Walmart Inc., not Covid-19 pandemic disruptions, has caused supply chain delays, according to a New Rochelle company that sells disposable gloves.
London Luxury LLC says it has lost nearly $45 million so far, in a complaint filed Jan. 5 in Westchester Supreme Court, and stands to lose more than $500 million on deals to supply Walmart with disposable gloves.
“Walmart’s wrongful efforts to shirk its contractual obligations to buy tens of millions of boxes of nitrile gloves,” London Luxury says, has “clogged ports and factories with the unsent shipments of gloves and severely stressed London Luxury’s global supply chain.”
Walmart spokeswoman Abby Williams said the company is committed to doing business fairly and it is “reviewing the complaint and will respond with the Court as appropriate.”
Marc Jason, a native of London, founded London Luxury in 2002 and established its global headquarters in New Rochelle. It designs and makes consumer home goods, such as bedding, and health and wellness products, such as nitrile (disposable synthetic rubber) gloves.
During summer 2020, as demand for personal protection equipment surged in the early days of the pandemic, Walmart and London Luxury began discussing a deal to supply disposable gloves.
The first deal, according to the complaint, was to supply about one million boxes of gloves per month. Walmart made no promise to buy a minimum amount and it could cancel orders at any time before shipment.
But Walmart kept asking for more gloves, the complaint states. Last February it struck a deal to buy 72 million boxes in 2021, and last June to buy 75 to 80 million boxes a year for five years.
London Luxury says it could not provide such massive quantities of gloves without a hard commitment from Walmart. So unlike the previous supplier agreements, London Luxury claims, Walmart agreed to noncancelable and irrevocable terms.
London Luxury lined up manufacturers in Thailand and Malaysia and made sure the factories were audited for compliance with good practices in making, packaging and warehousing nitrile gloves.
Shipments began last July, according to the complaint, and Walmart has accepted about three million boxes of gloves.
Then last fall, “things changed abruptly,” the complaint states, when Walmart purportedly lost a major business-to-business broker that was to resell the gloves to large hospital groups.
“Since that time, Walmart has engaged in a number of machinations to gin up pretextual reasons for abandoning its obligations under the commitment letter.”
Mercator Medical, one of the glove-makers, had reported to the U.S. Food and Drug Administration that gloves had been sold fraudulently under its name. Walmart demanded that the factory be re-audited, and Mercator passed the new examination by Walmart’s chosen auditor.
Mercator gloves also failed quality tests at a Chinese lab, according to the complaint, but the gloves were re-tested at three more labs and passed all quality standards.
London Luxury says the contradictory results by one lab versus three reputable labs suggests “some error by that laboratory and not any issue with the gloves themselves.”
But Walmart allegedly “seized on the aberrant findings … as a pretext to refuse shipments of gloves and to attempt to evade its non-cancellable and irrevocable commitment to purchase gloves from London Luxury.”
Walmart has allegedly refused to authorize shipments or accept delivery of six million boxes of gloves worth about $45 million.
London Luxury says it could lose more than $500 million under the one-year deal, plus hundreds of millions of dollars in the multi-year deal if Walmart does not stick to the terms.
London Luxury is asking the court to declare that Walmart must honor the noncancelable and irrevocable commitment to buy 72 million boxes of gloves in 12 months and then 75-to-80 million boxes a year for five years.
The company is represented by Manhattan attorneys Stephen R. Neuwirth, Deborah K. Brown and Jared E. Ruocco.
