Genesis sues jewelry supplier for leaving it in the lurch

Genesis Diamonds says jewelry supplier John Hardy left it in the lurch, terminating an exclusive sales agreement and leaving the Green Hills jeweler sitting on hundreds of thousands of dollars of products it can’t sell.

In a suit filed originally in Davidson County Circuit Court but removed to U.S. District Court by John Hardy, Genesis owner Boaz Ramon claims that John Hardy — a designer and supplier of luxury jewelery — acted in bad faith when it suddenly terminated a years-long exclusive sales agreement and just as suddenly made Genesis competitor King Jewelers its exclusive indepedent jewelry store in Middle Tennessee.

Until 2009, John Hardy had an exclusive deal with the now-defunct Carlyle & Co. for selling its products in Middle Tennessee, but shortly after Carlyle went out of business, the boutique jewelery designer gave that contract to Genesis. Genesis says it went to great expense and effort to make initial purchases of John Hardy products and to market them in Nashville, where the brand was largely unknown prior to 2010. So successful was this partnership, John Hardy asked Genesis to begin selling its products at its Cool Springs store less than one year after inking the contract.

Earlier this year, new John Hardy CEO Robert Handson hired a chief commercial officer, Marc Hrushka, from another leading jewelry firm, Chopard. Genesis claims that while Hrushka was at Chopard, he “abruptly terminated” the company’s exclusive agreement with Genesis — shortly after Genesis spent $200,000 on Chopard merchandise — and then just as abruptly switched allegiances to King Jewelers. Nevertheless, Genesis says it was repeatedly encouraged by John Hardy reps to make further purchases as those reps repeatedly confirmed that Genesis would continue to be the exclusive dealer of John Hardy products.

Based on these intimations, Genesis said it made 60 total orders between January and August of this year, when John Hardy called to terminate the dealer contract. Less than two weeks later, King Jewelers announced it would be the new exclusive John Hardy retailer in Middle Tennessee.

Genesis says it is within its rights to sell its remaining John Hardy stock, even as John Hardy advertises that authorized purchases are made only from King; furthermore, John Hardy will only warrant its jewelery if sold by an authorized retailer.

“Genesis faces an unwinnable dilemma,” the suit reads. “Genesis must either continue expending resources marketing John Hardy jewelery, primarily to the current and future benefit of John Hardy and King Jewelers, or cease marketing John Hardy and simply take a loss.”

Genesis’ attorney Brian Manookian says the situation is akin to one in college sports where a coach can leave a university at any time, leaving student-athletes with remaining eligibility stuck holding the bag, and to “bringing a girl to a dance, having her win Prom Queen, and then watch her go home with somebody else.”

Manookian said this situation is fairly common in the jewelry industry, because jewelers are unwilling to unilaterally agree to write in non-compete clauses into their dealer contracts or to agree to stop poaching deals.

Genesis is claiming violation of the state’s unfair and deceptive trade practices law, fraud, breach of contract and unjust enrichment. The retailer is seeking actual and punitive damages against John Hardy.