LOS ANGELES — Fraser Ross has a new legal target in former Kitson chief executive officer Chris Lee.
Lee, who ran specialty retailer Kitson between 2011 and 2015, is being sued by the chain’s founder, according to documents filed in Los Angeles Superior Court on Tuesday. The latest allegations follow the July lawsuit Ross filed against his former law firm Jeffer Mangels Butler & Mitchell LLP. Many of the claims in Tuesday’s complaint are also wrapped in the Jeffer Mangels lawsuit, which accuses the firm and partner Jeffrey Sultan of legal malpractice and breach of fiduciary duty in a case that could involve upward of $120 million in damages, Ross’ Canadian counsel Glenn J. Feldman said at the time of the July filing.
Ross declined comment for this story, referring questions to Feldman, who estimated total damages in the current case to be around $25 million.
Ross is demanding a jury trial in the case of Lee and alleges fraud, unfair competition under California law and unjust enrichment in addition to three other causes.
Lee, reached Wednesday morning, said the “court shall decide” on the matter.
The lawsuit accuses Lee of engaging in a number of self-serving business decisions, including the opening of several unauthorized Kitson stores in Korea.
“Defendant Lee’s entire tenure at Kitson was replete with self-dealing transactions, improper and unauthorized salary and personal expenses, incompetent performance of his duties, hiring of unqualified employees with personal affiliations, including his wife, and other illicit conduct….” the lawsuit said.
Lee, a former executive at Forever 21, joined Kitson in 2011. During his time at the helm of the boutique retailer — which had a knack for attracting tourists, locals and celebrities alike with its quirky mix of giftable items and up-and-coming brands — the company had lofty growth plans. Lee in 2013 spoke at the Next Great Consumer Brands Conference in New York expounding on the company’s need for growth capital and that the ultimate goal was an initial public offering or a sale to a public company. At the time of his talk, he disclosed the company had annual sales of $30 million.
High debt loads ultimately helped contribute to the company’s shuttering of its 17 stores and online operation in a move revealed in December.
The basis for the complaint hinges on a 2012 event in which Ross dealt with “a life-threatening injury which required a lengthy hospitalization and recovery, the effects of which continue to plague and affect” him, the lawsuit said.
Ross’ complaint alleges Lee knowingly took advantage of Ross’ declining health and used Jeffer Mangels as a tool to exploit Ross and Kitson, including convincing Ross to turn down sales offers in 2013. The lawsuit also brings up the $15 million secured loan Kitson received from Salus Partners LLC, a deal it called “not necessary and not in the best interest of either [Ross] or Kitson.”
The complaint makes a number of other allegations against Lee, including forging Ross’ signature on a conflict waiver for Jeffer Mangels and convincing Ross to provide a $2 million loan to Kitson in February 2015, the terms of which included 6 percent interest to be paid by June 2016.
“Defendant Lee concealed from plaintiff that he had no expectation that the loan would ever be repaid and that the purpose of the loan was to ultimately benefit defendant Lee,” the complaint claims.
Then there was Ross’ sale of his interest in Kitson to Lee for $300, which occurred in April 2015. The lawsuit alleges Lee accompanied Ross to a doctor’s appointment and then the two went to the offices of Jeffer Mangels to discuss the sale and Ross’ resignation. Ross alleges he did not endorse Lee’s $300 check and that it was signed off by either Lee or someone else. The check bounced and was later re-deposited by Lee without Ross’ signature, according to the complaint.
Ross re-entered the picture in May 2015 when he was convinced by Lee, according to the lawsuit, to sign a consulting agreement that waived his right to be paid back on the $2 million loan. Ross’ involvement was seen as necessary, the lawsuit said, in order to get a loan completed with Spencer Spirit Holdings Inc.