Suit: Sears owes vendor over $800K, falsely represented finances to public

A swimwear clothing company is suing Sears Holdings Corp., claiming the now-bankrupt retail giant has skimped on paying for its merchandise.

On Tuesday, Miami-based clothing vendor In Gear Fashions filed the lawsuit in Cook County Circuit Court against Sears as well as its CEO Edward Lampert, his private equity firm ESL Investments and Kmart, which is a subsidiary of Sears.

The complaint came a day after the Hoffman Estates-based corporation filed for Chapter 11 bankruptcy protection Oct. 15, in a move that stunned few but symbolized the fall of what was once a fixture of brick-and-mortar retail greatness in America and Chicago. About 500 stores will remain open.

Now, In Gear Fashions, which began business with Sears in 2012, alleges the defendants owe the clothing supplier $839,968.75 for merchandise and charges the company with breach of contract, unjust enrichment and fraudulent misrepresentation in the four-count lawsuit.

The vendor supplied Sears with “swim, resort and casual lifestyle clothing” that was either sold or kept in Sears’ inventory, according to the suit.

“Allowing the Sears defendants to not pay IGF for the monies owed pursuant to the [contract’s universal terms and conditions] violates fundamental principles of justice, equity, and good conscience,” the suit said.

A spokesman for Sears did not immediately respond to request for comment Friday morning.

In Gear Fashions said that as Sears’ fortunes continued to dwindle over the past few years, Lampert repeatedly assured vendors the corporation could be counted on to pay them on time, according to the suit.

“Across our entire vendor base, we have always met our payment obligations,” Lampert wrote in a 2014 blog post that the suit cited. “The steps we are taking to improve our financial strength and reduce our operating losses will ensure that we will continue to be a strong business partner for many years to come.”

The clothing supplier said $182,265.21 of the total amount allegedly owed was supposed to be paid in four installments from Sept. 28 to Oct. 25, according to the suit. But on Oct. 12, those payments were seemingly canceled.

The suit alleges Lampert and his equity firm engaged in a “questionable pattern” whenever financial woes were brewing at Sears. Lampert and ESL Investments would first publicize measures to bolster Sears’ image, then, when those efforts fell flat, “would swoop in as the proverbial ‘white knights’” to fix the situation, the suit said.

The vendor believes this was a fraudulent misrepresentation to the public and to its suppliers, according to the suit. Lampert and defendants were described as having “no intention of paying their vendors.”

“Defendants Lampert, ESL and the Sears defendants knew or should have known that the Sears defendants were facing insolvency,” the suit said.

The suit is seeking compensatory damages with interest in addition to “such other relief as may be deemed just and proper” by the court.