BCBG founders sue their own brand

By

Cassidy Mantor

Published
Mar 24, 2017

BCBG founders Max and Lubov Azria are now individually suing their failing brand for wrongful termination of Lubov Azria.

BCBG began closing 120 stores this January when it was faced with the decision to restructure yet again for the 3rd time in 2 years or go under.

Chief Restructuring Officer Holly Felder Etlin explained, “Like many other apparel and retail companies, BCBG has fallen victim in recent years to adverse macro trends, including a general shift away from brick-and-mortar to online retail channels, a shift in consumer demographics away from branded apparel."

The Vernon, CA-based brand filed for Chapter 11 Bankruptcy relief earlier this month in U.S. Bankruptcy Court in Manhattan. This week, the Azrias filed a complaint in the Chapter 11 proceedings arguing that Lubov Azria illegally lost her job as chief creative officer and director, a role she has held since the '90s.

BCBG claims it could "part ways" with Lubov Azria as part of the significant layoffs and job cuts it made at its Vernon headquarters. In total, BCBG has disclosed plans to layoff 123 jobs so far, including Ms. Azria's layoff which is scheduled for May, 2017.

The Azrias individually are arguing that Lubov's employment contract was part of a broader out-of-court deal between Guggenheim Partners, who has been bailing the company out for a decade, and the investors, and agreement that dates back to a restructure in 2015. They argue both her employment contract and the 2015 restructure have to be read together, not piecemeal.

BCBG's position on the termination is that Ms. Azria's employment contract had an entire agreement provision, meaning that it would supersede the 2015 out-of-court restructuring agreement and that they "expressly agreed that it was not integrated" with that 2015 agreement.

Whether the court finds the employment contract must be read in the context of the struggling business or whether it will stand on its own will hopefully be determined before BCBG runs out of money.

The Azrias have retained a 20 percent interest in BCGB and own the company's HQ and DC. The brand is currently hanging on by a thread with an $80 million loan for operations through bankruptcy.