MFN.”

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objections require it, at the very least, to apply more exacting scrutiny to the

settlements of those claims, reflected in the proposed plan of reorganization, than the

deferential review that would otherwise apply under Rule 9019. And 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.

In short, under the circumstances of this case, the Court does not believe that

it can confirm the proposed plan based on an analysis that looks only at whether the

claim settlements that form the cornerstone of the plan are broadly within the range

of reasonable, applying the highly deferential standard that otherwise applies to Rule

9019 settlements.

First, the Court rejects the argument that the “joinders” to the debtors’ claim

objections that MFN has filed can be mooted by the debtor’s decision to withdraw its

objections. The point of filing a joinder is to preserve the right to litigate the

underlying objection in which the party is joining. And the Court sees little benefit

to announcing a rule that would require a party that otherwise wishes to join in an

objection to clutter the docket by making a wholly duplicative filing.

Second, the Court does not believe that in the present circumstances, it can

apply deferential Rule 9019 review to the settlements baked into the plan. The

caselaw on which the debtors and the Committee rely, including the district court’s

decision in Kaiser Aluminum, has been overtaken by more recent decisions of the

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Supreme Court and the Third Circuit.3 Section 502(b) says that any “party in

interest” may object to the allowance of claim in bankruptcy and that when such an

objection is filed the bankruptcy court “shall” determine the amount of the allowed

claim.4 In light of the Supreme Court’s decision in Truck Insurance and the Third

Circuit’s decision in FTX – which interpret the terms “party in interest” and “shall,”

respectively – the Court believes that it is, at the very least, required to engage in a

more searching review of the reasonableness of the settlements, which will

necessarily be informed by the conclusions set out in the (yet unissued) summary

judgment ruling. 5

Given the importance of these issues and to show appropriate respect for the

hard work of the debtors, the Committee, and other creditors in reaching an

agreement that achieves a measure of consensus, the Court is prepared to hear from

the parties, at the status conference set for April 7, 2025 at 10:00 am Eastern Time,

with respect to the Court’s tentative conclusions on the legal issues described in this

letter. The Court will defer the issuance of its summary judgment opinion until the

parties have the chance to be heard at that time.

3 In re Kaiser Aluminum Corp., 339 B.R. 91 (D. Del. 2006).

4 11 U.S.C. § 502(b).

5 See Truck Ins. Exch. v. Kaiser Gypsum Co., 602 U.S. 268 (2024); In re FTX Trading Ltd., 91

F.4th 148 (3d Cir. 2024).

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Background

The debtors were a leading trucking company whose business failed in the

summer of 2023 as a result of a labor dispute. The debtors conducted a tremendously

successful auction process for the sale of their terminals and trucking assets. Those

sales generated approximately $2 billion in cash, which was used to pay off their

secured debt (including the DIP loan) in full and leaving hundreds of millions of

dollars available to pay unsecured claims.

Many of the debtors’ largest creditors are multiemployer pension plans. As a

result of the debtors’ withdrawal from those plans, the debtors owe withdrawal

liability under the Employee Retirement Income Security Act (“ERISA”). The

calculation of that withdrawal liability, however, is quite complex and raises a

number of unresolved legal questions both under ERISA and the Bankruptcy Code.

The pension plans have filed proofs of claim on account of the withdrawal liability.6

The debtors and MFN have each filed claim objections.7

One of the first disputes that the parties brought to the Court involving the

allowance of these claims involved those plans that received federal financial

assistance under the American Rescue Plan Act. If federal funds received by pension

plans under that statute were treated as ordinary plan assets, then the plans would

have little or no “unfunded vested benefits,” which would mean that a withdrawing

6 D.I. 5996 at 43 n.13, 45 n.14-21.

7 D.I. 1962, 2595 (debtors’ claim objections); D.I. 5182, 5492 (MFN’s claim objections).

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employer, such as Yellow, would have little or no withdrawal liability to those plans.

