Tarrant, American Rag Head Back to Court
The partnership between American Rag Cie LLC and Tarrant Apparel has entered a litigious new phase.
American Rag, which owns an eponymous chain of contemporary boutiques, formed a partnership in 2003 and granted Tarrant the right to produce and sell some American Rag Cie–branded apparel. Tarrant owns a 45 percent stake in the partnership. In 2007, American Rag founder Mark Werts filed assault charges against partner Gerard Guez, Tarrant’s chairman and acting chief executive, in connection with an altercation during a meeting of American Rag’s board members. Now, American Rag has filed acomplaint for declaratory relief against Tarrant in Los Angeles Superior Court.
The January 28 filing alleges that Private Brands, a wholly owned subsidiary of the publicly traded Tarrant, has violated its licensing agreement by failing to make timely royalty payments in more than two instances in the past 12 months. American Rag argues that this entitles it to terminate the licensing agreement with Tarrant. On Jan. 11, American Rag sent a notificationletter saying as much to Tarrant, which, in turn, contests American Rag’s right to terminate the partnership. American Rag hasasked the court to find Private Brands and Tarrant in breach of contract and uphold its allegation that the license is terminated.
On Feb. 1, Tarrant filed a cross-complaint against American Rag, suing for declaratory relief, breach of contract, dissolution of alimited liability company and breach of fiduciary duties. Tarrant’s suit alleges American Rag’s “officers and directors embarked on a pattern of misconduct in which they used the assets of the [partnership] to develop their own businesses hellip; and, ultimately,purported to terminate the trademark license agreement and freeze Tarrant out of the management of [the partnership].” Tarrant also said that at all times Private brands has paid the guaranteed minimum royalty and percentage royalty—making American Rag’s claims to the opposite unfounded.
Tarrant alleges misappropriation of assets by American Rag in connection to the Cafeacute; beau Soleil eatery adjacent to theAmerican Rag Cie store owned by the partnership formed by American Rag and Tarrant in Newport beach, Calif. According tothe suit, while Tarrant contributed to improvements in the cafeacute;, American Rag has failed to share revenues generated by therestaurant. Similarly, Tarrant alleges that while the partnership owns the American Rag Cie store in Los Angeles, the retaileropened the World Denim Bar, a premium denim in-store shop in 2006 but has failed to share revenue generated by the business.
Another sticking point is the American Rag Cie–branded apparel produced by the Macy’s Merchandising Group under 2005 sublicense with Private brands. According to Tarrant’s suit, American Rag and Tarrant disagree about how the royalties from such sublicenses are to be distributed, and attempts at a negotiation failed.
Tarrant has asked the court for a decree of dissolution of the partnership and distribution of its assets.
Werts and American Rag’s lawyers could not be reached for comment. Lawyers for Tarrant declined to comment.
—Erin Barajas
