The civil complaint, filed late Tuesday in the US District Court in NewYork, seeks to terminate the jeanswear licensing agreement between Klein andWarnaco. It also seeks to recoup Warnaco's profits from "improper sales" todiscounters and unspecified compensatory damages.

Calvin Klein has retained David Boies of high-powered law firm Boies,Schiller & Flexner, whom the Justice Department used as special trialcounsel in its antitrust case against Microsoft Corp. The co-founders of thefamous 32-year-old fashion house said they had repeatedly attempted toresolve their differences with Warnaco and Wachner, and only sought legalrelief as a last resort.

"Today is a really big step to protect our company, and something I do nottake any pleasure in," said an angry Klein on Tuesday afternoon in atelephone interview. "We simply cannot stand by and jeopardise the integrityand value of our trademark." Added Barry Schwartz, who co-founded thefashion house in 1968: "There have been problems with Warnaco for the lasttwo years, but they've gotten much worse recently."

A lawyer for Warnaco declined to comment, saying he had not yet reviewed thecomplaint, which was received late on Tuesday. Wachner couldn't be reachedfor comment.

Specifically, the suit charges Warnaco with "diluting" the Calvin Kleintrademark by selling large volumes of its merchandise to off-pricewarehouses such as Costco, Sam's Club and BJ's. The fashion house is alsocharging that Warnaco misrepresented its dealings to Calvin Klein in manyinstances-selling unauthorised products in Calvin Klein outlet stores,including Chaps by Ralph Lauren, a competing label that is produced byanother Warnaco division. In the suit, Calvin Klein alleges that Warnacoembarked "on a programme of discounting and mass-marketing of productsbearing [its trademarks], with the intention of maximising short-term cashflow regardless of the long-term damage" to Calvin Klein, which the publicvalues "as a quality designer brand." Tuesday's lawsuit involves only CKjeanswear, for which Warnaco holds a licence that runs through 2034.

Meanwhile, a similar dispute with Warnaco over the CK underwear licence isbrewing. Warnaco bought the CK underwear business outright from Calvin Kleinin 1994 for $64 million, but Calvin Klein, which still designs theunderwear, has control over certain aspects of the business. However, underthat purchase agreement, any conflicts must be resolved through arbitration,which Klein said Tuesday he is looking into.

The six-year relationship between the two parties has been testy from thebeginning, but tension rose in January, after Wachner announced Warnaco'splans to broaden its distribution of Calvin Klein underwear by selling thebrand to JC Penney Co. The move angered Calvin Klein's key department-storecustomers such as Dillard's Inc.

The house of Calvin Klein, one of America's most recognised brands, notedfor its sexy, cutting-edge advertising, generates an annual licensing streambelieved to be more than $150 million a year. The closely held company'swholesale revenue is estimated at more than $2 billion, across a breadth ofapparel, cosmetics and home furnishings, virtually all of it licenced toother companies. Calvin Klein argues that Warnaco's sales to "unapproveddiscounters" risk changing CK's jeans business from a "full-price wholesalebusiness into a mass-marketing discount operation." While Calvin Kleinapparel has shown up in many discounters' bins over the years, Klein assertsthat Warnaco was authorised only to unload irregulars and productionoverruns at such low-end retailers. But the complaint alleges that Warnacohas been manufacturing underwear expressly for those discounters, inviolation of their agreement.

The lawsuit squarely targets Wachner, calling her managerial style "abusiveand unprofessional." For instance, the plaintiffs charge that Wachner"cannot be relied on to honour her personal commitments or her company'scontractual or fiduciary obligations."

In meetings last November and December, Wachner "specifically told Kleinthat [Calvin Klein] merchandise would not be sold to JC Penney. Shortlythereafter, Warnaco went ahead and distributed Calvin Klein underwear toPenney," according to the court filing.

-- The Wall Street Journal