Condé Nast isn’t ready to settle with Stefano Tonchi just yet.
In its first response to the former W magazine editor in chief’s $1 million lawsuit claiming he was wrongfully terminated and denied severance, the publisher accused Tonchi of a series of actions that it says negatively affected the sale process for the magazine he edited for a decade. W was sold to Surface Media at the end of June and Tonchi was fired the same day.
Despite sources noting over the course of the process that Tonchi was actually tasked with identifying potential buyers and bringing them into the process, Condé claims that he was not a formal member of the team leading the sale and that he actually interfered “in order to achieve benefits for himself.”
“His actions included selectively and without authorization disclosing confidential and sometimes false information to the press and various bidders with the effect of dissuading full participation by buyers he disfavored, taking secret meetings with potential buyers even though he was not authorized to do so and numerous other violations of the express instructions he received from the team managing the sale process,” Condé wrote in the response, filed late Monday in local New York court.
Beyond that, Condé is accusing Tonchi of trying to “extort” an additional $1 million payment in order to meet with the company’s “preferred buyer,” Surface. As WWD previously reported, Tonchi and much of the staff were not pleased when it was revealed that Surface was the likely buyer, namely due to the small company’s reputation and that of its chief executive officer Marc Lotenberg. Condé claims that it was Tonchi who tried to discourage W employees to refuse to work for Surface. The publisher admitted, as WWD reported, that had employees done so it would have “likely” ended the Surface deal. Had Surface backed out, Condé even admitted that it would have simply closed W altogether instead of continuing to search for a buyer.
For those staffers who stayed on at W under Surface, which recently moved its operations into Condé headquarters at One World Trade Center through a sublease of Condé office space, there is already discord brewing. As reported, sources said the transition has not been exactly smooth and the employment contracts that had to be signed gave plenty of people pause. In addition to everyone coming on for a three-month trial period, giving rise to an expectation of future staff cuts, the contracts include a non-disclosure agreement and 11 “house rules.” Among the rules are “The magazine is a commercial product; revenue comes first” and “The creative process is collaborative; management decisions are not.”
Despite its many allegations against Tonchi, it appears the central issue for Condé is that his purported actions deeply affected the ultimate sale price. As previously reported by WWD, the sale price earlier this year was said to be around $8 million and while the ultimate price Surface paid was thought to be around $7 million, with the departure of the high-profile Tonchi, the price is thought to have gone down to around $6 million. According to Condé, the final sale price is “up to $15 million less than first round indications,” something caused by Tonchi’s “disloyal actions.”
Tonchi’s lawyer, Lani Adler, characterized Condé’s counterclaims as little more than an attempt to “blame Stefano for its bungling of the sale process and its apparent agreement to take what it thought was an unacceptably low price” for the magazine.
“I’m frankly amazed they’re litigating in the public the way they handled the sale process, as well as prepared to disclose in the public record the information they provided to the buyers and presumably whether the buyers thought the information was accurate and or complete,” Adler added.
As for Tonchi’s central claim of wrongful termination and that Condé denied him severance without case, Adler argued that Condé’s own actions up until Tonchi’s termination show cause did not exist.
“If you were to accept the conclusory statements in the counterclaim, it appears Condé has believed since the fall of 2018 that Stefano was acting in ways that constituted cause, but nonetheless kept him employed and did not disclose that until they sold W,” Adler explained. “The implication has to be they wanted to take advantage of his work, notwithstanding they thought him disloyal. Obviously there is a real disconnect and a really exploitative and bad faith undercurrent.”
In general, Condé claims that Tonchi’s actions, from having undisclosed dinners with potential buyers to having an obvious preference for one in particular (described in the response as “a venture capital fund” and presumably C Ventures) violated a set of “rules” regarding the sale and a confidentiality agreement. He also allegedly informed one of the three final bidders of the existence of the other two, something he was allegedly not supposed to do, and when the venture capital fund backed out of talks in mid-April Tonchi informed the third buyer who had also backed out, in an e-mail. “Condé is a real mess,” Tonchi wrote in the e-mail, according to the response. “They let my group go…they walked away from the deal. I am really upset. Let me know if you get any new ideas or future project…I want out.”
The publisher also claimed that Tonchi owed it a fiduciary duty and a duty of loyalty, which he violated. Given that, Condé is not only looking to have Tonchi’s lawsuit dismissed, but it’s looking to recover “all monies paid to him during his period of disloyalty, as a faithless servant.” Condé is also countersuing for unspecified damages, plus interest.
Adler said she “looks forward to trying this case.”
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