American court hearing recordings and interviews - Season 7. Episode 5. October 23, 2023. In re Yellow Corporation et al., chapter 11 bankruptcy case no. 23-11069, audio of hearing held in the Yellow Corp. bankruptcy proceedings pending in Delaware, USA, #trucking

Episode Date: October 25, 2023

Sorry about the sound... the audio recording is the official court audio and was posted this way to the court's docket. For other filings on the court's docket and more other information about the chapter 11 bankruptcy proceedings, see: https://dm.epiq11.com/case/yellowcorporation/info

You seated. Good morning. We are here in Ray Yellow Corporation, which is case number 23 at 11609. Ms. Jones. Good morning. Good morning, Your Honor. Good morning, Your Honor, for the record, Laura Davis Jones, at the Pacholski staying, Sealand Jones, on behalf of Yellow Corporation.

Yon, I think we have a very short agenda for you today. You should have in front of you the amended notice of agenda. I do. Thank you. Your Honor, matters 1-2-20 have either been continued or resolved. matter 21. I think Mr. McGutcheon has a few things to say about that. Matter 22, Your Honor, I think has come off calendar, or at least informally. So, Your Honor, with that, I'm going to yield to Mr. McGutcheon to give Your Honor an update on where we are,

and then we can talk about the calendar. Okay, very well. Thank you. Morning, Your Honor. Casey McGuschen from Kirkland and Ellis on behalf of the debtors. Good morning. As Ms. Jones referenced, even though there's a 14-page agenda here, there's not actually that much left. So I did want to give Your Honor some context for sort of what's been going on in the background,

understanding that the things left on the calendar are lift stay motions, which are not formally, obviously, the debtor's motions. So over the last several weeks, the debtors have been receiving a number of requests to lift the stay and allow litigation in state and federal courts to proceed, and those have continued to come in up through late last week. A central argument of several of those lift stay motions, is that effectively there won't be any harm to the debtors from allowing those cases to proceed because the defense costs and any judgments will be borne by insurers.

And the debtors have a number of potentially applicable insurance policies, and we've been in discussions with one of our primary insurers, old Republic insurance company or OREC. To date, OREC has not agreed that any of the underlying claims are covered. by the insurance policies. Oric is holding a little over $230 million in collateral from the debtors, and the debtors have been in discussions with Oric about coverage for those claims and the holding of that collateral. At the end of the day, it may be necessary for the debtors to litigate with Oric over this coverage.

Nobody wants that. What we've spent the last week's doing is talking with Oric to try to avoid that outcome. Late last week in our discussions with OREC, we came upon, you know, started discussing a potential process using alternative dispute resolutions, excuse me, alternative dispute resolution processes to try to avoid the need for some of this litigation. And we're very early in those discussions, but generally what we're talking with them about is to the extent that plaintiffs in cases outside of the bankruptcy court want to lift the automatic. state to proceed, we would set up some sort of ADR process to allow both ADR for the underlying claims and potentially ADR related to coverage issues. And the idea is, you know, let's try to avoid any unnecessary expense for these claims going on in state court while also addressing potential coverage concerns. And if the ADR process was ultimately unsuccessful, these plaintiffs

could waive claims against the estate and proceed in state court. with OREC or any other insurer reserving its rights as to coverage. So that's... Mr. McHuffin, just if I follow, are you talking about doing something like this under a plan or by motion or what's contemplated? Yeah, so I think the exact process by which we would present the court I don't think has been contemplated yet. That's a fair answer.

Yeah, it's a question of timing and sort of where we are in the case, you know, when all this comes to a head. And just to be candid, we are very early in our discussions with OREC about this process. But once we started having these discussions with OREC and sort of getting around this potential process, we started reaching out to a number of the LISTA plaintiffs who had their motions up for today. Ultimately, by Saturday morning, we were able to reach agreement with all but two of the LIS state plaintiffs, as Ms. Jones referenced. Last night and this morning, we reached resolution with one more.

