K mart Loses $73 Million in Contract Suit

Discount retailer K mart Corp. breached its contract with a wholesaler clothing buyer and must pay $73 million in damages, a federal jury decided Tuesday.

After four months of testimony, the six-person jury deliberated for 8 1/2 hours before returning the verdict to U.S. District Judge Ronald R. Lagueux.

“We were disappointed,” said Robert Stephenson, a spokesman at K mart headquarters in Troy, Mich. “We plan to appeal the verdict on the basis that the judge made a number of substantial errors in judgment during the trial.”

Fashion House charged that K mart ignored a 1983 agreement requiring the retailer to purchase 85% of its name brand and designer label apparel through the wholesaler.

K mart canceled the four-year contract in April, 1986, shortly after Fashion House filed suit against it for unpaid commissions.

Robert W. Steele, a K mart attorney, told the jury that the contract was canceled not because of the impending lawsuit but because Fashion House repeatedly failed to obtain the name brand merchandise the retailer wanted.

He said the stock K mart received came in broken lots, odd sizes and unattractive colors and that the retailer lost $45 million in its Designer Depot stores, which Fashion House stocked almost exclusively.

Fashion House attorney Richard Sharfman said that by 1984, K mart had already begun to ignore the terms of the contract and was purchasing more than 15% of its clothing directly from manufacturers.

Steele did not address the argument of K mart’s breach of contract by buying directly from the manufacturers but called the plaintiff’s request for $80 million in damages “an outrageous exercise in greed.”

The jury awarded Fashion House $30.7 million for unpaid commissions, $28.7 million for wrongful termination of contract, and ordered K mart to pay $13.6 million in interest on the award.