An international Levi Strauss subsidiary wants claims by a reseller that it’s due $5 million for a breached distribution agreement dealt with privately.
Singapore-based Levi Strauss Asia-Pacific Division on Tuesday urged a California federal court to send a lawsuit by Division Six Sports Inc., a wholesaler of off-price apparel, footwear and sporting goods, into arbitration, a private form of dispute resolution that takes place outside of the courts.
Division Six claims the Levi subsidiary interfered with its business and economic prospects by discontinuing its use of the company for the distribution of “second quality product,” namely unsold or overstocked Levi Strauss inventory and products with manufacturing defects, to about two dozen countries in the Asia-Pacific region.
The wholesaler agreed to buy the goods outright at a discounted rate directly from Levi’s producers, and Levi agreed to take a service fee per item purchased, set between $0.25 and $2.00, to be collected quarterly.
That agreement, however, allegedly holds that any dispute revolving around the contract be resolved through arbitration.
Indeed, the agreement at issue says “arbitration shall be the sole and exclusive remedy available” for any contract-related dispute, according to court documents.
“The [agreement] expansively submits disputes related to the agreement — without relevant exception — to arbitration,” Levi Strauss Asia said in a court filing. “Proceeding with this lawsuit would permit DSS to evade its obligation to arbitrate, require duplicative proceedings and produce a considerable risk of fundamentally inconsistent outcomes.”
Considering the language of the agreement, the Levi subsidiary asked the court to order the dispute into arbitration and to either dismiss or pause the litigation until a decision is made by an arbitrator — either on the merits of the action or the arbitrability of Division Six’s claims.
Division Six is seeking actual and punitive damages no less than $5 million for Levi’s alleged breach.
A Levi spokeswoman declined to comment, citing a company policy on ongoing legal matters. Counsel for Division Six could not be reached.
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