Less than a week after confirming its Chapter 11 reorganization plan, BCBG Max Azria filed a claim Friday that a distributor has failed to pay the women's fashion house royalties and owed more than $675,000.
In its complaint to the New York bankruptcy court, BCBG claimed NYAM LLC owes it $575,000 in royalties, plus interest and an unpaid $100,000 credit promised in the 2016 licensing agreement, and has continued to sell BCBG brands even after the agreement expired. BCBG, founded by Max Azria in 1989, filed for Chapter 11 protection in March with the hope of restructuring more than $500 million worth of debt.
Over the past three decades, the high-end purveyor of womenswear grew to more than 550 stores across the U.S., Canada, Europe and Japan. After years of success, the company saw a downturn in net sales over the past few years, declining more than 20 percent since 2014 to approximately $615 million in the most recent fiscal year, according to court documents.
The Chapter 11 plan approved by the court June 23 calls for New York-based Marquee Brands, a brand acquisition, licensing and development company, to acquire the rights to BCBG’s intellectual property for $108.1 million, while Hong Kong-based apparel, footwear and fashion accessories company Global Brands would take over marketing, sale and distribution of BCBG brands along with the debtor's wholesale operations, online sales platform and 42 standalone brick-and-mortar locations for $23 million.
According to the complaint in October 2016, BCBG signed a licensing agreement with New York-based wholesale fashion distributor NYAM. The agreement ran through the end of December, allowed NYAM to continue to sell BCBG brands for 90 days after its expiration and included a $100,000 credit from NYAM to apply against invoices due from BCBG.
NYAM subsequently filed what it claimed were both unsecured and administrative claims in the bankruptcy proceeding, but all were classified unsecured by the court on July 25.
However, BCBG claimed the $100,000 was never credited and that NYAM never paid the royalties due under the contract. It claimed NYAM’s chief financial officer admitted in an email in January that the company was $475,000 past due on royalties, and argued the actual amount was closer to $575,000, plus interest.
BCBG also claimed NYAM continued to sell BCBG merchandise past the April 1 cutoff date in the contract, saying it has been contacted by a closeout buyer who told them NYAM was continuing to liquidate BCBG purses and wallets.
“To date, NYAM has not paid BCBG any payments for inventory improperly sold on or after April 1, 2017,” it said.
Counsel for NYAM declined comment. Counsel for BCBG said they did not have any comment beyond the statements in the complaint.
BCBG is represented by Joshua A. Sussberg, Christopher Marcus, James H.M. Sprayregen, Stephen C. Hackney, Yates M. French and Benjamin M. Rhode of Kirkland & Ellis LLP.
NYAM is represented in the underlying bankruptcy by Christopher M. Samis, L. Katherine Good and Stephen B. Gerald of Whiteford Taylor & Preston LLC.
The case is BCBG Max Azria Group LLC v. NYAM LLC, case number 17-01101, in the United States Bankruptcy Court for the Southern District of New York.
The underlying bankruptcy is In re: BCBG Max Azria Global Holdings LLC et al., case number 1:17-bk-10466, in the U.S. Bankruptcy Court for the Southern District of New York.
REPRINTED WITH PERMISSION FROM THE JULY 31, 2017 EDITION OF LAW360 © 2017 PORTFOLIO MEDIA INC. ALL RIGHTS RESERVED. FURTHER DUPLICATION WITHOUT PERMISSION IS PROHIBITED. WWW.LAW360.COM