This story first appeared in the September 10, 2016 issue of WWD. Subscribe Today.
Mellon, a Jimmy Choo cofounder, has alleged that the footwear firm violated the terms of an employment agreement, which in turn forced her new company into bankruptcy. She is suing for more than $4 million in damages, attorneys’ fees and other costs the “court deems just.”
The label was founded in 1996 and Mellon had been with the brand through different ownership changes, first with Lion Capital, then Towerbrook Capital and finally Labelux Group GmbH, which acquired the brand in July 2011. Labelux subsequently took the company public in 2014.
After Mellon left the company in November 2011 and waited out a one-year non-compete agreement, she formed her own brand, Tamara Mellon Brand, in early 2013. The lawsuit said she raised $24 million, including $4 million from her personal funds. At the time Mellon started her new firm, Jimmy Choo’s sales revenue in comparison exceeded $445 million and made nearly $74 million in profit, the court document said.
The complaint noted that at the time Mellon left Jimmy Choo, she had indicated her plans to form her own firm and, through contacts established at her former job, use the same artisan factories as Jimmy Choo.
In the interim between leaving her former employer and starting her new brand, Mellon also published a memoir titled “In My Shoes – Tamara Mellon,” detailing topics such as personal and business ethics in connection with her departure from Jimmy Choo. Mellon has had an uneasy relationship with Labelux, one fraught with tension and animosity, and has charged that the brand’s current owner kept her out of the negotiations when they sought to acquire the brand from Towerbrook.
According to the court document filed Thursday, Mellon’s departure stemmed from multiple disagreements with Labelux, but mostly with her objection to her compensation package. The complaint said the proposal had the new owner invest post-tax dollars in an equity plan that, upon vesting, would result in the contributions being taxed as ordinary income versus capital gains. The lawsuit also noted that Mellon commissioned a KPMG study at her own expense on how to structure that plan as capital gains, but that it was ignored.
The complaint alleged that her former firm set out to “punish” her by “helping themselves to an indefinite ‘extension’ of the one year non-compete provision. The court document also charged that Jimmy Choo threatened the artisan factory owners with the loss of the Jimmy Choo business if they elected to work with Mellon. As reported by WWD in June 2015, Mellon’s new firm sent a cease-and-desist letter to Jimmy Choo. That letter cited instances of alleged behavior that included a meeting on June 10, 2013 between two Jimmy Choo employees and seven representatives from “key suppliers.” It was the subsequent boycott by the factories that led to her eponymous firm’s bankruptcy in December 2015, the legal document said. The bankrupt company emerged from bankruptcy with new investors earlier this year.
The Jimmy Choo spokesman said the company would “vigorously defend” itself against the lawsuit.