Federated Vendors Chargebacks Class Action
Introduction
Lieff Cabraser Heimann & Bernstein, LLP, along with co-counsel Tousley Brain Stephens, P.L.L.C., Rodney T. Harmon, P.S. and Ezra, Brutzkus, Gubner LLP, represent vendors in the clothing and apparel industry who allege that the large department stores and divisions of Federated Department Stores, Inc. ("Federated") had a standard policy and practice of deducting chargebacks from monies owed the vendors in violation of contract provisions among the vendors and Federated. Chargebacks are deductions that merchants take on payments to apparel makers for supposedly defective or unwanted goods.
The class action lawsuit is pending in the Supreme Court of the State of New York, County of New York, before Justice Bernard J. Fried. The retail divisions of Federated that are defendants in the suit include Macy's and Bloomingdales.
Plaintiffs' Allegations
On behalf of a proposed nationwide class of vendors that sold defendants' merchandise from December 10, 1999, plaintiffs allege that defendants engaged in a series of standard and uniform practices to take unlawful and/or improper chargebacks or other offsets and discounts from plaintiffs and the Class.
Plaintiffs specifically allege that regardless of whether any of the chargebacks were legitimate, Defendants had a uniform standard policy and practice of failing to provide plaintiffs and the Class with adequate notice of alleged breaches of contracts before deducting chargebacks as required under New York law. As a consequence, plaintiffs were deprived of a reasonable opportunity to inspect the goods in the condition in which they were delivered, to investigate alleged breaches, to verify the truth or falsity of defendants' claim of breach, to gather evidence for trial, and to investigate and gather evidence for any possible claims against their own suppliers.
Case Status
On December 13, 2004, Justice Bernard J. Fried of the New York Supreme Court granted, in part, and denied, in part, the motion to dismiss the amended complaint. The order allowed plaintiffs to continue to bring certain legal claims against defendants.
In his ruling, Judge Fried found:
"The purpose of the notification which saves the buyer's rights is to afford a seller an opportunity to cure, or to permit it to minimize losses.... Notification also serves to defeat commercial bad faith. The parties' agreement did not explicitly provide that defendants did not have to notify the vendors of non-conforming goods. It provided that the vendor could not cure unless the seller permitted, which is not the same thing... Plaintiff alleges that it had a right to ensure that deductions were properly made. Therefore, whether the defendants were obligated to give notice to the vendors is not clear... And the first cause of action will not be dismissed."
On July 22, 2005, the Court granted plaintiffs' motion to add Nick DeLeo as a plaintiff in this case (see May 19, 2005 press release below).
Additional Information
- The New York Times, May 21, 2005: "Clothes Supplier Joining in Suit Against Federated"
"Nick DeLeo has a complaint, one he says is shared by many suppliers of clothing. Department stores, he says, take all kinds of unauthorized deductions from suppliers' payments - and he has decided to sue Federated Department Stores, America's largest department store chain, to prove it...." [To read the full article, click here (off-site link)].
- The New York Times, May 17, 2005: "Stores and Vendors Take Their Haggling Over Payment to Court"
"Allan Elias, a vice president at a family-owned clothing maker in New York's garment district, had what he called "a very serious problem." Dillard's Inc., the big department store chain, had withheld thousands of dollars from payments for clothes he had shipped...." [To read the full article, click here (off-site link)].
About Lieff Cabraser
Lieff Cabraser Heimann & Bernstein, LLP is a fifty-plus attorney law firm that has represented plaintiffs nationwide since 1972. We have offices in San Francisco, New York and Nashville. We represent plaintiffs in class and group actions and in individual lawsuits in cases involving substantial losses. For the last six years, the National Law Journal has selected Lieff Cabraser as one of the top plaintiffs' law firms in the nation.
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