Rock & Republic in a Denim Distribution Dispute

The exclusive distributor of the Rock & Republic line in Canada is accusing the company of eschewing an agreement that mandates the pricey denim only end up in the hands of select, high-end retailers – and instead funneling the clothes to Costco stores.

Simms Sigal & Co. has been distributing clothes made by Rock & Republic – which is currently under bankruptcy protection – to Canadian stores since 2006 and credits itself as having “single handedly built the brand into a multimillion dollar enterprise in Canada,” according to court papers. As part of its efforts, Simms has limited its focus to stores like Neiman Marcus, noting that it doesn’t want its customers confusing the expensive duds with clothes like – shudder – Gap brand jeans.

“Given its cachet, styling and pricing, Simms’ strategy, as required by its agreements with R&R, has been to focus its marketing and sales activities exclusively at ‘approved retailers’ consisting of first-class, upscale retail clothing boutiques and stores specializing in the sale of expensive designer garments,” Simms said.

Definitely not on that list of retailers: Costco, the chain of giant warehouses that actually references cost cutting in its name. But that’s exactly where Simms discovered its prized Rock & Republic jeans in November 2009, according to court papers.

The company said it immediately alerted Rock & Republic officials, who assured Simms that Costco was not authorized to carry the products and vowed to take action. But months passed, and the jeans were still appearing on Costco’s shelves, Simms said.

“Despite R&R’s initial assertion that they were ‘investigating’ the Costco situation, no action was ever taken by them to cause Costco to cease selling the R&R Costco Merchandise,” Simms said.

In addition, Rock & Republic refused to support Simms in a lawsuit against Costco and even urged it to back down from the litigation. In the aftermath of that scuffle, a Rock & Republic representative admitted that it was actually the jeans designer itself that was feeding the merchandise to Costco, according to Simms.

Attorneys for Rock & Republic didn’t return calls seeking comment Friday.

Now, Rock & Republic is seeking to sever its exclusive distribution agreement with Simms, leading the Canadian company to hypothesize that the jeans maker went to Costco in an attempt to ditch the existing deal, which is not set to expire until the end of 2012.

“Simms finds it very suspicious that R&R has effectively refused to halt Costco’s sales of its products despite the requirement to do so in the agreement, and now attempts to bully Simms into withdrawing the very lawsuit against Costco that will most likely result in the halt of such sales and restitutions to Simms,” Simms said. “Given the facts, it would appear that the debtors have intentionally devalued the agreement to create a situation where they can claim that the agreement is not profitable and should be rejected.”

In its initial request to reject the agreement, Rock & Republic said eliminating the deal would allow it to build its Canadian sales. It called the agreement “burdensome.”

The dispute is currently in the hands of the U.S. Bankruptcy Court in Manhattan.