New England Motor Freight: Letter of Credit Cascade and Dual-Pool Liquidating Plan

New England Motor Freight, Inc. (NEMF) and ten affiliated debtors filed chapter 11 petitions on February 11, 2019 in the U.S. Bankruptcy Court for the District of New Jersey, lead case 19-12809 before Judge John K. Sherwood. The Elizabeth, New Jersey less-than-truckload carrier filed not to reorganize but to wind down a 101-year-old operation after a cascade of letter-of-credit non-renewals across four banks left the company unable to fund continued operations.

The case was structured from day one as a liquidation. Two affiliates — Eastern Freight Ways, Inc. and Carrier Industries, Inc. — were sold as going concerns to Estes Express Lines for $15 million after no competing bidders emerged at the bid deadline. The remaining nine entities cleared freight from 35 terminals in three weeks, terminated more than 90% of a 3,450-person workforce, and proceeded to a substantively consolidated Joint Combined Plan of Liquidation confirmed on January 15, 2020. General unsecured creditors of the NEMF pool received approximately 9.5%, and Eastern/Carrier unsecured creditors received approximately 6.23%. The Liquidating Trust remains active, with the court extending claims-objection and dissolution deadlines through December 31, 2026.

Debtor(s)	New England Motor Freight, Inc. (11 jointly administered entities)
Court	U.S. Bankruptcy Court, District of New Jersey (Newark)
Case Number	19-12809
Petition Date	February 11, 2019
Confirmation Date	January 15, 2020
Effective Date	February 3, 2020
Judge	Hon. John K. Sherwood
Claims Agent	Donlin, Recano & Company, Inc.

Letter of Credit Cascade and Path to Filing

NEMF was founded in 1918 in Elizabeth, New Jersey, and grew into a regional less-than-truckload (LTL) carrier serving the Mid-Atlantic, Midwest, and Northeast. The Shevell Dynasty Trust held the controlling equity interests, with Myron P. Shevell serving as longtime CEO. By the petition date, the eleven debtor entities employed approximately 3,450 full- and part-time workers, of whom approximately 1,900 were Teamsters/IBT members and approximately 1,550 were non-union. The platform spanned six lines of business: NEMF (LTL), Eastern Freight Ways (truckload), Carrier Industries (third-party logistics), NEMF Apex Transport (brokerage), NEMF World Transport (NVOCC services to Puerto Rico), and Jans Leasing (equipment leasing).

The First Day Declaration of CRO Vincent Colistra attributes the filing to operating losses and a liquidity squeeze. NEMF posted a 2018 operating loss of approximately $20.9 million, with year-over-year cash reduction of approximately $16.4 million and a projected 2019 12-month operating loss of approximately $24 million. Colistra cited the loss of key customer accounts in late 2018, the industry-wide truck-driver shortage, an aging fleet the company could not afford to refresh, employee costs "substantially above industry norms," and a union contract carrying onerous retroactive terms. The company had generated approximately $402 million in revenue in 2017 before sustained losses began, and trade press described the filing as the largest trucking bankruptcy in 17 years, with NEMF ranking as the 19th-largest U.S. carrier at the time of filing.

The acute trigger was the simultaneous unwinding of approximately $30.4 million in aggregate letters of credit outstanding at the petition date. Beginning in late 2018, TD Bank, Santander Bank, East West Bank, and JPMorgan Chase each indicated they would not renew their respective LC facilities. TD Bank initially agreed on January 18, 2019 to hold off pending cash-flow analysis, but on January 25, 2019 declared a default under its LC agreement and froze approximately $2.8 million of the Debtors' cash in deposit accounts. The Debtors had retained Phoenix Management Services, LLC in December 2018 to lead restructuring efforts, but lender negotiations failed when banks demanded additional collateral and equity injections that were not forthcoming. Vincent Colistra of Phoenix Executive Services was appointed Chief Restructuring Officer on February 6, 2019, and the petitions followed five days later. ABL Advisor reported the filing as an orderly wind-down from the outset rather than a reorganization attempt.

Capital Structure and Vehicle-Lender Collateral Pools

NEMF's prepetition balance sheet was dominated by secured vehicle financing and the LC facilities that triggered the filing. The First Day Declaration reports approximately $57.1 million in aggregate principal owed to twelve secured vehicle lenders: JPMorgan Chase, TD Bank, East West Bank, Santander Bank, Capital One, Wells Fargo, Fifth Third Bank, Daimler, IBM, Mercedes Benz, Webster Capital, and Volvo. Each lender held liens on discrete pools of rolling stock, a structure that would later drive contested allocation disputes during the sale process.

