FILED: NEW YORK COUNTY CLERK 04/05/2016 03:33 PM INDEX NO. 651814/2016 NYSCEF DOC. NO. 1 RECEIVED NYSCEF: 04/05/2016 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK SAKS & COMPANY LLC, Plaintiff', v. JOHN BARRETT HOLDINGS, LLC Defendant. Index No.: Date Summons Filed: SUMMONS Plaintiff designates New York County as the place of trial. The basis of venue is fixed by the parties under CPLR 501. To the above named Defendant: YOU ARE HEREBY SUMMONED to serve a notice of appearance on the undersigned at the address stated below within twenty (20) days after the service of this summons, exclusive of the day of service, or within thirty (30) days after the service is complete if this summons is not personally delivered to you within the State of New York. In case of your failure to appear or answer, judgment will be taken against you by default for the relief demanded in the Complaint. Dated: New York, New York April 5, 2016 Respectfully submitted, KELLEY DRYE & WARREN LL By: David Zalman Andrea L. Calvaruso Joel A. 1-lankin 101 Park Avenue New York, New York 10178 (212) 808-7800 Attorneys for Plaintiff To: JOHN BARRETT HOLDINGS, LLC 754 Fifth Avenue New York, NY, 10019 1 of 13
SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK SAKS & COMPANY LLC, Case No.: Plaintiff, v. COMPLAINT JOHN BARRETT HOLDINGS, LLC Defendant. Plaintiff Saks & Company LLC ("Saks"), by and through its attorneys, Kelley Drye & Warren LLP, alleges: NATURE OF THE CASE 1. This is an action for repudiation, anticipatory breach of contract, breach of contract, breach of the duty of good faith and fair dealing, and promissory estoppel arising from Defendant's complete repudiation and then breach of its contractual obligations to Saks in connection with a July 30, 2015 Licensed Services Agreement (the "Contract"). The Contract provided, among other things, that John Barrett Holdings ("JBH") would have an exclusive license to operate JOHN BARRETT branded salons and provide Salon Services' at more than a dozen select Saks retail locations for a term of no less than ten years. 2. After Saks and JBH entered into the Contract, and after Saks had substantially performed certain of its obligations pursuant to the Contract, JBH abruptly reneged on the Contract, leaving Saks without a partner to provide Salon Services at its retail locations. 3. As a result of JBH's breach of its obligations, Saks has suffered, and will continue to suffer, substantial damages. I Capitalized terms not otherwise defined herein are to be given the definition as provided by the Contract. 1 2 of 13
PARTIES & VENUE 4. Saks is a Delaware Limited Liability Company with its principal place of business located at 12 East 49th Street, New York, NY, 10017. 5. Upon information and belief, Defendant John Barrett Holdings, LLC is a Delaware Limited Liability Company with its principal place of business located at 754 Fifth Avenue, New York, NY, 10019. 6. Venue in this Court is proper under CPLR 501 because the parties fixed the place of trial as New York County. GENERAL ALLEGATIONS 7. Saks, through its affiliated companies, operates high-end, luxury retail department stores worldwide under the Saks Fifth Avenue brand, including more than 30 stores located in the United States and several to open in Canada in 2016. 8. Saks's competitors in the high-end luxury department store space include, among others, Bergdorf Goodman, Neiman Marcus, Barneys and Bloomingdale's. 9. Saks offers salon services at certain of its retail locations. Saks's customers may purchase a wide variety of salon and spa services and hair and body products at these locations. The salon services Saks offers generate revenue through direct sales, and also provide a unique customer experience, ensuring both loyalty and return visits to Saks's retail stores. 10. Services of this type are commonly provided by high-end luxury department stores to enhance the customer experience. Saks has consistently offered salon services to its customers at the highest quality in a manner that befits the Saks Fifth Avenue brand. 11. Starting in late 2014, Saks began to review its salon services program. Saks interviewed various elite salon operators and brands in order to ensure that its salon services 2 3 of 13
remained competitive and of the highest quality. As part of this review, Saks entered into discussions with at least five salon operators regarding a potential agreement to operate the highend salons in the Saks retail stores. 12. JBH is known for operating luxury salon services to high-end clientele. According to JBH's CEO "The [JBH] brand is so globally known and so pervasive in luxury super luxury-affluent customers that it's amazing in its breadth and reach." 13. In or about January 2015, JBH contacted Saks and expressed its desire to be the exclusive provider of Salon Services in Saks's Stores throughout the United States and Canada. JBH informed Saks that it was considering closing its longstanding location inside of Bergdorf Goodman, and desired to discuss the possibility of opening JOHN BARRETT branded salons in Saks retail locations. 14. Beginning in or around March 2015, Saks provided JBH with detailed financial and operational information regarding Saks's existing in-store salons. JBH representatives visited substantially all of Saks's existing in-store salons and met with general managers of such salons to discuss the salon operations. Owner John Barrett and now former CEO of JBH, Jim Hedges, visited certain salons personally, and JBH representatives visited certain salons multiple times. 15. On April 10, 2015, after numerous discussions with JBH and extensive due diligence, Saks and JBH entered into a Letter of Intent ("LOI"), with respect to JBH agreeing to become the exclusive provider of Salon Services in Saks's Stores throughout the United States and Canada. As a result, Saks abandoned its ongoing discussions with other very premier highend salon brands with respect to their potential operation of salons in the Saks retail stores. 3 4 of 13
