Oaktree Capital Alleges BJ's Breach of Tariff Refund Agreement

Tariff Refund Claims Surge Amid Growing Optimism for Refunds

Oaktree Capital Management LP has sued BJ's Wholesale Club Inc. for allegedly backing out of a deal to sell its rights to around $29 million in tariff refunds for 70 cents on the dollar. The suit, filed in New York on Monday, claims that BJ's walked away from a binding agreement with Oaktree because the market value of its tariff claim had increased above their agreed sale price.

The dispute highlights the surging value of tariff refund claims amid growing optimism that importers will actually get some money back. Many of President Donald Trump's global trade levies were struck down by the US Supreme Court in February. Shortly after the ruling, refund claims were trading above 40 cents on the dollar, up from 10-to-20 cents at the beginning of the year.

According to the suit, Oaktree had a "fully negotiated" final agreement on March 13 to pay BJ's $20 million for its tariff refund claim. The agreement was contingent on BJ's using "commercially reasonable efforts to execute and deliver" the agreement back to Oaktree. However, BJ's allegedly changed its mind after an in-house lawyer advised Oaktree on April 14 that it was "all set with internal approvals on our side."

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But the next day, the same lawyer sent a contradictory email stating that there was an issue with getting final approval. A day later, on April 15, the lawyer informed Oaktree that BJ's was exercising a Walk Away provision in the contract. Oaktree claims that this was never intended to be "a one-way cancellation option."

Tariff Refund Claim Trading Values

The scramble for refunds started immediately after the Supreme Court ruling. The 6-3 decision did not address the question of refunds, leaving it to the lower courts to hash out. Last week, Customs and Border Protection launched an online portal for importers to seek refunds of $166 billion in tariffs that Trump implemented under the International Emergency Economic Powers Act, or IEEPA. The Supreme Court found that the president exceeded his powers under the act.

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Refunds could start rolling in for thousands of importers in the next few months.