SVES names TJ Maxx, Burlington and Ross in its cross complaint. It alleges Gap went to them directly while SVES was struggling.
SVES does not only claim Gap sent it the wrong merchandise. It claims Gap then went after the customers it sold to.
The allegation sits in the fifth and sixth causes of action of the cross complaint SVES filed on September 30, 2024. It alleges contracts existed between SVES and its customers, naming Burlington Coat Factory, TJ Maxx and Ross Stores. And it alleges Gap began making direct sales to those same customers, or sharply increased its volume of sales to them, at the moment SVES was most vulnerable.
WHAT SVES SELLS, AND TO WHOM
To see why that would sting, you have to understand what SVES sells and to whom. The court’s own description of the company is clear enough: SVES and its related businesses buy retailers’ surplus or impaired inventory and resell it to major discount retailers, TJ Maxx, Burlington, Marshalls, Ross Stores. Those relationships are not a side of the business. They are the business.
SVES alleges Gap knew that. It alleges Gap knew SVES was under contract to resell the regular sized goods Gap had promised, and that when those goods did not come, SVES could not fill the orders it had already made to its own buyers. The pleading says the result was that SVES lost business and lost trust with its largest customers.
AN ATTEMPT TO GO PUBLIC
Running alongside all of this was an attempt to go public. SVES alleges Gap knew about that too, and alleges Gap threatened to sabotage the offering and damage SVES’s reputation unless it signed a settlement agreement acknowledging that Gap had met its obligations and the goods conformed.
WHERE THE RECORD TURNS AGAINST SVES
Here the record turns against SVES, and the turn is worth stating rather than skipping.
The judge found SVES was not in dire financial straits or facing imminent bankruptcy. He found the settlement was negotiated over several months with counsel on both sides. He found a reasonable person in SVES’s position would not have believed there was no alternative but to sign.
On the offering, he wrote there was a dearth of evidence: that Fullum admitted the public offering was mutually terminated before Gap filed suit, and that nothing was presented to show the offering could not have proceeded in the face of litigation. He also noted that SVES continued paying under the settlement until around the time the offering failed.
The duress defense lost. That is what the record says.
Q: DOES THAT MEAN THE INTERFERENCE CLAIM FAILED TOO?
A: No. What has never been tested is the interference claim itself.
The judge was explicit that the first phase of trial decided one thing only: whether SVES could rescind the October 2023 settlement. The interference counts, the fraud count, the unfair competition count and the demand for no less than $378 million are all still waiting.
PUT THE FACTS TOGETHER
SVES's account is that it lost the merchandise, then lost the customers, then got sued. Two of those three are not in dispute.
The cross complaint stands untried in its entirety, fraud, breach of contract, interference, and a demand for no less than $378 million.