Toys ‘R’ Us lawsuit asks court to halt Fung arbitration proceedings

By Caroline Salls

Pittsburgh, Sept. 11 – Toys “R” Us, Inc. and Toys “R” Us Europe, LLC filed a lawsuit Tuesday that asks the U.S. Bankruptcy Court for the Eastern District of Virginia to extend the automatic stay imposed by the company’s Chapter 11 filing and grant a temporary restraining order and preliminary injunction to prohibit Fung Retailing Ltd. from prosecuting an arbitration proceeding.

The Toys “R” Us entities said the arbitration proceeding was launched by Fung in the International Chamber of Commerce against non-debtors s TRU (UK) Asia Ltd. and Toys (Labuan) Holdings Ltd.

“Fung’s actions threaten to upend the Taj debtors’ reorganization,” the lawsuit said.

Through its arbitration action, Toys “R” Us said Fung is attempting to create uncertainty about the status of an Asia joint venture, which will allegedly “drive down bids – benefiting Fung (which can then either exercise its right of first refusal or bid for the asset at a depressed price), but harming the debtors and their creditors (whose primary basis for recoveries will be the value achieved from the Asia JV sale).”

“Fung’s actions also threaten core components of the restructuring process,” the lawsuit said.

Toys ‘R’ Us is a Wayne, N.J., toy retailer. The company filed for bankruptcy on Sept. 19, 2017 under Chapter 11 case number 17-34665.

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