The PBGC, seeking to carry out the statutory mandate that the funds provided under

the statute in fact be used to shore up the pension plans, issued regulations that

effectively provided that those funds would not be counted as plan assets for the

purpose of calculating withdrawal liability.8 The debtors along with MFN, the holder

of equity in the debtors, challenged those regulations as inconsistent with the terms

of the American Rescue Plan Act. The Court upheld the regulations, but certified the

question for direct appeal.9 The Third Circuit granted that direct appeal and ordered

an expedited briefing schedule, indicating that it would set the case for argument as

early as June 2025.10

In the meantime, other issues regarding the calculation of withdrawal liability

have been brought to this Court. The Court addressed a handful of withdrawal

liability calculation issues in the same opinion that upheld the PBGC regulations,

and later amended that ruling on reconsideration.11 A separate summary judgment

opinion resolved a number of issues regarding the calculation of withdrawal liability

owed to those pension plans that did not receive federal assistance under the

American Rescue Plan Act.12

8 The Pension Benefit Guaranty Corporation is referred to as the “PBGC.”

9 D.I. 4326; D.I. 5358.

10 See In re Yellow Corp., Third Cir. No. 25-8004 (Feb. 28, 2025), D.I. 25.

11 D.I. 4326 at 34-41; D.I. 4769.

12 DI. 5619.

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Seven significant questions bearing on the calculation of withdrawal liability,

applicable to both those plans that received funding under the American Rescue Plan

Act and those that did not, were separately briefed to this Court in connection with

several motions for summary judgment. In substance, the seven issues raised by

those motions are the following:

(1) Whether, as of the petition date, the debtors’ obligation to pay

withdrawal liability over 20 years had been accelerated as a result of a

default.

(2) Whether the debtors’ 20-year stream of payments is accelerated because

of their bankruptcy filing.

(3) Whether that stream of future obligations should be discounted to

present value on account of 29 U.S.C. § 1405(e).

(4) Whether, under federal bankruptcy law, the 20-year stream of payments

should be present discounted, and if so, what discount rate should be

used for that purpose.

(5) Whether the limitation on withdrawal liability set forth in

29 U.S.C. § 1405(b) applies to the employer’s total share of the plan’s

unfunded vested benefits, or only the amount after the application of the

20-year cap provided in 29 U.S.C. § 1399(c)(1)(B).

(6) Whether Central States and Local 641 used appropriate contribution

base units when calculating the debtors’ annual payment.

(7) Whether Central States’ claim arising under a side letter between the

parties is properly enforceable under applicable non-bankruptcy law.

The Court heard argument on those motions on January 28, 2025. A

Memorandum Opinion that seeks to answer those questions is substantially

complete.

In the meantime, however, a separate drama was unfolding as the debtors

sought to propose and confirm a plan of reorganization. In September 2024 the

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debtors filed the first version of a plan of liquidation.13 That plan was amended twice

in the fall of 2024.14 A confirmation hearing was set for February 24, 2025.

At the January 28, 2025 hearing, counsel for the Committee apprised the Court

that the Committee did not support confirmation of the plan, and (presumably

relatedly) that no impaired class of creditors had voted in favor of the plan, which

would preclude its confirmation under § 1129(a)(10) of the Bankruptcy Code. Counsel

went on to say that the Committee intended to move to terminate exclusivity or in

the alternative to convert the cases to ones under chapter 7.15

The confirmation hearing was subsequently pushed back to March 17, 2025.

On March 12, however, counsel for the debtors reached out to chambers asking to

cancel the March 17 hearing. The Court directed that the hearing go forward as a

status conference, and the debtors filed an agenda so indicating.16

At that status conference, counsel for the debtors said that they had canceled

the confirmation hearing because the “debtors do not have the votes for the waterfall

plan that we filed.”17 The reason for that, counsel explained, is that “[c]ertain of our

largest unsecured creditors are unwilling to vote for the debtors’ plan.”18

13 D.I. 4253.

14 D.I. 4580; D.I. 4974.

15 Jan. 28, 2025 Hr’g Tr. at 132.

16 D.I. 5878.

17 March 17, 2025 Hr’g Tr. at 6.

18 Id.

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Debtors’ counsel went on to explain, however, that the debtors had recently

received a proposal from the Committee for a form of plan that did have support from

“certain of the debtors’ largest unsecured creditors.”19 Counsel said that the debtors

were “vigorously evaluating” the proposal and that they understood that if the

debtors did not support it, the Committee would go forward with that plan on its

own.20 Counsel observed, however, that other stakeholders also needed to be

consulted, and that absent the agreement of those stakeholders, plan confirmation

would likely be hotly contested.

