Bed Bath & Beyond wants up to $315m compensation from MSC

Bankrupt former retailing giant Bed Bath & Beyond has filed a compensation claim totalling $315m against Switzerland-based shipping company MSC as it continues its battle against the shipping industry, which it has said was a major cause of its financial difficulties.

BB&B closed down earlier this year after its funds finally ran out. It is working to resolve wide-ranging creditor claims.

Its claim against MSC Mediterranean Shipping Company seeks compensation for the increased shipping costs and detention and demurrage charges that BB&B were subject to in 2020 and 2021. It is also suing for alleged lost profits.

The bankruptcy estate is DK-Butterfly. It filed the 36-page complaint with the FMC on November 28th.

The company claims that MSC breached the 1984 Shipping Act. The former retailer has also asked the FMC to order reparations from Orient Overseas Container Line and Yang Ming, once again for their failures to honour contracts and for what are alleged to be unjust D&D fees.

MSC, and other shipping companies, have faced similar claims from US retailers, and have issued similar denials. The latest filing alleges that MSC “took advantage of price inflation in the container shipping sector and unfairly exploited its customers.” The suit has alleged that MSC systematically and deliberately failed to meet its service commitments in two contracts that covered a period from July 1st 2020 through to April 30th 2022.

The suit states that the 2021 contract called for the carriage of 4,240 feus or an average month allocation of 353 feus. The filing has asserted that MSC provided 40% less than this, equal to about 2,553 feus. MSC’s performance under the 2021 Service contract was alleged to have been “abysmal.” Bed Bath & Beyond was asserted to have had to use the spot market to make up for the shortfall of container supply, at a cost of nearly $7.3m.

MSC is alleged to have repeatedly coerced the retailer into paying premiums, despite promises that it would honour the contract prices and only charge premium fees on extra shipments. The filing details repeated exchanges between the two companies showing, the litigant contends, that BB&B was forced into paying premium rates and surcharges for its containers to be at “the front of the line” as volumes surged and capacity and equipment became scarce.

The added costs above the contracts cost Bed Bath & Beyond over $5.5m in the 2021 contract period and a further $9m in the 2022 contract, the suit claims.

MSC is also alleged to have penalized the company by charging D&D fees when the conditions were outside Bed Bath & Beyond’s control. The suit claims that Bed Bath & Beyond wrongfully paid more than $13m in demurrage charges and nearly $10m in detention charges.

Finally, the complaint to the FMC claims that the delays in shipping caused scarcity and uncertainty in the business, which disrupted the ability of Bed Bath & Beyond to operate. The claim here enters a somewhat hypothetical and complex area. The suit asserts that BB&B made profits of at least $66,924 per container. Multiplying that by the 1,686 feu shortfall, the sum of $133m is suggested as “lost profit”. The final amount of lost profits should be determined during the trial, the suit states.

MSC’s actions were asserted to be wilful and purposely designed to inflate profits. It also notes that MSC recorded very large profits for the years in question and embarked on “a tonnage buying spree”, which they would not have done if large profits were not being made, the suit claims.

Under FMC rules, if Bed Bath & Beyond can establish that MSC’s actions included retaliatory conduct, then any award of reparations could potentially be doubled. That would bring the amount claimed to $315m.

This, it was noted, compared with a claim of just under $32m against OOCL and $7m against Yang Ming. OOCL said earlier this year that BB&B had distorted the facts and that it was also partly to blame for its own problems. OOCL said that Bed Bath & Beyond repeatedly failed to manage its own supply chain, which exacerbated the bottlenecks.