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Old Navy Wins Dismissal of Designer’s Lawsuit

(CN) - Designer Todd Oldham failed to convince a federal judge in Manhattan that Old Navy breached its contract by scrapping plans for him to design a signature collection. U.S. District Judge Denny Chin dismissed the designer's complaint, saying Old Navy made good faith efforts to negotiate with him and his company, L-7 Designs.

Oldham was brought to Old Navy, a Gap offshoot, as creative director tasked with reviving lagging sales. Old Navy also agreed to launch a line of Todd Oldham-branded products.

But negotiations over the creative services agreement dragged on for more than two years, with squabbles over the finer points halting any progress.

L-7's lawyers even demanded $75 million from Old Navy at one point for purportedly breaching the deal.

The parties tried to renew negotiations, but the project was ultimately doomed by litigation.

L-7 sued Old Navy for breach of contract, trade disparagement and fraud, among other allegations. Two days later, Old Navy responded with a letter severing ties, claiming Oldham's company "materially breached the [agreement] by filing a lawsuit against Old Navy, by failing to provide meaningful input on design processes and procedures, by failing to participate meaningfully in meetings with the Old Navy creative team and by otherwise failing to perform its obligations," according to the lawsuit.

Judge Chin reviewed the full history of the negotiations and found that Old Navy did not act in bad faith.

"Moreover, L-7 was making extraordinarily high demands," he wrote. "At one point during the discussions, L-7 demanded (through outside counsel) $75 million in compensation for lost royalties and reputational damages. It later demanded a minimum guarantee of $37.5 million in royalties for a three-year term, which it then later reduced to $20 million for a two-year term. At the agreed upon 5 percent royalty rate, some $200 million in sales of Todd Oldham-branded products would had to have been generated in one year to generate royalties of $10 million in a year. It is not surprising that Old Navy resisted these demands."

The judge added that Oldham was brought in to "motivate, inspire, coach, and share vision, insight and passion with Old Navy's creative team," and that "it is difficult to imagine that Oldham could perform these duties after he sued Old Navy."

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