NIPONS SUING LESLIE FAY TO VOID NO-COMPETE DEAL
Byline: Dianne M. Pogoda
NEW YORK — Albert and Pearl Nipon filed suit in bankruptcy court here Wednesday against their former employer, The Leslie Fay Cos. Inc., seeking a court order declaring a one-time non-compete clause no longer valid.
The Nipons are seeking the ruling in order to re-enter the apparel and accessories business.
The Nipons, who sold their designer apparel business and rights to the Albert Nipon name to Leslie Fay in 1988, had been restricted from competing with the dress and sportswear house by a lifetime consulting contract. Leslie Fay, which was forced into bankruptcy in April 1993 following disclosure of an accounting scandal, rejected that lifetime consulting contract March 7, 1994 but has refused to guarantee the Nipons that it wouldn’t sue them if the couple returned to the apparel business.
Kathryn D. Connors, senior vice president of corporate affairs and general counsel for Leslie Fay, said Wednesday the company had not been served with any papers and declined to comment since she had not seen the complaint. She said, however, that the Nipons were prohibited from using their name in any competitive activity.
The Leslie Fay-Nipon relationship began on Jan. 6, 1988, when Leslie Fay acquired Albert Nipon Inc. In August 1991, Leslie Fay removed the Nipons as heads of the Nipon Division but retained them in a licensing capacity through April 15, 1993, the end of their employment contract. The employment agreement also contained a lifetime consulting provision, which carried the non-compete clause.
As long as the Nipons were retained as consultants, they would not be allowed to compete. Under the consulting deal, the Nipons were to be compensated by a percentage of royalties and license fees, according to court papers. However, the Nipons were never asked to consult nor were they paid for any services, the suit alleges.
According to the suit, the Nipons requested several times that Leslie Fay formally agree that the March 7, 1994, rejection meant that the non-competition covenant would also be terminated.
“How can they have it both ways? That’s why we’re suing,” said Paul Rosen of Spector, Gadon & Rosen, the Nipons’ attorney. “All they had to do was keep the Nipons on as consultants [to restrict competition]. It was a major error in judgment.”
Albert Nipon said Tuesday that he expected to announce the details of a deal to go back into the apparel and accessories business in the near future. He would not specify a timeframe, disclose the name of the business or its collections or say if he would be reacquiring his name from Leslie Fay.