By: Alan Behr, Phillips Nizer Partner and Fashion Law Chair
The best words in any language were long ago vaccinated against easy translation. I am German and I still struggle to explain Gemütlich in simple terms. In my lumbering study of Italian (my pandemic at-home challenge), I came across sprezzatura, which can be roughly translated as a refined and carefully executed appearance of effortlessness. If you see a man wearing perfectly coordinated clothes with every appearance of somehow having just thrown them on before leaving home—that’s sprezzatura. (Rest assured: he spent a lot of time working on making it look like he spent no time at all.)
The look and the philosophy behind sprezzatura have characterized Neapolitan tailoring for generations. The result is a vibrant, instantly recognizable style that has been given a tactile presence by brands such as Mariano Rubinacci, E. Marinella, Kiton and the distinctly charming and playful Isaia. Trademark law is about the legal protection of brands, and brands are about nothing if not story: the best trademarks tell stories, inviting you into joining in the telling of those stories by your patronage of the brands behind them.
I was reminded of that by Jason Green as we sat in the comfortable parlor portion of a sales floor of the Isaia boutique on Madison Avenue in New York, sipping espresso. He opened by explaining that the brand’s distinctive logo represents the red coral of the Mediterranean—formed, according to myth, from the blood of the gorgon Medusa after she was beheaded by Perseus, her body thrown into the sea. People associated with the brand wear the coral logo on lapel pins, and by custom, whenever they are asked for the meaning of the device, they present the one they are wearing to the questioner.
That touch of branding whimsy is right for our times, noted Mr. Green. “My sense is that what is taking place in the mindset of people coming out of one of the most turbulent periods in recent history is a pent-up exuberance for the return of life as normal, he added. “In my view, there will be a powerful resurgence in sartorial expression, which, at its basis, means that you want to feel great—to leave behind whatever is connected to this challenging period and reclaim something joyful that was taken from us for too long.” That has brought on a resurgence, somewhat unexpectedly, of wedding wear and evening dress. You may not always wear a suit to the office, but a hand-tailored Neapolitan jacket (the buttons haphazardly fastened in homage to sprezzatura, of course) may well be your first no mask/no worries treat for yourself.
As with other brands, Isaia has spent this quiescent period reaching out to its best customers—visiting their homes and offices, giving them as close personal attention as possible. “It is big-box retailing that is dragging,” added Mr. Green. “Big boxes struggle with that due to their size and the intrinsic geography of that business.” In short, if your core business involves selling essentially the same inexpensive things on racks and online as your competitors, you can find yourself struggling to differentiate yourself enough to increase market share.
The trend toward specialized service will continue even in e-commerce, said Mr. Green, a channel often thought of as the nemesis of the personal touch. “We are moving away from that broad platform of selling a catalogue of styles online to something that literally takes place within the confines of a text, something personal delivered in a beautifully curated point of view—not a global transmission but an opportunity for an individual edit.”
What is the biggest problem facing luxury retailing? Mr. Green was quick to reply, “A shortage of good talent. High caliber people who know how to treat your customers well are not afraid to move around if given the chance, so much of what we do is nurture our talent. The same is true in the high-end auto and restaurant businesses.”
From a legal point of view, it comes down to protecting your brand and your trademarks, making sure your employment agreements are fair and up to date and, above all, approaching legal issues with the understanding that luxury retail has gone from being mostly about goods to being mostly about service.
By Alan Behr, Phillips Nizer Partner and Fashion Law Chair
We noted in a recent report in The New York Times of a husband and wife, both in their sixties, whose company owned a Connecticut warehouse in which Brooks Brothers had stored fixtures, displays and props. As a byproduct of the bankruptcy of that signature purveyor of American style, the entire lot was abandoned in their care, leaving the couple with a warehouse full of trunks, mannequins, racks, Christmas trees and more—instead of rent that had been the primary source of their personal income. The lowest bid they received to haul it all away was just shy of a quarter million dollars—a sort of Storage Wars or Baggage Battles in reverse.
The sad fact is that, when retailing—which is about little if not the flow of goods—goes wrong, things will get stuck somewhere. If you are left in possession of boxes of new-with-tags crew-neck cashmere sweaters, you might, with some effort, come out ahead, but not everything can be that easily monetized. It is like musical chairs, and whatever you might say about possession being nine-tenths of the law, if you end up possessing things you did not want or, worse, find difficult to sell or even give away, you can end up suffering collateral damage in a battle lost by someone else.
