Bed Bath & Beyond Files $316 Million Lawsuit Against MSC

Glenn Taylor
·4 min read

Bed Bath & Beyond, Inc. is extending its crusade against ocean carriers with a nearly $316 million lawsuit filed Tuesday claiming Mediterranean Shipping Company (MSC) breached service commitments during the Covid-19 pandemic.

The complaint, the biggest lawsuit filed with the Federal Maritime Commission (FMC) to date, accuses the world’s largest ocean carrier by shipping capacity of failing to meet service commitments during Covid, coercing Bed Bath & Beyond into paying extra for peak season surcharges and other fees, and charging excessive demurrage and detention costs.

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Bed Bath & Beyond is seeking damages amounting to nearly $157.9 million, but wants reparations doubled to $315.8 million on the grounds of MSC’s “willful” and “retaliatory” conduct.

Sourcing Journal reached out to a spokesperson for Bed Bath & Beyond Inc.

MSC said it is still studying the “meritless” complaint.

“MSC is proud of its efforts to provide its customers with continued service during a time of extraordinary market conditions,” a spokesperson told Sourcing Journal. “We look forward to serving our customers for many years to come and will continue to dispute unfounded allegations through the appropriate legal channels.”

The reparations that Bed Bath & Beyond wants dwarf that of the two previous lawsuits the company filed against major ocean carriers earlier this year. The bankruptcy estate already filed $31.7 million in claims against Hong Kong container shipping firm OOCL and $7.7 million against Taiwan’s Yang Ming. Both ocean carriers dispute the claims.

In the 37-page lawsuit, the complainant said it “had to make alternate transportation arrangements at higher prices or forgo shipping such cargo altogether, resulting in excess freight charges paid, lost profits and/or other business damage.”

Lost profits account for most of the damages at Bed Bath & Beyond, according to its estate now known as 20230930-DK-Butterfly-1, Inc. after selling off the retailer’s intellectual property rights to Overstock. The estate calculated it is owed $112.9 million by multiplying the average profits per container carried in the period with the shortfall the shipping line failed to transport.

During the 2021–2022 shipping year, the once-mighty retailer alleges MSC carried just 2,553.5 40-foot equivalent units (FEUs), a 1,686.5-FEU or 40 percent shortfall from the initial alleged service contractual obligation to move 4,240-FEUs.

Bed Bath & Beyond alleges that the additional incremental cost of replacing MSC’s shortfall during this period was at least $7.3 million more than what the company would have paid had MSC honored its service commitments.

In the 2020 and 2021 service contracts, the zombie company said it was forced to pay MSC an extra $5.5 million and $9 million respectively than originally negotiated.

Finally, Bed Bath & Beyond claimed that the carrier “unjustly and unreasonably assessed” at least $13.4 million in demurrage charges and at least $9.8 million in detention charges, totaling at least $23.2 million from 2020-22.

Ocean carriers have had a bigger target on their back since the FMC got expanded oversight over the shipper-carrier relationship in 2022. The government agency, which investigates excessive charges and contract breaches by ocean carriers, resolved 36 cases in the 12 months through September, according to a report from the Financial Times. In that time period, $2.89 million in penalties have been levied.

Not included in this statistic, the FMC ruled in June that Maersk-owned ocean liner Hamburg Süd owed furniture retailer OJ Commerce $9.8 million for breaching cargo service agreements, with Bed Bath & Beyond citing the case in the MSC lawsuit.

Container shipping giants like MSC, Maersk and CMA CGM came under the microscope when they recorded major profits amid a massive escalation in ocean freight rates during the massive supply chain congestion of 2021 and 2022.

In the case of MSC, Bed Bath & Beyond cited an unconfirmed report from Italian newspaper Il Messaggero, which said that total 2022 revenues for the privately held company were approximately $91.1 billion—an increase from approximately $69 billion in 2021. Net profits during the year reached $38.4 billion, with the Swiss shipping titan holding $68.7 billion in cash reserves by the end of 2022.

The profits, and complaints from shippers, helped advance the passing of the Ocean Shipping Reform Act of 2022, which equips the FMC to better ensure that carriers to unfairly bypass U.S. shippers in need of service.

Last week, the FMC dismissed Illinois food importer MSRF’s case claiming it suffered damages from Korean carrier HMM’s alleged capacity constraints.

Ocean freight-related lawsuits have also gone beyond FMC jurisdiction. One from Target’s insurer, Starr Indemnity & Liability Co., was filed against Maersk in a New York court, alleging that the logistics company owed the mass merchant $5.8 million for losing 57 containers in the Pacific Ocean.