Macy’s must swallow a bitter pill, following a long contract and chargeback dispute against a vendor.


A U.S. District Court judge has ordered Macy’s to pay $2.4 million to Sanidown Inc., a former bedding supplier, mostly for wrongful repudiation of a contract. The sum includes $125,000 in chargebacks that Macy’s failed to justify.


The decision in late December by U.S. District Judge Laura Taylor Swain resolves litigation that commenced in 2006 and culminated in a trial in 2009. Usually, disputes of this nature are settled quietly out of court or not contested at all since vendors don’t want to jeopardize their relationships with retailers. But this case arose after Macy’s and Sanidown ended their business together.


“The crucial thing about this decision is that it shows that a vendor can come after the retailer after the relationship has ended,” said Jonathon Warner, the attorney from the law firm Warner & Scheuerman, representing Sanidown. “The claim against a chargeback is not lost, this court said. You have the right for four years to pursue those claims.”


According to court papers, Sanidown, the defendant in the case, for about 15 years supplied down- and feather-filled products, including pillows, comforters and feather beds. Things soured in 2006 when Macy’s, the plaintiff, found spring season product with the wrong contents — duck feathers instead of goose feathers — and therefore was improperly labeled. It sent the products back to Sanidown and sued the supplier for damages from lost sales and profits. Macy’s also canceled the fall contract.


However, the verdict was not a complete victory for Sanidown. The supplier claimed close to $3 million in chargebacks from January 2000 to October 2006 were without justification, but the judge ruled Sanidown failed to substantiate most of its assertion, with the exception of the $125,000 that was rewarded.


Also, the court ruled that Macy’s was entitled to recover $1.7 million related to the spring goods. However, the court also ruled that Sanidown was entitled to $4.1 million from the wrongful cancellation of the fall 2006 contract, including interest that would have accrued over time, which nets out at about $2.4 million for Sanidown.


“We are pleased by the court’s ruling in favor of damages to Macy’s related to merchandise returned to Sanidown in the spring 2006 season, when testing showed that the content of Sanidown’s products available in our stores and online were not as labeled,” said Macy’s corporate spokesman Jim Sluzewski. “We are, however, disappointed by the court’s ruling in favor of Sanidown related to Macy’s decision to cancel orders for fall 2006. Customers place their trust in the products we sell when they make a purchase at Macy’s. We remain firm in our resolve to require that all vendors comply fully with requirements and labeling of the products they supply to Macy’s. On behalf of our customers, we will take quick and definitive action with a vendor when we have reason to believe the product being supplied to us is inferior, defective or incorrectly labeled.”

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