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Abboud Trial Ends, Judge Presses for Settlement

Judge Theodore Katz tasked JA Apparel and Joseph Abboud with trying to compromise over the latter's intention to use his name to promote his new men' wear line.

NEW YORK — The trial is complete, but the case isn’t over. 

After the final two-and-half days of testimony, during which both CFDA managing director Steven Kolb and Coach CEO Lew Frankfurt took the stand, Judge Theodore Katz once again tasked JA Apparel CEO Marty Staff and designer Joseph Abboud with trying to compromise over the latter’s intention to use his name to promote his new men’s wear line, Jaz. 

The men, former colleagues at JA Apparel whose relationship soured after disagreements regarding Abboud’s role at the company, shook hands and spoke convivially at the end of formal testimony Wednesday, but a settlement is not a forgone conclusion, especially given the two hardly have a good track record of finding common ground. 

A few weeks ago, after the first round of testimony, Judge Katz called a 17-day recess and challenged both sides to settle in the interim, but the talks failed to generate an agreement. There were also seven months in between the initial filing and the start of the trial—plenty of time for both sides to work out their differences. 

But if the case is destined for a ruling from Katz, the judge is holding out for one more round of talks. The sticking point: Did Abboud retain some rights to use his name after selling his trademarks to GFT SpA in 2000? (Marty Staff and J.W. Childs subsequently purchased the Joseph Abboud brand from GFT in 2004.) Abboud holds that his publicity rights allow him to use his name “descriptively” to promote the line. As example, he’s cited ads that could include the language “by designer Joseph Abboud.” The plaintiffs argue Abboud forfeited the right to use his name in business after he sold the trademarks for $65.5 million. 

Both arguments are based on differing interpretations of the contract Abboud signed in 2000 that transferred his trademarks to GFT. The contract was the focus of last week’s testimony as witnesses for both sides parsed the document’s text and dissected early drafts and letters of intent. If the first week of the trial featured heated testimony from Marty and Joseph, the second half featured Byzantine legal analysis. 

Ted Dinsmoor, Abboud’s longtime personal attorney, who represented the designer during the sale of the trademarks and was one of the contract’s principal architects, took the stand for six hours to present Abboud’s case. At its heart: that GFT bought only trademarks from Abboud and not any other kind of intellectual property, such as trade names. Under that interpretation, Abboud could have considerably more leeway in using his name in connection with Jaz. 

But the plaintiffs maintained that the language of the contract was unequivocal, citing passages in the document that identify “the names, trademarks, trade names, service marks, logos and insignias” as assets pending in the sale. 

The defense countered that those terms only refer to the group of trademarks that Abboud sold. JA Apparel also had its legal interpreter, Jeffrey LaGueux, a corporate attorney who represented GFT in 2000 during negotiations with Abboud and Dinsmoor. He took the stand to offer a different view of the language. When asked if the contract gave GFT all rights to the Joseph Abboud name in business, he replied coolly, “Yes.” 

LaGueux also testified that Dinsmoor never spoke to him about his interpretation of the contract and that Dinsmoor never clarified that Abboud was only selling his trademarks. Even if clarifications had been made, LaGueux claimed, the contract was watertight. “I was confident that we were getting the name under the terms of the agreement,” he said. 

awyers cross-examining lawyers makes for both tedious and electric testimony. JA Apparel attorney Tom Smart grappled with Dinsmoor over legal distinctions and technicalities for hours last Tuesday. Trying to establish that Abboud violated his non-compete agreement by working on Jaz before July 13, 2007, Smart probed the circumstances surrounding the acquisition of Fall River Shirt Co., a factory based in Fall River, Mass. While Abboud didn’t officially acquire the factory until September of that year, testimony indicated the designer began making loans to the financially distressed company starting in April. 

The loans passed through Alden Street Shirt Co., an entity Dinsmoor established a few months before the end of the non-compete. Asked repeatedly by Smart if he was acting on Abboud’s behalf in structuring the loans, Dinsmoor cracked. “Do you want to know why I did it? I did it to save the workers at that factory,” he boomed. 

The usually unflappable court reporter chided both men to speak more quietly. “Do you want this on the record?” she quipped. 

There was also inscrutable lawyer-speak. When asked about the nature of his phone calls to Merrill Sharpe, a sportswear company, Abboud eventually purchased, before the end of Abboud’s non-compete agreement, Dinsmoor stated, “I wanted to prepare myself for preparing the transaction.” 

In addition to arguing the minutiae of the sale agreement, lawyers also examined a few big names from the men’s wear industry. Both Lew Frankfurt and Steven Kolb took the stand to defend Abboud’s reputation and help bolster claims that his reputation is distinct from that of the Joseph Abboud brand. Frankfurt, the longtime chairman and CEO of Coach, described Abboud as “a world-class designer” and characterized his reputation as “impeccable.” Abboud made a line of neckwear for Coach in the mid-’90s. 

Kolb gave similarly glowing testimony as to the designer’s reputation and also helped establish a key point for the defense: that Abboud’s fame is distinct from the brand that bears his name. “I believe he carried that reputation even after he was no longer associated with [JA Apparel],” said Kolb. 

In addition to these high-wattage witnesses, there were also noticeable absences. Both Richard Baker, Lord & Taylor’s chairman, and retailer Bill Mitchell had been slated to testify on Abboud’s behalf but canceled due to scheduling conflicts, according to Abboud’s attorney. 

By the end of testimony last Wednesday, the trial seemed to have run out of gas. Judge Katz asked both sides to enter evidence in batches rather than one by one. Hundreds of documents from both parties were submitted to the court over the six days of testimony here, and Katz clearly wanted to speed up the process. “Even in the most complex cases, trials generally come down to five documents,” he told the court. 

With testimony complete, Staff and Abboud will have until March 27 to reach a compromise. Katz will mediate a conference call with both parties March 20 to assess their progress. If a settlement seems likely, Katz will help put a deal together on the 27. If talks fail, Judge Katz will likely issue a decision in the weeks to come.