Furniture maker and retailer Mitchell Gold Co. and Ryder Last Mile came to a deal on how to handle undelivered products to customers who had already paid for their orders, according to an Oct. 20 court filing.
Following Mitchell Gold’s sudden shutdown and bankruptcy, which has been converted from a Chapter 11 to a Chapter 7 liquidation, thousands of shipments to end customers became stuck in warehouses. Logistics providers held thousands of products as they awaited delivery payments from the bankrupt company. That included Ryder, which said it had more than 2,000 Mitchell Gold products at its warehouses.
The agreement between the companies allows for customers to pay for their own shipping so that Ryder will release and deliver their purchases in cases where the product has been paid.
“We wish to acknowledge the considerable frustration that the [Mitchell Gold Co.] shut-down may have caused you,” Ryder said in a letter it proposes to send out to customers. “Applicable bankruptcy law prevents Ryder from delivering any furniture in our possession without the agreement of the Trustee, certain lenders, and the approval of the United States Bankruptcy Judge overseeing the Bankruptcy Cases.”
More than a dozen customers — a fraction of those awaiting delivery — have filed letters on the court docket over undelivered goods.
When the company, which owns the Mitchell Gold + Bob Williams brand, filed for bankruptcy, it estimated $6.5 million worth of merchandise was being held at third-party facilities awaiting delivery and another $17 million stuck at its own facilities.
Many of those customers already paid fees for shipping — to Mitchell Gold. As Ryder explained in court papers, customers typically pay shipping fees up front to the retailers they purchased from, in this case Mitchell Gold.
Many purchases were made months before the bankruptcy filing, which meant Mitchell Gold would pay Ryder for its shipping services. However, in between receiving money for shipping from customers and paying Ryder for delivery, the company became insolvent.
Under the agreement, customers must pay Ryder directly for delivery, even though they already paid for that charge. Acknowledging this, Ryder tells customers in its proposed letter how they can file a proof of claim in Mitchell Gold’s bankruptcy case for the advanced shipping fees they paid to the company.
Complicating the situation yet further are questions raised by payment processors, worried about customers acquiring furniture for which the processors might have already returned payment.
Payment processors including American Express objected to the proposal with Ryder, saying the logistics provider does not do enough to prevent “customers from obtaining furniture for which they ultimately have not paid, or may not pay, and includes insufficient measures to mitigate the volume of customer chargebacks that the processors will ultimately be required to pay out, incur as losses and then submit as claims against the Debtor’s [i.e., Mitchell Gold’s] estate.”
An attorney for Ryder said at an Oct. 26 hearing that the parties “were almost there” on a deal that would mitigate the processors’ objections.
The delivery plan requires court approval before moving forward. The federal bankruptcy judge in the case, Laurie Selber Silverstein, raised questions at the hearing about whether the plan would uphold any rights customers might have under state laws and asked that the parties recognize that in their final agreement.
Among other things, Silverstein voiced concerns that customers wouldn’t know from Ryder’s letter how much it would cost to have their furniture shipped, and that it wasn’t clear if they could come pick up furniture themselves from Ryder’s facilities. In response to the latter concern, the Ryder attorney said that the company was built for business-to-business services and there were practical barriers to customers retrieving their purchases on their own.