Bangladesh apparel makers win $40m lawsuit against American chain Sears

Bangladeshi garment manufacturers have won a $40 million lawsuit against American department chain Sears.

Forbes magazine has described the development as a “rare” victory for the Bangladeshi apparel makers against “one of their biggest tormentors”.

Pummelled by the pandemic and battered by the unethical business practices of Western clothing giants, they were left with stacks of clothing and unpaid bills by the crumbling retailer.

Sears has stiffed them multiple times before as it muddled through “ugly” bankruptcy proceedings, the magazine said on Saturday.

Citing attorney Joseph E Sarachek, whose firm represented the 21 Bangladeshi factories in the lawsuit filed last June, Forbes said his clients have gotten “the bulk” of their money back in a settlement with Transformco, the privately-held company set up by American billionaire Edward Lampert’s ESL Investments hedge fund to acquire Sears and Kmart out of bankruptcy last year.

“The suppliers were obviously thrilled that we got them a significant return,” Sarachek told Forbes.

Sears is far from alone in shortchanging suppliers during the pandemic, according to the report.

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Last spring, when the pandemic hit, scores of major brands and retailers, including Forever 21, Ross Dress for Less, The Children’s Place, Kohl’s, Global Brands Group and Arcadia (owners of Topshop), refused payment to factories on $40 billion worth of completed goods, leaving factories facing down bankruptcy and pushing garment workers out onto the street without pay in some instances.

The cancellations “contributed to an evolving humanitarian disaster in Bangladesh and elsewhere in Asia,” according to lawyers representing factory owners.

But Sears pushed suppliers to a breaking point after the company went through bankruptcy and factories were left without payment on completed inventory multiple times.

The Bangladeshi suppliers who filed suit over the cancelled orders, some of whom were owed as much as $6 million apiece for clothing they’d already sewn and shipped for Sears last spring, received initial payments from the settlement last September and are continuing to receive payouts, helping them avoid certain financial disaster.

Sarachek said all have managed to stay in business despite the circumstances.

Sarachek also said he was still working through complaints from over 100 factory owners who are owed tens of millions of dollars by other large retailers, including Forever 21 and Global Brands Group, a subsidiary of Hong-Kong based Li & Fung and makers of brands like Sean Jean, Katy Perry, and Jones New York.

Li & Fung, the world’s largest apparel sourcing agent, likewise appears to have acted as a middleman to produce some of the inventory for Sears.

These companies did not return Forbes requests for comment.

While over two-dozen large brands, including H&M, PVH, VF Corporation, Zara, and C&A, reinstated and paid for orders after international pressure last year, a staggering $20 billion worth of goods manufactured before the pandemic have not yet been paid on, according to the report.