Fred Segal in Legal Battle Over Iconic Melrose Avenue Store

Fred Segal is in the midst of a legal battle in connection with the sale of the of 29,000-square-foot building located at 8100 Melrose Ave. in Los Angeles, California. According to a complaint filed early this month in the U.S. District Court for the Central District of California by Sandow, the New York-based brand management company that owns the Fred Segal trademark, alleges that CormackHill LP, the new owner of the famed shopping complex, is on the hook for trademark infringement. The dispute specifically concerns the rights to display the Fred Segal insignia on the Melrose Avenue property following its acquisition earlier this year.

A bit of background: Fred Segal opened his namesake store on Melrose Avenue in 1961, ultimately growing to house several independently run boutiques under its umbrella. While many of the retail tenants still occupy the building, the Fred Segal label has since moved out of the Melrose space, opting to maintain two locations in Japan, and one in the Los Angeles International Airport. Two former locations, in Santa Monica and Las Vegas, were permanently closed earlier in 2016 and in 2015, respectively.

The largely unpublicized closure of the Fred Segal store on Melrose earlier this year followed three key transactions. First, in 2001, Fred Segal sold its Melrose Avenue property and a license to use its brand name to its longtime insurance broker, Bud Brown. In 2012, Fred Segal sold the brand (read: trademark rights) to Sandow. Then in March of this year, Canadian real estate investment firm CormackHill purchased the Melrose Avenue property for $43 million from Brown.

Matters get complicated here because it would seem, according to a recent LA Business Journal article, that the real estate sale did not include the license to the Fred Segal name – without any mention of whether the purchase agreement at issue specified how the Fred Segal signage factored into the sale. Legally, that indicates that the Melrose center is no longer a Fred Segal store. In practice, that should mean that the building can no longer display vestiges of the Fred Segal trademark.

As we have covered before, a trademark (any word, name, symbol, or design, or any combination thereof, used in commerce to identify and distinguish the goods of one from those of another) can be very valuable for a business. Just as names like Bloomingdale’s and Chanel hold significance for consumers, the Fred Segal name is recognizable to Los Angeles shoppers and tourists alike. In the complaint, Sandow asserts, “There is a substantial likelihood of confusion on the part of the public and clients regarding the use of the Fred Segal [trademarks].” Put simply, if the unmistakable logo remains prominently displayed on the building’s exterior, consumers are likely to visit the site under the false belief that it is still the iconic Fred Segal.

Thus, if Sandow is successful in enforcing its trademark rights, CormackHill will no longer be able to profit or otherwise benefit from the Fred Segal trademark, given its potential to mislead customers. As for the tenants themselves, it remains to be seen how they will fare without the draw of the Fred Segal name.

* This case is Sandow + Fred Segal, LLC v. CormackHill, LP, 2:16-CV-06653, C.D.Cal.