16. On or about July 30, 2015, the parties entered into the Contract, pursuant to which, among other things, Saks would grant JBH the exclusive right to operate JOHN BARRETT branded salons within certain Saks Fifth Avenue retail locations in the United States and Canada. 17. Relying on JBH's agreement to operate Salon Services, Saks negotiated with its existing Salon Services provider for the orderly closure of its then existing in-store salons. Thereafter, in September 2015, Saks closed three salons. Saks closed four more salon locations in November 2015. Additional salons are scheduled to close in 2016, including the salon in Saks's flagship store located on Fifth Avenue in New York City (the "Flagship Salon"), which is scheduled to close on August 1, 2016. 18. JBH was fully aware of the dates on which Saks was scheduled to close its existing salons, and actively negotiated with Saks for earlier closing dates in certain store locations in order to accommodate JBH's planned renovations and new Salon openings. 19. The parties agreed that after the planned closure of the Flagship Salon for renovations by JBH pursuant to the Contract, Saks's hair stylists, colorists and customers would utilize the JOHN BARRETT flagship salon, located near the Saks flagship store, until such time as the Flagship Salon reopened as a JOHN BARRETT branded Salon. 20. At all times Saks satisfied all of its obligations under the Contract. 21. Pursuant to the Contract, JBH was required to renovate the salons already existing at Saks stores, and to design and construct the salon spaces that were to be opened in Saks stores that did not already have salons, all at JBH's sole cost and expense. JBH was also required operate the Salons after they opened. 4 5 of 13
22. JBH knew that it was critical to Saks that the Salons be operated in a manner consistent with the high quality that is associated with the SAKS FIFTH AVENUE brand. Indeed, pursuant the Contract, JBH expressly acknowledged that its services "must be commensurate with [Saks's position as a luxury retailer] and the services provided by its clientele [be] of quality at least equal to the high end Salon Services and JBH Products provided by JBH in its existing salon locations to date." 23. On or about September 28, 2015, JBH issued a press release with respect to the Saks Salons, which stated, among other things, that: John Barrett plans to invest heavily in the infrastructure, equipment and technology for each salon location. The foundation is set to deliver entirely new and singular concepts for the Saks client, including new service menus, spa treatment protocols, luxury retail offerings and plans for a new John Barrett 'fast-beauty' concept in the salon and beyond. John Barrett's plans are to reinvent the luxury salon experience to become the new standard of luxury and care. 24. In accordance with the Contract, JBH engaged third party design and contracting companies to assist with JBH's build out of new salon locations in Saks stores located in Miami, Florida, Houston, Texas, and two locations in Toronto, Canada. Each of these four new salons was to open contemporaneously with the grand openings of these new Saks stores providing Saks clientele with grand openings of stores devoid of salon construction. 25. Upon information and belief, pursuant to the terms of the Contract, JBH engaged third party contracting companies to perform significant construction at the salons in Toronto, Canada, which were scheduled to open in February 2016. 26. Upon information and belief, pursuant to the terms of the Contract, JBH also engaged third party contracting companies to perform significant construction at the salon in Houston, Texas, which was scheduled to open in April 2016. 5 6 of 13
27. Upon information and belief, pursuant to the terms of the Contract, JBH also engaged third party companies to conduct extensive design operations in connection with the salon in Miami, Florida, which was scheduled to open in September 2016. 28. Pursuant to the terms of the Contract, on or about November 2015, JBH took over the operations of the in-store salon at Saks's store in Boca Raton, Florida. 29. Upon information and belief, pursuant to the terms of the Contract, JBH began development of certain other new or existing in-store salons. 30. Notwithstanding the express terms of the Contract, its partial performance under the Contract, and its promises to Saks concerning the Flagship Salon, and less than two weeks after JBH's CEO met with Saks's employees to promote the parties' collaboration at an inperson meeting at Saks's flagship store, JBH informed Saks that it would not satisfy its obligations under the Contract. 