Like a piece of overstretched Lycra, it was a split heard round the fashion world.
Elie Tahari sued his longtime business partner Andrew Rosen over what should have been their biggest success: the sale of their jointly owned Theory clothing company to two Japanese firms in 2003.
In a ruling disclosed yesterday, New York State Supreme Court Justice Helen E. Freedman put an end to the battle royal by siding overwhelmingly with Rosen and denying six of Tahari’s seven claims.
The sole claim she upheld for Tahari related to questions of unpaid royalties by Theory’s Asian licensee, Link International, which, along with Fast Retailing – a Japanese company that owns the Uniqlo apparel retailer – bought Theory for roughly $100 million four years ago.
At the crux of the dispute was whether Rosen convinced Tahari to sell his 50 percent Theory stake on the cheap to the Japanese firms by suggesting his planned retirement would make it difficult to hold a full-scale auction for the company.
At the time, a boom in mergers and acquisitions for apparel companies was just getting under way, leading some to suggest that Rosen and Tahari could have sold out for a higher price if they had waited.
Rosen, who never did retire and continues to work for the company as head of its U.S. operations, has, in court papers, dismissed Tahari’s allegations as “seller’s remorse.”
“Elie and I built a hell of a company together, and I was proud of what we did,” Rosen said.
In a statement, Tahari said that he was grateful the “backbone” of his claim involving unpaid royalties had been upheld.
Since the split, Tahari has focused on designing a line under his own name that competes with Theory in stores like Saks Fifth Avenue, Bergdorf Goodman and Bloomingdale’s.
Tahari received $53 million for his Theory stake and additional compensation for services related to an agreement that expired on Aug. 31, 2006, according to court papers. Rosen received $49 million plus an 11 percent stake in L&F Holdings, now called Link Theory Holdings U.S., of which Rosen is the co-CEO.
According to Tahari’s lawsuit, filed in September 2006, Rosen informed him around the time of the sale that he planned to retire both from Theory and from the fashion industry in general. Tahari also claimed that Rosen said that without him at the helm it would be difficult to conduct a full-scale auction of the business, and suggested they cut a deal with the company’s Asian partners.