Pocketful of Dollars: Hudson Bay Apparel Brands LLC v. Umbro International Ltd [2010] EWCA Civ 949

November 7, 2010

Commercial, contract

Read the full case: http://www.bailii.org/ew/cases/EWCA/Civ/2010/949.html

The case concerned several sports clothing retailers, the claimants (Hudson Bay) are a North American Company and recently official suppliers to the Vancouver 2010 Winter Olympics, the defendants (Umbro), by contrast, are primarily a UK retailer focusing in particular on an international football (soccer) brand.  Essentially, the appeal concerned the validity of a series of contracts made between Umbro UK, Umbro’s subsidiary US company, Umbro Corp Inc (based in Delaware) and three North American clothing retailers: Hudson Bay Company (HBC), Dick’s Sporting Goods and a catalogue firm, S&S.

At issue was whether:

1)      Umbro UK had wrongly allowed Dick’s Sporting Goods to market off-field wear in breach of HBC’s exclusive licence

2)      HBC had acted in breach of contract by marketing on-field wear (Umbro UK’s counterclaim).

3)      Umbro UK had wrongly hindered HBC from exploiting its off-field licence in breach of an implied duty of co-operation

At first instance ([2009] EWHC 2861 (Ch)), the Judge (Mark Herbert QC) upheld all three claims. The claimants (HBC) contested aspects of each of these findings.

To understand the case, it is important to understand the nature of the disputed products. Essentially, Umbro UK sold three types of branded clothing:

  • “teamwear” (soccer kit provided to competitive teams [3])
  • on-field wear (was defined at [3] as “clothes used on the field of play”. While this is a pretty vague definition, there was a suggestion that the performance nature of the fabric e.g. high-wicking absorption qualities, the presence of sleeves and smaller less flamboyant logos all pointed to on-field use)
  • off-field wear (was defined at [7] as: “Men’s off-field apparel (meaning all apparel products that are not specifically intended to be used on the field of play for soccer including, for the avoidance of doubt, performance shorts and soccer jerseys) and shall, for the avoidance of doubt, only include the following: t-shirts, sweatshirts, sports polo shirts, hoodies (zip and non-zip), tank tops, reversible shirts, [shirts], sweatpants, sweat suits, wind suits, warm-up suits, rain suits, pull-over jackets, pullovers, outerwear, shorts.”) Lord Neuberger MR further stated that consideration of whether an item is on-field or off-field should be viewed from a hypothetical position rather than the subjective intentions of an actual buyer / supplier [18].

These products were then marketed through a number of North American stores. In Clause 9 of their Licensing Agreement with Hudson Bay, Umbro UK defined their “Distribution Channels” as falling into 7 broad sub-headings:

  • Sporting goods chains (Dick’s Sporting Goods)
  • Department stores (Macy’s and Dillards)
  • Mid-tier department stores (although the clause listed several stores they not named in the judgment)
  • Apparel speciality stores (these stores were similarly not named)
  • The Ad speciality market who sold promotional products via corporate catalogues (S&S, Broder Brothers, Heritage Imprints, Staton and Virginia Tees)
  • Soccer speciality retail (no stores were listed, just ‘as directed by the Licensor’)
  • Close-out stores (four stores were listed with restrictions limiting annual sales to 30% of the total)

Umbro UK licensed through Umbro Corp inc, the rights to manufacture on-field wear to Dick’s Sporting Goods, HBC had the rights to off-field wear, while Umbro UK kept the rights to teamwear for itself. What the Court(s) had to decide was whether HBC, Umbro and Dick’s breached the terms of their respective contractual agreements. 

The first claim arose because Umbro UK had authorised Dick’s to sell some goods (in particular a number of t-shirts and tank-tops) which were not specifically intended for on-field in breach of their exclusive arrangement with HBC. Although this breach was accepted by all parties, ultimately the only remedy for HBC was in damages for breach of contract as Dick’s were not joined as a party to the case.