So there is only, as far as I'm aware, one Lift State plaintiff who is still up on the calendar today. So the debtors are prepared to go forward on that motion today. My understanding from discussions with counsel is that they did not expect this to be a substantive hearing on their motion. They intended it to be more in the way of a status conference. But I'll certainly let them speak for themselves on that point. And at this point, unless the court has any questions, I'm happy to see the podium, and then I can respond to arguments. Okay. Now, that explanation was helpful.

I'm happy to hear from the move-in. So thank you, Mr. McKeshaw. Sir Rosner. Good morning. Good morning, Your Honor. I'm a good, Fred Rosner, Rosal Law Group, and I'll try to keep my remarks brief. We did specifically notice this for a preliminary hearing, consistent with the local rules, not that we were going to go forward on the merits today. So we just want to check in with the court and basically introduce ourselves and talk generally about what we are planning to do.

Again, I represent as bankruptcy counsel Donna Dorety individually and as the administrators of the estate of her late husband, Norman Dardy. I'm co-counsel with Chuck Dore of the Charles E. Door PC law firm. And Ms. Dowardy is a plaintiff in a wrongful death action against debtor, YRC, Inc. That action is pending in the United States' District of Georgia. Significantly in that action, as I understand it, we have demanded a jury trial, as is our constitutional right, and the procedural posture of the case, as I'm advised, is trial-based. So that was stopped when the debtors filed their Chapter 11 bankruptcy before this court, and we filed the motion to return to the district court in Georgia to appear before a jury of our peers

and seek to liquidate our claim against the debtor and pursue our claim as a claimant in this case and also pursue our third party rights. We are troubled... Third party rights, meaning you have claims against the debtor. non-debtors? Yes, insurance. Okay, but the insurance is only derivative, right? But you don't have a direct claim against the insurer. I always learn something. So, yes, exactly what the courts. Okay. Yes. So we are troubled by what we hear that old Republic work has taken the position they can draw down on the letters of credit and then deny coverage. So we intend to propound

discovery with the debtor and with ORC seeking to develop our record to allow us to lift the stay and go back to the District Court of Georgia. So that is where we are, and I did have a conversation with the Kirkland and Ellis Attorney, I think, sometime in the past few days. He was kind enough to send some of the documents over. So we're reviewing the policy, and we certainly are looking at the, form MCS 90 and we're going to explore what our rights are under that. But we don't agree that at the end of the day that Ork's position is tenable, either as a matter of the contracts or a matter of public policy when you're insured becomes insolvent. So I think we are going to pursue our rights and I'm somewhat heartened in what the 30 for The debtor just said that there might be an opt-out from the ADR.

So we want to be able to preserve that right to go back. And present our case not to a mediator, but to a jury of our peers, to liquidate the claim. Okay. I think with that I'll probably just pause and ask if the course are questions. I don't. I mean, all these issues are interesting, but since none of them is presented to me today, I'll resist the temptation to start spouting out what I think about them. So I'm happy to let the parties continue their discussions.

and when there's a right dispute, do my best to get it right. Thank you. Okay, thank you. Again, Casey McGushin from Kirkland-Aless on behalf of the debtors. As Your Honor noted, none of this is particularly right. We don't have an ADR process to present to you at this point. Obviously, everyone will have the right to object to whatever we propose to Your Honor and everybody's rights are preserved.

