Lawsuit claims Kohl’s failed to pay for $8M worth of clothing

A New York apparel company is accusing Kohl’s Corp. of theft by fraud in a federal lawsuit, saying the Menomonee Falls-based retailer refused to pay for about $8 million worth of clothing.

PSK Collective filed the lawsuit against Kohl’s Corp. on Aug. 13 in U.S. District Court in Milwaukee.

PSK said the company sustainably sources its clothing line, which blends streetwear and athletic apparel for women. The company was created by World Rugby Hall of Famer Phaidra Knight and The Powell Companies Real. The company said it donates 15 percent of profits to organizations that empower women and girls in sports.

In its complaint, the company alleges that it purchased 600,000 clothing units from factories and vendors to fulfill 600 purchase orders made by Kohl’s from 2021 to 2022. PSK said it filled the orders and submitted 1,500 invoices to the Menomonee-Falls based retailer, but the apparel company said Kohl’s refused to pay for $7.8 million worth of clothing.

“Despite these purchases and despite receiving written notice from PSK of its failure to pay, Kohl’s has failed and refused to pay the invoices,” the complaint states. “A variety of Kohl’s employees offered a myriad of excuses for its non-payment, with internal logistical and record-keeping problems among the most frequently cited.”

PSK said the retailer is in breach of its vendor agreement, claiming Kohl’s is believed to have made $17 million in profits from the sale of its goods.

The complaint states that Kohl’s strung PSK along with “empty promises and never-ending excuses” and requested documentation for more than two years. Even so, PSK said Kohl’s agents signed documents that showed it received the shipments and did not express dissatisfaction with the merchandise.

“Given this clear documentation and the history of non-payment, it is clear that Kohl’s never intended to pay the invoices,” the complaint states. “At the time the agreement was executed, Kohl’s falsely represented that it would pay PSK pursuant to the purchase orders, when, in reality, it had no intention of doing so.”

Kohl’s did not immediately respond to a request for comment on the lawsuit Monday, and the retailer has not yet filed a response in federal court.

The New York apparel company wants a judge to order that Kohl’s breached its contract, falsely represented that it would pay for merchandise and knowingly made false statements to get the company to fulfill purchase orders.

PSK has also requested a jury trial. U.S. District Judge J.P. Stadtmueller issued an order requiring attorneys and their clients to take appropriate measures to avoid a trial and explore settlement, citing the court’s limited resources and “ever-burgeoning case load.”

Kohl’s Corp. has been struggling over the last year. In January, the company announced plans to close 27 stores across the country where sales were lagging.

In the final quarter of last year, the Wisconsin-based retailer saw net sales drop by more than 9 percent year-over-year, and its operating income fell from $299 million the prior year to $126 million.

In May, the retailer also announced it had fired its CEO Ashley Buchanan after only months on the job, pointing to an investigation that found he behaved unethically. Kohl’s said a review by outside counsel found Buchanan directed the retailer to “engage in vendor transactions that involved undisclosed conflicts of interest” in violation of company policies.