Nanette Lepore

It appears the business deal between fashion designer Nanette Lepore and Bluestar Alliance LLC has unraveled.

Lepore, whose namesake ready-to-wear brand has been worn by First Lady Michelle Obama and other celebrities, filed a lawsuit against Bluestar and NL Brand Holdings LLC, in federal court last Tuesday, charging breach of contract and alleging the company has allowed the production of “shoddy” licensed products bearing her name.

The partnership, which started out on a high note in early 2015, has landed in court amid allegations of “unethical and improper conduct” being leveled at Bluestar and the holding company’s licensees.

A strong proponent of the Save the Garment Center movement in New York City, Lepore is going after Bluestar for allegedly cutting her out of the business and allowing licensees to manufacturing foreign-made “inferior and defective products” under her trademarks, according to the complaint.

Lepore, who built her business up from a small shop in the East Village in 1992 into a high-end brand that is now sold in Neiman Marcus and Saks Fifth Avenue and worn by the likes of Jennifer Garner, Sarah Jessica Parker, Taylor Swift and Reese Witherspoon, outlined a litany of allegations in the lawsuit filed against Bluestar in the U.S. District Court for the Southern District of New York.

Seeking to expand her brand worldwide, Lepore started her search for an investor and entered into a partnership with Bluestar, a brand management firm that markets and manages a portfolio of consumer brands, in August 2014, according to the complaint. As part of the deal, Lepore and her husband and business partner, Robert Savage, maintained a 20 percent minority interest in NL Brand Holdings, a holding company created as part of the agreement and an “exclusive, royalty-free, irrevocable and perpetual license” to use the Nanette Lepore core brand in connection with Lepore’s high-end fashion line, the lawsuit alleged.

Bluestar owned the remaining 80 percent interest in the holding company and handled the day-to-day operations of the business, the lawsuit said.

But the partnership appears to have been troubled from the outset, according to Lepore.

“The ink on the agreements comprising the deal had not even dried when Bluestar began showing its true colors,” the lawsuit alleged.

Lepore said she fought hard to maintain a creative role in the high-end fashion collection during negotiations and was named as creative director for NL Brand Holdings. However, NL Brand Holdings subsequently fired Lepore as creative director “without cause” and terminated the consulting agreement with her, accusing her of breaching the contract.

Lepore said the termination was associated with an in-store event she held during New  York Fashion Week last September.

According to Lepore’s account detailed in the lawsuit, the designer held an event at her store in New York that she dubbed the “Happening,” to showcase her spring collection. At that event, Lepore also featured artwork from a new artist named Sean Kinney of Eddie Eddie by Billy Tommy, who created four garments for the event that she said were “solely used” as background props and were never offered for sale to the public, according to the lawsuit.

The event was used to promote Nanette Lepore apparel and garnered “significant” media attention for the brands, according to the complaint. Lepore claimed the holding company “falsely alleged” the “mere display” of the four background “props” constituted “willful and material breach” of the consulting agreement and terminated it with her.

Lepore also asserted the holding company declined to pay her an agreed-upon “substantial” severance when it terminated her contract and countered that it was the one that breached the contract.

“Unfortunately, Bluestar’s unethical and improper conduct also extends to its dealings with BH’s licensees, retailers and consumers,” the lawsuit alleged. Lepore charged that products made overseas by licensees have diminished the value of her trademarks, which she has heavily invested in over the past 30 years.

“Sadly Lepore has received numerous complaints about Bluestar’s shoddy products bearing her name that quickly fall apart, or even worse, pose health risks to consumers (such as risk of cancer and birth defects),” the lawsuit charged. “Indeed, adding insult to injury, despite firing Lepore as creative director, Bluestar continues to represent to licensees and others that Lepore approves and endorses BH’s licensees’ shoddy, defective and inferior products, when in fact she does not.”

Similarly, the two sides appeared to lock horns over the licensing agreement, with Brand Holdings threatening to terminate that agreement and demanding payment for royalties related to sales of high-end merchandise to discounters that exceeded a certain threshold, according to the complaint. Lepore is countering that Brand Holdings “sought to deprive” her of the benefits of the exclusive license agreement by allowing the licensees to use the licensed marks in violation of the exclusivity provisions in the agreement.

Among the causes of action in the lawsuit are: “false endorsement,” breach of contract and a petition for judicial dissolution of the holding company. Lepore is seeking more than $735,000 in damages for the alleged breach of contract, in addition to punitive damages and damages covering attorney’s fees.

Messages left for Bluestar’s cofounders Ralph Gindi, chief operating officer, and Joseph Gabbay, chief executive officer, were not returned on Sunday.