Licensee Sues Rusty
San Diego–based surf brand Rusty and its new Australian owners are being sued by longtime Rusty apparel licensee and owner of more than 40 percent of the brand, C&C Partners, in California Superior Court for a laundry list of offenses, including breach of contract and breach of fiduciary duty. The surf brand, which launched as a surfboard manufacturer in 1985, has been licensing apparel to C&C since 1988. The lawsuit was filed on Dec. 14.
In June, Rusty founder Russell Preisendorfer sold his 52 percent of Rhellip;And Everything Else (which does business as Rusty) to Vegas Enterprises, a manufacturer and sublicense of the surf brand, which makes Rusty apparel for distribution in Australia and New Zealand.
Upon his departure, Preisendorfer signed a five-year, $300,000-a-year deal with Vegas to provide the company with part-time consulting services. The trouble started on July 21, the lawsuit alleges, when Vegas’ principals and Rusty’s new majority owners opted to transfer the expenses from Vegas’ books to Rusty’s. Donald Clark and Paul Carr, C&C’s principals and the minority owners of Rusty, opposed the move and allege in the suit that it represents a violation of California law and a breach of Vegas’ fiduciary duty to them.
Among other complaints, C&C alleges that Rusty owes C&C $298,000 for goods sold by the licensee to the brand and that Vegas plans to charge Rusty an $85,000 management fee each year, starting in 2007. Also, part of the licensing deal calls for Rusty to dedicate a percentage of its net domestic sales to direct advertising, promotion and marketing, promoting the brand and C&C’s Rusty-branded products in the United States. C&C alleges that Vegas plans to breach the licensing agreement by drastically reducing Rusty’s advertising expenditures.
C&C is asking for, among other things, damages, punitive damages and an order rescinding the delegation of Preisendorfer’s consulting fees to Rusty from Vegas.
Attorney Greg Weisman of Silver & Freedman is representing C&C in the suit and declined to comment on the pending litigation. “However, our goal is only the continued success for this venerable, core surf brand,” he said.
Representatives at Rusty and Vegas could not be reached for comment.
—Erin Barajas
