A federal court in late August left ABF Freight System with a clear choice: the less-than-truckload carrier could drop its struggle to wring $750 million in damages from the Teamsters union and YRC Worldwide, or try to appeal again after having its lawsuit challenging three rounds of union concessions at its competitor dismissed three times in as many years.
A three-judge panel of the U.S. Court of Appeals for the 8th Circuit led by Chief Judge William Jay Riley sided with U.S. District Court Judge Susan Wright, who last year ruled ABF had failed to exhaust opportunities to pursue a grievance against its LTL competitor and the Teamsters union under the National Master Freight Agreement.
The decision likely spells the end of the courtroom battle among two of the nation’s largest LTL carriers and the union that represents thousands of their workers. That would free both carriers to concentrate fully on rebuilding businesses mauled during the recession.
Corporate legal wars, however, don’t end until the last lawyer gets paid, and ABF isn’t sending its legal team home just yet. “We are assessing the opinion and determining whether to pursue additional options,” the LTL carrier said in a statement on www.abflegalaction.com.
Those options could include requesting that the entire appellate court review the decision or that the case be heard by the U.S. Supreme Court. Both requests could be denied, an outcome perhaps made more likely by two concurring dismissals.
If ABF were to prevail, the lawsuit could deal a crippling blow to YRC and reshape the LTL landscape. ABF, however, sees the lawsuit as a means to return a blow struck when the Teamsters granted YRC three rounds of concessions, leaving ABF with higher labor costs than its largest unionized competitor.
In its lawsuit, ABF challenged the legality of those concessions, which helped save YRC from bankruptcy, arguing that under the 2008 National Master Freight Agreement, concessions could not be offered to just one NMFA employer.
ABF said the competing carriers were covered by the same contract, and argued the concessions also should have been extended to ABF. The carrier did negotiate separate wage cuts in 2010, but ABF’s Teamsters employees rejected them.
When ABF filed the lawsuit in November 2010, YRC was losing nine figures a quarter. Since 2006, YRC’s losses have totaled more than $3 billion.
Since 2008, ABF has lost $249.5 million, reporting an annual profit only in 2011, when it posted a $3.6 million operating profit. The LTL carrier has blamed a “tilt in the playing field” caused by the YRC concessions for those financial woes.
“We are disappointed in the court’s ruling and the fact that YRC received three rounds of concessions from the IBT that ABF did not also receive,” ABF said, adding it would work with the Teamsters “to put ABF back onto a path to profitability.”
“We anticipated this outcome and are pleased with the court’s decision and supporting opinion,” said Michelle Friel, executive vice president and general counsel of YRC, which also is heading back toward profit and even flirted with the idea of acquiring ABF to build freight density earlier this year.
The lawsuit serves as a coda to the concept of a multi-company National Freight Agreement. When Teamsters leader James R. “Jimmy” Hoffa won the first NMFA in 1964, the contract covered more than 450,000 workers across the LTL industry, lifting many of those workers into the middle class. By 2008, the only major carriers left in the NMFA were the YRC companies and ABF (UPS Freight, formerly Overnite, has a separate contract). Today, YRC and ABF employ about 43,000 people.
ABF tried to negotiate a separate contract with the Teamsters in 2008, only to get a supplement that mirrored the YRC pact. That gave ABF basis to sue, claiming it is still party to the NMFA. Wright agreed, but ruled ABF must exhaust opportunities to pursue its claims through the NMFA grievance process, rather than the courts. The appeals court, in its Aug. 30 decision, upheld Wright’s ruling, stating that the grievance rules “provide a solution,” even if it may not be palatable to ABF.
ABF has fought the battle over labor costs and concessions on two fronts, in the courtroom and at the negotiating table, stating that the lawsuit and its contract talks with the very union it was suing “were separate events.” In June, ABF Teamsters approved a five-year ABF National Master Freight Agreement, granting ABF concessions that, while not as deep as those won by YRC, will help ABF lower costs. The company will have to decide whether those concessions are sufficient, or whether the potential benefit from pursuing its lawsuit further is worth the money.