Friday, March 1, 2024

"Yes, we owe money, but to whom?"


That's the conundrum faced by Ikea, which it's taken to court.

If you thought bankruptcy was complex – try no bankruptcy, but collapse: a situation that has led IKEA to the US courts.

IKEA has filed a lawsuit against Convoy, Hercules Capital and some 40 road transport providers in a bid to stop them invoicing the giant home furnishings retailer, because it doesn’t know whom to pay.

It’s certainly confusing. IKEA knows it owes some half-million dollars for US trucking services, but because the supplier of those services, Convoy, has shut its doors, the retailer doesn’t know what it owes to whom.

IKEA’s contract states it must only pay Convoy, not its suppliers. But the contract also states that IKEA had “the express right to withhold payment to Convoy until Convoy provided proof of the fulfilment of its obligations, which included the full payment of any subcontractors”.

Carriers, meanwhile, were prohibited contractually from sending Convoy’s customers, like IKEA, direct invoices.

In its lawsuit, IKEA claims Convoy failed to pay the carriers, and they, perhaps understandably, decided to take up the matter with IKEA instead.

. . .

“As a result, a conflict exists as to whether and to whom payment may be owed by IKEA for the services rendered by Convoy and the carrier defendants in relation to the transportation of IKEA products and goods.”

In the face of more than 40 invoices, where one would have sufficed, IKEA has placed the funds with the court and asked it to determine its distribution.

“IKEA has a reasonable fear of multiple liability because of these adverse claims,” it said. “IKEA is unsure which claimant is entitled to the property or to portions of the property.”

There's more at the link.

That's a very legitimate concern on Ikea's part.  If it pays claimant X, what if the agent who handled the booking (Convoy) then sues for its brokerage fee or commission?  If it doesn't pay claimant X, but pays the trustees of the bankrupt Convoy, what if X sues in return after the trustees pay out only a proportion of the claim as bankruptcy proceedings?  It's a legal can of worms that looks slipperier and nastier at every turn.

I guess the only people happy about it are the lawyers.  They'll be sure to get their fees up front, before anything else is paid to anyone!



Anonymous said...

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lynn said...

This happens all the time here in Texas as general contractors go broke or just refuse to pay their subcontractors. The subcontractors show up at your property for payment and then file mechanic's liens on your property. The mechanics's lien will be removed after a few years but meanwhile, if you sell the property those subs must be paid by someone before closing to release the liens.

Old NFO said...

Hoo boy, that's gonna be a mess and take a while to un...screw.

Anonymous said...

At least Ikea are trying to be honest and do the right thing without subjecting themselves to litigation.

Something to bear in mind when making purchasing decisions

Phil B

Mind your own business said...

Interpleader action. Ikea gives the money to the court and says, "You figure it out with the possible recipients." Not all that uncommon.

Anonymous said...

Interpleader plus claim by the subcontractors in the bankruptcy proceedings. They’ll get ironed out, although no one will be totally satisfied (either in the conventional or legal senses of the word). There’s likely plenty of case law discussing how to deal with this sort of set of issues.

Beans said...

Too bad the Courts just can't open Convoy's books and compare against billing and receiving by the subcontractors and others involved in this.

What would take, what, at most 4 hours by a decent accountant will now take months by idiots with law degrees.

Where the heck has common sense gone?

Simple solution.

Everyone involved drop all invoices involved and access to their accounts and badabing-badaboom there you go, it's solved.

Anonymous said...

Actually, federal bankruptcy trustees aren't paid that well.

Anonymous said...

There are these things called “contracts” and “bankruptcy law” that require answers beyond simply analyzing the books. Analyzing the books is only part of the process. You’d know that, if you were one of the idiots with a law degree.

Anonymous said...

Which is why you ne a lawyer before doing any construction or renovation, to draft a "non-lein agreement" a "non-claim agreement" , and a "certificate of insurance" agreement.
The contractors, all subcontractors, and all workers must sign these, which limit subs to only seeking payment from the General Contractor, the GC from allowing materials claims against the property, and workman's comp claims against the property / owner.
John in Indy