The second claim arose through Hudson Bay’s creation of a pocket-less ‘soccer basics’ and matching tracksuit range sold through S&S catalogues [20]. While it was widely accepted that this clothing was suitable for a myriad of athletic and leisure purposes [28], both Mark Herbert QC and Lord Neuberger MR criticised the lack of pockets on this clothing range and argued that this omission was absolutely critical to the case. Indeed, they suggested that the essence of an off-field product was that it should have “at least one pocket – for money, keys, mobile phone, or an iPod, for example” [30]. Hudson Bay didn’t help themselves in this regard when even their own marketing specialist (Jock Thompson) gave witness testimony that “adding pockets converted on-field garments into off-field garments, and that removing pockets converted garments the other way” [28]. The Court also heard testimony that FIFA forbade any on-field products to include pockets [30]. Given these conclusions, it was highly likely that these products would be considered to be “on-field” wear in contravention of HBC’s licensing agreement [31].

Similarly, although the Court accepted that tracksuits would generally be characterised as off-field wear, the fact that tracksuits were marketed alongside the shorts and t-shirts in both the S&S catalogue [33] and in Dick’s Sporting Goods [34] was enough to transfer the products into on-field wear, thereby absolving Dick’s Sporting Goods from any liability for breach of contract, and creating liability for Hudson Bay for their sales to S&S. The multi-purpose and multi-environment nature of the tracksuit was not therefore the important part, but rather in what context it was sold. The same tracksuit could therefore be both on-field and off-field depending on how it was marketed. This seems a particularly ambiguous way to conduct a commercial licensing agreement with two direct competitors, but perhaps grey is this season’s fashionable colour????!

Hudson Bay’s defence to this claim, that they were given the authority to market this clothing by Miss Barbara Jackson (appointed President of Umbro US in 2006) was however rejected [37]. At first glance this might seem surprising given that there was no doubt that Miss Jackson had both orally approved the removal of pockets from the “soccer basics collection” marketed in S&S [41] and signed a variation authorising this range [57], on closer reflection though, it is clear that Hudson Bay could not rely on either of these approvals [42] as they knew, or should have known that neither could not have bound Umbro UK.

While the Court held (obiter) that a company like Umbro UK could be bound “(through an implied term, implied agency, or, possibly, on some other basis) by a consent given by Miss Jackson” [50], none of these applied in this case as Hudson Bay could not have reasonably have believed that this approval would have been binding on Umbro UK given the previous detailed contractual history between the companies [59]. Makes you wonder what exactly Miss Jackson’s role was then? The devil is most firmly in the detail and in this instance the detail said that only Umbro UK could grant approval of designs.

For the same reasons, an estoppel argument also failed, as did a suggestion that Umbro UK had not enforced its prohibition quickly enough [60].  Even if the Court was wrong though and a waiver (license) was valid, this did not help HBC as such a conclusion could only defeat a damages claim for past marketing of the pocket-less ‘soccer basics’ clothing rather than authorise future sales of this range [62] which is what HBC wanted.

Perhaps unsurprisingly, Umbro UK’s decision not to process any further sales orders from HBC during this litigation (which formed the basis of HBC’s third claim) also failed as this was a reasonable commercial decision for Umbro to have taken [66], although Umbro were in breach for unreasonably failing to consider new clothing designs from HBC during the same period.

On a slightly lighter note, the pun of the case must go to Lord Neuberger at paragraph [32] when in discussing whether the provision of larger size products (XL, XXL and XXXL) was inconsistent with an on-field collection stated that: “we were not told what size waist would be accommodated by XXXL, and, anyway, people with ample waists are not excluded from playing soccer. Accordingly, I would not accord that point any weight [emphasis added].” 

Behind the scenes at Umbro Football Design (Youtube):

Hudson Bay advert from the Vancouver Winter Olympics (Youtube):

Advertisements
, , , , , , , , , , , , , , , , , , , , , , ,

About Kris

Associate Professor in Sports Law, Staffordshire University; British Gymnastics Senior Coach

View all posts by Kris

Follow us:

Subscribe to our RSS feed and social profiles to receive updates.

No comments yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: