Whirlpool has demanded that Sears send back products the appliance-maker shipped in the weeks before the retailer filed for bankruptcy protection.
Whirlpool, which stopped selling its branded products at Sears last year but makes appliances under Sears’ Kenmore brand, asked the department store chain to return all merchandise it received in the 45 days before Sears’ Chapter 11 bankruptcy filing Oct. 15.
In a letter filed in court last week, Whirlpool’s attorney demanded that Sears “refrain from selling, disposing, or using … for any purpose whatsoever” the merchandise it received from the appliance-maker during that time without permission from the U.S. Bankruptcy Court.
Whirlpool and Sears Holdings Corp., which also owns Kmart, declined to comment.
Sears listed Whirlpool as one of its largest unsecured creditors in its bankruptcy filing, saying it owed the appliance maker $23.4 million.
Twenty-First Century Fox told Sears it wanted $207,260 worth of merchandise returned, saying it believed Kmart received the products while insolvent, according to a letter filed with the court. The merchandise should not be sold without Fox’s written consent or a court order, an attorney for Fox wrote. Invicta Watch Co., Body Flex Sports, Reynolds Consumer Products and East Penn Manufacturing sent similar letters.
The bankruptcy code gives companies who sent products to a buyer on credit shortly before a bankruptcy filing the right to reclaim those goods, as long as the specific items can be identified.
It’s common to see those claims in retail bankruptcy cases, said Daniel Lowenthal, partner at Patterson Belknap Webb & Tyler and chair of the New York firm’s business reorganization and creditors’ rights practice.
“It affords suppliers who were presumably acting in good faith the ability to reclaim goods,” he said.
It’s not clear whether Whirlpool and the other companies will be successful, since it’s difficult to send goods back once they’ve made it to the buyer’s warehouse or sales floor, said Neil Stern, senior partner at Chicago-based consulting firm McMillanDoolittle.
“It certainly doesn’t help Sears” in its efforts to reorganize and keep the stores going, he said.