October 20, 2009, 12:00 AM

Playboy drops its lawsuit against eFashion Solutions

Playboy has dropped its complaint against eFashion Solutions, which has provided it with e-commerce services since 2008. Under the settlement, Playboy agreed to dismiss the lawsuit after receiving a late payment of an unspecified amount from eFashion.

Katie Evans

Managing Editor, International Research

 

Playboy Enterprises Inc., which sells online at ShoptheBunny.com and PlayboyStore.com, has dropped its lawsuit against its third-party e-commerce provider.

Playboy, No. 203 in the Internet Retailer Top 500 Guide, said yesterday it had dropped its complaint against eFashion Solutions Inc., which has provided Playboy with e-commerce platform management and other third-party services since 2008. “EFashionSolutions and Playboy have reached a settlement of their dispute, and have agreed to new, mutually-beneficial terms that will enable the continued success of Playboy`s online business,” the companies said in a joint press release.

In court papers filed June 17 in the U.S. District Court for the Northern District of Illinois, Playboy alleged that eFashion Solutions violated certain contract conditions, which it didn’t specify. Playboy also alleged that eFashion Solutions didn’t live up to various contractual obligations even after certain terms of the original January 2008 license agreement were renegotiated. Under the original contract, Playboy was to be compensated a total of $13.7 million, including a minimum royalty fee of $1.25 million for 2008. The minimum royalty was later renegotiated to $750,000, which Playboy said eFashion Solutions still hadn’t paid.

In updated court papers Playboy filed in September, eFashion Solutions and Playboy said they had reached a settlement Aug. 26.Playboy on Sept. 3 withdrew its lawsuit with prejudice, which means Playboy cannot file a similar lawsuit again. Under the terms of the settlement, Playboy agreed to dismiss the complaint within 10 days of receiving a past due payment of an unspecified amount from eFashion, which Playboy has since received, according to court documents. “The parties also agreed that the dismissal of this lawsuit shall be deemed to be with prejudice, with each party to bear its own costs and attorneys’ fees so long as eFashion makes an additional agreed-upon payment to Playboy.com by Jan. 5, 2010,” the court document says. The amount of the second payment wasn’t specified.

The settlement comes at a time when Playboy’s e-commerce business is hurting. E-commerce revenue in the second quarter ended June 30 for Playboy dropped 23.3% to $8.9 million from $11.6 million in the prior year. For the first half of the year, e-commerce revenue dropped 32.1% year over year to $18.2 million from $26.8 million. Playboy hasn’t set a date to release its third quarter earnings.

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