Beyond vehicle financing, NEMF carried approximately $30.4 million in LC facilities described as "substantially unsecured" because available cash collateral was insufficient to cover the aggregate exposure. The Debtors also owed approximately $968,728 to Bank Direct Capital Finance and approximately $40,818 to Agile Premium Finance for insurance premium financing as of December 31, 2018, plus approximately $1.1 million in solar equipment loans. Trade debt totaled approximately $9.5 million, with another approximately $3.2 million in other unsecured liabilities, including roughly $1.7 million tied to a pension settlement agreement.

The capital stack also included a ~$5.2 million life-insurance note receivable owed by Shevell family trusts to the Debtors. The notes memorialized obligations to repay approximately $10 million in life insurance premium payments the Debtors had made on four policies covering Myron Shevell. The receivable, including approximately $2 million of accrued interest, was secured by collateral assignments of the policies payable on Shevell's death and was treated as a plan asset under the eventual equity-holder settlement.

Cash Collateral and Shevell Equity Contribution

The case ran on cash collateral throughout, with no postpetition DIP facility. The primary cash-collateral lenders were JPMorgan Chase Bank, N.A. and TD Bank, N.A. The court entered the first interim cash collateral order on February 24, 2019, authorizing use through March 4, 2019, capped at $3 million in total interim funding apportioned $2,051,250 to Chase and $948,750 to TD. The order followed the Debtors' first-day cash-collateral approval days earlier.

A condition of the interim order required Myron Shevell to transfer $1,500,000 to the Debtors' Chase operating accounts by February 15, 2019. The Debtors granted Chase and TD adequate protection in the form of replacement liens, reasonable access to rolling-stock collateral for inspection and appraisal, and access to the CRO and books and records. The Debtors were also required to deliver a four-week budget to lenders at least two business days before each hearing, with permitted weekly line-item variances of up to 10% provided cumulative weekly expenditures did not exceed 110% of the aggregate budget. A second interim order followed on March 9, 2019, and successive interim orders carried the case through wind-down.

Colistra projected that more than 90% of the workforce would be terminated within the first three weeks of the petition date as the nine non-going-concern entities cleared their freight from 35 terminals. The Debtors filed a motion to approve global employee settlements covering both Teamsters/IBT and non-union terminated employees on February 22, 2019, and the court entered the Global Employee Settlements Order on March 1, 2019, resolving WARN Act and other employment-related class action claims as part of the wind-down framework. State labor agencies in New York, New Jersey, Pennsylvania, and Illinois recorded the cascading layoffs, with the upstate New York layoffs alone accounting for 518 affected workers.

Sale of Eastern Freight Ways and Carrier Industries to Estes Express Lines

The Debtors structured the sale of the going-concern affiliates separately from the LTL wind-down. On March 25, 2019 the Debtors filed a §363 sale motion to sell substantially all assets of Eastern Freight Ways, Inc. and Carrier Industries, Inc., along with certain rolling stock of NEMF, free and clear of liens. WSJ reported in the run-up that NEMF was fighting its banks over auction structure and sale-proceeds allocation among the vehicle-lender collateral pools.

On April 18, 2019, the Debtors designated Estes Express Lines as stalking horse for the Eastern, Carrier, and NEMF rolling-stock package, supported by the Declaration of Vincent Colistra. The bid protections were a $450,000 break-up fee and a $75,000 expense reimbursement. A WSJ report on the same day pegged the proposed Estes purchase price at approximately $15 million, with the company also preparing a separate six-week auction of more than 1,000 semi-tractors and trailers tied to the NEMF entity itself.

No qualified competing bids were received by the bid deadline. On May 10, 2019, the Debtors filed a notice cancelling the auction and selecting Estes Express Lines as the successful bidder, and the sale hearing followed on May 16, 2019. The proposed sale order authorized the transaction free and clear of all liens, claims, and encumbrances and recited findings that the consideration constituted "reasonably equivalent value" and "fair consideration." Multiple secured vehicle lenders, including East West Bank and Santander Bank, lodged objections concerning per-collateral-pool allocation of the purchase price and the order of lien releases, but the sale proceeded to closing. A. Duie Pyle and other Northeast LTL carriers absorbed redirected freight in the months that followed, with A. Duie Pyle reporting growth by absorbing a portion of NEMF's defunct business while remaining focused on the regional Northeast market.

Substantive Consolidation and the Dual-Pool Liquidating Plan

The Debtors and the Official Committee of Unsecured Creditors jointly proposed the Third Amended Joint Combined Plan of Liquidation and Disclosure Statement, filed November 19, 2019. WSJ reported the confirmation request shortly after filing. The court entered the Confirmation Order on January 15, 2020, with the Effective Date arriving on February 3, 2020.

