Sports Authority Sues Suppliers In Cagey Credit Move

Since filing for bankruptcy at the beginning of March, Sports Authority has had a rough go of things as it’s attempted to straighten out its finances. Its latest tactic, though, is sure to turn previous allies against them.

The Wall Street Journal reported that the beleaguered sporting goods retailer filed over 160 lawsuits in bankruptcy court on Tuesday (March 15), naming a wide variety of its soon-to-be former suppliers as defendants. Though Sports Authority released no official statement on the legal action, WSJ noted that Bank of America is named as a co-filer on the suits, indicating that the impending courtroom drama could revolve around who must foot the bill for the retailer’s ongoing financial troubles.

At the heart of the matter is where the money from consignment sales on Sports Authority’s unsold merchandise will go. Under normal rules, the retailer’s suppliers — like running apparel brand Asics America Corp. — would hold a clear claim over profits from sales on consigned merchandise. According to WSJ, Judge Mary Walrath, the presiding justice over Sports Authority’s initial bankruptcy hearing, instructed the company to escrow proceeds from consigned goods, a move that would have made it much less likely that BoA would be able to make back its loans to the retailer.

If anything, the decision to turn on its suppliers — however financially necessary it may have been — indicates how far Sports Authority has fallen. Retail TouchPoints explained that, not long ago, the retailer had a national brand and marketing agreements with the now-Super Bowl champion Denver Broncos. Its precipitous fall could have dozens of implications, from an indictment on a potentially overcrowded sports and lifestyle retail vertical to uncertainty over relying on revenue growth as an indicator of financial health.

Whatever the reason, there could soon be a very contentious, very public legal battle over who’s left holding the financial remnants of Sports Authority‘s demise.