31. On or about December 24, 2015, JBH expressly stated to Saks that it was "not in a position to execute on the partnership." 32. In late December 2015, JBH abruptly ordered a halt to all construction at the Toronto and Houston store locations and halted ongoing design plans in the Miami store, jeopardizing the ability of these salons to open contemporaneously with the stores, as planned. 33. On December 31, 2015, Saks notified JBH that it considered JBH in anticipatory breach of the Contract and sought JBH's confirmation that it intended to perform its obligations under the Contract and commitment to cure any past breaches. 34. During the first week of January, 2016, JBH informed Saks of its intention to cease ongoing Salon operations at the Boca Raton store location within days. 6 7 of 13
35. JBH failed to cure its breaches of the Contract as requested by the December 31, 2015 letter, and failed to confirm its intent to perform its obligations under the Contract. 36. In light of JBH's refusal to cure and perform under the terms of the Contract, on February 5, 2016, Saks terminated the Contract in accordance with its terms. 37. In addition to the failure to perform its obligations under the Contract, upon information and belief, JBH has failed to remit payment to certain contractors and/or subcontractors that it hired connection with renovations or build-outs of Salons in furtherance of JBH's obligations under the Contract. 38. Due to JBH's failure to adhere to its obligations, such contractor's or subcontracts have filed liens, potentially effecting and damaging title to property that Saks owns or leases. 39. Pursuant to the Contract, JBH is required to discharge any liens filed against any Saks stores with respect to work perfot ned by or on behalf of JBH, or post a bond with respect to any such liens. JBH has failed to do so, despite notice of such liens. As a result, Saks has been forced to expend money and resources in connection with bonding certain liens that have been filed against its store locations. 40. By virtue of JBH's failure to abide by the terms of the Contact, which included obligations to build out, open and then operate Salons at certain Saks locations over the next decade, JBH has breached the Contract and caused damage to Saks. 7 8 of 13
FIRST CAUSE OF ACTION (Anticipatory Breach Of Contract) 41. Saks incorporates by reference the allegations contained in Paragraphs 1 through 40 above, as though set forth fully herein. 42. Saks and JBH had a valid Contract which obligated JBH, among other things, to design and construct salon spaces within many Saks store locations, and to operate licensed salons within such Saks retail locations, at JBH's expense, for a period of no less than 10 years. The Contract also provided that JBH must pay Saks a Licensing Fee in connection with the sale of products and services that are offered by JBH at the Salons. 43. Defendant has materially breached this Contract by its repudiation of its obligations thereunder. Defendant explicitly disavowed the Contract after Saks had substantially performed thereunder. 44. At the time Saks learned of Defendant's repudiation of the Contract, and at all times prior to the termination of the Contract, Saks performed all of the conditions and obligations on its part to be done and performed, and was ready, willing and able to perform those terms and conditions necessary to complete performance on its part, except as expressly or impliedly excused, waived or rendered impossible by Defendant. 45. As a direct and proximate result of Defendant's anticipatory repudiation and breach of its contractual obligations, Saks has suffered and/or will suffer damages believed to be in excess of $11,000,000 dollars, exclusive of the damage to Saks's goodwill and reputation. Although Saks has attempted and continues to attempt in good faith to mitigate the damages caused by Defendant's breach of contract, Saks's efforts have not resulted in the complete mitigation of Saks's damages. Saks continues to suffer damages, the exact amount of which will be determined according to proof at trial. 8 9 of 13
SECOND CAUSE OF ACTION (Breach Of Contract) 46. Saks incorporates by reference the allegations contained in Paragraphs 1 through 45 above, as though set forth fully herein. 47. By failing to, among other things, renovate, build out, open and operate the Stores pursuant to the terms of the Contract, including but not limited to breaching the requirements contained in 4 and 11 of the Contract, Defendant has breached its promises to Saks under the Contract. 48. Saks has satisfied all its obligations to Defendant and all conditions precedent to bringing this action. 49. As a direct and proximate result of Defendant's anticipatory repudiation and breach of its contractual obligations, Saks has suffered and/or will suffer damages believed to be in excess of $11,000,000 dollars, exclusive of the damage to Saks's goodwill and reputation. Although Saks has attempted and continues to attempt in good faith to mitigate the damages caused by Defendant's breach of contract, Saks's efforts have not resulted in the complete mitigation of Saks's damages. Saks continues to suffer damages, the exact amount of which will be determined according to proof at trial. THIRD CAUSE OF ACTION (Breach Of The Implied Covenant Of Good Faith And Fair Dealing) 50. Saks incorporates by reference the allegations contained in Paragraphs 1 through 49 above, as though set forth fully herein. 51. In every contract there is an implied covenant of good faith and fair dealing that requires, among other things, that each party to the contract: (a) take no action to deny the other party the benefits of the agreement, and (b) do everything within its capacity to ensure that the 9 10 of 13
