The founder and former chief executive of BCBG Max Azria Group Holdings LLC and his wife have sued the fashion house, saying she was illegally terminated as the fashion company's creative officer after it filed for bankruptcy. Max and Lubov Azria filed an adversary complaint in BCBG's Chapter 11 bankruptcy in U.S. Bankruptcy Court in Manhattan on Tuesday. They said Lubov Azria's employment contract was part of a broader out-of-court restructuring agreement the company struck in 2015 with investors, including affiliates and clients of Guggenheim Partners.
BCBG, Parisian slang meaning "good style, good attitude," is known for designing and making women's apparel and party dresses worn by celebrities including Selena Gomez. It filed for bankruptcy protection last month, succumbing like several apparel retailers - including American Apparel, The Limited and Aeropostale - to competition from online shopping and declining visits to malls by consumers.
In court papers filed last week, BCBG said it would "part ways" with Lubov Azria in May as part of staff cuts at its headquarters in Vernon, California. The company gave notice in December to state officials of 123 permanent layoffs in Vernon. Azria has held the titles of chief creative officer and chief creative director at BCBG since the 1990s.
BCBG said in the filings that it had the right to cut Azria from its payroll because her employment agreement had a so-called entire agreement provision that superseded the out-of-court contribution agreement with investors in 2015 for a cash infusion.
"In other words, when she signed the employment agreement with BCBG Group, Mrs. Azria expressly agreed that it was not integrated with the contribution agreement," BCBG said. However, the Azrias said in their complaint that the two agreements were integrated and required BCBG to assume or reject them together rather than piecemeal.
The out-of-court restructuring left the Azrias with a 20 percent stake in BCBG, which they previously owned, long-term employment contracts and lease agreements for the company's headquarters and distribution center. The Azrias said resolving the dispute over the agreements are was critical, as it will affect terms for occupying the company's headquarters and distribution center, both owned by the couple, and the company's use of their names along with other intellectual property.
BCBG has a commitment for an $80 million loan to support operations during its bankruptcy.
* The case is In re BCBG Max Azria Group Holdings LLC et al, in U.S. Bankruptcy Court, Southern District of New York, No. 17-10466.