Shipper sues Expeditors for losses due to lack of business plan after cyber-attack

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© Raphael Henrique

Expeditors’ failure to implement a business continuity plan following last year’s cyber-attack means it is now facing a $2.1m claim in court.

iRobot, a customer for nearly 15 years, claims the forwarder’s ‘voluntary’ decision to shut down its global operating systems in February 2022, with no back-up plan, led to it incurring significant costs and expenses, as its deliveries ground to a halt .

The case, filed last week, claims “Expeditors’ own inattentiveness and negligence exposed its systems to attack, and Expeditors lacked and/or failed to implement the necessary business continuity plan to ensure that it could continue providing services to iRobot”.

The firm, which makes household robots, added that “the shutdown negatively affected every aspect of [Expeditors] business and drastically limited its ability to conduct operations for many weeks”.

Expeditors were contractually obliged to receive iRobot’s new products, store, maintain and ship them to iRobot customers within 24 hours of receipt of an order. And Expeditors had to update its system within four hours of any order or stock movement.

“All of the services that iRobot relied on Expeditors to perform came to a sudden and complete stop when Expeditors shut down its operating systems. Products that were in transit sat idle, and customer orders were unfulfilled.”

iRobot decided to switch to a new logistics provider so it could honor customer commitments, at a cost of $1.1m, it said. And, it added, despite its “best efforts to mitigate the effects of Expeditors’ failure to perform”, it still incurred another $1m in additional storage costs and back charges from retailers.

Expeditors refused to reimburse the company.

iRobot said its agreement required Expeditors to maintain a business continuity plan. By shutting down its operations it broke its agreement with iRobot, which also lost all visibility into its inventory, forcing it to send staff into Expeditors warehouses to count stock. It also had to ask other partners to hold inventory on ships, at docks and in containers, as Expeditors refused to take delivery.

“From February to April 2022, iRobot incurred over $1.2m in costs and expenses to transfer nearly 12,000 pallets of products in 207 tractor trailers from Expeditors’ warehouses in Sumner, Washington, and Virginia Beach, Virginia, to new facilities, in some cases across the country…iRobot was forced to reimburse retailers over $900,000 for various charge-backs as a result of late deliveries and other violations of the transaction terms. iRobot incurred an additional $80,000 for additional storage and demurrage costs caused by delayed shipments.”

iRobot also claims the cyberattack was foreseeable and had been identified as a risk in Expeditors’ 10-K filing, but that Expeditors still failed to implement any mitigation.

iRobot is calling for a minimum award of $2.1m, plus interest at the statutory rate of 9% from the date of the breach, as well as court and legal fees.

Yesterday, the court assigned a judge.

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