Counsel for the Committee then elaborated somewhat on the terms of the

proposal. She explained that the Committee has voted to support a plan that “would

resolve in full all disputes that have been or may be pursued with respect to the

claims” asserted by many of the largest pension plan creditors.21 Counsel added that

the plan “will also provide the opportunity for other [multiemployer pension plan]

creditors to participate in the settlement on substantially similar terms.”22 The

settlement will thus obviate ongoing claims allowance litigation and thereby “provide

general unsecured creditors with both more certainty as to when they would expect

19 Id.

20 Id. at 6-7.

21 Id. at 9-10.

22 Id. at 10.

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to receive recoveries, and more value than they would otherwise receive in virtually

all other scenarios.”23

Before concluding the hearing, the Court noted that it expected to be in a

position to issue its decision on the summary judgment motions argued on January

28 “sometime next week.”24 Appreciating the relevance of the Court’s resolution of

those disputes to the ongoing settlement discussions, the Court added that “[n]o one

has asked me … not [to] proceed in the ordinary course …. [s]o I’m just going to …

get it out as promptly as I can … without regard to whatever I [learned] today about

where the parties are.”25 The Court added that “if someone wants me to do something

different, I’ll let you ask me, but unless and until someone does, I’m just going to put

my head down and do my job.”26

Counsel for the debtors then suggested that the Court use an existing hearing

date on March 26 for another status conference to check in on the state of play

regarding the plan.27 The Court agreed to do so.28

On March 21, however, counsel for the debtor sent an email to chambers

(copying counsel for many but not all of the affected parties), that read as follows:

We are reaching out to update the Court regarding the [multiemployer

pension plan] summary judgment motions that were argued on January

23 March 17, 2025 Hr’g Tr. at 10.

24 Id. at 15.

25 Id.

26 Id.

27 Id. at 16-17.

28 Id. at 17.

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28, 2025, and are currently under advisement. At the status conference

on March 17 this week, the Court indicated it was likely to issue a ruling

by next week. We believe we have reached a settlement in principle with

the Committee and other [multiemployer pension plans] (other than

MFN Partners). As such, we would respectfully request that the Court

hold off on issuing its ruling, and we will provide a more fulsome update

at the status conference on March 26.

We have copied relevant counsel for the Committee, the [multiemployer

pension plans], and MFN Partners. Please advise if you have any

questions. Thanks, and have a nice weekend.29

Counsel for MFN responded by letter dated March 25, 2026.30 The letter notes

that the summary judgment motions were argued on January 28, 2025 and that the

“issues to be resolved either will result in resolution of over a billion dollars in

disputed [multiemployer pension plan] claims and, if the objections are sustained

even in part, would meaningfully improve recoveries to all general unsecured

creditors holding allowed claims.”31 The letter notes that while certain other creditors

have been brought into the proposed settlement in exchange for “new consideration,”

MFN was not, and that it took the position that the various settlements were likely

to be “patently unfair to MFN Parties and other general creditors and render any

plan unconfirmable.”32 For that reason, MFN argued that the “fair outcome for all,

29 The Court does not ascribe to debtors’ counsel any intent to exclude an affected party from

a communication with the Court. This Court’s chambers procedures do permit emails to

chambers with respect to certain procedural and scheduling matters, but require that all

such email communications be copied to opposing counsel. For a matter as substantive as

the request at issue here, however, the better practice would have been to file a letter on the

public docket.

30 D.I. 5961.

31 Id. at 1.

32 Id. at 2.

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including the MFN Parties who have objected to the [multiemployer pension plans’]

claims, is to have resolution of the disputes brought before the Court.”33 MFN

concluded by noting that “[t]here is no universal resolution and, until there is, this

Court should do in the same manner as it has multiple times during these cases –

resolve important disputes that impact all stakeholders.”34

The Court addressed these issues at the March 26 status conference. Counsel

for the debtors explained that a ruling on the pending summary judgment motions,

whatever that ruling may be, “will likely gut our ability to maintain the current level

of consensus” in support of the plan.35 Counsel added that while MFN had not agreed

to the plan settlement, the debtors’ “ultimate goal … would be to fold as many [parties

in interest], including MFN, into this contract as possible.”36

Counsel for the Committee added that the disputes before the Court in the

pending summary judgment motions “are the very matters that we are proposing to

settle onto the plan with the settling parties.”37 Committee counsel further warned

that:

The [C]ommittee firmly believes that if Your Honor were to issue a

ruling now in either direction or in a multitude of different directions

there will be no near-term consensual resolution of these cases[; no]

opportunity for unsecured creditors to vote on whether to accept or reject

the settlement [that] the [C]ommittee and the other parties … have

33 Id.

34 Id.

35 March 26, 2025 Hr’g Tr. at 5.

36 Id. at 8.

37 Id. at 11.

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negotiated into the plan, no opportunity for the [multiemployer pension

plans] that are not currently a party to the settlement to review the

terms of that proposal and elect to opt-in[; thus] no confirmable plan to

prosecute to the detriment of all stakeholders of these estates.38

In response that that plea, the Court posed a question to Committee counsel –

one that the Court had not previously considered. With apologies for the long-winded

formulation, the Court asked:

So imagine the following: There’s a creditor whose claim is unliquidated.

