Investors Castle Apparel Ltd. and TAL Apparel Ltd. sued the Del Vecchio, alleging that the Brooks Brothers bankruptcy ended up being a move that allowed the retailer to strengthen them on their minority investment in the business.
More from WWD
The lawsuit, filed Monday in federal court in New York, targets defendants including Del Vecchio and his son Matteo Del Vecchio, former executive director of Brooks Brothers. He is demanding more than $ 100 million in payment, an amount that investors say reflects their actual stake in the company.
Castle Apparel and TAL Apparel, which collectively refer to themselves as TAL in the lawsuit filed in New York federal court, claimed that had Brooks Brothers seriously solicited takeover bids in 2019, it would have paid off to shareholders, including TAL, “hundreds of millions of dollars”. But the retailer would have resisted in order to avoid paying the investment in TAL shares, according to the lawsuit.
The retailer’s $ 325 million bankrupt sale in September to SPARC Group, the joint venture of licensing company Authentic Brands Group and mall owner Simon Property Group, is a “fraction” of the value of 2019’s offerings. the Del Vecchios would have avoided, according to the lawsuit.
“To avoid millions of dollars in personal liability to TAL, the Del Vecchio have refused to consider a sale of Brooks Brothers unless TAL agrees to reduce or waive its right of redress,” the investors said in the pursuit.
“When TAL refused to waive its contractual rights, the Del Vecchio threatened to ‘roll the dice’ by throwing Brooks Brothers into bankruptcy and selling the company in the process, mistakenly believing that such a move was theirs. would circumvent their obligations to TAL, ”they said. “The Del Vecchio followed through on their threat, prompting the company to file for bankruptcy and continue with their pre-petition and pre-pandemic sales efforts.”
Claudio Del Vecchio did not immediately respond to a request for comment on Tuesday.
Brooks Brothers filed a Chapter 11 claim in Delaware bankruptcy court in July, claiming that while the company had been considering a possible sale or merger since 2019, those prospects did not materialize at the time, and the pandemic of COVID-19 ultimately prompted the company to “refocus their efforts on restructuring their businesses through Chapter 11 filing,” according to bankruptcy court records.
Castle Apparel had made an appearance in the Brooks Brothers bankruptcy case and was among the retailer’s equity holders as owning all of the company’s Class B shares, according to the Brooks Brothers Chapter 11 filing.
TAL investors also claimed that by the time they invested in the company in 2016, Claudio Del Vecchio reassured them to protect them from the risks of possible bankruptcy, according to the lawsuit in New York federal court.
“The plaintiffs knew that Claudio Del Vecchio and his family had substantial resources and therefore had the means to keep Brooks Brothers out of bankruptcy,” TAL investors said in the lawsuit.
“Representatives of the plaintiffs asked Claudio Del Vecchio if he would use his own funds to prevent Brooks Brothers from going bankrupt,” they said. “Claudio Del Vecchio assured the complainants that he would. Mr Del Vecchio further stated that the Del Vecchio would make the plaintiffs harmless in the event of a sale of the company, including in an adverse scenario, thus assuring the plaintiffs that their investment was protected.