Collateral Damage from the Retail BombPosted: April 8, 2021
By Alan Behr, Phillips Nizer Partner and Fashion Law Chair
We noted in a recent report in The New York Times of a husband and wife, both in their sixties, whose company owned a Connecticut warehouse in which Brooks Brothers had stored fixtures, displays and props. As a byproduct of the bankruptcy of that signature purveyor of American style, the entire lot was abandoned in their care, leaving the couple with a warehouse full of trunks, mannequins, racks, Christmas trees and more—instead of rent that had been the primary source of their personal income. The lowest bid they received to haul it all away was just shy of a quarter million dollars—a sort of Storage Wars or Baggage Battles in reverse.
The sad fact is that, when retailing—which is about little if not the flow of goods—goes wrong, things will get stuck somewhere. If you are left in possession of boxes of new-with-tags crew-neck cashmere sweaters, you might, with some effort, come out ahead, but not everything can be that easily monetized. It is like musical chairs, and whatever you might say about possession being nine-tenths of the law, if you end up possessing things you did not want or, worse, find difficult to sell or even give away, you can end up suffering collateral damage in a battle lost by someone else.
For warehouse owners, whose contracts are normally both detailed and favorable to their legal position, a useful preventative, wherever permitted by law, is to insist on more upfront rent and perhaps a further deposit (directly or in escrow) of a reserve for hauling away abandoned property. If apparel is what travels through your possession, a good idea is to remember that fashion is about speed: generally, the longer that goods stay anywhere, the harder they will be to resell in bulk. That may not be as true for classic items such as those typically sold by Brooks Brothers, but the Connecticut warehouse held no merchandise or anything else for which a few eBay postings would provide quick relief. True enough, Christmas trees may not go out of style—but consider what you might have to do to move along whatever you end up possessing should something go wrong in the chain of distribution in which you find yourself but one vulnerable link.
It is often said that commerce is powered by capital and initiative, but the fuel that moves it along is optimism. Lawyers are, by nature, worriers, and we should not allow our warnings of “but what if” to hinder the good works that will arise from a positive point of view. But having a good exit strategy never hurt even the most optimistic of field commanders, and the same is true whenever goods enter into the stream of commerce.