News

Delaware District Court Affirms Disallowance of Federal WARN Act Claims on Alternative Grounds

(D. Del. June 29, 2026)

I. Executive Summary

On June 29, 2026, the U.S. District Court for the District of Delaware affirmed the Bankruptcy Court’s disallowance of federal WARN Act claims brought on behalf of approximately 22,000 Yellow Corporation employees. The court held that Yellow qualified for the “faltering company” exception under 29 U.S.C. § 2102(b)(1) and that its abbreviated WARN notice satisfied § 2102(b)(3)’s “brief statement” requirement, reversing the Bankruptcy Court’s notice-deficiency finding. The court did not reach but expressed skepticism as to the Bankruptcy Court’s application of the liquidating fiduciary exception. The opinion underscores two preservation lessons: Yellow could defend the judgment on notice sufficiency as an alternative ground for affirmance without a cross-appeal, while the Unions forfeited their “gap in time” argument by not raising it below. The IBT has announced its intent to appeal to the Third Circuit. The New Jersey WARN Act claim remains intact, and future plaintiffs should preserve arguments under § 2102(b)(3)’s “as much notice as is practicable” requirement and challenge pre-petition use of the liquidating fiduciary exception.

II. Background and Procedural History

Yellow Corporation was the largest unionized less-than-truckload carrier in North America, handling approximately 50,000 shipments daily. In early 2023, while negotiating Phase Two of its “One Yellow” integration initiative, Yellow retained Ducera Investment Partners to pursue financing alternatives. Each viable option depended on a deal with the Teamsters.

As Yellow’s cash position deteriorated, it sought to defer approximately $50 million in monthly pension and healthcare contributions to the Central States Pension Fund. After the IBT General President denied the request, Yellow unilaterally deferred the contributions on July 7, 2023. Central States notified the IBT on July 17, and the IBT issued a strike notice for July 23 at midnight.

The strike notice triggered a “precipitous decline” in Yellow’s business. Within 24 hours, core customers diverted shipments to competitors. Although the Teamsters called off the strike late on July 23, Yellow’s equipment was already in “gridlock” at terminal lots, preventing new shipments.

On July 26, Yellow’s board voted to liquidate. The company completed its final customer delivery at 11:30 p.m. on July 29 and ordered the layoff of 22,000 union employees at noon the next day. That afternoon, Yellow issued WARN notices invoking the “unforeseeable business circumstances,” “faltering company,” and “liquidating fiduciary” exceptions and stating that it had hoped to complete transactions and secure funds but could not do so. Yellow filed for Chapter 11 on August 6, 2023.

The IBT, which is statutorily authorized to file claims on behalf of its members, filed approximately 20,000 proofs of claim and commenced an adversary proceeding alleging WARN Act liability. Additionally, separate WARN Act adversary proceedings were commenced on behalf of a class of more than 4,000 non-union employees (the “Moore plaintiffs”) and a class consisting of non-participating union members and non-union members (the “Coughlen plaintiffs”). The Bankruptcy Court coordinated the claims objections and adversary proceedings for resolution of common issues on cross-motions for summary judgment.

On summary judgment, the Bankruptcy Court found that Yellow substantively qualified for the “faltering company” and “unforeseeable business circumstances” exceptions, but that its WARN notice “did not contain enough facts adequately to justify the reduced notice.” After trial, the Bankruptcy Court held that Yellow was not a federal WARN Act “employer” because it was a “liquidating fiduciary” after completing its last delivery. In the alternative, the court would have reduced liability to 14 days under 29 U.S.C. § 2104(a)(4). The Unions appealed, and Yellow cross-appealed on New Jersey WARN.

III. The District Court’s Holdings

The District Court affirmed the disallowance of the federal WARN Act claims, but on different grounds. Rather than relying on the Bankruptcy Court’s “liquidating fiduciary” rationale, the court held that Yellow satisfied the “faltering company” exception under 29 U.S.C. § 2102(b)(1) and that its abbreviated WARN notice satisfied the statutory “brief statement” requirement. The court also affirmed that Yellow remained an “employer” under the New Jersey WARN Act.

Faltering Company Exception Sustained. The District Court agreed that Yellow was “actively seeking capital” through Ducera as of May 31, 2023, and reasonably believed WARN notice would prevent needed financing. The court deemed the Unions’ “gap in time” argument forfeited because it had not been raised below.

WARN Notice Held Sufficient. The District Court reversed the Bankruptcy Court’s notice ruling. It held that Yellow satisfied § 2102(b)(3) by identifying the faltering company exception and explaining that Yellow had tried, but failed, to complete transactions and secure funds. Applying Alarcon, the court found the notice sufficient to help employees understand Yellow’s situation.

Liquidating Fiduciary Exception Not Decided but Criticized. The District Court did not reach the issue but expressed skepticism toward applying the exception pre-petition. Citing In re World Marketing Chicago, LLC, 564 B.R. 587 (Bankr. N.D. Ill. 2017), the court noted that the exception applies “in the bankruptcy process.”

