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French Luxury Brands Head to Court

On Wednesday, Hermès International confirmed it has filed another lawsuit against LVMH Moët Hennessy Louis Vuitton.

PARIS — Never mind runways, the French fashion scene has a new hot spot: the courtroom.

On Wednesday, Hermès International confirmed it has filed another lawsuit against LVMH Moët Hennessy Louis Vuitton, escalating its standoff with the luxury giant, which is its largest nonfamily shareholder.

The complaint, filed with the commercial court here, aims to annul the equity swaps that allowed LVMH to acquire its initial 12 percent stake in Hermès using a series of complex financial instruments in accumulations below mandatory disclosure thresholds for public companies.

LVMH has subsequently increased its holding to 22.6 percent. An Hermès spokeswoman noted that it is not contesting share purchases from the free float.

An LVMH spokesman declined to comment on Hermès’ latest legal missive.

RELATED STORY: LVMH Files Another Lawsuit Against Hermès >>

But the group controlled by business titan Bernard Arnault has repeatedly charged Hermès with trying to sway an investigation by France’s stock market watchdog, the Autorité des Marchés Financiers, which earlier this month recommended LVMH be fined 10 million euros, or $13.3 million at current exchange.

“For more than two years, one of [Hermès’] executives has been waging a campaign of denigration and slander against LVMH that is extremely detrimental to LVMH’s image and reputation,” LVMH vice president Pierre Godé told the AMF’s sanctions committee earlier this month, reiterating vehement denials that it breached market rules.

The company is accused of dissimulating its gradual acquisition of Hermès stock via cash-settled equity swaps between 2001 and 2010.

The AMF, which launched its probe in November 2010, is expected to deliver its final decision no later than July 31.

LVMH-Hermès isn’t the only legal battle in town, though. France’s other major fashion group, Kering, is involved in a lawsuit of its own.

A first hearing is expected in September or October at the Tribunal de Grande Instance here pitting Balenciaga against its former creative director, Nicolas Ghesquière, who exited last November.

Officials at the civil court declined to discuss the particulars of the case, as only the lawyers involved are privy to them. However, it is understood Balenciaga is taking action against its former designer for remarks made in an interview he granted to upstart European fashion magazine System.

In France, freedom of expression is limited in instances where an employee or former employee besmirches or potentially imperils an enterprise, allowing them to seek damages.

At the upcoming hearing, each party would have to at least be represented by an attorney, who would meet before a judge, explained Pierre Warin, a counsel with August & Debouzy in Paris. He is not involved in the specific case.

Speaking in general terms, Warin told WWD it’s difficult to predict when a judgment might be handed down, since that can vary widely from case to case, as can the level of damages awarded, if there are any.

In the System interview, splashed over 32 pages, Ghesquière said that “there was no one helping me on the business side” and “I began to feel as though I was being sucked dry, like they wanted to steal my identity while trying to homogenize things.”

Balenciaga had no comment Wednesday. Ghesquière could not be reached for comment.

The number of cases in the Hermès-LVMH case has been multiplying.

Earlier this month, LVMH filed civil charges against an unidentified manager at Hermès, believed to be chief executive officer Patrick Thomas, who alleged during the company’s annual meeting that LVMH had built up its stake in Hermès in a “fraudulent” way.

Hermès filed a criminal complaint against LVMH last September, accusing it of insider trading, manipulating share prices and dissimulating its investment in the company.

LVMH in turn filed a suit against Hermès for slander, blackmail and unfair competition.

It is understood the commercial court will await the finding of the criminal complaint before turning to its case.

Hermès executives have repeatedly urged LVMH to reduce its shareholding, while LVMH insists it only has peaceful intentions and wishes to cooperate with the family-controlled maker of Birkin bags and silk scarves.

Last year, Hermès grouped family-owned shares into a nonlisted holding company to gird it against further advances by LVMH.