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MARTHA STEWART, ZELLARS NAMED IN LAWSUIT.

MONTREAL-Bonavista Fabrics Ltd., a local ready-made curtain manufacturer and importer, has filed a lawsuit against Zellers Inc., a Toronto-based 350-store Canadian discount chain, and Martha Stewart Living Omnimedia of New York for more than $680,000 ($1 million Canadian).

Manny Bloom, co-owner of Bonavista, claims in the lawsuit that Stewart's company "induced" Zellers to break its contract with Bonavista and supplant it as a drapery supplier. The charge against Zellers is one of "abusive termination" of its contract with Bonavista after a 15-year relationship.

That relationship began to unravel last year when Bonavista was doing about $1.7 million in sales with Zellers, or about a quarter of its total sales. Prior to that, Zellers had provided Bonavista with sales projections for each year, which were close to what the company ended up buying from Bonavista. Zellers did the same for 1998, projecting sales for Bonavista of $1.76 million.

But in May 1998, after Zellers acquired Kmart's Canadian stores (and subsequently began carrying Martha Stewart's merchandise), Bloom was presented only with a Master Merchandise Agreement, which he claimed he was pressured to sign. The agreement set out only the terms of purchase, such as advertising costs and discounts, but did not specify volume.

Bloom said he refused to sign the agreement since he didn't know how much Zellers was going to buy, and he had to book his orders from overseas four to six months in advance. In the end, he sold Zellers about $800,000 worth of curtains, less than half the usual amount.

"As a result, I've got over $550,000 worth of merchandise that I can't get rid of, sitting in a warehouse," said Bloom. "I can't ship it to the U.S. because it comes from quota countries, such as China, and I can't sell it to other Canadian chains because they have their own programs and designs."

The lawsuit claims that "Martha Stewart knowingly induced the said breaches of contract by Zellers with the intent to benefit itself and financially injure its competitor [Bonavista]."

The suit also claims that Zellers informed Bonavista that "orders would slowly wind down and would eventually be discontinued."

But instead orders "immediately and drastically declined," the suit alleges.

Additionally, Bloom said he was told by Zellers that it had entered into a supply agreement with Martha Stewart Living Omnimedia, and that Zellers wanted him to supply their Quebec stores only because Martha Stewart Living Omnimedia lacked the necessary French labels for the province.

"They [Zellers] didn't have to be in such a hurry to take on Martha Stewart," said Bloom. "If they didn't drop us so quickly, this lawsuit might not have happened."

When asked to comment, Martha Stewart Living Omnimedia referred the matter to Susan Magrino Agency, its New York public relations firm, which issued the following statement: "We are aware of the proceeding commenced in Quebec. . . MSLO fully believes this to be a spurious claim and believes that MSLO was included in the proceeding solely to put pressure on Zellers [the exclusive retailer of Martha Stewart products in Canada].

"Zellers has agreed to defend MSLO in the matter, and MSLO will not incur any damages in connection with the proceeding."

Because the matter is before the courts, MSLO wouldn't make any further comments, the statement concluded.

Zellers also wouldn't comment for the same reason.
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Author:Dunn, Brian
Publication:HFN The Weekly Newspaper for the Home Furnishing Network
Date:Oct 4, 1999
Words:557
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