For warehouse owners, whose contracts are normally both detailed and favorable to their legal position, a useful preventative, wherever permitted by law, is to insist on more upfront rent and perhaps a further deposit (directly or in escrow) of a reserve for hauling away abandoned property. If apparel is what travels through your possession, a good idea is to remember that fashion is about speed: generally, the longer that goods stay anywhere, the harder they will be to resell in bulk. That may not be as true for classic items such as those typically sold by Brooks Brothers, but the Connecticut warehouse held no merchandise or anything else for which a few eBay postings would provide quick relief. True enough, Christmas trees may not go out of style—but consider what you might have to do to move along whatever you end up possessing should something go wrong in the chain of distribution in which you find yourself but one vulnerable link.
It is often said that commerce is powered by capital and initiative, but the fuel that moves it along is optimism. Lawyers are, by nature, worriers, and we should not allow our warnings of “but what if” to hinder the good works that will arise from a positive point of view. But having a good exit strategy never hurt even the most optimistic of field commanders, and the same is true whenever goods enter into the stream of commerce.
By: Alan Behr, Phillps Nizer Partner and Fashion Law Practice Chair
About 2020 we can only say what the videogame hero Duke Nukem would sometimes offer when things turned out badly for him: “This sucks.” If you work for a company that rents evening attire, you have probably felt that more often than most by now; but if you work for a company that supplies Amazon with cardboard boxes, you may to be feeling just fine, thank you.
For 2021, many of us, whatever our employment, have resolved to make it a better one simply by going somewhere (just about anywhere) and, once there, doing something (just about anything).
For lawyers, the expectations are mixed. Word on the street is that, now that families have spent so much more time with each other—sharing living and working quarters in a way not experienced on such a scale in the West since before the Industrial Revolution—there should be one clear result: divorce lawyers can expect a banner year.
Fashion lawyers are not the subject of any predictions made with similar certainty, but a few notes are worth considering when reviewing what to address with fashion counsel this year:
- Perhaps your brand has undergone changes, such as if you have started making facemasks and PPE in workrooms once devoted to T-shirts, or if you have stopped producing ballgowns and switched to Zoom-friendly blouses. If you intend for those new products to stay in your line, it is time to consider updating your trademark registrations to reflect those expanded uses of your marks.
- There are special requirements to consider carefully with counsel if you have started offering purchasers the opportunity to review your products and services on your own website.
- Did you expand your relationships with influencers, endorsers and celebrities? There are rules and recommended structures for conducting those relationships that should be discussed with counsel.
- Needless to say, it is a good time to doublecheck your insurance coverage, the force majeure clauses in your contracts (as in, do you see the word pandemic anywhere?), and whether your lease allows you to sublet space you might not need if more members of your workforce will be working from home in whole or part going forward.
- And the workforce itself: You can cause yourself needless legal uncertainties if your employment policies no longer reflect the realities of your workplace. How will employees document the hours spent working from home? And what happens now if you have provided all along that your work hours are, say, nine to five, with an hour for lunch, but your people working from home are routinely taking off midday to get the kids settled in with homework and playdates and then finishing up the workday after dinner?
- What about your policies concerning office equipment for use in the home—everything from laptops to sewing machines for making muslin samples? They may also need to be updated, along with protocols for internet and email security.
That is just a partial list. The main thing to remember is simply this: whenever a business experiences changes as dramatic as those that the late and not lamented year 2020 brought on or accelerated, the legal circumstances under which the business operates very likely have changed as well. A legal refresh is therefore a prudent move—one that should be made without delay.
By: Alan Behr, Phillps Nizer Partner and Fashion Law Practice Chair
The inexplicable year 2020 was marked by technology connections that curiously spun into the fashion business worldwide. It is easy to point to the new Zoom wardrobes people have been buying online as a good example, but consider for a minute some far more circuitous connections:
On New Year’s Eve, a friend sent me a Facebook page showing the Staatsoper of Vienna, one of the world’s preeminent opera houses, displaying across its Neo-Renaissance façade an enormous lighted sign that sequentially spelled out “DANKE FUER NIX” (thanks for nothing). Just a couple blocks away, deep in the storage room of the Hotel Sacher, where I was supposed to be in March, but where I indeed never arrived, lies my latest suit from Henry Poole & Co. of Savile Row, London. Karen, a wise member of the tailor’s staff who, in more rational times, needed only to keep me from again mucking up my VAT refund forms, had sagaciously asked if I really wanted her to send out the suit (in Savile Row parlance, a single-breasted dining jacket, waistcoat and trousers in dark grey pinhead worsted) for me to collect in Austria. I said no worries, send it, please, and I even remembered to pack the suspenders (I mean, of course, braces) to hold it together when I arrived. Needless to say, the suitcase was never locked shut. It next turned out that the law firm I was to visit in Vienna was among the first establishments in Central Europe to have a COVID-19 outbreak—and there went my visit. And so, my suit sits comfortably in its box, along with the newly published book I had ordered on the history of Henry Poole (the oldest tailor on “the Row”), and there went as well my last chance of the decade to have original Sachertorte.
