Bed Bath & Beyond in Yet Another Legal Battle With Ocean Carrier

Glenn Taylor
·5 min read

Bed Bath & Beyond’s bankruptcy estate is coming after another container shipping line, just as the Federal Maritime Commission (FMC) adjusted its rules on how ocean carriers and terminal operators can charge late fees for containers.

The former home retailer, whose intellectual property is now a completely separate entity under the name Beyond Inc., filed a $4.3 million complaint with the FMC against Evergreen, marking the fourth ocean carrier the company has levied litigation against since the start of 2023.

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The complaint carries three allegations against the Taiwanese shipping line: failing to meet service commitments over a two-year stretch; coercing Bed Bath & Beyond to pay extra contractual prices and surcharges; and charging excessive demurrage and detention fees.

These three charges are similar to the allegations thrown at Orient Overseas Container Line Limited (OOCL), Yang Ming and Mediterranean Shipping Company (MSC), all of which are still ongoing cases. The suit against MSC is the largest filed with the FMC to date, with Bed Bath & Beyond seeking damages of as much as $315.8 million.

With the suits, Bed Bath & Beyond is holding the ocean carriers at least partially responsible for its Chapter 11 bankruptcy in April 2023. In the year prior to the bankruptcy filing, the home and bedding retailer had multiple quarters where it said out-of-stock inventory stemming from then-ongoing supply chain congestions had resulted in at least $100 million in lost sales.

In the filing served Feb. 21, Bed Bath & Beyond alluded to these issues, saying “Evergreen’s conduct has caused complainant to incur other injuries, including delays, failures to receive time-sensitive merchandise, reduced inventory available for sale, unnecessary expenses, lost profits, as well as attorneys’ fees and expenses relating to litigation.”

Like its suits against the other container shipping lines, the firm alleges Evergreen “allocated the complainant’s bargained for space to higher-priced cargo from other shippers to maximize Evergreen’s own profits.”

The plaintiff alleged that Evergreen carried only 20 percent of the committed cargo throughout the 2020-2021 service contract. While the contract initially set a minimum quality commitment (MQC) of 1,250 40-foot containers, Bed Bath & Beyond says the ocean carrier offered only enough space for nearly 257 containers.

Bed Bath & Beyond said the situation improved in the 2021-2022 contract, but Evergreen still transported just 60 percent of the initial 750-container space commitment. The former retailer claims the defendant provided nearly 456 40-foot equivalent units (FEUs) of space.

“As a result of Evergreen’s shortfalls in both the 2020–2021 and 2021–2022 shipping years, complainant was forced to seek carriage from other sources at higher rates, or else forgo shipments completely,” the suit said.

As far as the coercion charges go, the FMC submission claims the container line’s surcharges were used “as a prerequisite to honoring even a fraction of its service commitments.” One email from an Evergreen representative cited in the complaint suggested that other customers were willing to pay more than $1,000 extra on top of contracted rates to reserve space.

Bed Bath & Beyond’s third allegation of excess demurrage and detention charges started in April 2021. In connection with the Evergreen voyages, BBBY says it paid more than $820,000 in demurrage charges and at least $438,000 in detention charges imposed by Evergreen, totaling nearly $1,259,000.

The retailer called the charges “excessive,” saying they largely implemented to penalize the company for conditions outside its control, like port congestion, lack of appointments and lack of equipment.

“For example, communications between BBBY and/or its drayage vendors and Evergreen clearly indicate that a lack of appointments or dual appointment requirements resulted in BBBY and/or its drayage vendors being unable to pick up or return Evergreen containers,” according to the complaint. “In particular at the ports of Los Angeles and Long Beach, BBBY and/or its drayage vendors were unable to secure appointments for picking up or returning Evergreen containers, or were turned away when attempting to access the port.”

FMC aims for clarity with new demurrage and detention standards

Complaints like Bed Bath & Beyond’s and others brought more attention to claims that ocean carriers have been abusing their power via unreasonable charging practices and contract breaches.

The FMC, which already had required ocean carriers to prove the accuracy of detention and demurrage fees, updated its rules on these billing practices Friday. The ruling is designed to deliver more clarity on who can be billed, the timeframe within which they can be billed and the process for disputing such bills.

With the rule, invoices can only be issued to one of two parties: either the person who contracted for the ocean transportation or storage of cargo; or the consignee, defined as “the person to whom final delivery of the cargo is to be made.”

As of May 28, container ship carriers and marine terminal operators will be required to issue detention and demurrage invoices within 30 calendar days from when charges were last incurred.

Under the new system, shippers will not be obligated to pay these fees if carriers fail to properly bill.

The new ruling comes nearly a year after the FMC requested details from 11 ocean carriers on their policies and practices for issuing detention and demurrage invoices.

The FMC estimated the costs for carriers and terminal operators to comply with the updated invoicing requirements at between $6.3 million and $12.7 million.