Mexican Court Orders Levi to Pay $45 Million

A federal court in Mexico has ordered jeans maker Levi Strauss & Co. to pay $45 million to a former contractor wrongly targeted in a police raid seeking to crack down on clothing counterfeiters.

The judgment announced Monday by San Francisco-based Levi vindicates Mexico City contractor Comexma, which sued the company for the fallout from a June 2001 incident at its plant.

Accompanied by local media, Mexican police raided Comexma looking for evidence of bogus Levi brands based on information provided by a company attorney. The brand-protection attorney set up the raid without getting the required company approvals, Levi said.

Police backed off after Levi confirmed Comexma as an authorized manufacturer, but it came too late to prevent significant damages, the contractor alleged in a lawsuit filed in March 2002.

The court decided late last week that Levi’s actions caused $24.5 million in direct damages to Comexma and awarded an additional $20.5 million for the contractor’s tarnished reputation.

Levi is appealing the ruling because it believes the damages are excessive, company spokesman Jeff Beckman said. He declined to elaborate.

Levi believes Comexma already was planning to close the Mexico City plant before the raid occurred. Just before the police action, Levi said it notified Comexma of its plans to cut their business ties.

Levi said Monday that profit for its first quarter ended Feb. 27 was expected to be higher than in the same period a year earlier. Preliminary figures for the period also indicate the company’s sales rose.

Levi plans to announce first-quarter results next month. The company is privately held but discloses profit because some of its debt is publicly traded.