8-K

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): July 29, 2005

Enesco Group, Inc.
__________________________________________
(Exact name of registrant as specified in its charter)

Illinois	001-09267	04-1864170
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
225 Windsor Drive, Itasca, Illinois		60143
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 630-875-5300

Not Applicable
______________________________________________
Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[  ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[  ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[  ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 8.01 Other Events.

Enesco Group, Inc. today filed a Complaint against Department 56, Inc., Sunshine Productions, Inc., Kevin Knowles and Jim Shore Designs, Inc. in the United States District Court, Northern District of Illinois, Eastern Division.

In summary, the Complaint, as against Jim Shore Designs, alleges breach of contract related to Enesco's current license agreement with Jim Shore Designs, which license was filed with the SEC on a Form 8-K, dated October 5, 2004. Enesco specifically alleges that Jim Shore Designs is breaching provisions relating to Enesco’s exclusivity under the current license agreement. With regard to Department 56, the Complaint alleges a violation of Section 43(a) of the Lanham Act. As against Sunshine Productions, Enesco alleges that Sunshine Productions interfered with Enesco's contract with Jim Shore Designs. Finally, in the Complaint, Enesco alleges that Sunshine Productions and Kevin Knowles engaged in a civil conspiracy and induced an employee to breach her duty of loyalt y to Enesco. The Company seeks monetary and equitable relief in connection with the suit.

Enesco plans to rigorously pursue adherence to its current license agreement, and does not seek to terminate its license agreement with Jim Shore Designs in this Complaint.

The Complaint and press release are attached hereto, respectively as Exhibits 99.1 and 99.2.

Item 9.01 Financial Statements and Exhibits.

(c) Exhibits

99.1 Complaint, dated July 29, 2005, filed against Department 56, Inc., Sunshine Productions, Inc., Kevin Knowles and Jim Shore Designs, Inc. in the United States District Court, Northern District of Illinois, Eastern Division.

99.2 Press Release, dated July 29, 2005, announcing a Complaint filed against Department 56, Inc., Sunshine Productions, Inc., Kevin Knowles, and Jim Shore Designs, Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Enesco Group, Inc.
July 29, 2005	By:	/s/ Cynthia Passmore-McLaughlin
		Name: Cynthia Passmore-McLaughlin
		Title: President and Chief Executive Officer

Exhibit Index

Exhibit No.	Description
99.1	Complaint, dated July 29, 2005, filed against Department 56, Inc., Sunshine Productions, Inc., Kevin Knowles and Jim Shore Designs, Inc. in the United States District Court, Northern District of Illinois, Eastern Division.
99.2	Press Release, dated July 29, 2005, announcing a Complaint filed against Department 56, Inc., Sunshine Productions, Inc., Kevin Knowles, and Jim Shore Designs, Inc.

EX-99.1

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

ENESCO GROUP, INC. ) )

Plaintiff,	)
)Civil Action No._____
vs.	)
)Judge ___________________________
JIM SHORE DESIGNS, INC., SUNSHINE )

PRODUCTIONS, INC., KEVIN KNOWLES, ) Magistrate      

AND DEPARTMENT 56, INC.	)
)JURY TRIAL DEMANDED
Defendants.		)

COMPLAINT

Plaintiff, Enesco Group, Inc., by its attorneys, alleges as follows:

THE PARTIES

1. Plaintiff, Enesco Group, Inc. (“Enesco”), is an Illinois corporation, with its principal place of business in Itasca, Illinois.

2. Defendant, Jim Shore Designs, Inc. (“Jim Shore”), is a South Carolina corporation, with its principal place of business in Heath Springs, South Carolina.

3. Defendant, Sunshine Productions, Inc. (“Sunshine”), is an unincorporated business, with its principal place of business in Berlin, Maryland.

4. Defendant, Kevin Knowles (“Knowles”), is an individual residing at 23 King Richard Road, Berlin, Maryland 21811.

5. Defendant, Department 56 (“D56”) is a Delaware corporation with a branch showroom in Chicago, Illinois.

BACKGROUND

6. Enesco is a world leader in the giftware and home and garden decor industries. Serving more than 40,000 customers globally, Enesco distributes products to a wide variety of specialty card and gift retailers, home decor boutiques, mass-market chains and direct mail retailers. Internationally, Enesco serves markets operating in Europe, Canada, Australia, Mexico, Asia and the Pacific Rim.

