Nasty Gal has filed a breach of contract lawsuit this week against a software vendor in connection with its ongoing bankruptcy proceedings. According to the Los Angeles-based retailer's lawsuit, which was filed on Wednesday in the U.S. Bankruptcy Court for the Central District of California, the vendor at issue stands to impair the $20 million offer that UK-based company Boohoo has waged for the struggling fast fashion brand.
Nasty Gal alleges that Island Pacific Systems, Inc. - a merchandising and store operations software solutions firm - has threatened to "stop an essential service" that it provides to Nasty Gal in light of the brands existing debts. Island Pacific Systems Inc allegedly demanded nearly $158,000 in outstanding fees from Nasty Gal, with a payment deadline of Friday, and has rebuffed approaches to discuss its bankruptcy stay.
As such, Nasty Gal has urged Judge Sheri Bluebond of the U.S. Bankruptcy Court for the Central District of California to prevent the vendor from severing its inventory management and sales analyses services.
Per Reuters, "Nasty Gal told that court that it needs to maintain its normal business operations to meet conditions of a stalking-horse offer by Boohoo Limited, a subsidiary of U.K. fast-fashion online retailer Boohoo. Its offer for Nasty Gal's intellectual property and customer databases, made last month after the retailer filed for Chapter 11 bankruptcy in November, will be subject to other bids at an auction on Feb. 7."
If this move sounds familiar, it's because American Apparel - which is on its second round of bankruptcy proceedings with the past two years - filed suit against one of its suppliers last month. In American Apparel's case, it petitioned the U.S. Bankruptcy Court in Delaware to step into a dispute with its fabric provider which threatened to withhold 248,011 pounds of raw fabric. The parties ultimately settled the matter out of court and the Los Angeles-based brand was successfully acquired this month by Canadian company Gildan Activewear.
* The case is In re Nasty Gal Inc, in U.S. Bankruptcy Court for the Central District of California, No. 2:16-bk-24862-BB.