NEW YORK — The fashion world is airing some of its dirty linen — and who knows what else could come to light as the lawsuit filed by Carolina Herrera against Oscar de la Renta and designer Laura Kim proceeds through the court system.
A hearing date is set for Jan. 10 at 10:30 a.m. in a Manhattan state court. The hearing is in connection with a preliminary injunction request to bar Kim from working for de la Renta until her six-month noncompete agreement runs out on April 8.
Intriguingly, according to a letter filed with the lawsuit from Herrera’s lawyer Holland & Knight, the noncompete agreement does not apply to any fashion company except Oscar de la Renta. Explaining it didn’t mind that Kim worked on her own brand, Monse, with her colleague Fernando Garcia, the lawyer’s letter added, “Moreover, Carolina Herrera has no objection to Ms. Kim working for any fashion house other than Oscar de la Renta, Carolina Herrera’s direct competitor.”
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The letter is the latest indication of the long-running rivalry between the two iconic American fashion houses. While Herrera’s business, which is owned by Puig, is substantially larger, its primary category is fragrance, while de la Renta’s business is centered on ready-to-wear and accessories.
Kim worked for the late de la Renta for 12 years before leaving to consult with Herrera and discuss a full-time position at that company, which is the subject of the lawsuit. Kim and her co-creative director Garcia also were the latest in a string of de la Renta executives recruited by Herrera, stretching back to one of the house’s former designers, Hervé Pierre, and including its current chief operating officer, Giuseppe Celio.
Judge Jeffrey K. Oing — he is the same State Supreme Court Justice who presided over Macy’s Inc.’s much publicized lawsuit against Martha Stewart Living Omnimedia and J.C. Penney Co. Inc. — has granted a temporary restraining order barring Kim from working for de la Renta until Jan. 10, and barring de la Renta from employing her or accepting any services from her at any time until that day.
Kim and Garcia consulted for Herrera in fall 2015, and Kim became the company’s senior vice president for design last January for an annual salary of $450,000, or at a semimonthly rate of $18,750.
The agreement also gave her a clothing allowance of $20,000 annually at cost at Carolina Herrera New York and for 50 percent of the retail price at Carolina Herrera. The agreement required Kim to provide three months’ notice of her intention to resign, and said the company could “at its discretion” elect to exercise a six-month noncompete provision. Further, if Kim didn’t receive severance, then she would receive a monthly payment of 50 percent of her monthly base salary during the noncompete period.
She was subsequently offered the job of creative director at Herrera — a move that would have “transitioned out” the 77-year-old designer — at an annual salary of $1 million plus the opportunity to get up to a $300,000 bonus, but allegedly turned the job down and joined de la Renta as co-creative director, along with Garcia. Supposedly she wanted Herrera to also hire Garcia, and what swayed her decision was that de la Renta acceded to her request to hire Garcia. De la Renta also invested in Monse.
In Justice Oing’s Dec. 21 order that the parties show up in court on Jan. 10 for the preliminary injunction hearing, he said he “considered” the Dec. 20 sworn affidavit of Celio in scheduling the hearing date and granting the TRO.
In Celio’s affidavit, he noted that Kim on July 8 submitted a resignation letter to Francois Kress, Herrera’s chief executive officer, to start the running of the three-month notice requirement under her employment contract. On Aug. 26, Kress e-mailed Kim and Garcia, informing them they were relieved of any obligation to work at Herrera from that time forward. On Sept. 7 — the day after the news broke that Kim and Garcia were rejoining de la Renta — Kress sent Kim a letter regarding the company’s election of the six-month noncompete provision. The Herrera lawsuit said it is paying Kim 50 percent of her monthly base salary during the noncompete period and intends to do so until April 8, 2017.
There are even further twists and turns to the fashion battle after that.
Celio said in his affidavit that in correspondence between lawyers for Kim, de la Renta and Herrera, there was an Oct. 14 letter noting that Kim “has not been employed by Oscar de la Renta” since her employment with Herrera began in January. His affidavit also said that Herrera’s counsel sought clarification regarding what lawyers meant about plans to “rehire” Kim “shortly.”
It was reported in WWD on Dec. 7 that Kim and Garcia would show their first de la Renta collection for fall 2017, which is shown in February, although news of Kim and Garcia joining de la Renta broke in early September. The fact that the show date and design time frame would be prior to the expiration of Kim’s Herrera six-month noncompete agreement is just one part of the dispute. Celio’s affidavit said Kress “directed me” to de la Renta’s Instagram account, which allegedly had a posting in which Kim and Garcia were described as “co-creative directors” of de la Renta’s brand for its “pre-fall collection. The pre-fall collection has already been designed and presented.”
Celio went on to say that if the two were the creative directors behind the pre-fall collection, “That means that they have been working for [Oscar de la Renta] for months.” He said the Instagram posting is no longer available to view. He said the company received confirmation from de la Renta’s counsel on Dec. 19 that Kim was hired as its creative director — even though that happened in September — which Celio noted is with “at least four months of Ms. Kim’s noncompete obligation remaining.”
However, a spokesman for de la Renta said Thursday that Kim and Garcia had nothing to do with either the house’s pre-fall or bridal collections and reiterated that their first collection for the house will be for fall 2017. “They did not design pre-fall or bridal,” the spokesman said. “Those collections were developed by Oscar de la Renta’s internal team.”
