Beyond the Rack Can't Escape Gucci Lawsuit Even if it's Bankrupt

The lawsuit that Gucci filed against Beyond the Rack is not going away, even if the Montreal-based flash sale site recently filed for bankruptcy. You may recall that Gucci filed an ugly multi-million dollar lawsuit against Beyond the Rack in February 2016, alleging that it was selling counterfeit Gucci bags.

According to Gucci’s lawsuit, which was filed in the Southern District of New York Court (“SDNY”), Beyond the Rack “recently promoted, advertised, distributed, offered for sale and/or sold a line of [at least four] unauthorized bags bearing an exact replica of Gucci's registered Interlocking Non-Facing GG Monogram (or a mark substantially indistinguishable therefrom) and the registered GUCCI mark, including sale via its website located at www.beyondtherack.com.”

The Italian design house further alleged that Beyond the Rack “manufactured, distributed, promoted and/or sold a variety of goods bearing one or more of the Gucci Marks that, upon information and belief, are not genuine Gucci products and are of inferior quality.” These are not just close copies, according to Gucci. The complaint states that the bags that Beyond the Rack is offering and passing off as authentic “are identical to or substantially indistinguishable from [authentic] Gucci product designs.”

Gucci’s legal team stated at the time that it filed suit “in order to protect the integrity of the Gucci brand and our loyal customers. Gucci is committed to protecting consumers from such illegal activity and to vigorously enforcing our intellectual property rights against those who sell counterfeit or infringing Gucci merchandise.”

According to the SDNY’s docket, Beyond the Rack’s counsel filed a “Notice of Bankruptcy” in April, after it failed to find a buyer to help offset some $44.3 million in debt that it owes to creditors ranging from secured lenders, such as Long Zone Holdings and Silicon Valley Bank, to Google and FedEx, as well as “dozens of creditors from the fashion industry.”

As part of its restructuring plan, Beyond the Rack changed its name, laid off two-thirds of its staff and filed for creditor protection – the Canadian equivalent of Chapter 11 bankruptcy – in Quebec Superior Court.

Beyond the Rack – which continues to operate online and on social media as Beyond the Rack despite its corporate name-change to 7098961 Canada Inc. (opting for the change in order to “preserve the value of the company’s brand and reduce the potential negative impact” of the filing) – is just the latest in a rather long list of struggling retail entities that have filed for bankruptcy protection in the past several years.

In its creditor protection filing, Beyond the Rack traces its woes to early 2014, citing a failed expansion into the U.S. as one of several reasons for its current predicament. Ugly lawsuits certainly do not help an ailing business, something that once-thriving, now-bankrupt Nasty Gal can certainly attest to.

* The case is Gucci America, Inc. v. Beyond the Rack Enterprises, Inc. et al, 1:16-cv-01156 (SDNY).