THE FASHION LAW EXCLUSIVE – LVMH Moet Hennesy Louis Vuitton and Proenza Schouler are in hot water in connection with a lawsuit filed against them this summer. According to Patrice Lataillade – the former CFO of New York-based brand, Proenza Schouler – LVMH, Proenza Schouler, and Proenza’s CEO, Shirley Cook are allegedly on the hook for unlawful employment discrimination and wrongful termination. Lataillade’s lawsuit, which was filed in late August in the U.S. District Court for the Southern District of New York, also sheds quite a bit of light on the much talked-about potential acquisition of Proenza Schouler by LVMH, a deal that never came into fruition.
According to Lataillade’s complaint, which cites violations of Title VII of the Civil Rights Act of 1964, Proenza Schouler terminated him solely in retaliation for a 2011 lawsuit that he filed against Marc Jacobs, and LVMH similarly subjected him to unfavorable employment treatment as a result of the lawsuit. (Note: Under Title VII, an employer is liable for employment discrimination if it fires an employee as retaliation for his filing a complaint against the company).
A bit of background: You may recall that in 2011 Lataillade filed a sexual harassment and retaliation lawsuit against Marc Jacobs International, where he had served as its Chief Executive Officer and then Chief Operating Officer beginning in 2002. In his suit against Jacobs, Lataillade alleged that he was subjected to an offensive and discriminatory work environment and that he was fired when he complained about it. In particular, Lataillade alleged that Robert Duffy – designer Marc Jacobs’ longstanding business partner – required employees to look at gay pornography, handed out a book with multiple pictures of employees nude or in sexual positions, and repeatedly made inappropriate sexual comments in the workplace.
Marc Jacobs and Lataillade were able to settle the suit out of court prior to trial in 2012, but according to the suit at hand, Lataillade became concerned about his employment while working at Proenza Schouler due to his history with the LVMH-owned Marc Jacobs brand. According to Lataillade, in December 2010, Proenza recruited him, “an executive with nearly 20 years of experience in the fashion industry, to assist the budding New York-based luxury brand to develop its business strategy and operations.” After working as a consultant for a year, Lataillade was promoted to Chief Financial and Operating Officer.
Lataillade further alleges in his lawsuit that in 2014 Proenza began searching for new investors and “in or around early spring 2014, LVMH emerged as a promising solution to Proenza's cash flow problem and the two brands began negotiating a deal.” Lataillade asserts that he “became concerned about his job security with Proenza, as he feared retaliation by LVMH” due to the suit he filed against Marc Jacobs in 2011.
His complaint goes on to state that his “concerns about retaliation were justified; during the negotiations, LVMH Fashion Group Chairman and CEO, Pierre-Yves Roussel made clear to Proenza that [Lataillade’s] continued employment would be an obstacle to the deal.” However, after expressing concerns, Lataillade alleges that Proenza’s CEO, Shirley Cook, assured him that he would not be fired in the event of an LVMH buyout and awarded him shares in Proenza that made him a 1.8% owner. That ownership stake, according to the parties’ agreement, would be bought back by Proenza in the event that Lataillade left the company but not if he was terminated.
Things started to go south thereafter in July 2014, according to Lataillade, when the LVMH Proenza deal “was in jeopardy.” The complaint states:
To make matters worse, Proenza's sales were declining. By the fall, Proenza was desperate for negotiations to resume, which they did in November, when LVMH and Proenza executed a ‘Term Sheet for Acquisition.’ That agreement gave LVMH an exclusive right to acquire a majority interest in Proenza until March 31, 2015. During negotiations, on information and belief, LVMH requested information concerning plaintiff, including a copy of his Unit Grant Letter Agreement with Proenza. On information and belief, Roussel, in retaliation for [Lataillade’s] prior equal employment litigation, made [Lataillade’s] firing a precondition for the deal to move forward.
Ultimately, Lataillade claims that “not surprisingly, in January 2015, Proenza fired plaintiff in order to entice LVMH to finalize the transaction, and also to absorb the value of plaintiffs shares.” The “LVMH deal did not materialize, allegedly because LVMH and Proenza could not agree on the value of the Company,” and “absent LVMH's retaliation against [him] for his prior lawsuit and Proenza's retaliation against [him] for his protected activity, [he] would still be employed by Proenza, and a 1.8% owner of the Company.”
At the time of Lataillade’s termination, he alleges that he was “60% vested in his shares; an interest worth approximately $2,300,000.” Lataillade is seeking lost wages, compensatory and punitive damages, and other appropriate legal relief. The case is still underway in the Southern District of New York.
UPDATED (11/30/2016): In a court filing on Wednesday, attorneys for Proenza Schouler disputed Lataillade’s claims. A LVMH spokeswoman said Wednesday, “The claims against LVMH lack any merit and LVMH looks forward to a complete vindication in these proceedings.” In another court filing Wednesday, attorneys for Proenza Schouler’s former CEO Shirley Cook, who also is cited in Lataillade’s complaint from this summer, disputed numerous allegations.
* The case is PATRICE LATAILLADE v. LVMH MOET HENNESSY-LOUIS VUITTON SE; LVMH MOET HENNESSY-LOUIS VUITTON INC.; PROENZA SCHOULER, LLC; and SHIRLEY COOK 1:16-cv-06637.