A U.S. Federal Maritime Commission (FMC) Administrative Law Judge has handed digital freight forwarder Flexport a significant legal victory, rejecting a $33.7 million reparations claim filed by fitness equipment manufacturer Peloton.
The ruling could have broader implications for future disputes involving demurrage and detention charges, particularly when shipments move under “store door” arrangements.
The 70-page initial decision, released Wednesday, dismissed Peloton’s allegations that Flexport violated the Shipping Act by imposing unreasonable demurrage, detention and drayage fees on more than 7,000 shipments during the severe supply chain disruptions that affected global trade between 2020 and 2023.
Flexport, which is also registered as a Non-Vessel Operating Common Carrier (NVOCC), had faced claims linked to charges accumulated during a period of intense congestion at ports.
Peloton first brought its complaint before the FMC in May 2024. The company argued that Flexport was operating under “store door” terms, meaning it had assumed responsibility for all aspects of the inland movement of Peloton’s containers.
On that basis, Peloton maintained that Flexport should have been liable for millions of dollars in demurrage and detention charges generated amid severe port congestion.
The judge rejected that interpretation.
“Peloton’s argument that an ocean common carrier is responsible for detention and demurrage on store door moves is not supported by the applicable guidance,” FMC Administrative Law Judge Mary Hervey wrote in her decision.
Hervey also pointed to the FMC’s Demurrage and Detention Final Rule, issued in 2024. According to the judge, the rule does not prohibit shippers from being assessed demurrage and detention charges on store door movements.
“Thus, it is clear that the Commission has not determined that demurrage and detention cannot be charged on store door moves, but rather may be closely scrutinized when appropriate to do so,” Hervey stated.
The decision also underscores the importance of the FMC’s “Incentive Principle,” under which demurrage and detention charges are intended to encourage freight fluidity rather than function simply as a source of revenue.
Peloton had argued that Flexport failed to follow that principle, alleging that the company applied detention and demurrage charges under its own tariff in an effort to maximize revenue.
The ALJ, however, found that the charges Flexport assessed against Peloton were “more likely than not” consistent with the incentive principle.
Hervey stressed that determining whether charges comply with that principle requires specific evidence connecting the circumstances of individual shipments to the fees assessed.
“This is why specificity as to the events resulting in the imposition of charges is necessary in order to determine whether they are consistent with the incentive principle,” Hervey wrote. “Although no particular form of proof is required, logic dictates that there must be evidence linking particular events to the imposition of charges on the dates assessed.”
The judge ultimately concluded that the record did not contain enough evidence to establish that Flexport’s tariff-based assessment of demurrage and detention was inherently unreasonable.
“In the absence of a container-by-container analysis, there is insufficient evidence in the record to show that Flexport’s assessment of [demurrage and detention] in accordance with its tariff was per se unreasonable.”
The ruling does not yet constitute a binding legal precedent. Only the full FMC or federal appeals courts can establish binding precedent. However, initial decisions issued by FMC Administrative Law Judges are frequently cited as persuasive authority in subsequent cases.
That means the Flexport-Peloton decision could nevertheless become an important reference point in future complaints involving demurrage, detention and “store door” transportation arrangements.