other party enjoys the benefits of that agreement. By reason of the Contract, JBH covenanted to perform in good faith and deal fairly with Saks in all respects related to the subject matter of Contract. The implied covenant of good faith and fair dealing in the Contact prohibited conduct by JBH which prevented or impaired, or would tend to prevent or impair, Saks from enjoying the benefits of the Contract. 52. Saks has at all times fulfilled all conditions, covenants and promises it was required to perform under the Contract with Defendant. 53. In repudiating its obligations under the Contract and refusing to perform, as alleged herein, Defendant has prevented Saks from enjoying the benefits of the Contract and has deprived Saks of its ability to receive economic benefit from its relationship with Defendant. Moreover, by requiring Saks to enter into an exclusive arrangement requiring the rebranding of existing salons and inhibiting Saks's ability to contract with other third parties for salon services, knowing that they had no intention of performing or ability to perform, Defendant acted in bad faith, and in a manner intended to deprive Saks of its benefits under the Contract. Accordingly, Defendant has breached its duty of good faith and fair dealing to Saks. 54. As a direct and proximate result of Defendant's breach of the duty to deal with Saks in good faith, Saks has suffered and/or will suffer damages believed to be in excess of $11,000,000 dollars, exclusive of the damage to Saks's goodwill and reputation. Although Saks has attempted and continues to attempt in good faith to mitigate the damages caused by Defendant's breach of contract, Saks's efforts have not resulted in the complete mitigation of Saks's damages. Saks continues to suffer damages, the exact amount of which will be determined according to proof at trial. 10 11 of 13
FOURTH CAUSE OF ACTION (Promissory Estoppel) 55. Saks incorporates by reference the allegations contained in Paragraphs 1 through 54 above, as though set forth fully herein. 56. Pursuant to the Contract JBH promised, among other things to design, construct, open and operate Salons at certain Saks store locations at its own expense and to become the exclusive operator of Salon Services, including payment of costs associated with designing, constructing and opening and operating the new Salons, and payment of Licensing Fees to Saks in connection with the Salons, for a period of at least ten years. 57. JBH promised it would allow Saks and its customers to utilize JBH's freestanding JOHN BARRETT salon, located near the Saks's flagship store in New York City, during the period of time when Saks's Flagship Salon was closed for renovations by JBH pursuant to the Contract. 58. JBH reasonably should have expected Saks to change its position substantially as a result of those promises. 59. Saks changed its position substantially in reliance upon JBH's promises, including but not limited to abandoning negotiations with other premiere high end salon operators regarding operation of the salons located at Saks's retail stores, closing then existing in-store salons, and planning for the closure of other salons, including its Flagship Salon, with the understanding that it and its customers would utilize the JBH flagship salon during the completion of JBH's renovations of the Saks Flagship Salon. 60. In further reliance upon Defendant's promises, Saks invested substantial time, effort, and resources to perform its obligations under the Contract and to ensure that JBH's 11 12 of 13
launch of the Salons would be a success, including but not limited to planning upcoming customer events to promote the JOHN BARRETT salon at the in Boca Raton, Florida store. 61. As a direct and proximate result of Saks's reasonable reliance upon Defendant's promises, Saks has suffered and/or will suffer damages believed to be in excess of $11,000,000 dollars, exclusive of the damage to Saks's goodwill and reputation. Although Saks has attempted and continues to attempt in good faith to mitigate the damages caused by Defendant's breach of contract, Saks's efforts have not resulted in the complete mitigation of Saks's damages. Saks continues to suffer damages, the exact amount of which will be determined according to proof at trial. PRAYER FOR RELIEF WHEREFORE, Saks prays for relief as follows: 1) For compensatory and consequential damages in an amount to be proven at trial, but in the minimum amount of $11,000,000; 2) For attorney's fees and expenses; and 3) For such further relief as the Court may deem just and proper. Dated: April 5, 2016 New York, New York KELLEY DRYE & WARREN LLP By: David Zalman Andrea L. Calvaruso Joel A. Hankin 101 Park Avenue New York, New York 10178 (212) 808-7800 Attorneys for Plaintiff Saks & Company LLC 4251456 12 13 of 13