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NEW YORK — Rachel Roy is trying to stop Jones Apparel Group from selling her business to Bluestar Alliance for $14.6 million, a move that allegedly was done without her consent.
This story first appeared in the April 24, 2014 issue of WWD. Subscribe Today.
Roy has filed a lawsuit against Jones claiming breach of a contractual agreement in connection with the sale of her business, which allegedly was done “free and clear” of the designer’s approval rights. The lawsuit was filed April 11 in a New York state court in Manhattan. Named as defendants were Jones Investment Co. Inc., Jones Apparel Group USA Inc. and The Jones Group Inc. Jones has since been acquired by Sycamore Partners in a transaction valued at $2.2 billion.
Neither Sycamore nor Bluestar were named as defendants in the suit. As the new owner of Jones, Sycamore executives declined comment on the legal matter.
Roy entered into interrelated agreements with Jones in 2008 to develop and sell products under the Rachel Roy brand. Those agreements include the transfer of intellectual property assets, an asset purchase agreement, a licensing agreement and an employment agreement establishing Roy as artistic director for the Rachel Roy brand.
The agreements were drafted by Jones, and Roy was not represented by counsel in connection with those negotiations, the lawsuit said.
According to the complaint, filed by her attorneys at Kasowitz, Benson, Torres & Friedman, “Jones had no intention of actually partnering with Ms. Roy, but instead entered into these agreements under false pretenses, and now wrongfully seeks to take exclusive control of Ms. Roy’s brand and the trademarks.”
The lawsuit also said that Roy’s “rights to creative control and approval of designs were non-negotiable conditions of the business relationship.” The court document specified that a critical aspect of the deal with Jones was that Roy “would at all times retain full creative control over the designs that were to be sold under her name, and would have exclusive approval rights over the use of the trademarks.”
Prior to the completion of the sale of Jones to Sycamore, Jones had shut down Roy’s business. The lawsuit said the action was done to “eviscerate” Roy’s Rachel Roy designer brand, and that Jones was “stonewalling” all efforts by her to continue conducting her business. The lawsuit also alleged that executives at Jones were incentivized to sell to Sycamore due to possible “golden parachute compensation” in excess of $53 million, and that it was Sycamore who wanted Jones to “purge the Rachel Roy business.”
The lawsuit also alleged that Jones went ahead with the deal with Bluestar even though there were other parties who were both interested in acquiring the Roy assets and would honor Roy’s approval rights.
There is also a Rachel Rachel Roy contemporary collection that is sold exclusively to Macy’s, which Jones will continue to produce.
Roy is seeking a declaration from the court that Jones had no authority to sell the Rachel Roy trademarks without her “explicit approval.” In addition, due to the alleged breach of the 2008 interrelated agreements between Roy and Jones, she is seeking a rescission, or an undoing, of those agreements, in addition to damages in the form of lost profits and lost opportunities.