ValueVision Files Defensive Lawsuit Against Vendor

In a lengthy and bitter retailer-vs.-supplier dispute, ValueVision Media has filed a defensive lawsuit against D.G. Jewelry and two of its top executives.

The suit, filed in late August in the U.S. District Court for the District of Minnesota, seeks a declaratory judgment confirming that the parties’ December 2001 agreement of settlement and release of all claims is valid and binding. It also names Samuel Jacob Berkovits, D.G.’s president and chairman, as well as Bentzion Berkovits, the manufacturer’s executive vice president of sales, and seeks damages claiming D.G. and the Berkovitses “interfered with the relationships between ValueVision and its employees.”

At press time, neither ValueVision’s legal representatives nor D.G. Jewelry executives would return JCK‘s phone calls. However, in a recent release, D.G. called the suit “false, outrageous, and defamatory” and said it will “vigorously defend itself” against the allegations.

The legal action by ValueVision is just the latest volley in a dispute that dates back to early 2001. The suit is ValueVision’s response to recent public allegations—and threats of legal action—that Toronto-based D.G. has made accusing the Minneapolis-based TV/electronic retailer of breach of contract.

D.G. has claimed, among other things, that ShopNBC—ValueVision’s TV shopping arm—has failed to buy the amount of product agreed upon, thus causing the manufacturer significant financial hardship. In fact, D.G. cited this “rupture” of its relationship with ShopNBC as a major factor in its disappointing second-quarter and first-half performance. The firm also said it expected future revenues to be “significantly adversely affected as well” and warned of “substantial” future write-downs and the potential failure to meet bank covenants.

D.G. also has accused ShopNBC of entering into the December 2001 agreement “in bad faith” simply to obtain a release from all future claims. D.G. further alleged that ShopNBC took actions “believed to be illegal and in breach of ShopNBC’s duties to its own shareholders,” which D.G. says it refused to participate in. As a result of this refusal, D.G. claims that ShopNBC has “engaged in a retaliatory campaign” that included minimized selling airtime for D.G. products.

In a separate statement, ValueVision said it has “consistently denied” D.G.’s claims and “endeavored to avoid the expense and inconvenience of litigation” by entering into the December 2001 settlement agreement. ValueVision also said it has honored that agreement “in all material respects,” despite D.G.’s continued allegations of breach of contract. The companies were even involved in mediation recently in an effort to resolve their differences outside the courtroom. As a result of the suit, however, they have broken off all mediation efforts.

“We regret having to get involved in litigation, but D.G.’s continuous pattern of inappropriate conduct has left us no choice,” ValueVision said in the statement. “We feel compelled to protect the interests of our company and the well-being of our employees.”

D.G., which specializes in stone-set jewelry for the high-volume sector, does some 80% of its sales in the United States. According to the firm’s 2001 annual report, ShopNBC accounted for 46% of D.G.’s $36 million in sales last year (roughly $17 million). D.G. merchandise has been featured on three ShopNBC programs: Brilliante, Diamond Jack, and Trader Jack.

ShopNBC is the third largest TV shopping retailer behind QVC and HSN. Jewelry accounted for two-thirds of the company’s $450 million in sales last year (roughly $300 million), according to parent ValueVision’s 2001 annual report.