Several suppliers suing Toys ‘R’ Us Canada for unpaid merchandise: court docs

TORONTO – Toys “R” Us Canada is being sued over alleged unpaid invoices by several suppliers, including the maker of Paw Patrol and Gabby’s Dollhouse toys.

Court records show six toy suppliers quietly filed lawsuits against the retailer last year in hopes of recouping cash for alleged unpaid merchandise they sent the chain.

Among the biggest names going after Toys “R” Us Canada is Spin Master Ltd., the Canadian company also behind the Melissa & Doug, Hatchimals, Ms. Rachel and Bakugan toys.

Other plaintiffs include U.S. bike makers Huffy Corp. and Dynacraft BSC, as well as Baby Einstein and Gerber Childrenswear distributor Kidcentral Supply.

The lawsuits, which collectively seek more than $4 million from the retailer, are the latest sign of financial trouble at Toys “R” Us Canada. The company has recently been closing many of its stores and is also facing at least $31.3 million in lawsuits from landlords over alleged unpaid rent.

The retailer, its lawyers and those representing the company’s CEO did not immediately respond to a request for comment about the lawsuits Thursday. 

The allegations Toys “R” Us Canada is facing have not yet been tested in court. The company has also not yet filed a statement of defence in some of the cases.

In the cases where the retailer has responded with court filings, Toys “R” Us Canada has largely denied the allegations suppliers have levied and taken issue with the sums they’re demanding.

In one case the retailer is facing from Diana Dolls Fashion Inc. — a Stoney Creek, Ont., company that does business as Kushies Baby and has been a Toys “R” Us Canada supplier for 25 years — the chain calls the $81,737.11 being requested “inflated, excessive and not recoverable.”

In another lawsuit from Incredible Novelties Inc., a Toronto toy distributor, filed against Toys “R” Us Canada, the retailer said the $208,352.27 requested for unpaid merchandise is “inaccurate and greatly exaggerated.”

Toys “R” Us Canada argued it shouldn’t have to pay the fee because its contract with Incredible Novelties allegedly allowed the retailer to reduce the amount it owed for merchandise, if it could not sell the products over specific time periods.

Because Toys “R” Us Canada “suffered financial losses in the form of reduced sales revenue and lost profits” when Incredible Novelties stopped sending it products, it asked for the case to be dismissed with costs.

It went even further when battling Spin Master, which did not immediately respond to a request for comment.

At the centre of that lawsuit is an agreement where the retailer would order shipments of product that would be supplied to Everest by Spin Master. Invoices would then be issued by Spin Master to Everest but Toys “R” Us Canada was liable to pay all invoiced amounts.

Everest Toys is a Canadian toy distributor owned by the same family behind Putman Investments. 

Putman Investments owns Toys “R” Us Canada, HMV, Sunrise Records, Northern Reflections, Ricki’s and Cleo and is run by Doug Putman, the son of Everest Toys founder Bob Putman. Everest Toys was forced into receivership last summer by TD Bank which accused it of “deteriorating financial circumstances.”

Spin Master’s statement of claim said Toys “R” Us Canada failed to pay for US$3,402,703.05 in product.

Toys “R” Us Canada argued some of the toys it ordered from Spin Master were “unsaleable” and are available to be returned so it’s asking for a refund of more than $5.6 million.

While most of the cases have yet to be heard by a court, Toys “R” Us Canada has already lost at least one by default.

In December, it was ordered to pay the Canadian equivalent of US$267,193.00 and another $1,250.00 for the costs related to that lawsuit. The fees carry a four per cent interest rate.

The order was a default judgment, which happens when a defendant fails to respond to a claim within a specified time limit. 

Grant Packard, an associate professor of marketing at the Schulich School of Business at York University, said it’s not unusual for retailers to miss a payment from time to time as they handle business hiccups.

But when it happens repeatedly, “you start to worry, which I am sure started to happen here,” he said of Toys “R” Us Canada.

Companies with mounting unpaid bills usually do everything they can to resolve the issue, so it doesn’t result in legal action, he said.

Even when they are able to avoid a lawsuit, he warned there are often still consequences.

“You’re going to pay some late fees and when you renegotiate for your next big buy, you’re going to get less favourable terms,” he said.

“That’s going to make it harder for Toys ‘R’ Us to be profitable because their margins are going to be cut a little bit, or they’re going to have to pay more quickly, or they’re going to have to pay before they even get the product.”

This report by The Canadian Press was first published Jan. 22, 2025.

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