Bed Bath & Beyond Claims Ocean Carrier Owes it $32 Million
Bankrupt Bed Bath & Beyond wants at least $31.7 million from container shipping company OOCL. According to the complaint the Union, N.J.-based home goods retailer filed with Federal Maritime Commission (FMC), the Cosco Shipping subsidiary failed to meet minimum quantity commitments (MQCs) under its 2020 and 2021 service contracts.
The retailer also claims said that OOCL charged $6.4 million in demurrage and detention fees from August 2021 to June 2022, which were “not reasonable or fair” given the pandemic port congestion and labor disputes on top of policies that interfere with the handling of ocean freight and social distancing regulations.
More from Sourcing Journal
Analyst: Off Price Gets Last Laugh in Bed Bath, Tuesday Morning Meltdown
This Big-Box Brand Is Going After Bankrupt Bed Bath & Beyond's Customers
Another bone of contention in Bed Bath & Beyond’s complaint alleges that OOCL tried to “coerce premium pricing” by strongarming the chain into premium rate contracts as a precondition to carry “just a fraction” of the quantity commitment to which it had previously committed. Bed Bath & Beyond says it paid a premium of $12.6 million to OOCL, which could have been avoided if the shipping company fulfilled its service commitments.
“Respondent’s practices were knowing and deliberate, and were not due to an absence of available cargo space or necessitated by any other circumstance outside of Respondent’s control,” the claim said.
The retailer called out OOCL for having “profited greatly” from the conduct, citing the carrier’s $7.4 billion in 2021 operating profit, a 642 percent increase from the previous year.
Bed Bath & Beyond declined to comment on the complaint. OOCL didn’t immediately respond to a request for comment.
While the constraints in the global supply chain hampered the broader retail industry, they had a significant impact on Bed Bath & Beyond that likely accelerated its demise. The company reported hundreds of millions of dollars in lost sales starting with the 2021 holiday season that lasted well into 2022, stemming from out-of-stocks that limited product availability. The company’s stores were almost 35 percent out of stock by December 2022, according to Holly Etlin, chief restructuring officer of Bed Bath & Beyond, in the company’s Chapter 11 petition.
The claim delves deeper into some of the concerns that supposedly led to the out-of-stocks.
Under its July 1, 2020 to June 30, 2021 contract with OOCL, Bed Bath & Beyond had an MQC for 2,100 40-foot equivalent units (FEUs). But the merchant said OCLL only provided it with 1,475.85 FEUs of space, which forced the company to seek carriage from other sources at higher rates, costing an estimated $2.2 million in additional shipping costs, the retailer said.
A second service contract from May 1, 2021 to April 30, 2022 saw Bed Bath & Beyond order an MQC for 3,796 FEUs, which the retailer said ended up amounting to just 2,432.74 FEUs of space, equating to $9.4 million in extra freight costs.
For the months of October 2021 through March 2022, the complaint said that OOCL provided just
52.9 percent of contracted space to Bed Bath & Beyond, if allocated monthly. Additionally, the retailer says “much of the freight…was moved only after [BBB] agreed to [OOCL’s] demands for exorbitant premium pricing.”
Bed Bath & Beyond is also seeking compensation for peak season surcharges (PSSs), arguing that its contract rates included these fees and other surcharges.
The chain cited correspondence in August 2020 from an OOCL employee who stated, “We admit to being short against expectations…Consider paying a PSS on all shipments to the West Coast…The PSS would put BBB in position to secure extra space on the high demand loops to the West Coast.” PSSs proposed by OOCL were as high as $5,800 per FEU, the firm said in its complaint.
The retailer agreed to a PSS in December 2020 that would extend through February 2021. But the company still alleged that OOCL was “auctioning space to the highest bidder rather than meeting service commitments.”
In one such case, the claim noted the OOCL employee’s error in demanding “$X,000” in incremental PSS rather than filling in the number it was demanding to secure space, demonstrating that it was not an isolated incident.
“It appears from Respondent’s communications that Respondent was holding a broad auction for
space on a ‘first come, first serve’ basis while admittedly flouting its service commitments, and
that Respondent’s conduct represented an extensive pattern and practice affecting other shippers
as well as Complainant,” the complaint said.
OOCL has yet to file a response to the retailer’s allegations with the FMC.
Yang Ming sues Bed Bath & Beyond after similar MQC claims
OOCL isn’t the only ocean freight company that Bed Bath & Beyond is tangling with. The home furnishings retailer also says it is pursuing at least $7.8 million in claims against Taiwan’s Yang Ming.
Yang Ming already sued Bed Bath & Beyond in the Southern District Court of New York ahead of the plans, disputing claims that it breach contractual agreements. The ocean carrier is seeking a declaratory judgment that it does not owe the retailer for failing to meet its MQC.
Yang Ming said Bed Bath & Beyond submitted the claim for $7.8 million, as well as an unspecified amount of lost profits and other “consequential damages.”
The dispute relates to the retailer’s service contract for May 1, 2021-April 30, 2022, which had an MQC of 1,000 FEUs. According to Yang Ming, the contract stated that “in the event of the carrier’s failure to meet the annual MQC…the shipper may reduce the annual MQC by the amount of the shortfall.”
Yang Ming claimed that despite Bed Bath & Beyond’s continued warnings of litigation, the contract agreement provided no basis for pursuing monetary damages for such shortfalls.
In response to the carrier’s request for declaratory judgment, the retailer said in a court filing Thursday that any action against it would require the bankruptcy judge to provide relief from the Chapter 11 automatic stay.
As Bed Bath & Beyond continues its post-bankruptcy liquidation sale and attempts to find outside buyers to either keep the business afloat, or at least purchase some of its assets, the company’s days as a publicly traded firm are over.
The retailer’s common stock will be delisted from the Nasdaq after the stock exchange opens on Wednesday.
