Retail Tales: A Contracts Story

After a five-year battle between Macy's and its former vendor and bedding supplier Sanidown, Inc. over some contracts issues, a U.S. district court judge has ordered Macy's to pay $2.4 million. WWD reports that Macy's must pay Sanidown this amount for wrongful repudiation of its contract with the bedding company. It all started in 2006 when, after a successful 15-year business relationship, Macy's claimed that Sanidown supplied bedding products with duck feathers instead of the agreed upon goose feathers. In response, Macy's sent back the wrongly labeled products to Sanidown, canceled its contract and sued for damages resulting from lost profits. Sanidown, on the other hand, claimed that this was wrongful repudiation of their contract. Here is the rough breakdown of the amounts the judge has ordered to be paid out between the parties: Sanidown claimed around $3 million in chargebacks spanning from 2000 to 2006. However, because of Sanidown's failure to substantiate this full amount, the judge ordered Macy's to pay only the $125,000 that Sanidown was able to substantiate. In addition, Sanidown was also entitled to $4.1 million for Macy's wrongful repudiation of the contract. Macy's, however, was entitled to recover $1.7 million from Sanidown for the duck feathers giving us roughly a $2.4 million payout to Sanidown. One of Sanidown's attorneys, Jonathon Warner of the firm Warner and Scheuerman, explains that the reason for the uncommon litigation situation between this vendor and retailer is that the relationship between Macy's and Sanidown was terminated before the litigation began: "The crucial thing about this decision is that it shows that a vendor can come after the retailer after the relationship has ended." Most of the time, in the interest of maintaining a working business relationship, these types of retailer/vendor disputes are privately resolved outside the judicial system. Warner goes on to explain to WWD that chargeback claims need not be pursued immediately, which explains why Sanidown was able to wait until its relationship with Macy's was over. Instead, there is grace period of sorts in which a plaintiff may bring a claim (in the legal world, we call this period the statute of limitations and the exact time period depends on the specific claim). In response to the decision, Macy's spokesman Jim Sluzewski says: "We are pleased by the court's ruling in favor of damages to Macy's related to merchandise returned to Sanidown in the spring 2006 season, when testing showed that the content of Sanidown's products available in our stores and online were not as labeled…We are, however, disappointed by the court's ruling in favor of Sanidown related to Macy's decision to cancel orders for fall 2006. Customers place their trust in the products we sell when they make a purchase at Macy's. We remain firm in our resolve to require that all vendors comply fully with requirements and labeling of the products they supply to Macy's. On behalf of our customers, we will take quick and definitive action with a vendor when we have reason to believe the product being supplied to us is inferior, defective or incorrectly labeled." Share this on Facebook Tweet This! Share this on del.icio.us Digg this! Stumble upon something good? Share it on StumbleUpon Share this on FriendFeed Share this on Reddit Post on Google Buzz Subscribe to the comments for this post? Share this on LinkedIn

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