Good-Faith Reduction Not Reached. Because the faltering company exception was dispositive, the District Court did not address the Bankruptcy Court’s alternative 14-day liability reduction under § 2104(a)(4).

New Jersey WARN Act Affirmed. The District Court affirmed that Yellow was an “employer” under N.J. Stat. Ann. § 34:21-1 when the layoffs occurred. Because the New Jersey statute does not incorporate the federal exceptions, the state-law claims remain intact regardless of the Third Circuit appeal.

IV. Appellate Risk and Preservation Strategy

A. The Waiver Asymmetry

The opinion’s asymmetric treatment of new arguments on appeal offers a useful preservation lesson. Yellow, as the prevailing party, could argue for the first time on appeal that its WARN notice was sufficient, even though the Bankruptcy Court had ruled otherwise and Yellow had not cross-appealed that issue. The court relied on Jennings v. Stephens, 574 U.S. 271, 276 (2015), for the rule that an appellee may defend a favorable judgment on any ground supported by the record.

The Unions, by contrast, forfeited their “gap in time” argument because they had not raised it in the Bankruptcy Court under § 2102(b)(1). They had argued that Yellow was not “actively seeking capital” and lacked a good-faith belief that notice would preclude financing, but not that the timing gap independently defeated the exception. That omission was fatal.

The lesson for plaintiffs is straightforward: preserve every statutory counter-argument in the trial court, including arguments that address different subsections of the same provision. Redundancy below is less costly than forfeiture on appeal.

B. Holding or Dicta?

After finding the Unions’ timing argument forfeited, the District Court added that the “near impossibility” of obtaining financing just before shutdown could not itself foreclose the faltering company exception, because every company that shuts down presumably does so after failing to obtain financing. Whether that passage is an alternative holding or dicta remains open.

The better view is that the passage is dicta, not a binding alternative holding. The District Court did not frame the point as an independent basis for decision. Its phrase “also agrees” suggests supplemental reasoning, and the court’s express reliance on forfeiture was enough to resolve the issue. The merits discussion also consisted of a single sentence without analysis of § 2102(b)(3) or 20 C.F.R. § 639.9.

Opposing counsel may argue that the passage is a co-equal alternative holding under Woods v. Interstate Realty Co., 337 U.S. 535, 537 (1949). Plaintiffs’ counsel should be prepared to respond that the opinion’s structure, forfeiture ruling, and footnote on practicability all support treating the passage as non-binding dicta.

C. The Practicability Pathway

The most important opening for future litigants is the District Court’s footnote noting that § 2102(b)(3) separately requires an employer relying on the faltering company exception to “give as much notice as is practicable.” The court expressly noted that the Unions did not frame their timing argument that way. Instead, they argued only that Yellow should not receive a good-faith reduction.

That distinction matters. A future litigant should argue that, even if an employer was actively seeking capital at the 60-day mark, a multi-day gap between the last realistic financing opportunity and the WARN notice may show that the employer failed to give as much notice as was practicable under § 2102(b)(3).

That pathway remains open. The District Court did not decide it, reject it, or suggest it lacked merit. Future plaintiffs should raise the practicability argument under § 2102(b)(3) at the earliest stage.

V. The Liquidating Fiduciary Exception

Although the District Court did not decide the liquidating fiduciary issue, its skepticism is useful for plaintiffs. The Bankruptcy Court had relied on In re United Healthcare System, Inc., 200 F.3d 170 (3d Cir. 1999), to hold that Yellow was no longer an “employer” after its last delivery. The District Court questioned applying that exception pre-petition and cited World Marketing Chicago for the proposition that the exception applies “in the bankruptcy process.” Plaintiffs should cite that skepticism when debtors invoke the exception based on pre-petition conduct.

VI. Broader Implications for WARN Act Practice in Bankruptcy

Yellow provides a useful model for resolving large-scale WARN Act claims in bankruptcy. The Bankruptcy Court coordinated claims objections and adversary proceedings so common issues could be heard together. Plaintiffs’ counsel should consider proposing similar procedures in comparable cases.

State WARN Act claims also remain important, especially in jurisdictions like New Jersey that do not incorporate the federal exceptions. Yellow provides a useful illustration of the benefits to Plaintiffs able to rely on state WARN claims as a backstop against unfavorable federal rulings.

Some commentary has described the opinion as a “handbook” for employers seeking to avoid WARN Act liability. The American Bankruptcy Institute’s quick-take analysis described it as telling “managers how to shut down a failing business and draft a notice to employees that will avoid [WARN Act] liability.” Plaintiffs should counter that framing by emphasizing the narrow holding, unresolved practicability issue, and the District Court’s acknowledgment that notice sufficiency was “close.”

Finally, the Moore class settled for approximately $12.3 million before trial, showing that settlement leverage can remain even where federal claims face obstacles. Viable state-law claims, unresolved federal issues, and substantial exposure may still support meaningful settlement discussions.