Hat World suing three former execs for contract breaches

September 2, 2011

Indianapolis-based Hat World Inc. is suing three former executives for allegedly violating their contracts and non-compete clauses by starting a rival business and  attempting to take customers and employees with them.

Hat World filed the lawsuit in federal court in Indianapolis on Aug. 26. The complaint seeks monetary damages and a permanent injunction prohibiting the men from soliciting customers and employees for one year, and from disclosing any of Hat World's trade secrets.

Named as defendants are Thomas Handlen and two sons, Jeff and John Handlen, who were hired to lead the Lids Team Sports division created in 2009 following Hat World’s purchase of the Handlens’ Madison, Wis.-based company, Impact Sports.

Hat World, also known as Lids Sports Group, used the $4 million acquisition to help it grow its team sports business. The Lids Team Sports division now does business in 43 states.

The Handlens traveled to Indianapolis frequently following the sale and were in constant contact with Lids Team Sports sales reps, the suit said. But, on May 5, 2011, Hat World terminated the Handlens due to poor performance, the suit says.

“Sales representatives were quitting, communications with Hat World executive management was poor to non-existent, and the Handlens proved to be terrific salesmen but poor businessmen in terms of their ability to actually run the Lids Team Sports business,” the suit said.
 
Still, the Lids Team Sports division is performing quite well for Nashville, Tenn.-based Genesco, the parent company of Hat World.

Hat World generated sales in the latest fiscal year of $603 million, a nearly 30-percent increase from the previous fiscal year. The growth included a $46.7 million increase in sales from the Lids Team Sports business, primarily due to acquisitions, according to Genesco Inc.’s latest annual report.

Since their firing, the Handlens have attempted to rebuild Impact Sports, the lawsuit asserts.

The suit says Jeff Handlen contacted World Wide Promotions, the largest customer of Lids Team Sports, and offered to sell it embroidered or printed sports uniforms and apparel. The company would initially offer "generic” brands but would eventually carry top retail brands such as Nike or Adidas, Handlen said, according to Hat World’s complaint.

The suit also said the Handlens had unlimited access to business, development and marketing strategies of Lids Team Sports, and to other confidential information such as pricing and customer and vendor lists.

Besides monetary losses resulting from the Handlens’ conduct, Hat World also will “sustain intangible losses that cannot be remedied by any award” if a temporary restraining award and permanent injunction are not granted, the suit said.

“Use of the confidential information by a competitor would result in serious, irreparable harm to Hat World,” the complaint said.
 
Lids Team Sports maintained production and warehouse operations in Madison until the division moved to Indianapolis in December 2010.

Genesco announced in June 2010 that it would spend $22 million to expand the company’s Indianapolis headquarters and distribution operations.

Lids Sports Group, which employs about 250 at its Indianapolis headquarters and distribution center, announced in June 2010 that it would add as many as 571 jobs here by 2015 as part of the project. That included about 150 Impact Sports job production and distribution jobs moving from Madison.

Hat World is represented by David Given of Indianapolis-based law firm Baker & Daniels LLP.

 

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