There’s another major creditor in the case who has filed an objection to

the allowance of that creditor’s claim. The debtor-in-possession, the

trustee or what have you, seeks to settle with the creditor whose claim

is the subject of another party’s objection. How does the Bankruptcy

Court think about the question of can I approve the settlement in an

amount that is greater than [the amount in which it would ultimately

be allowed if the Court resolved the claim objection on the merits?]

So what do I do if … the trustee in bankruptcy wants to settle, but

another creditor, who has a statutory right to object to the allowance of

the claim, says, “Judge, the claim is invalid, disallow the claim, I've

objected to it and I'm entitled to its disallowance?” What does a Court

do in that circumstance because I think the answer to that is relevant

to what’s in front of me today.39

Committee counsel responded that the issue is “no different than the resolution

of any potential estate claim.”40 Counsel added that “so long as what’s being proposed

is within the range of reasonableness … the debtors can settle and resolve even if

other claimants are not supportive of the resolution.”41

38 Id. at 11-12.

39 Id. at 13-14.

40 Id. at 14.

41 March 26, 2025 Hr’g Tr. at 14-15.

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After counsel for MFN argued that it was entitled to a ruling on a motion to

which it was a party, the Court observed that it appreciated the point made by the

debtors and the Committee that the Court should not issue a ruling that could be

“massively disruptive” to the case and “interfere with [the] progress” the parties had

made.42 At the same time, the Court indicated that it believed that MFN was

“entitled to an adjudication” of an issue that it had properly brought before the

Court.43 The Court accordingly concluded that it would be appropriate to give the

parties an additional window of time in order to see if an MFN might be brought into

the fold. To that effect, the Court agreed to defer issuance of its opinion until noon

on Friday, April 4th unless the parties unanimously requested an additional delay.44

On March 27, 2025, counsel for the debtors and the Committee wrote a joint

letter to the Court.45 The letter makes essentially two arguments. First, the debtors

and the Committee contend that because MFN filed a “joinder” in the debtors’

objection rather than a “standalone” objection they had no independent right to an

adjudication. Second, the letter provides law in support of the position that the

Committee took in response to the Court’s question at the March 26 hearing

regarding the debtors’ authority to “settle out” claims to which another party-in-

interest had filed an objection. They contend that such settlements are permitted

42 Id. at 22.

43 Id.

44 Id. at 24.

45 D.I. 5982.

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and need only satisfy the usual Rule 9019 standard, which essentially asks only

whether the settlement is within the range of reasonableness.

On March 28, 2025, the debtors and the Committee filed a new plan of

reorganization.46 The accompanying disclosure statement explains the mechanics of

the proposed settlement in some detail.47

Analysis

I. MFN’s joinder in the debtors’ claim objections should be treated as

incorporating the debtors’ objection by reference.

The debtors and the Committee argue that because MFN did not file a stand-

alone objection to the proofs of claim, but instead filed a joinder in the debtors’

objection, it should not be treated as a party that has objected to the allowance of the

claims. In support of that contention, the debtors and the Committee point to two

decisions from the Southern District of New York.48

In Republic Airways, two creditors joined in an objection filed by a creditors’

committee to relief sought by the debtor. The debtor resolved the committee’s

objection. Judge Lane’s decision does in fact state that “[i]n light of the Official

Committee’s withdrawal of its objection, this joinder is also resolved.”49 The opinion,

however, goes on to say that “[i]n any event, no one from the Teamsters made any

46 D.I. 5995.

47 D.I. 5996 at 52-55.

48 D.I. 5982 at 3 (citing In re Republic Airways Holdings Inc., No. 16-10429, 2016 WL 2616717

at *2 (Bankr. S.D.N.Y. May 4, 2016) and In re Metaldyne Corporation, No. 09-13412, 2009

WL 2883045, *1 n.4 (Bankr. S.D.N.Y. Jun. 23, 2009)).

49 Republic Airways, 2016 WL 2616717 at *2.

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argument at the hearing on these motions.”50 In light of that statement, it is far from

clear that Judge Lane would have permitted the committee to settle out the objection

had the joining party sought to press forward with it.

