NEW YORK — Jessica Simpson appears to have another breakup in the works.
Over what was once touted by its owner as a celebrity fashion label with the potential to hit $1 billion to $2 billion, there's now a legal war between a major licensee and Simpson. Tarrant Apparel Group has sued Simpson and master license owner Vincent Camuto for $100 million over Simpson's alleged failure to promote her lines.
Tarrant filed the lawsuit alleging several breach of contract claims against Camuto and one against Simpson in New York State Supreme Court last week, and said it has already lost $25 million to date and will lose another $75 million through the remainder of its licensing agreement. Tarrant is also seeking a declaration by the court, or declaratory judgment, that it has an exclusive sublicense with Camuto, as well as a separate declaration by the court that Tarrant did not breach any terms of the licensing agreement.
Neither Camuto nor Simpson could be reached for comment.
As reported in WWD, Simpson signed a master licensing deal with Andrew Kirpalani, chairman of JS Brand Management, in October 2004 for $10 million up front. In January 2005, JS Brand Management entered into a sublicense agreement with Tarrant. Kirpalani sold the master license in August 2005 for $15 million to Camuto, president and chief executive officer of VCS Group and co-founder of Nine West Group Inc., but JS Brand Management retained a sublicense deal.
According to the lawsuit, the sublicense obligated JS Brand Management to "provide reasonable assistance to [Tarrant] in marketing the sublicensed products at [Tarrant's] request." Paragraph 6.5 of the sublicense, included in the lawsuit, states, "Ms. Simpson shall be actively involved in promoting the sub-licensed products, whether requested or not by sublicensee, and shall, wherever reasonably practicable and appropriate, publicly wear/display or use the sublicense products, particularly at public events, shows and appearances."
Tarrant paid JS Brand Management $600,000 as an advance advertising and marketing fee for 2004 and 2005, with commitments for guaranteed payments throughout the initial term of an additional $1.7 million. The lawsuit said that upon execution of the sublicense, Tarrant paid $1.6 million as a guaranteed sale royalty for 2004 and 2005, and an additional $4.4 million was guaranteed by Tarrant under the terms of the sublicense for the remainder of the initial term.According to the sublicense agreement, the initial term was for a three-year period ending on Dec. 15, 2007, with Tarrant having the right to renew for an additional two-year term. The distribution channel and royalty rate was agreed at 8 percent for the upper tier, or department and specialty stores; 6 percent for the middle tier, or midlevel nameplates such as J.C. Penney, and 5 percent for the mass tier, such as Wal-Mart and Kmart.
When Camuto bought the master license, he agreed to assume the obligations owed to Tarrant, according to the lawsuit. The parties also changed the definition relating to the distribution channels, granting Tarrant a greater product range than what was in the initial sublicense. Upper tier now included sublicensed products under the Jessica Simpson and Princy names; middle tier was for products bearing the name JS by Jessica and mass tier was for products under the Sweet Kisses by JS name.
Tarrant said that its attempts to grow the Jessica Simpson brand name under its sublicense were "repeatedly thwarted" by the defendants. The lawsuit also charged that Camuto "engaged in a bad-faith attempt to render [the] sublicense null." Tarrant also charged that it attempted to obtain approval for its next Princy line, but that "Camuto has unreasonably withheld such approval by wrongfully claiming that the sublicense has been terminated."
Tarrant said in the lawsuit that it had numerous meetings with JS Brand Management and Simpson, and that JS Brand Management said that Simpson would be "supportive of the clothing line, from inspecting the clothing and giving her comments and approval/disapproval to wearing the product publicly to promoting the products." But Tarrant also charged that Simpson would not pose for photos nor provide any photographs to promote the product lines.
In one example, Tarrant said that Charming Shoppes in February 2005 was prepared to sign a three-year agreement to purchase the JS by Jessica line of apparel, which would have covered Tarrant's entire minimum volume under the license through that one sales channel alone. The retailer placed $5 million in apparel orders and increased orders to $8 million within weeks. Charming also requested that Simpson make public appearances, "but she refused," court papers alleged. By May 2005, Charming cancelled half its orders.In May 2005, Tarrant said it began sales of Princy, and encountered similar issues in not obtaining any "meaningful support" from Simpson. The lawsuit alleged that when asked in June 2005 what is her favorite brand of jeans, Simpson said, "True Religion" instead of "Princy." Tarrant said in the lawsuit that "without celebrity marketing, the product went nowhere."
The lawsuit also charged that Camuto, in bad faith, prohibited Tarrant from using the Jessica Simpson trademark so "Camuto alone could profit from its use." It said that Camuto has a Jessica Simpson footwear line.
Tarrant also said that it has not received any breach notice from Camuto in connection with the sublicense. A source close to the parties said that they tried settling the matter amicably, but to no avail.
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