Merchant ends long-term business relationship without adequate notice: Business losses: Fraud: Verdict: Punitive damages

Law Reporter, Aug 2003

Hagale Indus., Inc. v. Lands' End, Inc., U.S. Dist. Ct., W.D. Mo., No. 00-3474-CV-S-4, Dec. 19, 2002.

Hagale Industries, Inc. (Hagale), produced apparel for Lands' End, a direct merchant. Hagale and Lands' End had a business relationship for 14 years, and Lands' End represented a significant portion of Hagale's sales.

Lands' End decided to use offshore suppliers instead of Hagale. The company allegedly made the decision to discontinue the relationship in December 1998 or January 1999, but informed Hagale much later. Hagale suffered business losses and was ultimately forced to declare bankruptcy and close its plants.

Hagale sued Lands' End, alleging fraud. Plaintiff alleged that defendant's failure to timely communicate its decision to change sources caused its business losses. Defendant contended that it had not reached its decision by the end of 1999, and had communicated the decision in a timely manner.

A jury awarded $4.5 million in compensatory damages and $33.46 million in punitive damages. Defendant's post-trial motions asking the court to set aside the punitive damages award were granted. Plaintiff has appealed.

Defendant's experts were Don Burkhalter, apparel/clothing industry, Atlanta, Ga.; Jeff Cohen, economics, and Dana Northcut, economics, both of Chicago, Ill.

Plaintiff's Counsel

Steve Garner,

James A. Burt, and

*Steven D. Harrell, all of Springfield, Mo.