Why a $33.7 Million Demurrage Claim Failed: The Peloton Decision and How U.S. Detention and Demurrage Actually Works

On September 9, a Federal Maritime Commission administrative law judge rejected Peloton Interactive's claim against Flexport in full. The company had sought $33.7 million in detention, demurrage, and storage charges accumulated during the pandemic-era supply chain disruption. It recovered nothing.

The breakdown of what was claimed is instructive. Roughly $13.8 million in demurrage, $16.2 million in equipment detention, and $3.7 million in yard and warehouse storage, across thousands of containers moved between 2020 and 2022.

The reason the claim failed has almost nothing to do with whether the charges were fair, and everything to do with how the case was built. For any shipper, importer, or forwarder carrying detention and demurrage exposure, that distinction is the entire lesson.

First, a Clarification Worth Making

Readers of our earlier pieces on demurrage and laytime should be clear that this is a different animal.

Charter party demurrage arises under a contract between a shipowner and a charterer, is governed by the charter party and English law in most cases, and is resolved in London arbitration. The dispute is about laytime allowances, day types, exceptions, and whether a Notice of Readiness was valid.

U.S. detention and demurrage in the container trades is a creature of the Shipping Act. It arises between ocean common carriers, marine terminal operators, ocean transportation intermediaries, and the cargo interests they bill. It is regulated by the Federal Maritime Commission, subject to a federal billing rule, and litigated before FMC administrative law judges.

Different parties, different law, different forum, different evidence. A practitioner comfortable with one is not automatically equipped for the other, and the strategic mistakes in this case would not have arisen in a charter party dispute.

What Peloton Argued

The complaint was filed in May 2024. The core theory was that approximately $26 million of the charges resulted from Flexport's own actions rather than from any fault on Peloton's part.

The causes Peloton pointed to will be familiar to anyone who moved containers through U.S. ports during that period. Chassis shortages. Inland carrier delays. Port congestion. An absence of available appointments.

The underlying argument is intuitive and has real force. Detention and demurrage exist to incentivize the prompt movement of cargo and the return of equipment. Where cargo cannot be moved because there is no chassis, no appointment, and no truck, the charge is not incentivizing anything. It is simply a penalty for conditions the cargo interest did not create and could not fix.

That is the incentive principle, and the FMC has recognized it. Peloton's difficulty was how it tried to apply it.

Why the Judge Said No

Administrative Law Judge Mary Apostolakos Hervey rejected the argument as a blanket test.

Two findings did the work.

First, the decision noted that the Commission has never ruled that detention and demurrage cannot be charged on store-door movements. Peloton's position implied that where a forwarder controls the inland leg, it cannot pass charges arising from that leg to the cargo interest. There is no such rule.

Second, and more consequentially, the judge held that the key issue is what caused the delay for each individual container and whether the resulting charge was reasonable in that instance.

That is a container-level standard, not a program-level one. It means a claimant must establish, for each box, what happened, why the delay occurred, whether the billing party's conduct was unreasonable, and how the charge relates to that conduct.

Peloton did not do that. The judge found it had failed to provide the container-by-container and day-by-day evidence necessary to tie individual charges to unreasonable conduct. Its expert analysis relied in part on consolidated invoices covering multiple shipments, which did not contain enough detail to establish what caused each delay.

A claim built on thousands of containers was presented in aggregate and decided at the level of the individual container. That mismatch is why $33.7 million produced zero.

The Second Claim Failed the Same Way

Peloton also alleged that Flexport issued deficient detention and demurrage invoices after the Ocean Shipping Reform Act of 2022 took effect.

This was the stronger argument on paper, for reasons explained below, and it failed for a procedural reason. The judge rejected it because Peloton did not sufficiently identify the invoices or explain how they violated the law.

That is worth pausing on. The billing rule is genuinely powerful, and the claim under it was dismissed not on the merits but because the claimant did not point to specific invoices and specific defects.

The Framework You Are Actually Operating In

Understanding what Peloton might have done differently requires understanding the tools available.

Shipping Act Prohibitions: The provision most commonly invoked in detention and demurrage disputes is 46 U.S.C. 41102(c), which prohibits unreasonable practices relating to receiving, handling, storing, or delivering property. Related claims arise under 46 U.S.C. 41104(a)(2) for conduct not in accordance with service contracts, 41104(a)(3) for retaliation, and 41104(a)(10) for unreasonable refusal to deal or negotiate.

The Incentive Principle: The FMC's interpretive guidance establishes that detention and demurrage charges must serve their purpose of incentivizing cargo movement and equipment return. Where cargo is genuinely unavailable for retrieval, a charge assessed anyway invites scrutiny. The principle is real. What Peloton demonstrated is that it operates as a lens for evaluating individual charges rather than as a rule that disposes of thousands at once.

