By  on January 9, 2012

LOS ANGELES — Longtime Dickies brand licensee Apparel Ltd. has sued its licensor, claiming that Williamson-Dickie Manufacturing Co. is undercutting its sales while at the same time expecting royalty payments.

In a lawsuit originally filed Dec. 29 in the U.S. District Court in Dallas, Apparel Ltd., which has had an exclusive contract to make junior clothing sold under the Dickies brand for the past 10 years, is charging breach of contract, among other counts.

Apparel Ltd. said that after July 2010, it noticed Williamson-Dickie was selling product that wasn’t made by Apparel Ltd. but allegedly looked identical to the garments designed by the licensee. The company claimed that, because Williamson-Dickie was directly competing with it, Apparel Ltd. was unable to sell enough product to meet its minimum royalty payments. It also claimed that Williamson-Dickie is damaging its relationships with retailers such as Wal-Mart, Kmart and J.C. Penney.

Since discovering that Williamson-Dickie manufactured and sold product that competed with its own, Apparel Ltd. said it paid about $1.4 million in excess royalties, based on the difference between the applicable percentage of net shipments of licensed products and the agreed minimum royalty. Apparel Ltd. also expected to pay excess royalties to Williamson-Dickie this year.

According to the 2007 licensing agreement, which expired Dec. 31, Apparel Ltd. agreed to pay minimum royalties of $3.5 million on sales of at least $50 million in 2010. Last year, the minimum royalty payment was increased to about $3.6 million on sales of $52 million.

Robert L. Esensten, Apparel Ltd.’s lawyer at Wasserman, Comden, Casselman & Esensten LLP in Tarzana, Calif., said it’s too early to specify how much Apparel Ltd. is requesting in damages and compensation from Williamson-Dickie. Apparel Ltd. is currently operating under a new three-year licensing agreement with Williamson-Dickie.

“We’re doing this to mitigate our damages and preserve our relationship with the big box stores,” Esensten said. “Unless [Williamson-Dickie] changes their marketing practices and the way they’re doing business, we’re going to be damaged forever, especially if they market their product on the same rack with us in the same stores.”

Williamson-Dickie, based in Fort Worth, didn’t respond to a request for comment.

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