That had earlier come to mind when a neighbor’s dog, a rescue animal with emotional problems, charged at me and sank her fangs into my right kneecap, tearing open the sturdy denim of my Levi’s 511 jeans. The owner offered to pay for my pants. As I managed the bleeding, I explained that was the least of it, and lucky her that I had just changed out of a Henry Poole suit. The tech connection continues from there: while going for my tetanus shot, I asked for a COVID-19 test, and it came back positive. For reasons not clear to anyone, I spent a lucky quarantine completely asymptomatic, but that gave me plenty of time to reflect on all that and to consider future posts I hope to provide.
Tailors such as Henry Poole depend on foreign trade. (Well-dressed London men remain ubiquitous, but there simply are not enough of them to keep all the houses going.) For the tailors, even more so than for me, not being able to travel internationally was an enormous disruption—one that, without concessions from landlords and others, could prove ruinous. As reported in The New York Times, most of the properties on the Row are owned by a single landlord, The Pollen Estate, just under four-hundred-years old and therefore mercifully able to think long term. It gave the houses the rent accommodations necessary to hold them over until business improves.
We have seen similar prudent arrangements made in New York City where landlords who see the bigger picture and, if permitted by their lenders—which sometimes have a say in the matter and which also have to think in broader terms if their own customers are to remain viable—have been similarly forgiving. Accommodations can take several forms, including forgiving late payments, stretching out due dates for payments, abatement of rent for a period of time, permanent reductions of rent, and allowing tenants to sublet or to surrender all or a portion of rented space (sometimes in combination with the foregoing or in exchange for lengthening a lease term).
Despite rumors to the contrary, the practice of law can sometimes be a satisfying experience, and it has been a particular joy at the firm to help our fashion clients and so many others navigate through the perfect storm brought on by the pandemic.
And so, our suggestion to the fashion community at the start of a new, and let’s please hope, better year: retrieve that lease you signed and have a good look. Work with counsel and make sure that you understand what it says about your options when things might go wrong. And while you are at it, have counsel do some digging on your landlord to find out how it responded to tenant problems during the pandemic. As always with commercial law: what you understand now, when things are relatively quiet, can only benefit you later—when, after all, who can tell?
 Norges Bank Investment Management (the sovereign wealth fund of Norway), holds a majority interest in The Pollen Estate.
Michael S. Fischman, Partner Phillips Nizer LLP
In many states, such as New York, a covenant of good faith and fair dealing is implied in every contract and prevents the trademark owner from (ab)using the right of sole discretion in a manner that would deny the manufacturer the benefits of the contract. An example of the interplay of the covenant of good faith and “sole discretion” rights can be found in a 2017 case involving a dispute between Elie Tahari Ltd. (“Tahari”) and one of its licensees, Parigi Group Ltd. (“Parigi”). As reported in public filings, Tahari and Parigi were parties to a license agreement by which Parigi was to produce and sell a line of children’s clothing under the ELIE TAHARI trademark, commencing with the spring/summer 2015 season. Pursuant to the detailed procedures of the license agreement, Tahari gave Parigi its approval, in writing, for styles that it accepted for the first collection and those styles were placed into production.
Thereafter, during a visit to the Parigi showroom, the head of Tahari and its chief designer, Elie Tahari, announced that he was revoking Tahari’s approval of each and every style that was previously approved by the Tahari personnel. Tahari, the company, claimed that it had the right to force Parigi to pull the entire collection from the showroom (just as it was to be offered for sale to retailers) under a provision of the license agreement that allowed it to “revoke its approval of Licensed Products in the event that Licensor [Tahari] determines, in its sole discretion, that any such prior approved item has become outdated or the durability or design of such prior approved item no longer meets the highest standards of style, appearance, distinctiveness and quality as to conform to the standards and specifications established by Licensor” (emphasis suppled).
The parties each claimed that the other breached the license agreement. Parigi refused to produce further products under the Tahari license and risk losing its investment in yet another collection. Tahari claimed that Parigi was obligated to continue under the license agreement, design new product and pay the minimum royalties regardless of whether Tahari would approve it unconditionally or not. Tahari ultimately commenced an action against Parigi alleging that licensee’s repudiation of the agreement constituted a material breach and that it was owed $1,000,000 for royalty payments and guarantees. Parigi filed its own claim alleging that Tahari materially breached the agreement and its duty of good faith and fair dealing.
