Russell Simmons has sued Li & Fung USA’s The Millwork Trading Co. unit for more than $55 million, alleging fraud and breach of contract over its marketing of the Russell Simmons ArgyleCulture brand licensed in tandem with his American Classics label.
In court papers filed Thursday in New York State Supreme Court, the hip-hop mogul, who co-founded Def Jam and created clothing line Phat Farm, said that in 2007 Li & Fung USA, a division of the Hong Kong-based apparel sourcing firm now known as LF USA, approached him about obtaining the exclusive license for American Classics and expressed what he termed “a false enthusiasm” for ArgyleCulture, a brand Simmons had intended to develop along with American Classics.
The suit alleges that LF in June terminated its agreements with Simmons improperly through an e-mail exchange between Simmons and Rick Darling, president of LF USA, and contends the license remains in force. Quoting the licensing agreement, the plaintiff noted that it would be due a termination fee of $2.3 million, less any royalty payments, in the event of an early voiding of the agreement. LF USA failed to achieve the minimum net sales called for in the agreement in its first year, ended at the conclusion of 2009 and, according to forecasts, was on track to miss second-year minimums as well, court papers said.
The particulars include details about LF’s alleged frequent lateness in shipping ArgyleCulture products to Macy’s, “Argyle’s largest and primary customer and a very [important] partner in the Simmons fashion empire.”
Simmons seeks compensatory and punitive damages in excess of $55 million. LF USA declined to comment on the lawsuit.
The licensee was characterized in the suit as “basically starving the ArgyleCulture brand and Macy’s business. It was not until Wal-Mart, which was the sole retail outlet for American Classics, told L&F how important the Russell Simmons ‘fashion halo’ was to all of their business that L&F began paying attention to the ArgyleCulture and Macy’s business.”
Simmons said he came to terms on both licensing agreements provided that LF USA “use its best efforts to manufacture, sell and promote American Classics and ArgyleCulture licensed products in the U.S.”
The suit alleged that L&F was “only interested in the more lucrative American Classics license” and led Simmons to believe that it would “develop, support and grow the ArgyleCulture brand,” which the sourcing company “treated” as the “poor cousin of American Classics.”
Drawing on Simmons’ success with the Phat Farm label, the suit said L&F “nearly killed the brand,” and alleged that the firm’s “recently stated intention to stop performing” under its trademark agreements “well before the expiration of their initial terms,” caused the brands to lose millions of dollars in profits.
“After two years of repeated misrepresentations, failed execution and lack of development and support, it is blatantly clear that Li & Fung USA never intended to perform its contractual obligations under both ArgyleCulture and American Classics trademarks,” Simmons said. “Therefore I have taken this action to protect my partnerships with retailers and recover millions in damages on behalf of my brands and to protect my name and reputation in the industry.”
The licenses were set to expire at the end of 2011.