Bankrupt BCBG Max Azria Group LLC is the victor in a contract dispute with its former creative director Lubov Azria.
Azria, also the wife of BCBG founder Max Azria, was suddenly replaced little more than a week after the company filed for bankruptcy in early March and launched a parallel court battle in an effort to keep the brand from rejecting her 2015 employment agreement.
Although she argued the terms of her employment agreement were part and parcel to the terms surrounding BCBG’s 2015 out-of-court restructuring, which saw the Azrias give up 80 percent of their full ownership of the company in exchange for a $135 million capital infusion from Guggenheim Partners, a bankruptcy judge ruled otherwise Monday.
“The court ruled that the contribution agreement and employment agreement were not integrated and, therefore, the employment agreement could be rejected,” BCBG attorney Joshua Sussberg said.
The court is expected to soon enter an order to that effect.
Counsel for the Azrias could not be reached for comment.
Max Azria, who stepped down as chief executive officer of BCBG last year, and Lubov Azria both submitted declarations to the court claiming neither would have agreed to give up control of the brand without a secure employment agreement in place, but fell short of providing any substantive evidence supporting their position.
In an April 15 declaration, Max Azria said “employment agreements for me and Lubov were always going to be part of any transaction in which we gave up majority control of the company we built together,” and pointed to a draft term sheet from Guggenheim that calls for “definitive agreements” to include employment terms.
But BCBG noted in arguing its right to reject Lubov’s subsequent employment agreement that “a parties’ unexpressed subjective intent as to the meaning or interpretation of a contract” is not allowed as evidence in contract disputes.
Since filing for bankruptcy in New York, BCBG has continued with store closings, related layoffs and even managed to strike a licensing deal with Global Brands Group worth at least $2 million that will help fund the bankruptcy process.
The brand is currently soliciting offers for its assets and the deadline for any bids is set for May 19, with an auction to be held, if needed, May 24.
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