7. Enesco product lines include some of the world’s most recognizable brands. Enesco’s top brands include Jim Shore, Walt Disney Company, Walt Disney Classics Collection, Pooh & Friends, Nickelodeon, Bratz, Heartwood Creek, Halcyon Days, Lilliput Lane and Border Fine Arts.

8. When Enesco first met Jim Shore, he was an artist selling figurines at local craft and art shows. One of Enesco’s representatives saw Jim Shore’s figurines and decided that, with Enesco’s expertise in product development, marketing, manufacturing and distribution, Mr. Shore’s figurines could be cultivated into a product line with wide appeal in the specialty gift market.

9. Jim Shore entered into a license agreement with Enesco and, together, Enesco and Mr. Shore developed a line of garden products, Christmas and other seasonal figurines.

10. Sales of the products started out slowly, but through Enesco’s dedication to Jim Shore products and commitment to expand the Jim Shore line, sales grew to over $30 million last year alone.

11. Enesco has provided Jim Shore with annual, dedicated support, including a line-specific marketing staff, specialty catalogs and funding for personal appearance tours for Jim Shore to promote the line. Enesco has placed the product line into specialty gift shops and national retailers, such as The May Company’s stores, Kohl’s, and Costco, and even negotiated airtime for Jim Shore on QVC. Additionally, Enesco has provided co-branding opportunities to Jim Shore via its contacts with Walt Disney Company and QVC.

12. In 2005 alone, Enesco spent over $700,000 to promote the Jim Shore line, an enormous investment in the specialty gift industry.

13. Enesco paid Jim Shore royalties in an amount exceeding $2 million last year alone.

14. Enesco has dropped its top collectible line, Precious Moments, with an intent to, among other things, focus more resources and attention on the Jim Shore line. Enesco, in fact, recently has dedicated increased resources to the Jim Shore line and, among other things, has worked to convince retailers to dedicate more square footage to the Jim Shore line.

THE CURRENT LICENSE AGREEMENT

15. The subject and current license agreement (“Agreement”) between Jim Shore and Enesco, which became effective by its terms on January 1, 2005, was signed in October, 2004 and filed with the SEC on a Form 8-K in October, 2004. A copy of the Agreement is attached hereto as Exhibit A. The Agreement states: “The rights and licenses granted in Paragraph 1(a) and (b) herein shall be sole and exclusive (other than for certain non-core product categories as set forth in Schedule III) to ENESCO for all of the PRODUCTS. Exhibit A at pg. 4.

16. Enesco has the right and authority to enforce infringements of the trademarks and copyrights for all the Jim Shore products covered under the Agreement. Exhibit A at pg. 7.

17. The Agreement also obligates Jim Shore “not to license or grant rights to others to make, have made, advertise, import, distribute and/or sell products that: are competitive with the PRODUCTS; incorporate or display derivative works based on the WORKS; and/or incorporate or display copies of works such that the products have the same “look and feel” as and/or are confusingly similar with the PRODUCTS.” Exhibit A at para. 8(c), pgs. 8-9.

18. Furthermore, the Agreement provides that “[t]he PRODUCTS subject to this Agreement are all product categories and formats, other than bolt fabric. Enesco may, at its option and subject to a right of first refusal, permit LICENSOR to license certain formats to third parties on a non-exclusive basis.” Exibit A at pg. 11.

RECENT CONDUCT

19. Enesco has recently learned that D56, a competitor, has been advertising at trade shows that it is an “exclusive licensee” of Jim Shore and has represented that, in the future, it will be offering figurines by Jim Shore (on an exclusive basis). D56 further has disseminated marketing materials that represent that it has an exclusive Jim Shore line of jewelry, scarves and ties.

20. On information and belief, Jim Shore personally met Knowles through Knowles’ wife, Tammy Knowles. Tammy Knowles is an employee of Enesco.

21. Tammy Knowles also is listed as the President of Sunshine by Dun & Bradstreet.

22. Upon information and belief, Tammy Knowles assisted her husband in furtherance of a deal with D56 by providing her husband with Enesco’s confidential company information, including drawings of Jim Shore products not yet released to the public, and by actively participating in the formation and function of Sunshine.

23. Knowing of Enesco’s Agreement, Knowles approached Enesco with the idea of creating a line of ties, scarves and pins for Enesco to sell under the Jim Shore name. While Enesco did not reject the concept of selling ties, scarves and pins under the Jim Shore name in connection with its Agreement, it rejected the particular items for various business reasons, including, inter alia, the poor quality of the items. Enesco explained its reasoning for refusing the items to Knowles, and invited Knowles to develop products more in keeping with the quality of the brand. Knowles never asked Enesco for consent to develop any products under the Jim Shore name for sale to any entity or individual other than Enesco.

