A top Swiss luxury watch brand and its North American distributor were in litigation early this year over whether the brand can cancel its contract with the distributor. Each accuses the other of alleged product shortages and supposedly diverting watches to the gray market.

Roger Dubuis S.A., based near Geneva, says it ended its contract with Helvetia Time Corp., doing business as Roger Dubuis North America, in November for “many breaches of contract.” However, the U.S. firm, based in Wilkes-Barre, Pa., denies that and contends the watchmaker actually wants to take over the business in America. RDNA has taken legal action here and in Switzerland to block what its president Alex J. Nobile calls the “unjust termination.”

The contract runs through May 2009, with an option to renew until 2014.

RDNA’s bid for an injunction to prevent the termination and also to prevent alleged unfair competition and contact with its customers and employees by the watchmaker was approved in December 2005 by Pennsylvania and federal courts. At press time, a hearing in federal court on the watchmaker’s challenge to the injunction was expected to be held in January.

RDNA also filed for an injunction in the Geneva court (also opposed by the watchmaker), and asked the arbitration panel of the International Chamber of Commerce, based in Switzerland, to review the issue and order the watchmaker to continue the contract.

In a Jan. 11 statement given to JCK, watchmaker Roger Dubuis S.A. said that because of “many breaches of contractual obligations” by RDNA, it was “obliged to cancel the contract,” effective Nov. 11. It alleged there were “many late payments” and that despite “reminders and warnings … a substantial number of invoices remained outstanding.” It also claimed the North American distributor “frequently disposed of watches on the parallel [i.e., gray] market,” damaging the image and economic interests of the Swiss watchmaker and its retailers worldwide.

In a JCK interview Jan. 17, Nobile denied there were any breaches of contract and said RDNA had been sending “payments on account.” He contended the Swiss watchmaker was trying to “unjustly terminate” the contract and was holding “as hostage and leverage,” more than 100 watches of RDNA’s customers, some since June, sent there for repair. “When they release the watches, repaired to our satisfaction and that of our customers, we will pay everything that’s due,” he said in January.

As for the “parallel market” charge, Nobile called that “an absurd statement. Nothing in their legal responses raised that issue.” Instead, a Dec. 27 letter to RDNA customers about the dispute from Steve Holtzman, RDNA chief executive officer (following one sent Dec. 16 by the watchmaker), said the Swiss watchmaker “created product shortages [and] diverted products to fuel the gray market” and was now trying to blame RDNA.

The U.S. firm also sought 1 million Swiss francs (about $780,000) for alleged unpaid advertising costs. That was also contested by the Swiss watch manufacturer.

In its statement, Roger Dubuis S.A. said it was “restructuring and improving its international distribution network,” and that the dispute wouldn’t affect the growth and development of its business or sales in North America.

Nobile said, however, RDNA “took an unknown luxury brand, worked hard, and invested heavily in making it successful here. We are the exclusive distributor of Roger Dubuis watches for North America, Central America, and the Caribbean.”

Manufacturer Roger Dubuis S.A. began in 1995 and is sold worldwide. It produces only 28 of most new models in its several collections of large watches. Its specially built facility in Meyrin-Satigny, outside Geneva, has almost 400 employees and produces between 25,000 and 30,000 watches a year. In 2005, it significantly expanded its headquarters and launched a line of jewelry.

Helvetia Time (as RDNA) began distribution of the watches in North America in 1999 and has about two-dozen high-end retail jewelry clients here.