NEW YORK — A federal jury ruled that Lands’ End must pay nearly $38 million to bankrupt Hagale Industries for failing to disclose plans to move work away from the vendor.
Included in the verdict were $4.5 million in compensatory damages and almost $33.5 million in punitive damages.
Hagale is based in Springfield, Mo., where it filed the lawsuit. The nine-member jury agreed with Hagale’s contention that the direct merchant, which was acquired by Sears, Roebuck & Co. this summer, engaged in fraudulent conduct for failing to disclose fully its plans to move business from the vendor to overseas manufacturers.
At its high point, 72 percent of Hagale’s business came from Dodgeville, Wis.-based Lands’ End. The jury also ruled against Lands’ End in a countersuit against Hagale.
“We are taking a look at the jury’s verdict and then we will evaluate our options about how to proceed,” said a Lands’ End spokeswoman. “Clearly, we are very disappointed, and remain steadfast in our conviction to evaluate this further.”
Hagale’s attorney, Steve Harrell, said the jury also determined that Lands’ End acted with “outrageous and in reckless indifference” toward the plaintiff.
“Lands’ End didn’t disclose that it was planning to move one part of its business overseas in six months and another part of its business overseas in about a year,” said Harrell. “As a result, Hagale could not plan accordingly and that is what caused the bankruptcy.”
Once Lands’ End severed its 13-year relationship with Hagale in 1999, the company had to begin closing nine of its 11 facilities that employed more than 1,700 people. In January 2001, Hagale filed for Chapter 11 bankruptcy protection and has since ceased business with more than $22 million in debt.
The legal claim against Lands’ End is the company’s single remaining asset and its Lands’ End judgement will go to U.S. bankruptcy court, where it will be used to pay legal fees and debts.
This story first appeared in the December 23, 2002 issue of WWD. Subscribe Today.