Forbes Faces: Calvin Klein
Debra Lau, Forbes.com, 01.19.01, 12:05 PM ET
NEW YORK - Calvin Klein will be making a big debut in New York on Jan. 22--not at Fashion Week but in federal district court.
The designer is going after the Warnaco Group (nyse: WAC), the manufacturer and distributor of Calvin Klein underwear and jeans, with a vengeance. And he's enlisted a top gun: David Boies, the Justice Department's lead attorney in its antitrust case against Microsoft (nasdaq: MSFT) and Vice President Al Gore's lawyer in the Florida recount.
Klein sued Warnaco and Chairman Linda Wachner in May for diluting his brand name with the unauthorized sale of Calvin Klein jeans and underwear to discount warehouses like Costco, Sam's Club and BJ's. The complaint also accuses Warnaco of making and selling unapproved designs.
Klein, who will testify at the trail that could last up to four weeks, is seeking an undisclosed amount in compensatory damages, the profits from sales of the unauthorized goods and a termination of its jeanswear agreement with Warnaco. It's reported that about one-third of Warnaco's total revenue in 1999--$628.6 million--came from the sale of Calvin Klein jeans.
Warnaco countered with its own lawsuit in June, alleging defamation by the designer, who accused the company of making substandard products on CNN's Larry King Live. Warnaco also said the lawsuit was in breach of a licensing agreement because it was not informed about the move beforehand.
To top it off, Klein has fired another salvo on the eve of the trial: He terminated his six-year licensing agreement with Warnaco. In a letter to Warnaco's General Counsel Stanley Silverstein on Jan. 16, Klein said he was ending their arrangement because Warnaco's debt-to-equity ratio was higher than 5-to-1 in the third quarter of 2000, breaching the rules of their financial contract. Klein filed another complaint in the New York State Supreme Court asking a judge to ratify the move.
Contacted by Forbes.com, Warnaco representatives declined to comment. The company has had a series of earnings disappointments, and its stock was trading at $2.69 this morning, from $13.80 in Jan. 2000.
Founded in 1968 by Klein and his childhood friend, CEO Barry Schwartz, Calvin Klein Inc. has more than two dozen licensing agreements, including the one with Warnaco, for its various products, which include upscale men's and women's wear, accessories, shoes, sleepwear, hosiery, eyewear and fragrances. The company sought a buyer or strategic partner in Oct. 1999 but chose to stay private after a number of other design houses like Donna Karan International (nyse: DK) and Tommy Hilfiger (nyse: TOM) held disappointing IPOs.
Known for his clean, simple lines in clothing and bedding designs, the 58-year-old Klein made his original fortune with designer jeans in the late 1970s. Klein always dreamed of becoming a designer, teaching himself to sketch and sew as a boy. After graduating from New York City's High School of Art and Design and the Fashion Institute of Technology, he worked his way up New York's garment center until he launched his own label with Schwartz.
Although he's never sued anyone before, Klein is clearly geared up for this legal battle with Warnaco. And nothing will come between Klein and this lawsuit. |
