Azrias Push Back on Termination of Lubov’s Employment

Discord has arisen in the house of BCBG.

Attorneys for Max Azria and Lubov Azria on Tuesday filed a lawsuit seeking to block BCBG Max Azria Global Holdings LLC’s attempts to terminate Lubov’s employment contract with the firm. The company had announced a restructuring in parts of its executive suite earlier this month with, most notably, the departure of Lubov as BCBG’s chief creative officer. The company said in court filings, Lubov’s employment “does not provide any benefit to BCBG Group’s estate and is not necessary to BCBG Group’s ongoing operations.” The Vernon, Calif.-based fashion company — parent to its namesake brand, BCBGeneration and Hervé Leger — filed for Chapter 11 at the beginning of the month following an earlier announced plan to shutter a portion of its store fleet as it turns to a focus on the digital, wholesale and licensing businesses.

At the center of the disagreement are two contracts signed in 2015 between Lubov and the company and how each party in the lawsuit views them.

The first was a contribution agreement with BCBG Max Azria Global Holdings LLC that was related to Lubov’s interest in the company and shareholder rights along with non-compete and non-disparagement provisions among other stipulations in effect until Jan. 3, 2022.

The second contract is an employment agreement signed Feb. 5, 2015, with BCBG Group, a separate subsidiary from the one Lubov signed the contribution agreement with.

Attorneys for the company asked a judge earlier this month to allow them to reject the employment agreement with Lubov, arguing it is separate from the contribution agreement.

The Azrias disagree.

“The outcome of the dispute will affect the terms under which the [company] occupy their distribution center, the [company’s] ability to use and exploit the Azrias’ names and other intellectual property rights and the parties’ various entitlements with respect to pre-petition claims and post-petition administrative expenses among other issues,” attorneys for the Azrias said in their lawsuit.

The Azrias own the office and distribution center in Vernon the company occupies.

Max Azria founded BCBG Max Azria in 1989 and had been the company’s long-standing chief executive officer up until his departure last year. Lubov Azria had also been the company’s longtime head of creative, with the couple the sole owners of the business up until a February 2015 restructuring. The deal that brought a $135 million cash infusion from Guggenheim Partners and its affiliates changed the equity structure, sending the Azrias’ stake in the business to 20 percent and also, their attorneys argue, “purported to bar them in certain respects from using their own names and other IP and to prohibit them from earning their livelihood elsewhere in the fashion industry.”

The Azrias took the deal, the lawsuit went on to say, because they were ensured long-term employment and control of the business. Max was to remain ceo but then be tenured in with the title of founder and head of international strategy, while Lubov would remain chief creative officer, according to the lawsuit.

“The Azrias would never have agreed to the February 2015 restructuring without the benefits that were an integral part of the transactions,” the lawsuit said.

A hearing on the matter is set for next week.