Even more questions and contradictions are raised by the lawsuit, not the least of which is whether Carolina Herrera herself knew of her company’s plans for her to “transition out” as creative director of the brand she founded 35 years ago. Sources have been saying for months that Herrera was being sidelined at her company as she was being pressured to take on more of an ambassador’s rather than day-to-day role.
In addition, the lawsuit places a huge value on Kim’s designs — even though Kim and Garcia worked at Herrera for only 10 months, first as consultants and then, for Kim, full-time since last January.
On the one hand, Herrera’s lawsuit claims the brand has lost business since Kim’s departure and that the fall collection shown during New York Fashion Week in February was a dud at retail. The lawsuit also said that during her tenure at Herrera, Kim designed one season’s collection from beginning to end. It also said that season — the resort 2016 collection — was Herrera’s most commercially successful collection in its 35-year history. In contrast, the fall 2017 collection, designed after Kim’s departure from Herrera and by a different designer, “has not inspired the same level of commercial orders from clients.”
Yet in the affidavit filed by Kim’s lawyer as part of the lawsuit, Kim alleges that Kress told her and Garcia on Aug. 25 that “Carolina Herrera (the person) did not like our designs for the upcoming show and that she felt she could finish the collection in a way that was appropriate for her brand.” That collection would have been the fall 2016 one that Kress admitted did not perform at retail, stirring the question as to whether Kim’s original versions would have done better.
Kim’s affidavit added that Carolina Herrera herself went on to say to her, “‘Nobody knows you and nobody knows you are here. I am more famous than you and I have more powerful friends.'”
The lawsuit noted that Herrera and de la Renta are “head-to-head competitors,” adding that they specialize in women’s eveningwear in the rtw market, that both collections have comparable tones and share a similar geographic footprint worldwide. “When one brand suffers — which [Oscar de la Renta] did following the death of its eponymous founder in 2014 — the other often benefits in a zero-sum manner as its portion of their shared market grows,” the complaint said rather coldheartedly.
The court document said after Kim joined Herrera, Bergdorf Goodman decided to shrink the in-store space dedicated to the de la Renta shop, and give that space to Herrera’s shop. “Prior to Kim’s affiliation with [Herrera], Herrera’s efforts to obtain independently identifiable and dedicated floor space in Bergdorf Goodman were unsuccessful,” the complaint said.
The de la Renta collections at that time were being designed by Peter Copping, which retailers said failed to perform at retail. Sources said that could have been the reason Bergdorf’s shrank the space devoted to de la Renta.
In short, the complaint said the Herrera fashion house doesn’t want Kim to participate in the design of de la Renta’s fall 2017 collection, or participate in industry and press events, which are in “contravention” of the noncompete clause she agreed to “and for which [Carolina Herrera] has continued to pay her.”
The document also said it would be impossible to quantify the loss that Herrera’s business could suffer from Kim’s premature entry into the de la Renta business. Herrera explained that if the company were to “lose a portion of its business in head-to-head competition with [de la Renta for the fall 2017 collection], that business loss could be compounded over the following season because retailers will not necessarily restore their previous budget allocations of sales dollars after they have adjusted them for a season.”
The Celio affidavit noted the same, adding: “How far into the future such a depressing market effect will last is unpredictable. Accordingly, there is no way to quantify the loss in business attributable to Kim’s improper competition.”
The Celio affidavit went on to say that creative directors and top designers are given significant attention because their “creative visions and abilities are what define the products that we sell, which is a form of artistic expression.” He said the publicity also extends to “commercial contacts and buyers in the industry.” Celio explained that a designer collection’s commercial success is whether buyers of large department stores place large orders to stock the collection heavily.
“These buyers know the designers behind a collection. Based on my years of experience in the industry, it is clear that a buyer’s past opinion of a collection’s designer will impact the buyer’s impression of the collection and its expected resonance with the public,” Celio concluded.
The Herrera lawsuit, while seeking to enforce the noncompete in Kim’s contract, is also seeking damages and other “relief as the court may deem just and proper.”
The odd thing is that Herrera’s lawsuit only seeks to keep Kim from working at de la Renta for basically four months — until April, when the noncompete agreement expires — which means she would miss only one season, fall 2017. The suit — while saying it is difficult to quantify the financial impact Kim’s designs for de la Renta might have on Herrera’s business as the two firms go “head-to-head” — does not address what Herrera plans to do after the fall 2017 season when, presumably, Kim would be working at de la Renta on the cruise and spring 2018 collections.
For its part, de la Renta said Thursday it was sticking by Kim and Garcia. “While we are disappointed by the court’s decision yesterday to temporarily restrain Laura Kim from returning to our company, where she worked closely with Oscar for over 12 years, we respect the court’s decision and look forward to returning to court soon. At that time, we will more fully brief the court on this noncompete matter and to otherwise respond to this oddly timed lawsuit brought by Mrs. Herrera and her team,” the company said.
“More than ever, we remain committed to our partnership with Laura Kim, Fernando Garcia and Monse, a firm with a very bright future in which we recently made a significant equity investment and with whom we are working closely.
“Eliza [Bolen], Alex [Bolen], Laura and Fernando all remain tremendously excited about working together again — even if on a somewhat delayed basis — to build the Monse and Oscar de la Renta brands so that our firms continue to represent the very best in fashion,” de la Renta concluded.