Hearts On Fire is suing CIRCA, claiming the New York City–based jewelry buyer overcharged it on advertising it agreed to place in exchange for merchandise.
According to the suit, filed March 20 in Massachusetts federal court, in June 2009, Boston-based HOF made a deal to sell merchandise to CIRCA in exchange for trade credit. CIRCA would then buy advertising for HOF using a combination of trade credit and cash.
HOF’s attorneys maintain this agreement was meant to benefit both parties. CIRCA could make the industry-standard 10 to 15 percent commission on the ad placements and could also sell the HOF merchandise for profit. (According to a copy of the agreement included in the court documents, “remarketing guidelines” stipulate the items could not be sold through jewelers, department stores, or online merchants that represent a “direct to manufacturer” relationship, like Ideeli or Rue La La.) From HOF’s standpoint, it could use merchandise, as opposed to cash, to fund its advertising and could buy placements for a cheaper rate through bulk-buyer CIRCA than it could for itself.
The deal ended in fall 2013. Ultimately, the legal papers say, HOF provided CIRCA with $4 million worth of merchandise, and CIRCA invoiced it for $8 million in advertising.
When the deal ended, HOF’s lawyers say the company found it could buy advertising cheaper on its own than using CIRCA’s wholesale rates. The suit claims that CIRCA charged as much as 60 percent commission on the ad placements, in excess of the agreed-upon 15 percent. According to the papers, CIRCA maintains its ad costs are proprietary. CIRCA is also said to claim that HOF still owes it money under the agreement.
The suit charges CIRCA with breach of contract, breach of covenant, and claims HOF has suffered $2 million in damages.
At press time, CIRCA has not answered the complaint in federal court and did not respond to a request for comment from JCK. HOF declined further comment.
The case was originally brought by HOF in Massachusetts state court but was moved to federal court by CIRCA.