Like much in life, both the big picture and details matter in fashion contracts. But many fashion companies and designers pay too little attention to important details in negotiating fashion contracts. There are many reasons for that fact, including misplaced frugality, impatience and, at times, just plain laziness.

I write both to share a story about how I bailed a client out of a mistake made by their former lawyer and to pay tribute to that client.

Tricots St. Raphael, Inc. was a successful sweater company known for its understated, elegant men’s products that would enhance any wardrobe. When I began to represent that company many years ago, it sold sweaters under both the Tricots St. Raphael brand to Bloomingdales and other luxury retailers and also, through a licensee, under the diffusion brand TSR to mid-tier retailers such as J.C. Penney.

The founder, head designer, President and driving force of Tricots St. Raphael was a wonderful woman named Cecile Platovsky. Cecile was super smart and had an infectious laugh, which I got to hear often. She was a pleasure to work with. Cecile taught me the importance of in-person communication. My office was then, as now, on Third Avenue between 39th and 40th Streets. Cecile’s office was on 55th Street just east of Sixth Avenue. I preferred to talk about legal matters on the phone. Cecile would not have that if an important issue required our attention. She always insisted that I come to her office. So off I would go in a taxi across 42nd Street and up Sixth Avenue. Cecile was absolutely right. The in-person meetings produced results that would not have happened on the phone, or today on a Zoom call.

This is what happened with the TSR business. Cecile decided, before I represented her company, to license the TSR brand and trademark to a respected wholesaler of men’s shirts and other apparel products under many well-known licensed brands. The idea was for the licensee to sell a collection of TSR apparel products, not just sweaters, to mid-tier retailers. Tricots gave the licensee many business and personnel assets to make this happen: a book of millions of dollars of TSR orders and its TSR designer and sales director. What a great deal for the licensee! The licensee only needed to pay customary earned royalties on sales and minimum royalties.

The TSR business went very poorly under the licensee despite the great launching pad it received. In fact, in less than a year, the licensee ran the TSR business into the ground. Fifty-eight per cent of its sales went to off price retailers at deep discounts. I have never forgotten that number.
The licensee had large minimum royalties to pay and very small sales to support those payments.
What to do? The licensee could have asked Cecile for some monetary relief. But they were an arrogant lot and didn’t do that.

Instead, the licensee told my client that it would not pay the minimum royalties owed and would only pay the royalties owed on actual sales of TSR products. They claimed that my client had sold products to their customers in breach of a provision in the license agreement that barred my client from selling products that were “competitive on the basis of price” with the licensee’s TSR products.

My client’s prior lawyer dropped the ball — it was unclear what “competitive” meant. Did that mean a 10 percent difference, a 20 percent difference or some other standard? And could my client’s end of season closeout prices for the main brand be compared to the regular TSR prices? And could you compare my client’s prices for some totally unrelated brand to the TSR prices? The license agreement made none of this clear. Had I negotiated the license agreement I would have made this all clear.

I learned that my client had, in fact, used leftover yarn to make small amounts of end of season sweaters under a totally different brand which it sold to some of the licensee’s retail customers at prices that were not far off its regular TSR prices. As a result of the lack of clarity in the license agreement, the licensee was able to argue that these sales were a breach of the agreement on my client’s part.

Here is what I did. I put the licensee in default for not paying their minimum royalties. When they didn’t pay the quarterly minimum royalty due, I accelerated all the minimum royalties due, as the license agreement permitted me to do, and sued the licensee for $600,000 plus interest and attorneys’ fees .

I argued that the licensee could not pick and choose to pay the royalties on sales but not the minimum royalties. We found a case that said exactly that. The licensee’s proper path, were there a serious, material breach of the agreement, was to terminate it. It didn’t choose to go down that road, probably because the breach they asserted was, at best, a minor one.

The Court agreed with my position and granted my client summary judgment, without the need of a trial, for the $600,000 of minimum royalties we sought, plus interest and attorneys’ fees, and terminated the license agreement due to the licensee’s breach. A huge victory. I called Cecile. She was overjoyed

Details mattered!

I also got a new client as a result of this victory.
My client’s former TSR designer had become the designer for another sweater company. When they needed legal help he told them to call me – he said everyone was afraid of me in the fashion industry.
It was amusing to hear that.
I went on to work with that other sweater company for many years.

A great result for my client and me.