JOE BOXER IN TROUBLE OVER VAN MAR SUIT

Byline: Vicki M. Young

NEW YORK — Joe Boxer Corp. is facing a court action that threatens to do more than get its shorts in an uproar.
Its former intimate apparel licensee, Van Mar Inc., last month obtained a $3.15 million judgment against Boxer, but the real issue may center on whether Boxer is able to pay.
Van Mar obtained an arbitration award in October 2000 against Boxer in the amount of $3,155,746, which includes damages for breach of the licensing agreement, attorneys’ fees and costs, and interest. Since Boxer didn’t pay the amount owed under the award, Van Mar sought satisfaction in a California state court in San Francisco by having the award confirmed and a judgment entered against Boxer on Dec. 18.
Not unlike the well-chronicled Calvin Klein-Warnaco dispute, which goes to trial here later this month, the ruling against Boxer dramatizes some of the less-publicized practical considerations that enter into licensors’ relationships with their licensees. The Boxer matter addressed circumstances under which a licensor could be deemed unfairly competing with its own licensee.
But the fine points of licensing appear to be a secondary issue for Boxer founder Nick Graham and his associates, which include W. John Short who, as reported, was recently named president, chief executive and chief operating officer of the San Francisco-based company.
According to Jed Schlacter of Schlacter & Associates, Van Mar’s counsel: “Joe Boxer has indicated to us that it doesn’t have the funds to pay the full judgment at the moment, and if forced to pay, it may have to file for bankruptcy.”
Court papers submitted by Van Mar in November to have a judgment entered on the award said: “There is a very real threat that respondent Joe Boxer Corporation will file bankruptcy in the near future.”
Neither Graham, also chairman of the San Francisco-based company best known for its imprinted boxers and clever promotions, nor Short could be reached for comment. A spokeswoman for the company said they would be available early this week.
On Dec. 22, following the entry of judgment, the San Francisco state court issued an order requiring Boxer to turn over to the San Francisco County Sheriff’s Office various documentation: stock certificates of Boxer Holdings Inc., a wholly owned subsidiary of Joe Boxer Corp.; stock certificates of Hoser Imports Inc., a wholly owned subsidiary of Joe Boxer Corp.; all tax refund proceeds from the Internal Revenue Service and state taxing authorities, and evidence of debt owed by Graham to Joe Boxer Corp. in the amount of $220,000.
In addition to the Dec. 22 order, Boxer also was notified that it has a Jan.16 date with the San Francisco Superior Court in connection to testimony regarding its financial condition and ability to pay the judgment. As part of the discovery proceeding, Boxer has been asked to produce other documents including tax returns for the previous two years, bank statements and canceled checks for the past 90 days, all license agreements in which Boxer is licensor and documents pertaining to debt obligations owed to Boxer.
As reported, Boxer has indicated that it generates annual sales of $100 million. The company specializes in underwear for men, women and children. However, market sources told WWD that the company has been dogged by questions about its financial health over the last several months. One source pegged Boxer’s volume at closer to $60 million. Even at that volume level, court papers suggest that Boxer would be unable to pay the $3.15 million Van Mar judgment.
According to the arbitration award by Professor J. Lani Bader of the Golden Gate University Law School, Van Mar and Boxer entered into a license agreement that provided for an initial term through Dec. 31, 1997 and a one-year extension option through Dec. 31, 1998. During the final year of the contract — throughout 1998 — both parties claimed that the other breached the terms of the agreement.
In the award and determination of liability, Bader wrote: “The minimum sales Van Mar was obligated to make ranged from $750,000 in 1996, the initial year, to $2,000,000 in 1997, the last year. Van Mar’s actual sales ranged from $2,381,000 in 1996 to $11,049,545 in 1997. During the [extension year], however, Van Mar’s sales precipitously declined to $5,011,175.”
The crux of the dispute centered on whether Boxer’s creation of a new line of Boxer branded apparel to replace the line manufactured by Van Mar was an interference by Boxer of Van Mar’s exclusive rights under the licensing agreement. Boxer started the line in preparation for the expiration of the licensing agreement, which was set to end on Jan. 1, 1999.
After 11 days of hearings in San Francisco starting on March 20, 2000 and review of more than 250 documents, the arbitrator determined that Boxer’s actions in soliciting orders and taking orders for product delivery in 1999 was the equivalent of selling product that interfered with the exclusive rights given to Van Mar.
Graham, who began his career in the apparel industry making men’s novelty ties before focusing on men’s underwear, founded Joe Boxer in 1985. A native of Calgary, Canada, he refers to himself as “chief underpants officer,” and bought himself the title of Lord of Balls. The ancestral estate of the Lord of Balls is located on the lower Penrod River in Bedfordshire, England.
Lately, Graham’s attention has been focused on the recently opened Dot Restaurant in the Miyako Hotel in San Francisco. The restaurant’s theme of dots includes the Lord of Balls Lounge on the second floor. According to a spokeswoman, Graham was working as a consultant on the project, which is not connected to Joe Boxer Corp.

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