A federal judge ordered Burlington Coat Factory Warehouse Corp. to pay Fendi $4.7 million for violating a decades-old injunction barring the off-pricer from selling the luxury brand’s trademarked goods without permission.
This story first appeared in the February 22, 2010 issue of WWD. Subscribe Today.
The retailer agreed to the prohibition in 1987 to settle charges that it sold fake Fendi products. Fendi North America Inc., the brand’s U.S. unit, filed a new infringement lawsuit in 2006 accusing Burlington Coat of continuing to sell counterfeit handbags.
U.S. District Court Judge Leonard Sand in Manhattan on Feb. 8 granted Fendi’s motion for summary judgment in the latest case. Sand adopted a December report and recommendation from U.S. Magistrate Judge Michael Dolinger that required the off-pricer to pay $4.7 million to Fendi for being found in contempt of the injunction. The sum includes $2.5 million in profits, $1.6 million in interest and more than $540,000 in attorneys’ fees.
A Burlington Coat representative said Friday the company will appeal the decision and declined further comment. Bain Capital Partners acquired the retailer and took it private in 2006 for $2.06 billion.
Fendi chief executive officer Michael Burke told WWD he hoped the penalty would be a deterrent.
“Retailers have a duty to society and their customers to do a certain amount of due diligence,” Burke said. “Clearly [Burlington Coat] did not.”
The brand’s lead counsel, Richard Mattiaccio, said the penalty “gives teeth” to the previous injunction.
In its 2006 complaint, Fendi alleged Burlington Coat had sold the counterfeits since 2002 and that it had sent the retailer a cease and desist letter in 2004. Burlington Coat said the goods were real and its suppliers had vouched for their authenticity. According to Sand’s Feb. 8 opinion, a majority of the product in question was counterfeit.
Sand gave Burlington Coat 60 days to present a plan detailing its intent to abide by the original injunction and ordered the retailer to file compliance reports with the court every six months for the next five years. The judge wrote that Burlington Coat’s inability to adhere to the injunction over the 23 years between cases prompted the guidelines.
“It was very important to us that the burden not be put on the intellectual property owner,” Burke said of the judge’s self-policing requirements.
The case has the potential to prove even costlier to Burlington Coat. Sand returned the matter to the magistrate judge, who will separately determine the damages for acts of infringement to which the plaintiff is entitled.