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June 2016: Victory for Client Hudson

June 2016

The firm achieved an important victory for client The Hudson Group, a retailer that operates hundreds of stores in airports throughout the United States. Several years ago, Hudson entered into license agreements with Kitson, a trendy Los Angeles retailer, to use the Kitson brand and marks in two stores operated and leased by Hudson in Los Angeles International Airport. These agreements allowed Hudson to call the stores “Kitson” stores and to sell Kitson products, but to retain control of the underlying retail space and to use Hudson employees to operate the stores.

The relationship between Hudson and Kitson soon proved to be dysfunctional. Not long after the opening of the first Kitson-branded airport store, Mr. Fraser Ross, Kitson’s founder, began to visit and to repeatedly engage in erratic outbursts and abusive behavior, including swearing at Hudson employees and threatening to fire them. Meanwhile, Kitson made clear it had staked its financial future on taking over the two airport spaces controlled by Hudson. Kitson began to lobby the airport authority and the Office of the Los Angeles Mayor to usurp control of the two retail locations from Hudson, smearing Hudson’s name and reputation in the process. When those tactics failed to achieve the desired result, Kitson launched an aggressive media campaign against the airport authority and Mayor Eric Garcetti, even going so far as to sell t-shirts with the slogan “Mayor GAR-SHADY.” When officials refused to take a side in the dispute, Kitson accused them of corruption and collusion, causing the airport authority to refer the matter to the City Attorney.

Hudson hired Quinn Emanuel, which quickly took the offensive, filing suit against Kitson for breach of contract. Meanwhile, Hudson began plans to discontinue operating the stores as Kitson stores and to bring in another retailer. To stop Hudson from doing that, Kitson sought an immediate preliminary injunction and obtained an ex-parte temporary restraining order preventing Hudson from taking further action until the court could conduct a thorough evidentiary hearing. At that later hearing, the court adopted all of the firm’s arguments and dealt a devastating blow to Kitson, lifting the temporary restraining order and permitting Hudson to rebrand its stores and stop doing business with Kitson. The judge also held that Kitson had breached the license agreements and was subject to a liquidated damages provision. Having lost its revenue stream from the airport stores and its claim to the airport leases, and subject to a potentially devastating damages award, Kitson ultimately was forced into insolvency. It dropped its claims against Hudson and agreed to settle Hudson’s claims for 80% of their value.