Ikea sues Convoy over unpaid carriers

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Updated May 26, 2024

The Ikea corporation has filed suit against Convoy as well as a raft of carriers and freight factoring companies in an effort to figure out who to pay in the aftermath of the digital freight brokerage's $3.8 billion dollar collapse in October 2023

The interpleader case, filed in the U.S. District Court for Northern Illinois, lists Ikea as plaintiff. Convoy and 58 other named parties are the defendants, including Hercules Capital (who loaned Convoy money), Convoy's subcontracted carriers and associated factoring companies.

[Related: Convoy's collapse: Was the tech worth the hype?]

The lawsuit seeks court guidance on who among those parties should get paid of an amount that totals $519,254.44. 

The suit was filed in early January, but just last week Convoy's tech platform relaunched under new management at Flexport, known for freight forwarding and brokerage services. Flexport bought Convoy's tech assets after the company ceased operations in 2023. Convoy has not declared bankruptcy. 

In announcing the relaunch, Flexport CEO Ryan Petersen heralded nearly 200 loads dispatched on the platform, but didn't respond to questions surrounding the dozens, at least, of carriers that got stiffed the last time Convoy dispatched loads.

"A homerun in the first inning," Petersen tweeted of Convoy's relaunch.

Meanwhile, the Ikea lawsuit makes clear that Convoy's Transport Agreement with the shipper locked in rates between October 6, 2023 and October 31, 2023. Convoy's former CEO Dan Lewis announced the shutdown on October 19.

This left the carriers in the lawsuit unpaid after having delivered loads for Ikea. Sometimes, when a broker doesn't pay, one recourse option for a carrier is to get in touch with the shipper and look for payment from them directly. 

[Related: How can you get paid when a freight broker goes bust?]

Yet Convoy's Carrier Service Agreement, included in the filings, specified otherwise: “Convoy shall pay freight charges quoted to you on the Service regardless of whether Shippers pay Convoy. In exchange for this guarantee of payment, you shall not invoice or otherwise attempt to collect any amounts related to services provided with respect to any Shipment from any Shipper or any other third party; Carrier shall look solely to Convoy for payment of freight charges hereunder. You hereby waive any right you may otherwise have to proceed or commence any action against any Shipper for the collection of any freight bills arising out of transportation services hereunder."  

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Under Ikea's contract with Convoy, Convoy "shall only be payable by [IKEA] to [Convoy] if [Convoy] has fulfilled all of its obligations set forth in the Agreement and any obligation in relation to the Services, including but not limited to the full payment to subcontractors."

Because Convoy never paid the carriers, Ikea refuses to pay Convoy because, in Ikea's eyes, Convoy's work isn't done. Convoy also defaulted on a loan from Hercules, a venture capital lender, which foreclosed on Convoy's assets, including accounts receivable. 

So who gets paid?

"Since Convoy and Hercules have failed and/or refused to remit payment to the Carrier Defendants, IKEA has no obligation to remit payment to Convoy or Hercules and, therefore, neither Convoy nor Hercules presently possess any accounts receivable with respect to IKEA," the facts of the case in the lawsuit state. "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."

Unsatisfied with this, both Hercules and individual carriers have plowed ahead to seek payment from Ikea. 

Ikea, for its part, seems to want to pay. Ikea has already handed over the $519,254.44 to the court, and awaits the court's decision. Otherwise, Ikea just wants this business behind them, with no more carriers and other parties coming after them for payment. 

Convoy never filed bankruptcy. Despite not paying some carriers, or severance to their own workers, in October, Convoy continues to exist as a business entity, which recently sold its tech assets to Flexport. 

Flexport never disclosed what it paid for Convoy's tech, but Brittan Ladd, a supply chain consultant and popular industry commentator on LinkedIn, said that a Flexport employee indicated the sale amount sat around $8.7 million. That's a mere shadow of the $3.8 billion valuation Convoy had run up after years of venture capital fund-raising, but still enough to pay the carriers mentioned in the Ikea case 16 times over.  

The Flexport deal did not include Convoy as a company or its liabilities, but the Convoy company, whatever is left of it, must have had a sizable capital infusion. Why hasn't Convoy paid?

Convoy founder Lewis, who now works at Flexport, celebrated the Convoy technology's return in a LinkedIn post, and claimed the trucking community ate it up. 

"I'm so proud to see Convoy's technology platform and marketplace relaunch this week within Flexport. The feedback from the trucking community has been amazing," wrote Lewis on LinkedIn.

In comments under the post, some motor carriers begged to differ with Lewis's assessment, asking (without answer) what happens now to the stiffed carriers. 

Ryan Petersen at Flexport, Convoy's new owner, frequently boasts of the company's "fortress balance sheet." According to Ladd, Petersen mostly concerns himself with raising venture-capital money and making a splash in media. 

Petersen recently reinstalled himself as CEO of Flexport after ousting David Clarke, who built out the ground logistics operation at Amazon. When Petersen took over the company, he said that Flexport had about a billion in cash on hand. Ladd said that's probably only half true, judging by conversations with Flexport employees, with perhaps only $500 million in the bank and a considerable burn rate of cash, which might explain why Flexport recently raised $260 million from Shopify

Perhaps Flexport sees money to be made with Convoy's digital freight brokerage tech, which Ladd said was a far superior product to Flexport's existing tech. Flexport, with a built-in base of customers, could perhaps operate the tech platform more sustainably, with less reliance on enterprise sales teams landing big customers like Ikea. 

For now, Flexport and Petersen have offered no comment on when former Convoy-contracted carriers will get paid or what they should expect, all while seeking to convey the new business as especially driver-friendly. 

Petersen offered the following tweet as a quote, unattributed to anyone, the day of Convoy's relaunch: "I’m excited to be able to use Convoy’s technology again. I’ve been running my business using its tools for years now; it’s the most driver friendly and it’s a huge relief to have the app back in today’s market. Can’t wait to start moving freight on the Convoy Platform again. Convoy is one of the few brokers that advocates for drivers."  

But at least one carrier stiffed by Convoy begs to differ. 

"Rich people can get away with everything," said one fleet owner who is a defendant on the lawsuit. "Only the small fish, poor people like me, they suffer. This is always like this and always will be."

This carrier said loads for Ikea represent "about 90%" of the money they're owed by Convoy. Of course, other shipper customers of Convoy may have lawsuits like this pending as more carriers seek payment. For small carriers struggling through the down market of the last year and more, nonpayment from Convoy could have already wiped them out of business. 

Read next: Ikea v. Convoy: Lawsuit reveals glimpse at contract rates, broker margins

If you are a carrier who has gone unpaid by Convoy, get in touch with [email protected]