The panel of three arbitrators hearing the dispute concluded that, notwithstanding the broad approval rights of Tahari under the contract, including Tahari’s right in its “sole discretion” to revoke prior approval of product, “the Agreement’s fundamental purpose was entirely frustrated by Tahari’s conduct, and therefore … Parigi was entitled to terminate based on Tahari’s material breach of the Agreement.” The panel concluded that Tahari could not collect minimum royalties because it had prevented Parigi from making any sales against which royalties could be earned. In other words, Tahari had breached the covenant of good faith and fair dealing that is implicit in every contract.
The covenant of good faith and fair dealing “encompasses any promises which a reasonable person … would be justified in understanding was included in the parties’ agreement.”  A party breaches its duty of good faith and fair dealing when it “acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement.” Tahari breached the implied covenant of good faith and fair dealing by revoking its explicit approval of each and every product in an entire seasonal collection, all of which products it had approved months earlier.
Although an extreme case in the suddenness and timing of Tahari’s announcement of its decision to revoke its earlier approval and in the consequences of doing so, the Tahari-Parigi dispute underscores the importance of considering the impact of “sole discretion” decisions. There is nothing really “sole” about a contract with another party.
 See In The Matter Of The Arbitration Of Certain Controversies Between Parigi Group Ltd. v. Elie Tahari, Ltd. (656041/2017). Parigi was represented in the matter by Alan Behr and Michael Fischman of Phillips Nizer LLP.
 ARB Upstate Commc’ns LLC v. R.J. Reuter, L.L.C., 93 A.D.3d 929, 934 (3d Dep’t 2012) (internal quotation marks omitted) (citation omitted).
 Id. (citation omitted). See also, Jaffe v. Paramount Commc’ns, 222 A.D.2d 17, 22-23 (1st Dep’t 1996) (“[the] covenant of good faith and fair dealing … is breached when a party to a contract acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other party of the right to receive the benefits under their agreement.”); Legend Autorama, Ltd. v. Audi of Am., Inc., 100 A.D.3d 714, 716 (2d Dep’t 2012) (“The covenant embraces a pledge that ‘neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract.’”)(quoting, Dalton v. Educ. Testing Serv., 87 N.Y.2d 384, 389 (1995)); Richbell Info. Servs. v. Jupiter Partners, 309 A.D.2d 288, 302 (1st Dep’t 2003)(even an explicitly discretionary contract right may not be exercised in bad faith so as to frustrate the other party’s right to the benefit under the agreement).
Alan Behr, Phillips Nizer Partner and Fashion Practice Chair
Fashion is about nothing if not what comes next, and we are already being questioned at the firm about what are the best options for when this terrible scourge at last subsides and we can go to work without fear for the health of ourselves, friends, coworkers and families. In other words, what will we do when normalcy returns, and will things ever be normal, at least in the way we once saw it, again?
The first point to note is that COVID-19 will likely accelerate the trend, moving along an ascending line throughout the century, of the replacement of tangible experience with digital access. The world went to remote working and learning because it could. We have to remember that, a generation ago, those options were not all but universally available to those who could benefit from them. Online buying now being nearly the only way to get what you need, we expect that the trend toward shopping online will only continue. And because online buying is dominated by a handful of retailers–starting with Amazon–the pressure to limit their market dominance or even to break them up will also likely grow.
Another trend, one that is less-often written about but also significant, is that electronics have helped bring down the cost of made-to-measure and other forms of garment customization. You can (as I have) pick a fabric online, inform your shirt maker and have it delivered from, depending on price point and style, Britain, Italy or China at what has increasingly become a smaller marginal cost over off-the rack. We can expect that trend to continue as well.
Those are conveniences that benefit retail customers, but retailers and, to put a human face on it, the people who work for retailers, will have different lives. It is a different kind of employment from helping a customer who comes into your shop to buy her wedding dress to working at the computer five states away that takes the order and verifies with the warehouse that the piece is in stock and ready for shipment. There are ample satisfactions offered by the latter job, but they are not quite the same as seeing the bride leave the shop in the dress that you helped assure will be right for her.
For retailers, integrating their online and their physical presence will likely grow only more challenging–because customers will expect a seamless experience. That means a commitment of financial and human resources immediately following a sustained moment of financial terror. It is that part of it that we expect to focus on with our clients: helping them adjust by helping rework their existing agreements to fit the new, more complex and layered intake and distribution system that has gone by the name of “omni-channel” and may now simply be called business as usual. Real estate attorneys will be needed to help with that, along with attorneys able to assist with new sourcing and distribution relationships, trademark attorneys will need to make the necessary filings to protect marks for a broader range of services given in connection with sales and purchases and, as often happens after a downturn, litigators will be needed to help work through the disputes that arise whenever markets decline.
It may seem premature now, but it is never too early to plan and, while you are discussing with your attorney how to renegotiate the lease and work out a deal with the unions following layoffs, to consider what to do when, as they will, things again go right for the world