If Your Honor has any questions, happy to answer them. Otherwise, of course, we'll deal with discovery as needed and keep process progressing all these issues forward. Okay. I don't have questions at this time. Obviously, you know, to the parties are talking and trying to work to something that's consensual, that's terrific to the extent there's a motion

that's brought to me that I've got to decide. I'm happy to do that. But it seems to me in the meantime what I should do is stay out of the way and let the parties continue their discussions. I feel footsteps behind. Yeah, Mr. Clatter. Good morning, Your Honor. David Clauter, on behalf of Old Republic Insurance Company with me,

and the court is my co-counsel, Kenneth Thomas, from Foxswivell in Chicago. Mr. Thomas has been admitted Prohawah VJ and would like to address the court on behalf of Old Republic. Very well. Thank you. Mr. Thomas. Good morning, Your Honor. Ken Thomas, Foxwable, Levin, Carroll, on behalf of Old Republic. As the debtors have laid out, we continue to engage in conversations about an ADR. process and so I won't I won't tread more ground on that front I just wanted to make sure that a couple of things that the record was clear because I've heard a couple of things represented and I want to make sure that our position is represented properly old republic has not denied coverage we've issued

reservation of rights and as you know your honor is laid out in our omnibus objection the coverage is a fully fronting indemnity policy so it's not your typical liability auto liability insurance policy. And so we've issued reservation of rights. So I read your paper and I confess, I know just enough about insurance to be dangerous, but I was interested in understanding at some point, and while you're here as this is as good time as any, understanding more about how this coverage works. If you could just explain it in terms that someone who's not really an insurance lawyer can understand, that would be constructive. Yeah, so as you noted, Judge, I am a bankruptcy lawyer, so I rely heavily on

coverage lawyers to understand how it works. But the fully fronted indemnity policy coverage, which was covered by around $230 million of letters of credit, is not just auto. It's not auto. It's also workers' comp, and there's some general property liability coverage. So there's a couple of different buckets over that course.

And under that policy, there is a $6 million retention. which equals the limits of liability, and it's a dollar-for-dollar drawdown on the limits of liability for every dollar that the debtors pay on that retention. And so the policy also includes an MCS-90 endorsement, which is obviously subject to lots of law about how that applies. So that's just sort of a general overview of the policy.

But I just wanted to make the point that the $230 million dollars a letter of credit proceeds was applicable to the auto, the workers comp, and some some general liability property, not just auto. It's only a portion of that is the auto. And that we've issued reservation of rights, and we have not denied coverage, but whether coverage applies will be a case-by-case basis. And really, the debtors have been responsible for handling these claims. We've taken the position that we don't have a duty to defend.

And the way it worked prior to bankruptcy is that the debtors were, in the debtors were in the weeds as far as defending these claims and the facts. So all the public is really just getting up to speed as to what the facts of these cases are to understand how they would operate under our policy. Okay. So it's a $6 million policy with a $6 million self-insured retention. So does that mean that the debtor pays $6 million before $1 of coverage kicks in? Or just how does this, what's the mechanic of how? how this relationship between the available coverage and the SIR. Right.

So, again, I'm not a coverage order, so I'll do my best. But as far as the retention, the way the policy is supposed to work is that it's indemnity. So the debtors would pay, and then basically it would be a dollar-for-dollar drawdown on the limits of liability up to the limit. I see. So they pay $6 million dollars themselves and then concede. indemnifies them for both defense costs and underlying liability, so they can spend up to $6 million of their own money. They're up front, not you. And once they've spent, whatever they've spent, up to $6 million, they can turn to you and say, can you cut me a check, please, for the $6 million

I've spent? So I will stop myself from making me any further, because I want to make sure. Okay, that's fair enough. And look, this isn't in front of me now. I was just, when I read your papers, I didn't fully wrap my brain around how it works, and it's not necessary that I understand it fully today. So we'll leave my state of knowledge where it is, and we'll learn more as necessary. So I appreciate your help. Thank you, George.

Thank you, Mr. Thomas. Okay. Knowing a little bit is quite dangerous. That's about me, not counsel. Is there anything else that the court can do to be helpful to the parties? while we're here today. No, I think that's all we have done. Okay.

Well, let me thank all of you for the reports. Obviously, appreciate the efforts by the parties to keep their conversations going. And, you know, to the extent those are successful, great. And to the extent they're unsuccessful, you all know how to find me. So with that and my thanks for everyone's hard work. We're adjourned.