From Beyond, Bed Bath Files $4M Complaint Against Evergreen with FMC
The bankruptcy estate for former home goods retailer Bed Bath & Beyond continues to pursue its grievances against the shipping industry for its role in the demise of the chain. In its latest move, Bed Bath & Beyond (today known as DK-Butterfly) filed a $4.3 million complaint with the Federal Maritime Commission against Evergreen citing “a practice of systematically failing to meet its service commitments.”
Once a popular retailer at the beginning of 2020, the company was operating nearly 1,000 Bed Bath & Beyond stores and a total of 1,500 retail stores in addition to its robust online business. Issues that had been building for years in its business were compounded by the pandemic. In 2018-2019, the company slipped into the red reporting losses that continued to mount until April 23, 2023, when it filed for liquidation under U.S. bankruptcy laws. The trade name was later sold and continues to be operated by an unrelated online retailer.
As Bed Bath & Beyond was moving into liquidation it unleashed its assault on the shipping industry which former management blames for the downfall of the company. First, they filed a complaint against Orient Overseas Container Line citing $25 million in excess costs due to the carrier’s failure to meet contracted shipping levels as well as more than $6 million in what the retailer termed excessive detention and demurrage expenses. In a similar action, the bankruptcy estate is seeking reparations totaling more than $15 million from Yang Ming.
They followed their initial complaints with a filing against MSC Mediterranean Shipping. In that case, it is seeking a whopping $315 million for increased shipping costs and detention and demurrage charges the company incurred in 2020 and 2021 as well as for lost profits.
In a filing served February 21, DK-Butterfly is now adding similar complaints for Evergreen which they say systematically failed to meet two service contracts. As with the other carriers, they allege Evergreen “allocated the complainant’s bargained for space to higher-priced cargo from other shippers to maximize Evergreen’s own profits.” They state that the company’s 2020-2021 contract provided for the transportation of 1,250 FEU, but Evergreen carried only 20 percent of the commitment or a total of just over 256 FEUs. They admit the situation improved in 2021-2022 when they contracted for 750 FEUs and Evergreen transported 60 percent or nearly 456 FEUs.
Furthermore, they allege a “practice of coercing” to get the shipper to pay extracontractual prices and surcharges. Further content that a substantial majority of the detention and demurrage charges were for periods when conditions outside the company’s control prevented them from moving boxes.
Detailing the costs, the complaint says Bed Bath & Beyond incurred a total of nearly $4.3 in costs, including nearly $4 million in excess ocean freight fees as the retailer had to enter the spot market to ship its containers. They contend they also paid Evergreen more than $317,000 in extracontractual surcharges as well as more than $1.26 million in improper demurrage and detention charges.
As with the other complaints, the bankruptcy estate is asking the FMC at trial to calculate other injuries suffered by the retailer.
Each of the complaints stands independently and begins a process of discovery and responses. OOCL, for example, responded to the complaint in May 2023 writing that it believed the bankruptcy estate had started an “unfortunate campaign to distort and obfuscate the relevant facts, contracts, and law, in order to secure an unwarranted return.”
While the issues raised in the Bed Bath & Beyond complaints mirror those of other shippers, these by far are the largest dollar amount complaints filed with the FMC. It opens broader issues for the FMC and reflects the elements that drove the reforms to the Ocean Shipping Act as shippers broadly allege the carriers took advantage of the situation during the pandemic for their profits at the expense of their customers.