Burberry is seeking to void its tailored clothing license with the bankrupt Hartmarx Corp.
According to documents filed in the Northern District of Illinois bankruptcy court, Burberry Limited, a New York-based subsidiary of Burberry Group plc, wants out of the license Hartmarx has held since 1997, citing failure to meet terms of the agreement.
The key issue is the sale of Hartmarx to a third party. The court papers, which were filed April 3, argue that in the event of a sale Burberry’s fall orders would be filled by a new owner. Since licensing agreements cannot be transferred without a licensor’s consent, Burberry said it has the right to terminate the contract now in order to line up a new manufacturer.
“Burberry needs to make arrangement for its fall product now,” the company said in the filing, adding it “should not be required to deal with a licensee not of its choosing.”
The filing also said Hartmarx breached its licensing agreement by failing to furnish statements for both yearly sales and royalty payments related to its licensed Burberry product.
Details of the licensing agreement, including the amount Hartmarx currently owes Burberry, were redacted in the court documents, but the partnership has been sizeable for Hickey Freeman, the Hartmarx-owned brand that produces Burberry clothing at its Rochester, N.Y., factory. According to financial documents filed with the court, Hickey Freeman paid Burberry almost $500,000 in the 90 days before the company filed for bankruptcy on Jan. 23.
The license between Hartmarx and Burberry is set to expire in mid-2010.
Hartmarx, which declined comment, has until April 11 to file objections. The motion is scheduled to be heard on April 14.