Former Bed Bath & Beyond CEO Mark Tritton sued the company on Friday, accusing the struggling retailer of cutting off bi-monthly payment of his $6.76 million severance agreement in January.
In a 13-page complaint filed with the Supreme Court of the State of New York, Tritton accuses the company of breach of contract for failing to continue the payments following his departure from the company on June 23, 2022.
According to the court document, Bed Bath & Beyond’s chief legal officer, David Kastin, acknowledged the company stopped paying Tritton in order to preserve its cash reserves. Bed Bath & Beyond has struggled in recent months to avoid bankruptcy, warning just last week that it could not rule out needing bankruptcy protection if its latest attempt to raise $300 million in the stock market fails.
In discussions between Kastin, Tritton and his legal counsel, the company “conceded Tritton was (and is) entitled to those payments and that Tritton complied with all requirements and/or conditions,” that would entitle him to his severance payments, the court complaint says.
And instead of resuming the agreed-upon payments, Tritton says the company offered in “bad faith” to buy out his severance “for a sum lower than the contractually agreed amount — if the company’s performance improves,” despite the resumption of severance payments to some employees.
Tritton says he made a final attempt to resolve the dispute by sending a March 13 letter to the company demanding the past due severance payments after the retailer announced that it had received further funding. However, the company didn’t respond, according to court documents.
In a statement to Retail Dive regarding the lawsuit, Bed Bath & Beyond said, “As is our practice, we do not comment on legal matters.”
Tritton’s attorneys didn’t immediately respond to Retail Dive’s request for further comment.
Tritton began serving as Bed Bath & Beyond’s CEO in November 2019, following his time at Target where he successfully re-envisioned its private label strategy. Under the employment contract with the company, Tritton agreed to serve as the company’s president and CEO for three years, with an automatic one-year extension unless either party terminated the agreement in writing.
Tritton received an annual base salary of $1.2 million. At the time of his departure, Tritton said in court documents that the total severance payment was based on two times the sum of his annual salary ($1.2 million) and a full target annual bonus for the 2022 fiscal year ($2.2 million) less any withholdings and deductions. The payments were due on the company’s regular payroll schedule.
Tritton’s lawsuit requests unspecified damages and attorney’s fees.
Tritton’s allegation that the company simply stopped paying him when cash ran low is yet another apparent setback for the New Jersey-based company. Bed Bath & Beyond’s troubles have accelerated in the last year, Cristina Fernández, managing director and senior research analyst with Telsey Advisory Group, told Retail Dive in an email.
“The company’s performance peaked in 2011 and weakened in the following years mostly due to increased competition and price transparency as players like Amazon became big, a failure to invest in digital/technology/supply chain as consumers moved to shopping online, and a reliance on promotions/coupons,” Fernández said.
“The weakness was exacerbated by the shift to private label under CEO Mark Tritton as the product did not resonate well with the consumer nor brought new customers to the brand. We do not feel the strategy to add private labels was wrong as many companies have success in this area, but the execution was poor.”
One reason, Fernández explained is that “Bed Bath did not properly test and develop the lines and the product was not that exciting or differentiated. Also, the company took away many national brands that consumers loved.” Fernández also said the company “made the mistake” of spending about $1 billion in share repurchases in 2019 and 2020 before completing a turnaround and before making investments in technology and supply chain.
Fernandez also described the company’s approach to raising cash as unusual but said their efforts have bought them time. “If Bed Bath were to file for bankruptcy it would need to find a buyer or get a cash infusion to restructure under Chapter 11. Given it hasn’t been able to find a buyer, there is a high chance that if they file for bankruptcy the company is liquidated.”