NEW YORK — Jones Apparel Group is facing accusations of shirking royalty payments related to its use of the Gloria Vanderbilt trademarks.
Netherby Ltd., a British company that owns the global rights to Gloria Vanderbilt, filed a complaint against Jones in a Manhattan federal court on Sept. 1, accusing the apparel and footwear giant of “artificially diverting the flow of revenues…in an effort to circumvent the royalty payments due.” In total, the complaint sought redress on six counts, including breach of contract, failure to provide accurate quarterly reports and failure to provide information on licenses.
Jones did not return calls seeking comment on the matter.
Netherby’s royalty claim hinges on a 1988 acquisition agreement, in which Netherby granted Gitano Worldwide, which was acquired by Jones in 2002, the Vanderbilt rights in the United States, Canada, Brazil, Australia and New Zealand. Based on the 1988 agreement, Jones is obligated to pay royalties based on Vanderbilt sales in those countries.
According to the suit, Netherby recognized a problem more than two years ago, when its accountant discovered that HBC/Zellers Inc., which licenses the Vanderbilt trademark from Jones for use in Canada, halved its royalty percentage to Jones to 0.625 percent from 1.25 percent. Repeated requests for an explanation for the royalty reduction garnered no response from Jones, said Netherby.
More recently, in June, Netherby discovered Zellers wasn’t paying any royalties to Jones on products such as sunglasses and watches bearing the Vanderbilt trademark.
“The royalty was being paid by certain vendors Jones apparently licensed to manufacture and supply these goods,” said the suit. “This arrangement, again, appears to have been cleverly designed by Jones to camouflage a royalty payment as something else, so as to avoid paying to Netherby a percentage of the royalty received,” the suit charged.
The lawsuit said Netherby has repeatedly had problems collecting royalty payments since the 1988 agreement was entered into with Gitano, which was founded and run by members of the Dabah family.
Netherby characterized its relationship with the Dabahs as “strained” in the suit, saying it was repeatedly forced to pursue legal action to obtain payments. The complaint further said since 1992 the company has “been forced to bring at least seven actions against the buyer, all of which resulted in a substantial recovery.” The original buyer was Gitano, which subsequently was bought by Jones.
This story first appeared in the September 8, 2004 issue of WWD. Subscribe Today.
After resigning from Gitano in 1993, Isaac Dabah was hired by Jones in December 2003 as group chief executive officer of the company’s Polo Jeans Company, Gloria Vanderbilt and l.e.i. divisions.
Netherby is seeking access to licensing information and an unspecified amount in compensatory damages.
— Ross Tucker