The plan substantively consolidated the eleven debtor entities into two pools — the Consolidated NEMF Debtors and the Consolidated Eastern Debtors — each with its own creditor waterfall. The two pools separated the LTL business from the truckload, logistics, and brokerage operations sold to Estes. The dual-pool architecture allowed creditors with claims tied to the going-concern Eastern/Carrier business to participate in a recovery pool funded substantially by the Estes sale proceeds, while NEMF creditors recovered against rolling-stock auction proceeds and other estate assets.

Class treatment. The plan adopted parallel class structures across both consolidated debtor pools:

The Colistra Confirmation Declaration projected the Consolidated NEMF Debtors GUC pool at approximately $6,311,628 in cash available for distribution, with a recovery range of 7–11% and a preliminary scorecard of approximately 9.0%. The Consolidated Eastern Debtors GUC pool was projected at approximately $4,951,935 in distributable cash, with a recovery range of 3–7% and a preliminary scorecard of approximately 6.2%. Actual distributions through December 31, 2020, reported in the Report of Distributions, totaled approximately $9,953,249 across all categories — $1,396,794 in administrative fees and expenses, $168,656 to secured claims, and $8,387,798 to general unsecured claims — landing the actual percentage dividend at 9.50% for NEMF GUCs and 6.23% for Eastern/Carrier GUCs.

The plan also incorporated an equity-holder settlement with the Shevell family entities. Myron P. Shevell purchased nine vehicles from the Debtors for $282,000, and the Shevell family trusts' approximately $5.2 million life-insurance note receivable was contributed to the estate as a plan asset. In exchange, the Shevell-related parties received plan releases. The Official Committee of Unsecured Creditors had earlier objected to the Debtors' exclusivity extension motion on October 1, 2019, contesting the pace of the case and the rate at which professional fees were consuming creditor recoveries; that dispute was resolved as part of the broader plan settlement architecture.

Auto Liability Claims Protocol and the State Farm Dispute

The plan established an Auto Liability Claims Protocol to resolve bodily injury and property damage claims arising from truck accidents involving NEMF rolling stock. The Protocol channels all such claims through the Debtors' automobile insurers, primarily U.S. Fire Insurance Company, State Farm Mutual Automobile Insurance Company, and Protective Insurance Company, and is backstopped by an injunction against direct suits against the Debtors by auto liability claimants.

The Protocol generated extensive post-effective-date motion practice. In January 2021, the Liquidating Trustee filed a motion seeking a finding that State Farm Indemnity Company was in violation of the plan injunction by pursuing direct state-court actions against the Debtors' insurers rather than channeling claims through the Protocol. Multiple accident claimants — including Stephen Ross and Andrew J. Kelly, among others — separately moved for leave to file late proofs of claim or to gain access to the Protocol, generating further objections from U.S. Fire Insurance and other Protocol participants.

Class 5C, comprising auto-insurer unsecured indemnity claims, was deemed to reject and received no distribution from estate assets. Class 5B auto-liability claimants were excluded from the GUC pool's pro rata recovery and instead routed entirely through the insurer-funded Protocol, leaving the disposition of any individual claim contingent on resolution within that channel rather than on estate liquidity.

Liquidating Trust Administration and Long-Tail Claims

On the February 3, 2020 Effective Date, a Liquidating Trust was established to hold and administer estate assets for allowed claim holders. Kevin Clancy of CohnReznick Advisory LLC was appointed Liquidating Trustee, with continuing duties spanning claims reconciliation, prosecution of causes of action, distributions, and administration of the Auto Liability Claims Protocol.

The post-confirmation docket has been substantial. By early 2021, the Liquidating Trustee had initiated more than 100 adversary proceedings targeting preferential transfers and fraudulent conveyances. The trust's litigation extended beyond avoidance actions: the Liquidating Trustee separately filed suit against United Healthcare Insurance Company and HPHC Insurance Company for alleged ERISA fiduciary breaches related to the Debtors' health benefit plans; the court denied the defendants' motion to dismiss. The trustee has filed at least fifteen omnibus claims objections through November 2025, targeting duplicative, late-filed, and cargo claims; as of January 2026, the court had sustained the 13th, 14th, and 15th omnibus objections. Oak Point Partners acquired the trust's remnant assets in December 2024.

On January 28, 2026, the court entered an order extending the claims-objection deadline and the trust's dissolution date through December 31, 2026. Ongoing distributions tied to recoveries from the Protocol, omnibus objections, and adversary proceedings remain characterized in trust filings as "to be determined."