Judge Glenn’s decision in Metaldyne is to similar effect. There, the court noted

that the committee had objected to approval of the debtors’ DIP loan. A footnote

states that “[t]he Pension Benefit Guaranty Corporation also filed an untimely

joinder to the Committee’s objections. The Court will not consider untimely objections

in the disposition of this dispute. In any event, because the PBGC incorporated the

Committee’s objections into its own, the Court resolves the PBGC’s objections on the

same grounds.”51 Nothing in the opinion, however, suggests that the PBGC sought

press the point it had made in its joinder. In context, it is very far from clear that

this “in any event” point expressed in a footnote is a holding that a party that files a

“joinder” should be treated differently from one that files an independent objection.

As a practical matter, the principal reason to file a joinder is to give the joining

party the independent right to appear and be heard with respect to that issue. This

Court has always construed a joinder as saying, in effect, that the joining party

intends to incorporate by reference the points made in the submission in which that

party is joining. Sure, one could live in a world in which courts chose not to respect

“joinders” but instead required a joining party to file its own independent objection.

50 Id.

51 Metaldyne, 2009 WL 2883045 at *1 n.4 (internal citation omitted).

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The obvious result of such a rule would be that parties would stop filing joinders, and

(at the expense of the forests and electronic storage space) would instead file their

own, identical pleading, on the docket. The Court is very hard pressed to see how the

adoption of such a judicially created rule would make the world a better place or

promote the efficient resolution of bankruptcy disputes. The Court therefore will not

impose such a rule. Rather, it will treat MFN’s pleadings as what they were intended

to be – documents through which MFN asserted the same objections to the pension

plan proofs of claim that were asserted in the debtors’ objections.

II. Without definitively resolving the question of the standard of review

that will apply to the plan settlement, in light of the pending MFN

objections the Court’s evaluation must be more searching than the

otherwise applicable Rule 9019 standard.

The second argument advanced by the debtors and the Committee, that the

Court can approve the plan settlement under Rule 9019 notwithstanding the MFN

claim objections, is a serious argument and raises a question on which bankruptcy

courts have divided. At some level, one could say that this is a confirmation issue

that need not be addressed at this stage. And indeed, the Court is not definitively

resolving the issue now. That said, the Court’s analysis of this issue has led it to

conclude that it would make sense to set forth its preliminary views of that issue now,

rather than after a confirmation hearing.

Based on this Court’s review of the caselaw and a preliminary review of the

disclosure statement, the Court does not expect that it will endorse the debtors’ and

Committee’s strongest argument in support of the usual 9019 standard – that the

Page 17 of 27

proposed settlement is to be reviewed under a highly deferential Rule 9019 standard

that asks only whether the resolution falls within the outer confines of the range of

reasonableness.52

The letter submitted by the debtors and the Committee points to a number of

cases that (unbeknownst to the Court, when it asked this question to the parties at

the March 26 status conference) have addressed the question whether a bankruptcy

trustee may settle a claim that is the subject of a pending objection asserted by a

party in interest.53 Indeed, the topic is the subject of a helpful article that categorizes

the caselaw as falling into three groups.54 One group are the cases on which the

debtors and the Committee rely, which is described as the “majority” position.55

52 This argument can be found in the most recently filed version of the disclosure statement.

D.I. 5996 at 52-55. See, e.g., In re Capmark Financial Group, 438 B.R. 471, 514-515 (Bankr.

D. Del. 2010).

53 The Court here uses the term “trustee” to include the debtor-in-possession in a chapter 11

case. See 11 U.S.C. § 1107(a). It is interesting that § 1123(b)(3)(A) states that a plan may

“provide for … the settlement or adjustment of any claim or interest belonging to the debtor

or to the estate,” but does not expressly state that the plan may provide for the settlement of

a claim against the estate. See id. § 1123(b)(3)(A) (emphasis added). The Court has no

trouble, however, with the proposition that such a settlement may properly be achieved under

the “catch-all” authority of 1123(b)(6) that states that a plan may “include any other

appropriate provision not inconsistent with the applicable provisions of this title.” The

overarching point, however, is that the basic standard is not different than the one that would

apply to a trustee seeking to settle a claims dispute outside the plan context.

54 Brian L. Shaw and David R. Doyle, Section 502 and the Hidden Limits on a Creditor’s Right

to Object to a Claim, 2019 NORTON’S BANKR. L. ADVISER 1 (2019).

55 See In re Heritage Org., L.L.C., 375 B.R. 230 (Bankr. N.D. Tex. 2007); In re Tri-State

Ethanol Co. LLC, 370 B.R. 222 (Bankr. D.S.D. 2007); Kaiser Aluminum Corp., 339 B.R. 91;

In re Trism, Inc., 282 B.R. 662 (8th Cir. BAP 2002); In re Dow Corning Corp., 244 B.R. 72

(Bankr. E.D. Mich. 1999).

Page 18 of 27

The district court’s decision in Kaiser Aluminum is a good example of this line

of reasoning. There, a creditor had objected to a claim against the debtor’s estate

filed by the PBGC. The debtor sought to settle with the PBGC, granting it an allowed

claim that, according to the objecting creditor, gave the PBGC a “windfall.”56 The

bankruptcy court did there what the debtors and Committee ask this Court to do here

– stayed the claim objection and considered the motion to approve the settlement

first. The subsequent approval of the settlement effectively mooted the objection to

the allowance of the claim.57

The district court affirmed. The court concluded that there was “no direct

conflict between Section 502(a) and Rule 9019 which would require the Bankruptcy

Court to resolve claim objections before approving a settlement.”58 Imposing such an

obligation, the court said, “would undermine the important policy of promoting

settlements in bankruptcy proceedings by requiring the parties to litigate the very

issues that the settlement seeks to resolve.”59 The court noted that a chapter 11

debtor “is charged with fiduciary responsibilities to all creditors to resolve claims in

the best interest of the estate.”60 The proposed settlement of the PBGC claim, the

court concluded, should accordingly be judged by that standard.

56 Kaiser Aluminum, 339 B.R. at 93.

57 Id.

58 Id. at 94.

59 Id.

60 Id. at 95.

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On the merits, the district court applied the Third Circuit’s Martin factors,

which require the bankruptcy court to “assess and balance the value of the claim that

is being compromised against the value to the estate of the acceptance of the

compromise proposal’ in light of four factors.” 61 Those factors are: “(1) the probability

of success in the litigation, (2) the likely difficulties in collection, (3) the complexity of

the litigation involved, and the expense, inconvenience and delay necessarily

attending it, and (4) the paramount interests of the creditors.”62 The district court

found that the bankruptcy court had not abused its discretion in how it weighed those

factors.63

There is a second group of cases on the other side of the spectrum. The

bankruptcy court in C.P. Hall, for example, held that a creditor that objected to the

allowance of a claim “has statutory rights to object to the claims and obtain a ruling

on his objection. The settlement cannot be approved if approval would deprive the

creditor of those rights.”64 The court there noted that § 502(b) of the Bankruptcy Code

61 Id. at 96 (citing See In re Martin, 91 F.3d 389, 393 (3d Cir. 1996)).

62 Kaiser Aluminum, 339 B.R. at 96.

63 Id. Other courts have adopted this analysis. See In re Mallinckrodt PLC, 639 B.R. 837,

908 (Bankr. D. Del. 2022) (following Kaiser Aluminum and noting that a contrary conclusion

“would allow a party-in-interest unfettered power and allow them to derail settlements,

which would slow down the bankruptcy proceedings”); In re Fog Cap Retail Investors LLC,

No. 22-1297, 2024 WL 659559, *6 (10th Cir. Feb. 16, 2024) (suggesting that only a claim

objection that “involves the individual rights of the objecting creditor, such as a dispute over

competing lien rights” may not be resolved without permitting the creditor the opportunity

to be heard on the merits).

64 In re C.P. Hall Co., 513 B.R. 540, 542 (Bankr. N.D. Ill. 2014).

Page 20 of 27

“permits any ‘party in interest’ to object” to the allowance of a claim.65 And when a

claim objection is filed, the statute provides that “the court … shall determine the

amount of such claim … as of the date of the filing of the petition, and shall allow

such claim in such amount.”66

The C.P. Hall court rejected the argument that the “orderly and expeditious

administration” of the bankruptcy case provides a reason to override this statutory

language, explaining that the “restriction” on the right of a party in interest to object

to the allowance of a claim, which other courts had adopted, “does not appear in the

Code itself” but rather is a rule that was essentially made up by judges.67 “It may be

that sound bankruptcy policy warrants limiting creditors’ rights this way, and when

it comes to objecting to claims a chapter 7 trustee should be given first crack. But

Congress, not the courts, decides what makes for sound bankruptcy policy.”68 The

court accordingly rejected the rationale of Kaiser Aluminum on the ground that the

decision is “based not so much on an analysis of the Code as on the courts’ own policy

views.”69

The decision in CS Mining is to the same effect. “The C.P. Hall case is

persuasive as it applies the unambiguous language of the Code. Section 502 makes

65 Id. at 543.

66 11 U.S.C. § 502(b).

