Harry & David Faces Two Lawsuits

Mar 24, 2011 9:10 PM  By

UPDATE: Harry & David Files Chapter 11

Troubled multichannel food gifts merchant Harry & David is being sued by a contact center vendor and by a former employee.

Customer relations management firm Convergys filed a breach of contract suit against Harry & David in U.S. District Court of Medford, OR.

According to court documents, Convergys is seeking nearly $10 million from Harry & David – $5.96 million for “improper and unlawful termination of the agreement by Harry & David” and a past-due payment of $3.83 million.

Convergys began working with Harry & David on or about Aug. 1, according to the lawsuit, and Harry & David requested an early termination of that agreement in February. Harry & David has disputed the $3.15 million termination fee.

Harry & David also disputes that is owes Convergys $3.17 million for services it provided in November and December. Harry & David said the amount for those two months should be $2.7 million, but it has also refused to pay that amount to Convergys, according to court documents.

The complaint claims Harry & David signed a two-year, no-termination deal with Convergys. The merchant has not responded to that lawsuit, which was filed March 14.

Meanwhile, its former executive vice president/chief customer officer Drew Reifenberger is suing Harry & David in the U.S. District Court of Atlanta because he said his contract when he was terminated by the company “without cause” on Jan. 12.

Reifenberger, who was brought in by then-CEO Steve Heyer as part of a turnaround team in Febuary 2010, said in the complaint that he is contractually owed a payment of 12 months base salary and continuation of health benefits.

But Harry & David said Reifenberger was fired for cause, though the reason for Reifenberger’s firing was not detailed in Harry & David’s response to the complaint. Reifenberger is suing for $350,000 plus prejudgement interest.

Portland, OR-based turnaround specialist Renee C. Fellman has been following Harry & David, and says that the merchant has been very “tight lipped” about its business affairs.

Harry & David may not be paying Convergys or Reifenberger because it is conserving cash so it “can successfully navigate a planned Chapter 11,” Fellman says.

Though Heyer was replaced as CEO by turnaround specialist Kay Hong, who also has the title of chief restructuring officer, on Feb. 18, Fellman says Harry & David seems to be in public denial about its financial situation. But the cataloger should have known when it signed its agreement with Convergys that it was a contract it may not have been able to honor, she notes.