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Commitments and Contingencies
6 Months Ended
Jun. 30, 2016
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

9. Commitments and Contingencies

Legal Proceedings

 

In July 2013, Signature Apparel Group LLC, referred to as the Debtor, filed an amended complaint in an adversary proceeding captioned Signature Apparel Group LLC v. ROC Fashions, LLC, et al., Adv. Pro. No. 11-02800 in the United States Bankruptcy Court for the Southern District of New York that, among others, named Studio IP Holdings LLC, referred to as Studio IP, and the Company (Studio IP and the Company are collectively referred to as Iconix), as defendants.  In the amended complaint, the Debtor asserts that Iconix was complicit in an alleged conspiracy to pay $2.8 million to Debtor’s principals.  The Debtor also alleges that ROC Fashions LLC paid a $6.0 million fee to Iconix for a license, and asserts that those funds should be returned to the Debtor as well.  In total, the Debtor is seeking at least $8.8 million in damages from Iconix. Iconix vigorously defended against the claims, and the trial on this matter concluded in March 2016.  The Company is currently awaiting the Bankruptcy Court’s determination on the matter and is unable to estimate its ultimate outcome.  

In December 2015, Anthony L&S, LLC, referred to as ALS, the licensee of the Pony and related trademarks, commenced an action captioned Anthony L&S, LLC v. US Pony Holdings, LLC and Iconix Brand Group, Inc., Index No. 654199/2015 in New York State Supreme Court, New York County against the Company and its subsidiary, US Pony Holdings, LLC, referred to as Pony, seeking damages of $30.0 million, plus punitive damages, attorneys’ fees and costs.  ALS alleges that Pony breached the parties’ license agreement by failing to comply with its marketing obligations.  ALS also alleges that Pony and the Company are liable for fraud because Pony and the Company made purported misstatements about their marketing intentions/efforts.  The Company and Pony are vigorously defending against the claims.  At this time, the Company is unable to estimate the ultimate outcome of this legal matter.

In January 2016, ALS’s affiliate, Anthony L&S Athletics, LLC, referred to as Anthony Athletics, commenced an action captioned Anthony L&S Athletics, LLC v. US Pony Holdings, LLC and Iconix Brand Group, Inc., Case No. 11867 in the Chancery Court in the State of Delaware against the Company and Pony.  Based primarily on the same allegations as in the New York action, Anthony Athletics, the Company’s joint venture partner in Pony, seeks a judicial dissolution of Pony, as well as $30.0 million in damages resulting from the Company’s purported breach of the Pony operating agreement and the failure to market the brands. The Company and Pony are vigorously defending against the claims.  At this time, the Company is unable to estimate the ultimate outcome of this legal matter.

 

In April 2016, New Rise Brands Holdings, LLC, referred to as New Rise, a former licensee of the Ecko Unlimited trademark, and Sichuan New Rise Import & Export Co. Ltd., referred to as Sichuan, the guarantor under New Rise’s license agreement, commenced an action captioned New Rise Brands Holdings, LLC and Sichuan New Rise Import & Export Co. Ltd v. IP Holdings, LLC, et al., Index No. 652278/2016 in the New York State Supreme Court, New York County against the Company’s subsidiary, IP Holdings, LLC, referred to as IP Holdings, seeking damages of $15 million, plus punitive damages of $50 million, attorneys’ fees and costs.  Among other claims, New Rise alleges improper termination of New Rise’s license agreement and fraud.  IP Holdings is vigorously defending against the claims and has asserted counterclaims against New Rise and Sichuan.  At this time, the Company is unable to estimate the ultimate outcome of this legal matter.

Two shareholder derivative complaints are pending in the United States District Court for the Southern District of New York captioned James v. Cuneo et al, Docket No. 1:16-cv-02212 and Ruthazer v. Cuneo et al, Docket No. 1:16-cv-04208, and two shareholder derivative complaints are pending in the Supreme Court of the State of New York, New York captioned De Filippis v. Cuneo et al. Index No. 650711/2016 and Gold v. Cole et al, Index No. 53724/2016.  The complaints name the Company as a nominal defendant and assert claims for breach of fiduciary duty, insider trading and unjust enrichment against certain of the Company's current and former directors and officers arising out of the Company's recent restatement of financial reports and certain employee departures.  An additional shareholder derivative complaint captioned Rosenfeld v. Cuneo et al., Index No. 510427/2016 is pending in the Supreme Court of the State of New York, Kings County.  The complaint names the Company as a nominal defendant and asserts similar claims against certain of the Company’s current and former directors and officers as noted in connection with the shareholder derivative complaints described above.  At this time, the Company is unable to estimate the ultimate outcome of these legal matters. 

As previously announced, the Company has received a formal order of investigation from the SEC. The Company intends to continue to cooperate fully with the SEC.

Three securities class actions, respectively captioned Lazaro v. Iconix Brand Group, Inc. et al., Docket No. 1:15-cv-04981-PGG,  Niksich v. Iconix Brand Group, Inc. et al. , Docket No. 1:15-cv-04860-PGG and  Haverhill Retirement System v. Iconix Brand Group, Inc. et al  Docket No. 1:15 – cv 06658, have been consolidated in the United States District Court for the Southern District of New York against the Company and certain former officers and one current officer (each, a “Class Action” and, together, the “Class Actions”). The plaintiffs in the Class Actions purport to represent a class of purchasers of the Company’s securities from February 22, 2012 to November 5, 2015, inclusive, and claim that the Company and individual defendants violated sections 10(b) and 20(a) of the Securities Exchange Act of 1934, by making allegedly false and misleading statements regarding certain aspects of the Company’s business operations and prospects.  The Company and the individual defendants have moved to dismiss the consolidated amended complaint and intend to vigorously defend against the claims.  At this time, the Company is unable to estimate the ultimate outcome of this legal matter.

From time to time, the Company is also made a party to litigation incurred in the normal course of business. In addition, in connection with litigation commenced against licensees for non-payment of royalties, certain licensees have asserted unsubstantiated counterclaims against the Company.  While any litigation has an element of uncertainty, the Company believes that the final outcome of any of these routine matters will not have a material effect on the Company’s financial position or future liquidity.