67 In re C.P. Hall Co., 513 B.R. at 544.

68 Id.

69 Id.

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clear that ‘the court’ is to ‘determine’ a claim objection under section 502(b) of the

Code. When a party files an objection to a claim, their rights to be heard on the claim

objection should not be abridged or modified by a settlement.”70

Finally, there is one case in a third category. The Bankruptcy Court for the

District of Colorado, in DVR, sought to find a goldilocks solution by forging a middle

ground.71 There, Judge Brown acknowledged that “the use of the word ‘shall’ in

§ 502(b) imposes a duty on the bankruptcy court to determine the allowed amount of

a claim once an objection has been filed.”72 The decision, however, emphasized the

important role of the bankruptcy trustee as a fiduciary to various constituencies,

whose interests will at times conflict with one another. Seeking to reconcile the

express authority of any party in interest to object to a claim with the trustee’s duty

to administer the estate as a fiduciary, the court suggested that the way to reconcile

the principles is “to allow the objector to bring his objection, airing any legitimate

grounds for doubting the claim’s validity, but then to allow the trustee to come along

and settle the dispute when doing so is in the best interests of the estate.”73

The court described this as a “tag team” approach in which every party in

interest “will continue to have a voice in the claim allowance process through his

ability to lodge an objection to the settlement,” but a bankruptcy court could

70 In re CS Mining, LLC, 574 B.R. 259, 281 (Bankr. D. Utah 2017).

71 In re DVR, LLC, 582 B.R. 507 (Bankr. D. Colo. 2018).

72 Id. at 512.

73 Id. at 518.

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nevertheless approve a settlement reached by the trustee where the court concludes

that such a resolution is in the best interests of the estate.74 The Court further

suggested that the substance of the objector’s contention would receive fair

consideration in connection with the motion to approve the settlement. “Moreover,

[the creditor] will still have his day in court. Under Rule 9019, this Court cannot

approve the Trustees’ settlement without first ruling on [the creditor’s] objection to

it. The Trustees will bear the burden of proving to the court that their settlement is

fair and in the best interests of the estate.”75 And while the court went on to identify

the factors the court would consider in seeking to approve the settlement as ones that

are similar to those identified by the Third Circuit in Martin, nothing in the DVR

opinion suggested that the court’s analysis would be nearly as deferential to the

trustee’s judgment as the law under Rule 9019 otherwise is.76 Indeed, the clear

implication of the “tag-team” approach is that the trustee’s burden in seeking

approval of the settlement is a meaningful one.

* * *

One could certainly take the position that choosing among these three

standards for approving a settlement is a confirmation issue that need not be

addressed at this time.77 And while that is certainly correct as a technical matter,

74 Id. at 521.

75 Id. at 523-524.

76 See id. at 524.

77 See March 26, 2025 Hr’g Tr. at 8 (counsel for the debtors arguing that “MFN’s ability to

object to the [proposed settlements] is a confirmation issue”).

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the Court’s strong inclination is that two controlling appellate decisions that post-

date the decisions in Kaiser Aluminum effectively eliminate the so-called majority

approach from consideration.

The Supreme Court’s decision in Truck Insurance v. Kaiser Gypsum makes

clear that when a statute says that any “party in interest” has a right to appear and

be heard, it means that any party in interest has a right to appear and be heard.78

And the Third Circuit’s decision in FTX makes it unmistakably clear that when the

Bankruptcy Code directs that the “bankruptcy court shall” do something, it means

that the bankruptcy court shall do it.79 This emphasis on the literal statutory words

– words that also appear in § 502(b) of the Bankruptcy Code – accord with the

approach set out in C.P. Hall and cannot be squared with the more policy focused

approach adopted in Kaiser.

In brief, the question in Truck Insurance was whether the debtor’s insurer had

a right to object to confirmation of the debtor’s plan under which the insurer would

likely be obligated to pay the claims allowed under that plan.80 The insurer took the

view that it was a party in interest and therefore, as § 1109(b) says, “may raise and

may appear and be heard on any issue in a case under this chapter.” The Fourth

Circuit rejected that view, finding that language in the plan that purported to ensure

that the plan was “insurance neutral” vitiated the insurer’s standing to raise other

78 Truck Ins., 602 U.S. at 277-278.

79 FTX, 91 F.4th at 153.

80 Truck Ins., 602 U.S. at 268.

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objections. The Supreme Court reversed, explaining that the language “party in

interest” is “capacious.”81 The point of that language, the Court explained, was to

promote “broad participation” in the reorganization process.82 “Drafters and early

commentators hoped that an expansive definition of ‘party in interest’ in § 1109(b)

would allow a broad range of individual and minority interests to intervene in

Chapter 11 cases, and expressly warned that undue restrictions on who may be a

party in interest might enable dominant interests to control the restructuring

process.”83

Use of the same phrase in § 502(b) – party in interest – can only be read to

achieve the same purpose. The Court accordingly does not see how the district court’s

rationale in Kaiser Aluminum, which essentially permitted an objecting creditor to

be excluded from the claims allowance process, can be squared with Congress’ express

statement that any “party in interest” can object to the allowance of a claim.

