NEW FACTS IN CKI, WARNACO DISPUTE

Byline: Vicki M. Young

NEW YORK — As rumors swirled about another legal assault by Calvin Klein Inc. against the Warnaco Group, new information about CKI’s claim regarding Warnaco’s alleged breaches of contract — much of it directly tied to CKI’s unsuccessful attempt to sell the company — has come to light.
What, if anything, did Calvin tell Tommy about Linda? As reported, both Warnaco and Tommy Hilfiger made bids for CKI.
That’s a question that could very well be answered during the opening days of the jury trial — which begins Jan. 22 — in the trademark infringement lawsuit filed in Manhattan federal court last year by Calvin Klein Inc. against the Warnaco Group. The claims center on the jeanswear license that Warnaco holds.
The answer could prove instrumental in Warnaco’s defense.
Meanwhile, CKI sources told WWD that it would be filing another lawsuit against Warnaco, this time alleging that a breach in the financial covenant in the jeanswear license is grounds for termination of the license. Related paperwork was being finalized Wednesday evening and the suit could be filed as early as today, the source said.
An attorney connected to the case said CKI attempted to introduce the claim in a procedural hearing Tuesday, but that Judge Jed Rakoff, who is overseeing the trademark infringement trial, refused to allow the claim to be included in the Jan. 22 legal debate.
Stanley Silverstein, general counsel for Warnaco, said Wednesday, “As far as we know, CKI has not filed another lawsuit. If they do, we will defend it with characteristic rigor.”
As reported, CKI began shopping the company in October 1999. CKI hired Lazard Freres & Co. as its financial advisor and Wachtell, Lipton, Rosen & Katz as legal counsel.
In a court document filed by Judge Rakoff last month, the outside advisors began drafting various offering memoranda and other disclosure documents that might be given to prospective purchasers. One question that came up around December 1999 concerned what should CKI disclose about its disputes with Warnaco, and in what form. The judge noted that by January 2000, CKI had already sought Wachtell’s advice on whether or not to bring a lawsuit against Warnaco.
Judge Rakoff noted that in the course of discovery — the evidence gathering procedure that the parties have been engaged in since the May 2000 filing of the CKI lawsuit — Warnaco received copies of the disclosure documents that CKI furnished to Hilfiger. In the documentation, CKI represented that “no material contract to which CKI was a party ‘has been breached’ and that ‘no material infringement actions [are] being taken or contemplated to be taken[for] infringement of the [CKI trademarks.”‘ Judge Rakoff noted that the “representations [are] arguably inconsistent with assertions made by plaintiffs in the instant lawsuit. Other discovery, however, suggested that some of the disputes between CKI and Warnaco may have been orally disclosed to Hilfiger during discussions.”
Judge Rakoff allowed Warnaco to limited discovery to determine what had been represented, orally or in writing, to Hilfiger or to other prospective purchasers, but not determine the accuracy of the representations made. The judge noted that Warnaco plans on introducing written representations made by CKI to Hilfiger as admissions of CKI that are inconsistent with its claims of trademark infringement.
As reported, a month after CKI filed its lawsuit against Warnaco on May 30, 2000, Warnaco shot back with a series of counterclaims, including defamation charges against the designer personally. The issues that will go to trial include Warnaco’s claims of trade libel and defamation against CKI and Calvin Klein personally, and CKI’s trademark infringement and breach of contract claims against Warnaco. CKI is seeking a recision of the Jeanswear license, and Warnaco, in its counterclaims, is seeking monetary damages.
To be sure, more turbulence and even a few bombshells could be expected over the course of the trial, which some legal experts said could run for a minimum of three weeks.

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