Battle of the Burches Ends

Tory Burch and her ex-husband Chris Burch settled their lawsuit over the sale of his stake in Tory Burch LLC with the addition of two new minority investors.

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NEW YORK — One of fashion’s most heated legal feuds has ended in a truce.

This story first appeared in the January 2, 2013 issue of WWD.  Subscribe Today.

Tory Burch and her ex-husband Chris Burch settled their contentious lawsuit over the sale of his stake in Tory Burch LLC with the addition of two new minority investors.

Although the terms of deal are confidential, investment firms BDT Capital Partners LLC and General Atlantic LLC made minority investments in the brand. Both Burches owned a 28.3 percent stake in the company, which the duo created in 2003.

Chris Burch retains a stake in Tory Burch, although a spokesman for the entrepreneur declined to reveal how much he still owns.

“They are completely aligned with our long-term approach to building our brand and share our vision for growth globally,” chief executive officer Tory Burch said of the new minority investors.


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Calling the deal a “milestone transaction,” Chris Burch said he is “confident” in the New York-based brand’s “continued success” as he stays on as a “significant investor.”

Aptly dubbed the Battle of the Burches, the lawsuit, which was filed on Oct. 2 in Delaware Chancery Court, had all the trappings of a courtroom melodrama, replete with gossip, media buzz and an eccentric judge.

In the months leading up to the lawsuit, it was no secret to anyone who followed the Burches that the business partnership between Tory and Chris was teetering. Chris had just started C. Wonder, a new retail concept that opened its first store in fall 2011 and, according to sources at the time, its seeming likeness to the Tory Burch brand upset his former wife.

In early 2012, New York Magazine published a fiery profile on the former couple, examining their relationship as well as the similarities between the two brands. This included the resemblance of their gilded logos, in-store light fixtures and respective candy-colored decor.

At the same time, Chris Burch was in the process of trying to sell part of his stake in Tory Burch, but no deal was completed. He claimed that the Burch board made the sale of his stake difficult, and that they were focused on getting Chris to change C. Wonder.

At the time, there was mounting speculation that Tory would be the first to sue Chris, claiming, among other things, trade dress violation, unfair competition and breach of fiduciary duty. In the end, it was Chris who fired first.

After what Chris Burch’s legal team described as “constantly” changing, “onerous and unreasonable” demands to alter C. Wonder, Chris sued his ex-wife for blocking the sale process of his stake in Tory Burch, which had been dubbed “Project Amethyst” by the financial community.

Team Tory countersued Chris in November, alleging he used his role in her company as a director and consultant to develop “copycat” products for C. Wonder.

Burch denied that her company threw a wrench in the sale of her former husband’s stake, claiming Project Amethyst “died” because Chris did not meet the criteria laid out by the majority shareholders. Those criteria essentially amounted to refraining from using the money from the potential sale to grow C. Wonder. According to Tory, the majority shareholders saw C. Wonder as competition to Tory Burch.

“Tory Burch is saying it won’t let Christopher Burch sell out his interest and get hundreds of millions of dollars and continue to compete against the company,” Tory Burch’s lawyer Marc Wolinsky told WWD at the time. “This guy ripped off Tory Burch. His product looks like our product, his stores look like our stores.”

Chris Burch’s lawyer, Andrew Rossman, said both brands’ products reflected “timeless styles that other people invented.”

“I don’t think Tory Burch invented the cardigan, the gold button or the ballet flat,” he offered.

If that back and forth wasn’t enough, presiding judge Leo Strine weighed in during a scheduling conference with a colorful and bizarre rant about preppy clothing and the definition of a WASP.

“Real WASPs actually don’t go and pay full Polo price,” Strine said in November. “They actually will find a bargain. That’s how they got to be, you know, WASPs. When Tory Burch became popular, no one said, ‘Oh, my gosh, this is the newest thing that ever happened.’”

Calling the impending trial a “drunken WASP fest,” Strine asked the court, “Are the Burches WASPs? Do we know?.…I think you’re going to have to have interrogatories about who’s a WASP. And I’ll certainly be attacked as anti-WASP, probably, and then I love all WASPs.”

It was unclear when the settlement talks began, but it enables both sides to avoid a nasty courtroom battle. Attracting investors hasn’t been difficult for the Tory Burch brand, which has been of perpetual interest to the investment set for some time, with ongoing speculation over when the company might go for an initial public offering.

New minority investors BDT and General Atlantic said they see strong growth opportunities in the lifestyle brand, which has been rumored to be worth upward of $2 billion.

“BDT Capital is committed to investing alongside and advising entrepreneurs and closely held companies with high-quality brands and strong leadership who seek a trusted, long-term partner,” said Byron Trott, chairman and ceo of BDT Capital Partners.

BDT last year sided with Coty Inc. in its ill-fated attempt to take over Avon Products Inc. Trott is a protégé of investment legend Warren Buffett.

BDT and Barclays acted as advisers in the settlement.

“As a long-term partner to great management teams, General Atlantic helps propel exceptional companies to their next phase of growth,” said Bill Ford, ceo of General Atlantic, which has invested in companies such as Gilt Groupe, Facebook and Alibaba Group.

“Tory and her team have a unique ability to create accessible luxury clothing and accessories that have broad and lasting appeal,” Ford concluded. “We look forward to working with the company to continue to build its exceptional brand globally.”

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