Professional Retentions and Fees

Aggregate professional fees through the Effective Date exceeded approximately $7 million across debtor and committee roles, against approximately $9.95 million in total distributions across all classes during the first year post-confirmation. The Debtors retained Gibbons P.C. as lead counsel (final fees of $3,384,127.05 plus $30,089.40 in expenses for the 2/11/2019–2/3/2020 period), with Withumsmith+Brown as accountant ($288,692.50 plus $1,525.51), Whiteford Taylor & Preston LLP and Akerman LLP as special counsel, and Wasserman, Jurista & Stolz, P.C. as conflicts counsel. Phoenix Executive Services served as the CRO firm. Donlin, Recano & Company served as claims and noticing agent (final fees of $74,151.20).

The Official Committee of Unsecured Creditors retained Elliott Greenleaf, P.C. (final fees of $1,018,786.50 plus $15,059.86) and Lowenstein Sandler LLP (final fees of $1,310,550.50 plus $17,235.30) as co-counsel. CohnReznick LLP and CohnReznick Capital Market Securities, LLC served as the committee's financial advisor and investment banker, respectively, with combined final fees of $932,251.00 plus $2,112.72 in expenses. Kevin Clancy of CohnReznick was subsequently appointed Liquidating Trustee. Deloitte Consulting LLP served as a debtor-side consultant during the August 2019 to January 2020 period.

Key Timeline

Date	Event
December 2018	Phoenix Management Services retained for restructuring
Late 2018	TD Bank, Santander, East West Bank, JPMorgan Chase signal LC non-renewal
January 25, 2019	TD Bank declares default; freezes ~$2.8M of Debtors' cash
February 6, 2019	Vincent Colistra appointed CRO
February 11, 2019	11 entities file chapter 11 in D.N.J.
February 24, 2019	First interim cash collateral order ($3M cap)
February 25, 2019	UCC appointed; Gibbons P.C. retained as debtor counsel
March 1, 2019	Global employee settlements approved
March 25, 2019	§363 sale motion filed for Eastern/Carrier assets
April 18, 2019	Estes Express Lines designated stalking horse ($450K break-up fee)
May 10, 2019	Auction cancelled; Estes selected as sole successful bidder
May 16, 2019	Sale hearing held
November 19, 2019	Third Amended Joint Plan filed
January 15, 2020	Plan confirmed
February 3, 2020	Effective Date; Liquidating Trust established (Kevin Clancy, Trustee)
March 2020	Initial creditor distributions
December 2020	Second round of distributions; cumulative ~$9.95M
January 5, 2021	Trustee files motion targeting State Farm violation of Auto Liability Protocol
February 2021	More than 100 adversary proceedings initiated
December 2024	Oak Point Partners acquires trust remnant assets
January 28, 2026	Court extends claims-objection and trust dissolution deadlines through December 31, 2026

Frequently Asked Questions

Why did New England Motor Freight file for chapter 11?

NEMF entered chapter 11 on February 11, 2019 to effect an orderly wind-down after a cascade of letter-of-credit non-renewals across TD Bank, Santander, East West Bank, and JPMorgan Chase exhausted its liquidity. The First Day Declaration attributes the filing to a combination of customer-account losses in late 2018, the industry-wide driver shortage, an aging fleet, employee costs above industry norms, and an onerous union contract. NEMF posted a 2018 operating loss of approximately $20.9 million and projected a 2019 12-month loss of approximately $24 million.

Who bought Eastern Freight Ways and Carrier Industries?

Estes Express Lines acquired the going-concern assets of Eastern Freight Ways, Inc. and Carrier Industries, Inc., together with certain NEMF rolling stock, for approximately $15 million. Estes was designated stalking horse on April 18, 2019 with a $450,000 break-up fee and a $75,000 expense reimbursement. No competing qualified bids emerged by the deadline, and the auction was cancelled on May 10, 2019.

What did unsecured creditors recover under the plan?

The substantively consolidated plan created two creditor pools. Consolidated NEMF Debtors general unsecured claims received approximately 9.50%, and Consolidated Eastern Debtors general unsecured claims received approximately 6.23%, based on actual distributions reported through December 31, 2020 in the Report of Distributions. Auto liability claimants in Class 5B received no distribution from estate assets and were instead routed through the plan's Auto Liability Claims Protocol administered by the Debtors' automobile insurers.

Who is the claims agent for New England Motor Freight?

Donlin, Recano & Company, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Is the New England Motor Freight liquidating trust still active?

Yes. On January 28, 2026, the court extended the Liquidating Trustee's claims-objection deadline and the trust's dissolution deadline through December 31, 2026. Oak Point Partners acquired the trust's remnant assets in December 2024.

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