Federal judge dismisses ABFS suit against YRCW
December 17, 2010
A federal judge in the U.S. District Court ruled against ABF Freight Systems in its case against the International Brotherhood of Teamsters, various subsidiaries of YRC Worldwide and other entities following a ratified labor agreement by YRCW Teamsters members.
When it first signaled its intent to take legal action, ABF said that it was on the grounds that these organizations were in violation of the National Master Freight Agreement (NMFA), which serves as the collective bargaining agreement for the majority of U.S.-based trucking employees.
ABFS officials said that yesterday’s hearing was dismissed, due to a lack of subject matter jurisdiction.
“We are disappointed in this outcome and continue to believe that our November 1 lawsuit is strong,” said ABFS We are reviewing the Court’s ruling and considering next steps including possibly an appeal of the decision to the United States Court of Appeals for the Eighth Circuit.
YRCW, not surprisingly, had a different take, with President and Chief Operations Officer Mike Smid saying in a statement that from the moment the suit was first filed YRCW felt it had no merit. Smid added that he is gratified that after a thorough review of the facts the judge came to the same conclusion and dismissed the case.
“The agreement we negotiated in good faith with the union was ratified by our employees who have remained committed to our company, and our customers,” said Smid.
YRCW’s agreement, which is the third one its Teamster members have ratified going back to 2008, extends its previous agreement with the Teamsters that was slated to expire in 2013 to March 31, 2015. The agreement is being viewed by several industry experts as core to its survival. Some of the key components of the deal include: resuming pension contributions on June 1, 2011 at a 25 percent contribution rate; revised union work rules, which is comprised of reduced vacation time, a flexible work week, and four-hour work classification; and a renewal of its expiring ABS facility, among others. YRCW expects this deal to save the company $350 million annually during the duration of the agreement.
While YRCW may be on the path back to solid footing with this agreement, ABFS President and Chief Executive Officer Wesley Kemp blasted it, noting that the three rounds of concessions granted to YRCW are in violation of the NMFA that has been in effect since April 2008.
“The NMFA applies equally to every company that signed it and quite simply, with these three amendments, it does not do that,” Kemp said in November. “We need a long-term, industry-wide solution that is fair to all NMFA parties. We have the obligation to our employees, to our customers and to Arkansas Best shareholders to enforce our rights under the NMFA and compete on the same playing field with our industry peers.”
In late May, ABFS’ roughly 8,000 Teamsters employees rejected an agreement with the Teamsters. This proposed agreement was comprised of 15 percent wage concessions and an “Earnings Plus” plan that pays union and non-union ABFS employees when the company’s operating ratio reaches certain levels for the duration of its NMFA, which expires on March 31, 2013. It also called for 15 percent reduction in mileage rates, with negotiated wage increases and cost of living adjustments, if any, would have remained in effect until the agreement expired.
Prior to this being rejected, ABF officials said it would provide the company to opportunity to adjust its cost structure to be more comparable with the LTL marketplace.
“There is no doubt that ABF should have been able to get concessions from the Teamsters,” said Satish Jindel, president of SJ Consulting, in a recent interview. “They should not have to be in ‘critical care’ before somebody sends doctors to help them, as they are not in a healthy state of affairs. “While their balance sheet is not at bad at YRCW’s, it does not mean they don’t need relief. If a Teamsters worker is willing to work for YRCW at the current rates they have, then they should be able to do the same for ABF at the same wages also, as well as the same concessions and pension agreements. The Teamsters should do what is right and put both the companies at par so that both survive. Otherwise they will put ABFS in a condition similar to that of YRCW and it will get worse.”
Stifel Nicolaus analyst David Ross commented in a research note that the promptness of the dismissal was likely influenced by a November 16th YRC filing, which urged expedited resolution of its motion to dismiss on the grounds that the mere existence of a lawsuit could substantially imperil YRC’s liquidity, jeopardize its debt restructuring, and discourage its ability to obtain new financing.
“While we are still awaiting further details on the Court’s decision, we believe its rationale could have been based on a view that ABF was not a party to the same agreement that bound YRC and the Teamsters, although both ABF and YRC were signatories to the original NMFA,” wrote Ross. “Thus, the Court could have held that defendants YRC and the Teamsters were not in violation of the contract by selectively applying contract concessions to YRC. The concessions to the NMFA granted to YRC and not to ABF leave ABF at a distinct operating cost disadvantage. Therefore, we believe it is likely that ABF will continue to pursue legal recourse and appeal the ruling.”
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