Celebrated Designer Can Sue Over Old Navy Deal

     MANHATTAN (CN) – Renowned designer Todd Oldham can pursue breach-of-contract and wrongful-termination claims against Old Navy, the 2nd Circuit ruled.

     Old Navy had accepted Oldham’s proposal to team up in 2007, offering the designer a chance to introduce a line of clothing in his name and receive royalties through his company, L-7.
     On Sept. 30, 2008, however, months after Old Navy said it was taking steps to “finalize” the agreement, an executive announced that the chain would postpone signing the license for Oldham’s line “indefinitely,” according to a 41-page decision Wednesday.
     Oldham’s company L-7 sued Old Navy in February 2009 for wrongful termination, breach of contract and fraud in a sealed complaint, but U.S. District Judge Denny Chin dismissed the case a year later.
     Chin had found that wrongful termination did not apply since Oldham would have been unlikely to “perform [his] duties after he sued Old Navy” because of the “harm caused by the public filing of a lawsuit.”
     The 2nd Circuit countered that “it is undisputed that both of L-7’s complaints were filed under seal.”
     Chin also wrote that there was no breach of contract because Oldham requested “extraordinarily high demands” for minimum royalty guarantees met with “not surprising” rejections.
     The federal appeals court replied that Chin made his finding before seeing the evidence.
     “L-7 argues, and we are inclined to agree, that this factual determination was made without the benefit of discovery or expert testimony,” U.S. District Judge Shira Scheindlin wrote for a three-judge panel. Scheindlin sat on the panel by designation from the Southern District of New York.
     Though the court reversed on two counts, it upheld the dismissal of Oldham’s claims for trade disparagement, common-law fraud and bad faith.
     The case will be remanded to the Southern District in Manhattan.

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