Section 502(b) goes on to say that when a party in interest objects to the

allowance of a claim, “the court … shall determine the amount of such claim.”84 And

as the Third Circuit said in FTX, construing the language in § 1104(c) stating that in

certain circumstances, “the court shall order the appointment of an examiner,” the

81 Id. at 277.

82 Id. at 280.

83 Id. (internal citations and brackets omitted).

84 11 U.S.C. § 502(b).

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“meaning of the word ‘shall’ is not ambiguous.”85 It is “a word of command … that

normally creates an obligation impervious to judicial discretion.”86

For these reasons, the Court is quite convinced that it cannot follow the

rationale of Kaiser Aluminum and confirm the proposed plan so long the plan’s

settlement mechanism falls anywhere within a broadly conceived range of reasonable

settlements. And while the Court inclines to think that cases like Truck Insurance

and FTX strongly support the approach adopted in C.P. Hall and CS Mining, the

Court is open to a middle-ground approach in the spirit of DVR that seeks to

harmonize the right of any party in interest to object to the allowance of a claim with

the practical concerns expressed by the courts in Kaiser Aluminum and Mallinckrodt.

Applying an approach modeled on DVR, however, would not involve affording

the settlements the usual deference to a debtor’s business judgment that would

otherwise apply to a settlement under Rule 9019. A trustee is undoubtedly entitled

to that deference when it seeks to settle an estate cause of action. But in the context

of settling a claim to which another party in interest has objected, the analysis would

need to involve a fairly searching analysis of the fairness of the proposed settlements.

Under such an approach, the factors that the Third Circuit set forth in Martin would

85 FTX, 91 F.4th at 153.

86 Id. (internal quotations and citations omitted). See also Gardner v. New Jersey, 329 U.S.

565, 573 (1947) (when an objection to a proof of claim is filed, the bankruptcy court “is duty

bound to pass on them”).

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of course be relevant. But the broad deference to the debtor’s business judgment that

courts otherwise apply under Rule 9019 would not be applicable.

In either case, the analysis that the Court would apply would be informed by

the legal conclusions it has reached with respect to the seven questions the parties

presented on summary judgment. The Court accordingly believes that that it would

be best for the go-forward process to issue its summary judgment decision so the

parties can see the target at which they must shoot.

That said, the Court wants to emphasize the great respect it has for the hard

work of the parties in this case and the challenges they have overcome in proposing

a plan that appears to have the support of most of the debtors’ largest constituencies.

The Court has a measure of sympathy for the pragmatic views expressed in decisions

like Kaiser Aluminum that seek to facilitate the resolution of the bankruptcy case in

the face of such a broad consensus.87

But even so, in light of decisions like Truck Insurance and FTX, the Court

simply does not believe that an order confirming the proposed plan on the ground

that the claim settlements fall somewhere within a broadly defined range of

reasonableness would be consistent with controlling law. Out of respect for the hard

87 At the same time, it is also true that one way to reach consensus among 20 parties is for

parties 1 through 19 to agree that they will mug the 20th and divide up that party’s fair share

among themselves. In such a case, it is the Court’s obligation to see through the parties’

efforts to cast party 20 as a “holdout” who is the “sole obstacle” to a consensual resolution.

The Court has certainly not formed any view on merits of the proposed settlement here. Any

such judgment will be based solely on the presentation of evidence at the confirmation

hearing.

In re Yellow Corporation, et al., No. 23-11069

March 31, 2025

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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.

A status conference in this case is set for April 7, 2025 at 10:00 a.m. The Court

will not issue its summary judgment decision before that time. But unless the Court

is persuaded that, notwithstanding the views expressed above, it would serve the

interests of the orderly administration of this bankruptcy case to further withhold

the opinion, it intends to issue it following that hearing.

Sincerely,

2?

iq JIM We

Craig T. Goldblatt

United States Bankruptcy Judge