Playboy.com Inc. has filed a law suit against e-commerce and catalog service provider eFashion Solutions LLC, in the US District Court for the Northern District of Illinois, claiming breach of contract. Playboy.com is seeking a declaratory judgment and injunctive and monetary relief.
Playboy claims eFashion’s moves will irreparably harm the company and
force it to shut down its e-commerce and catalog businesses. These
businesses generated nearly $17 million in annual revenue before
eFashion took them over and have been reduced to approximately $4
million to $5 million under eFashion’s operations, according to
Playboy.com entered into a license agreement with eFashion in January 2008 to have the latter handle the development and operation of its existing e-commerce and catalog businesses, including ShoptheBunny.com and PlayboyStore.com, which had previously been handled in-house. The suit claims that soon after, eFashion sought to renegotiate the financial terms of the agreement and eventually failed to meet its financial obligations. On June 1, eFashion made an anticipatory move, claiming Playboy had breached the contract and that the license agreement would end on July 1.
Playboy is seeking a declaratory judgment that the license agreement is enforceable and injunctive relief and monetary damages for breach of contract and for amounts due under the license agreement. Playboy claims eFashion has effectively received $13.7 million in financial relief that it would have been obligated to pay under the license agreement.
Playboy’s catalog business is one of the obligations at issue. EFashion initially agreed to commit to an annual catalog budget equal to or greater than $4.4 million. After officially taking over operation of Playboy’s catalog and e-commerce businesses in March 2008, eFashion soon began to question the financial efficacy of the catalog business and requested to adjust the license agreement to eliminate its financial commitment to this business.
Playboy says it ultimately agreed with the expectation that, based on eFashion’s representations, the e-commerce firm would grow Playboy’s overall direct business while reducing its commitment to the catalog business.
A representative from Playboy said the company doesn’t comment on pending legislation, and eFashion couldn’t immediately be reached for comment.