American Rag, Tarrant Settle Suit
Tarrant Apparel announced Dec. 30 that it had reached a settlement with American Rag Cie.
The two companies had been feuding since early 2008, when each had filed suits against the other alleging, among other things, breaches of their licensing agreements, fraud and nonpayment of royalties.
In 2003, Los Angeles–based manufacturer Tarrant and retailer American Rag had formed a partnership that granted Tarrant the license to produce and sell American Rag–branded apparel. At the time, Tarrant acquired a 45 percent stake in American Rag. Tarrant produced its licensed apparel under Private Brands, a wholly owned subsidiary of the publicly traded company.
The settlement, which terminated the two lawsuits, gives Tarrant an amended license to produce American Rag–branded apparel, including a sublicense to produce apparel for Macy’s Merchandising Group, until Sept. 30, 2018, with six consecutive 10-year automatic-renewal runs. The new licensing agreement also reduced the annual guaranteed-minimum royalties and revised the royalty rates, clarified the provisions with respect to calculation of royalties and reporting, and amended the termination provisions. Mark Werts, American Rag’s founder and chief executive, bought back Tarrant’s stake in his company for an undisclosed amount.
“I am very pleased that that chapter of my life is behind me. I am very optimistic, positive and joyful for the future,” Werts said when reached for comment.
Tarrant also announced that NASDAQ has granted the company an extension for continued listing on the exchange until April 17. The suspension, which was originally to expire on Jan. 16, is related to the price deficiency of Tarrant’s stock. Tarrant’s stock has been trading below the required $1 per share. At market close on Dec. 30, Tarrant stock was trading at 40 cents per share. —Erin Barajas