The Billing Rule at 46 C.F.R. Part 541: This is the provision most shippers and forwarders under-use, and it changed the landscape.

The Provision That Decides Claims

The FMC's detention and demurrage billing rule imposes two requirements that carry an unusual consequence.

(1) A demurrage or detention invoice must contain accurate and sufficient information, and it must be issued within 30 days.

(2) Failure to comply with either provision eliminates any obligation of the billed party to pay the applicable charge.

That is not a reduction, a defense, or a mitigating factor. Non-compliance extinguishes the obligation.

For a cargo interest or forwarder facing a large volume of charges, this is the most efficient avenue available, because it turns on the face of the invoice rather than on proving what happened to each container. An invoice missing required information, or issued outside the window, is unenforceable regardless of whether the underlying delay was anyone's fault.

The practical requirement is that you must identify the specific invoices and explain the specific defect. That is exactly where Peloton's claim under this rule failed.

What the D.C. Circuit Changed

One part of the rule is no longer in force and anyone working in this area should know which.

In World Shipping Council v. FMC, decided September 23, 2025, the D.C. Circuit struck down section 541.4, which had limited the parties to whom detention and demurrage invoices could be issued.

The court found the FMC's approach internally inconsistent. The rule had excluded motor carriers from the parties who could be billed, even where a motor carrier had a contractual relationship with the billing party, which did not sit with the Commission's own stated objective of confining billing to parties in a contractual relationship. The court also noted inconsistency in the rule's inclusion of consignees who may not have contracted with the billing party at all.

The practical effect is that truckers can once again receive detention and demurrage invoices, and the question of who may properly be billed is unsettled pending any future rulemaking.

The FMC has been clear that everything else survives. All provisions of 46 C.F.R. Part 541 except section 541.4 remain fully applicable, and common carriers and marine terminal operators must continue to follow them or risk being found in violation of the Shipping Act. The accurate and sufficient information requirement and the 30-day issuance deadline are both intact, along with the consequence attached to breaching them.

How to Actually Build a Challenge

The Peloton decision reads as a roadmap in reverse. Six practical points follow from it.

Start with the invoices, not the theory. The billing rule gives you a route that does not require proving causation. Pull the invoices, check them against the content requirements and the 30-day deadline, and identify each defect specifically. A schedule of non-compliant invoices with the defect named for each is a stronger opening than any narrative about conditions at the port.

Build the record container by container. If you are challenging charges on causation grounds, the evidence has to operate at that level. What the container was, where it sat, why it sat there, what appointments were sought and refused, what chassis were available, and what the billing party did or failed to do. That is a substantial documentary exercise and there is no shortcut through it.

Do not rely on consolidated invoices. The judge specifically identified expert analysis resting on consolidated invoices covering multiple shipments as insufficient. Aggregated billing is the norm in this trade, which means the work of disaggregating it falls on the claimant.

Capture the evidence contemporaneously. Appointment requests and refusals, chassis availability, terminal gate records, trucker communications, and carrier correspondence are the material that establishes causation. Reconstructing them two years later from consolidated invoices does not work, which is the practical lesson of this case.

Dispute in real time. Waiting until charges accumulate into a nine figure exposure and then litigating the whole program is precisely the approach that failed here. Charges challenged as they arrive produce a contemporaneous record and frequently resolve commercially.

Know which forum you are in. FMC complaints are governed by Commission procedure. There is also an informal small claims process for smaller disputes, and the Commission's Office of Consumer Affairs and Dispute Resolution Services handles complaints without formal litigation. A $33.7 million claim was always going to be a formal proceeding, but not every dispute is.

Where This Sits Now

The decision is an initial decision rather than a final one. Either party may file exceptions within 22 days. If the Commission does not review the ruling, the initial decision becomes the decision of the Commission.

It is also one of a growing number of FMC decisions arising from the 2020 to 2022 congestion period, and the pattern emerging from them is consistent. The Commission and its judges are willing to scrutinize detention and demurrage practices, and they require the claimant to do the evidentiary work.

The Bottom Line

Peloton had a theory that many shippers share and that has genuine merit. Charges accrued during a period when cargo could not be moved, for reasons the cargo interest did not cause, do not obviously serve the purpose detention and demurrage exist for.

What the decision establishes is that the theory does not carry a claim. The Commission's judges assess these charges container by container and day by day, and a claimant who presents the case in aggregate has not met the standard, however large the aggregate is.

The billing rule offers the more efficient route, because non-compliant invoices are unenforceable regardless of cause. Using it requires identifying the invoices and the defects with precision, which is a documentation exercise rather than an advocacy one.

Either way, the work happens in the records. A detention and demurrage position is built when the charges arrive, not when the claim is filed.