Updated: New information on events leading to Celadon's bankruptcy likely to anger former employees

Screen Shot 2020 01 15 at 10.09.31 AM
Screen Shot 2020 01 15 at 10.09.31 AM
Celadon officials knew of intent to file bankruptcy earlier than claimed. (The Trucker file photo)

*Updated 1/28/2020, 8:00 AM CT
In another twist to the Celadon bankruptcy case, reports indicate the company in the process of liquidation is requesting $900,000 to pay bonuses to three executives for their efforts “to make extraordinary efforts to manage and implement a successful wind-down and to maximize distributions to creditors.” The new information was revealed in a review of Celadon’s filing with a court in Canada to have its U.S. bankruptcy proceedings recognized and the final results accepted in the country where Celadon operated Hyndman Transport, a carrier with approximately 200 employees. The bonuses had previously been referred to in U.S. court filings; however, the details have not been included in unsealed documents.
Although bonuses, often much larger than those Celadon is reportedly requesting, are often approved in bankruptcy cases, the U.S. Trustee overseeing Celadon’s bankruptcy is opposed to the payments. Andrew Vara said the company has not provided proof that the bonuses are truly an incentive for the executives or that Celadon’s plan for compensation follows the precedence of similar bankruptcy situations.
Celadon’s filing indicated it “would be unable to achieve significant value” in the disposition of assets without the three executives. The filing added that the executives “possess irreplaceable skills and experience.”
A hearing is scheduled in U.S. courts for January 30 in which Andrew Vara will present his case opposing the bonus payments as well as requesting transparency in proceedings by unsealing other documents in the case.
While news of the Celadon bankruptcy that shocked the trucking industry broke nearly two months ago, newly unsealed documents provide insight into factors leading the carrier’s Chapter 11 bankruptcy filing. In this instance, the documents show that TA Dispatch (TAD) of Ensley, Alabama, filed a $6.2 million lawsuit against the carrier six days before Celadon officials announced the company sought a U.S. bankruptcy court’s protection. The documents also suggest Celadon had a minimum of 11 days to inform employees of the company’s pending closure.
TAD’s lawsuit is based on a breach of contract on the part of Celadon. The contract stated that the two companies would partner, allowing Celadon to access TAD’s logistics platform in a revenue-sharing agreement that would assist both companies in better serving customers.
While Celadon and TAD shared billing duties and transferred funds under procedures stated in the revenue sharing section of the contract, in mid-November, Celadon was unable to make its payment of $4.4 million due to its partner. TAD claimed that in a late November meeting, a Celadon executive told them the carrier was insolvent. In fact, Celadon requested a loan from TAD in order to keep operations afloat.
When demand for payment sent to Celadon on November 27 went unmet, TAD officials stated Celadon responded that further inquiries would be referred to its bankruptcy attorneys. In addition, Celadon cut off TAD’s access to its IT services, a move that severely interrupted TAD’s operations. Later, Celadon restored access.
The timeline of events in late November provides some insight into a potential reason for Celadon’s bankruptcy. But former employees will be much more interested in the dates TAD notes in its lawsuit.
Celadon caught many employees off-guard on December 8, when it sent a midnight message to drivers announcing it had ceased operations. Shortly thereafter, the Celadon’s fuel card company deactivated cards and left drivers stranded across the U.S.
The timeline of events offers evidence to support a former employee’s lawsuit claiming Celadon had violated the WARN Act, requiring large employers to provide notice of at least 60 days before implementing layoffs. The timeline as reportedly recorded in the documents suggests Celadon had a minimum of 11 days during which company officials knew of its intent to cease operations — 11 days employees could have spent searching for new jobs and to prevent them from being unemployed during the holiday season.

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