24. Enesco has learned that Knowles, and his company Sunshine, knowing that Enesco’s consent had been denied, sought a license from Jim Shore for the sale of products by Sunshine under the Jim Shore name for sale to an entity other than Enesco. D56 claims it has received permission from Sunshine and/or Jim Shore to sell certain products under the Jim Shore name.

25. On information and belief, Jim Shore recently has offered licenses to others in violation of the Agreement.

JURISDICATION AND VENUE

26. Pursuant to the Agreement, Jim Shore Designs, Inc. has consented to jurisdiction and venue in Illinois. Exhibit A at para. 17.

27. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1332 and 1367(a). Venue is proper under 28 U.S.C. § 1391(a).

COUNT I – BREACH OF CONTRACT

28. Enesco hereby incorporates by reference paragraphs 1-27 as if fully set forth herein.

29. Jim Shore has breached, and continues to breach, the Agreement by, inter alia, licensing third parties in contravention of the Agreement.

COUNT II- TORTIOUS INTERFERENCE WITH A CONTRACT

30. Enesco hereby incorporates by reference paragraphs 1-29 as if fully set forth herein.

31. Sunshine has tortiously interfered with the Agreement.

32. Sunshine’s actions have damaged Enesco and will continue to irreparably damage Enesco if not enjoined.

COUNT III – CIVIL CONSPIRACY

33. Enesco hereby incorporates by reference paragraphs 1-32 as if fully set forth herein.

34. Tammy Knowles owes a duty of loyalty to Enesco as an employee of Enesco.

35. Among other things, Knowles and Sunshine induced Tammy Knowles to obtain, access and provide him with Enesco confidential information, which she did. These are overt acts in furtherance of a conspiracy to induce Jim Shore to breach its contract with Enesco. These acts constitute unlawful acts, in breach of, inter alia, Tammy Knowles’ duty of loyalty to Enesco, and in furtherance of the conspiracy.

COUNT IV – INDUCEMENT TO BREACH DUTY OF LOYALTY

36. Enesco hereby incorporates by reference paragraphs 1-35 as if fully set forth herein.

37. At Kevin Knowles’ and Sunshine’s prompting, Tammy Knowles has breached her duty of loyalty.

COUNT IV – UNFAIR COMPETITION

38. Enesco hereby incorporates by reference paragraphs 1-37 as if fully set forth herein.

39. D56’s use of the terms “exlcusive licensee” is literally false and constitutes unfair competition in violation of 15 U.S.C. § 1125(a).

40. Even under the terms of the license and permission D56 claims it received from Sunshine and/or Jim Shore, D56’s use of the terms “jewelry,” exclusive, and figurines is literally false and constitutes unfair competition in violation of 15 U.S.C. § 1125(a).

41. D56’s false claims have caused damage to Enesco and will continue to cause irreparable injury to Enesco if not enjoined.

COUNT V — VIOLATION OF ILLINOIS UNIFORM DECEPTIVE
TRADE PRACTICES ACT AND ILLINOIS CONSUMER FRAUD AND DECEPTIVE BUSINESS PRACTICES ACT

42. Enesco realleges and incorporates paragraph 1-41 above.

43. D56’s aforesaid acts constitutes a deceptive trade practice in violation of the Illinois Uniform Deceptive Trade Practices Act, IL. Ann. Stat. Ch. 815, para. 510/1 et seq. and the Illinois Consumer Fraud and Deceptive Business Practices Act, IL. Ann. Stat. Ch. 815, para. 505/12 et seq. and the common law of the State of Illinois.

WHEREFORE, Enesco seeks the following relief:

a. An Order requiring that Jim Shore specifically perform under the Agreement and preliminarily and permanently enjoining Jim Shore from granting licenses to others or otherwise acting in contravention of the Agreement;

b. An Order preliminarily and permanently enjoining Knowles and Sunshine from interfering with the Agreement;

c. An Order preliminarily and permanently enjoining D56 from engaging in conduct that constitutes unfair competition;

d. All monetary damages suffered by Enesco;

e. Enesco’s reasonable attorneys fees and costs; and

f. Any other equitable relief the Court deems appropriate and just.

Respectfully submitted,

ENESCO GROUP, INC.

