The fight is getting dirty.
Calvin Klein Inc. has terminated its jeanswear license and its store license agreement with Linda Wachner’s Warnaco.
Using the breach of a financial covenant in the jeanswear licensing agreement as the justification, CKI delivered the letter of termination to Stanley Silverstein, general counsel and secretary to the Warnaco Group on Tuesday.
In addition, CKI has filed a lawsuit with the New York State Supreme Court asking for affirmation that the company is able to terminate this license.
However, Warnaco denies the company has broken any of the financial covenants. “On Jan. 9, Calvin Klein Inc. sought to amend the existing action and was rebuffed by the Federal judge,” Silverstein told The Post.
“They have now filed in state court, raising the same claims that were rejected in Federal court. We have not violated any covenants of the license agreement, and we will defend these new actions in court.”
The two companies are embroiled in a nasty battle of wills that is scheduled to be heard by a jury in Manhattan federal court starting Jan. 22.
CKI charges that Warnaco, its largest licensee, is damaging its reputation by selling regular merchandise to discount stores. In addition, Warnaco is being charged with making unapproved design changes and not meeting Calvin Klein’s quality standards.
Warnaco has filed counter claims, charging a breach of its jeanswear license and interference with business relations, along with defamation.
The financial covenant in question involves the shape of the licensee – specifically the debt-to-equity ratio of Warnaco.
Though the “terminated” jeanswear license is the agreement currently being contested in federal court, CKI’s filing of this suit is a move to cover its bases.