Activewear supplier PSK Collective filed a lawsuit against Kohl’s alleging that the retailer refused to pay it about $8 million as contracted.
Filed on Aug. 13 in Wisconsin’s Eastern District, PSK’s complaint alleged that the first purchase order from Kohl’s was executed in late March 2021, with about 600 follow-on orders being executed by September 2022. PSK said that Kohl’s saw success launching the brand on its e-commerce platform, then worked to launch the brand in stores around December 2021, making promises to “market the brand extensively.”
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The company noted that based on the promises Kohl’s made, it chose to decline other retailers’ exclusivity requests and adapted its business accordingly, despite its “extraordinarily successful launch” that resulted in orders from a variety of U.S. retailers, including Walmart, Target, Nordstrom, Macy’s and Kohl’s, among others.
“With the large ordering volume and Kohl’s public and private statements in support of the brand, PSK borrowed money and invested heavily in inventory, staff, marketing and manufacturing to fulfill these orders,” PSK said in the complaint.
Ultimately, the activewear brand alleged, Kohl’s did not make good on its “promises to provide in-store support for the PSK brand, which was a principal reason that PSK declined the exclusivity requests of several other retailers.”
According to PSK, the young company fulfilled its end of the contract, delivering the applicable merchandise and keeping up its relationship with Kohl’s. PSK said that to date it has issued about 1,500 invoices to Kohl’s in an effort to obtain payment. The company noted that Kohl’s requested additional documentation “for more than two years in an effort to make [PSK] believe that the invoices would eventually be paid.” PSK, in turn, provided bills of lading, delivery photographs, invoices and other documentation, it said.
PSK claimed that despite its willingness to share additional information about the allegedly unpaid invoices, Kohl’s did not pay what it owed the activewear company.
“In total, [PSK] purchased more than 600,000 units from factories and vendors to fulfill Kohl’s orders. Despite these purchases and despite receiving written notice from PSK of its failure to pay, Kohl’s has failed and refused to pay the invoices,” PSK alleged. “A variety of Kohl’s employees offered a myriad of excuses for its non-payment, with internal logistical and record-keeping problems among the most frequently cited.”
PSK said Kohl’s did not dispute the validity of the shipping documentation it shared, nor did it indicate that it had qualms about the quality of the merchandise PSK sent. Still, PSK argued the company made a habit of “stringing [PSK] along with empty promises and never-ending excuses.”
PSK said it believes Kohl’s turned a large profit on the allegedly unpaid goods.
“On information and belief, Kohl’s had an approximate 70 percent retailer price markup, resulting in an approximate $17 million net profit,” counsel for the company wrote, noting that Kohl’s also reaped goodwill from consumers for promoting a Black-owned, women-owned brand.
“Kohl’s further used the PSK relationship to publicly announce that it was a great supporter of women and minority-owned businesses,” PSK wrote.
As a result of Kohl’s alleged actions, PSK alleged that the retailer breached contract, committed theft by fraud and participated in intentional misrepresentation, among other claims. PSK seeks monetary damages from Kohl’s.
Kohl’s did not return Sourcing Journal’s request for comment on the lawsuit, and federal records show that the company has not yet responded to PSK’s complaint.