By:	/s/ John S. Letchinger
	One of its attorneys

John S. Letchinger, Esq.
Sandra Scavo Pedersen
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive
Suite 3000
Chicago, IL 60606
(312) 201-2000
Attorney No. 10535

For Immediate Release

Contact: Donna Shaults
630-875-5464
dshaults@enesco.com

ENESCO GROUP, INC. FILES LAWSUIT
REGARDING ALLEGED BREACH OF LICENSE AGREEMENT

Itasca, Ill. – July 29, 2005 – Enesco Group, Inc. (NYSE: ENC) today filed suit against Department 56, Inc., Sunshine Productions, Inc., Kevin Knowles and Jim Shore Designs, Inc. in the United States District Court, Northern District of Illinois, Eastern Division.

In summary, the Complaint, as against Jim Shore Designs, alleges breach of contract related to Enesco’s current license agreement with Jim Shore Designs, which license was filed with the SEC on a Form 8-K, dated October 5, 2004. Enesco specifically alleges that Jim Shore Designs is breaching provisions relating to Enesco’s exclusivity under the current license agreement. With regard to Department 56, the Complaint alleges a violation of Section 43(a) of the Lanham Act. As against Sunshine Productions, Enesco alleges that Sunshine Productions interfered with Enesco’s contract with Jim Shore Designs. Finally, in the Complaint, Enesco alleges that Sunshine Productions and Kevin Knowles engaged in a civil conspiracy and induced an employee to breach her duty of loyalty to Enesco. The Company seeks monetary and equitable relief in connection with the suit.

Enesco plans to rigorously pursue adherence to its current license agreement, and does not seek to terminate its license agreement with Jim Shore Designs in this Complaint.

About Enesco Group, Inc.
Enesco Group, Inc. is a world leader in the giftware, and home and garden décor industries. Serving more than 40,000 customers globally, Enesco distributes products to a wide variety of specialty card and gift retailers, home décor boutiques as well as mass-market chains and direct mail retailers. Internationally, Enesco serves markets operating in Europe, Canada, Australia, Mexico, Asia and the Pacific Rim. With subsidiaries located in Europe and Canada, and a business unit in Hong Kong, Enesco’s international distribution network is a leader in the industry. The Company’s product lines include some of the world’s most recognizable brands, including Heartwood Creek by Jim Shore, Walt Disney Company, Walt Disney Classics Collection, Pooh & Friends, Nickelodeon, Bratz, Halcyon Days, Lilliput Lane and Border Fine Arts, among others. Further information is available on the Company’s web site at www.enesco.com.

This press release contains forward-looking statements, which reflect management’s current assumptions and beliefs and are based on information currently available to management. The Company has tried to identify such forward-looking statements by use of such words as “expects,” “intends,” “anticipates,” “could,” “estimates,” “plans,” and “believes,” and similar expressions, but these words are not the exclusive means of identifying such statements. Such statements are subject to various risks, uncertainties and other factors, which could cause actual results to vary materially from those anticipated, estimated, expected or projected. Important factors that may cause actual future events or results to differ materially and adversely from those described in the forward-looking statements include, but are not limited to: the Company’s success in developing new products and consumer reaction to the Company’s new products; the Company’s ability to secure, maintain and renew popular licenses, particularly our Cherished Teddies, Heartwood Creek and Disney licenses; the Company’s ability to grow revenues in mass and niche market channels; the Company’s ability to comply with covenants contained in its credit facility; the Company’s ability to obtain a new global senior credit facility; the Company’s ability to effectively transition to the legacy information system; changes in general economic conditions, as well as specific market conditions; fluctuations in demand for our products; manufacturing lead times; the timing of orders and shipments and our ability to predict customer demands; inventory levels and purchase commitments exceeding requirements based upon incorrect forecasts; collection of accounts receivable; changes in the regulations and procedures affecting the importation of goods into the United States; changes in foreign exchange rates; price and product competition in the giftware industry; variations in sales channels, product costs or mix of products sold; and, possible future terrorist attacks, epidemics, or acts of war. In addition, the Company operates in a continually changing business environment and does not intend to update or revise the forward-looking statements contained herein, which speak only as of the date hereof. Additional information regarding forward-looking statement risk factors is contained in the Company’s reports and filings with the Securities and Exchange Commission. In light of these risks and uncertainties, the forward-looking statements contained herein may not occur and actual results could differ materially from those set forth herein. Accordingly, you should not rely on these forward-looking statements as a prediction of actual future results.

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