A few weeks before Loves Furniture filed for Chapter 11 bankruptcy protection and blamed a good chunk of its troubles on Penske Logistics, the 3PL itself filed suit against Loves with a different view of the relationship.
The suit was filed on January 5 in the Oakland County Circuit Court in Michigan, which is where Loves is headquartered. Because it was filed before the bankruptcy, it doesn’t provide a forum for Penske to address some of the complaints of poor service that were in Loves’ bankruptcy filing.
Penske asserts that Loves was in financial difficulty for several weeks toward the end of 2020, and it was denied access to merchandise that could’ve been seized in response to non-payment.
The Loves bankruptcy filing, in discussing what it sees as Penske’s role, focuses on a warehouse in Burton, Michigan. But the Penske suit discusses activities at a warehouse in Warren, Michigan, where Loves had leased space but contracted with Penske to operate the logistics at that facility. That deal was signed in July 2020. It included a “general warehouseman’s lien” that would allow Penske to seize merchandise in lieu of missed payments.
“After several months of Penske providing services pursuant to the agreement, Loves began having trouble making payments for services,” the Penske lawsuit charges. “Penske provided numerous opportunities for payment and came up with several payment options, but Loves ultimately failed at each turn to meet its obligations.”
By mid-November, Penske was signaling it would exercise the lien. “This effort resulted in Loves making some additional payment in order to, by agreement, temporarily stave off exercising of the lien,” the lawsuit said. It adds that Loves did not challenge Penske’s right to exercise that lien.
The Loves debt to Penske got up to $1.55 million by the end of the year, while Loves’ Chapter 11 filing lists debts to Penske Logistics at approximately $1.6 million. That $1.55 million estimate was as of December 29, 2020. On the same day, according to the suit, Penske said it was planning to conduct a “private sale of the goods in storage” on January 23 “unless payment was made.”
At that point, according to the suit, Loves sought to block Penske personnel from access to the Warren site. Penske was seeking to exercise the warehouseman’s lien, “but Loves is intentionally interfering with these efforts.”
In the January 5 filing, Penske said its staff had seen “truck traffic in and out of the facility, which likely indicates Loves beginning to unlawfully remove the goods from the warehouse.” The suit says that Loves staff had “indicated” they are moving inventory and that they intend to continue to do so.
Loves is doing this, “in order to frustrate Penske’s lien, as Loves is of the belief that the lien will not be available to Penske once the goods are no longer in the warehouse,” Penske said.
Penske has been forced to dismiss some employees at the warehouse as a result of the standoff, the suit says.
Penske says in its request for declaratory judgment that it has the “right to possession” of the goods in the warehouse and asks the court for an order to allow it to possess merchandise at Warren.