Cherokee, Mossimo Dispute Settled
Cherokee Inc. was issued an interim award on Nov. 11 following arbitration to settle a dispute between the Van Nuys, Calif.-based apparel manufacturer and Santa Monica, Calif.-based Mossimo Inc.
Last May, Mossimo filed for arbitration against Cherokee Inc. to renegotiate royalties subject to payment under an agreement that enabled Cherokee to broker a multimilliondollar licensing agreement with Target Corp.
“Our view is that Mossimo is important to Target, and we also feel that we are important to Target—we just want to put this behind us and move forward,” said Kyle Wescoat, Cherokee Inc.’s chief financial officer.
Approximately $2 million in back payments for finder’s fees, plus interest, is owed to Cherokee for the first six months of the current fiscal year, said Wescoat. Additionally, Mossimo will be responsible for paying Cherokee’s attorneys’ fees.
In a recent press statement, Mossimo Inc. said it doesn’t agree with the interim award and is preparing to challenge the decision.
Mossimo Inc. chief financial officer Manuel Marrero was unavailable for comment. However, the company reported that the funds were placed in escrow, even though payments were pending as a result of the arbitration.
According to public documents provided by the Securities Exchange Commission (SEC), Mossimo signed a Finders Agreement with Van Nuys, Calif.-based Cherokee on March 27, 2000, that allowed the company to negotiate a product development agreement with Target Corp. to license women’s, men’s and children’s apparel and footwear, and accessories.
The agreement states that should Mossimo enter a direct retail license agreement it is subject to pay Cherokee in perpetuity finder’s fees equal to 15 percent of net revenues.
Mossimo’s revenues rose 23 percent to $17.3 million for the nine months ending Sept. 2, and net income rose 52 percent to $8.3 million. The company said revenues reflect growth of Target sales and the recognition of $1.5 million in previously deferred revenue.
Cherokee chief executive officer Robert Margolis was unavailable for comment. —Claudia Figueroa
