In a year marked by uncertainty, there was no shortage of legal issues affecting the fashion industry. From Amazon’s COVID-19 worker protection challenges to Sephora and JCPenney dueling over shop-in-shops, FN rounds up six of the biggest legal dramas to hit retail and fashion firms in 2020.
UCLA and Under Armour Fall Out After Record-Breaking Deal
Things have soured between UCLA and Under Armour in the four years since the two signed was the biggest footwear and apparel sponsorship in college sports history: A $280 million deal.
In late June, Under Armour informed UCLA of its desire to end their record-breaking 15-year contract by invoking the force majeure clause as the COVID-19 health crisis swept the United States and subsequently put a pause to college sports. Two months later, UCLA filed a lawsuit against Under Armour, alleging that the company failed to pay up as scheduled or deliver product as promised. UCLA also claimed that the coronavirus crisis was not the reason behind Under Armour’s decision to exit the partnership; rather, the university alleges it was the brand’s financial standing. The current status of the litigation is unclear although recent reports have indicated that UA will continue to outfit UCLA’s varsity teams for the next few months before a new partnership between Nike Inc. and its owned-brand Jordan takes effect.
Retail Rent Imbroglio: Gap, Ross, Saks Fifth Ave. + More Sued By Landlords
With the majority of their stores still closed to the public as the COVID-19 pandemic took hold across the United States, Gap Inc., Ross Stores Inc., Nordstrom, H&M and Burlington Stores were among the retailers that skipped out on their rent. Their decisions had caused some commercial landlords to take legal action — with Gap, Saks Fifth Ave. and Ross among the boldface fashion purveyors to be sued over rent this year. While some landlords were able to offer rent concessions, others cited a need to meet their own mortgage terms as among the reasons they could not be flexible with shuttered tenants.
Lori Loughlin and Husband Get Jail Time in College Admissions Scandal
In August, Lori Loughlin and her husband, fashion designer Mossimo Giannulli, were sentenced to jail time for their roles in a college admissions scandal that rocked the academic world. Judge Nathaniel M. Gorton handed down a two-month sentence to the actress, while her husband was given five months in prison. Loughlin will have two years of supervised release, during which she must complete 100 hours of community service and must pay a fine of $150,000. While Giannulli also received two years of supervised release, he is required to complete 250 hours of community service and ordered to pay a $250,000 fine. Loughlin surrendered herself in October to begin serving the sentence. Mossimo turned himself in on Nov. 19. The sentencing put an end to the one of last year’s most high-profile scandals, which involved parents of college-bound teenagers paying others to take exams for their children or bribing coaches to falsely state their children were members of athletic teams.
JCPenney and Sephora Duke it Over Shop-in-Shop Partnership
After several weeks of back-and-forth legal issues, J. C. Penney Company Inc. and Sephora USA Inc. in May agreed to settle their dispute over the beauty giant’s purported attempt to terminate its business contract with the department store chain. At one point during the dispute, JCPenney filed a restraining order against Sephora. But that same week, the two retailers announced that they had reaffirmed their partnership — which dates back more than a decade — that allows Sephora to operate about 650 boutiques inside JCPenney’s stores. Both companies said they “worked constructively” to resolve outstanding legal matters and agreed to “mutually beneficial revisions” to their existing deal. (The terms of the settlement were not disclosed.) Despite the truce, Sephora announced this month a new partnership with Kohl’s Corp., which would see it open several hundred shop-in-shops at the department over the next two years. The deal has been largely viewed as a replacement for Sephora’s JCP deal which will soon expire.
Famed Attorney Michael Avenatti Found Guilty in Nike Extortion Saga
A nearly-year-long imbroglio involving famed attorney Michael Avenatti and Nike Inc. came to an end in February when Avenatti was found guilty on all charges related to an alleged plot to siphon more than $20 million from the Swoosh. The celebrity lawyer, who rose to fame representing adult film star Stormy Daniels in a suit against President Donald Trump, faced three counts related to what prosecutors said was on extortion attempt: intent to extort; violation of the Hobbs Act, which criminalizes extortion; and honest service wire fraud. The celebrity lawyer had pleaded not guilty to all charges. In March 2019, Avenatti was arrested 15 minutes after he tweeted that he planned to reveal a basketball bribery scandal amid the annual March Madness tournament. Prosecutors initially charged him with four counts related to accusations that he plotted to siphon millions of dollars from the Swoosh by threatening to disclose evidence of misconduct on the part of Nike executives, ahead of the company’s third-quarter report. He alleged that Nike made illicit payments to elite student athletes, among them No. 1 overall NBA Draft pick Zion Williamson.
Amazon Under Fire for Worker Safety Amid COVID
Designated as an essential retailer, Amazon was able to continue operating as the global health crisis touched down in the United States and companies faced challenges in keeping workers safe amid limited supplies of personal protective equipment and sanitizers. In May,13 U.S. attorneys general addressed a letter to Amazon CEO Jeff Bezos and Whole Foods CEO John Mackey, asking them to address a number of possible issues, including a purported lack of personal protective equipment for workers as well as alleged whistleblower firings. Despite Amazon’s statements outlining more than 100 safety measures it said it was taking, the AGs said they were “dismayed to have heard multiple reports of Amazon warehouses with inadequate PPE and hand sanitizer, inability to practice social distancing, limited opportunity to wash hands, and other deficiencies that put employees at risk.” Additionally the AGs asked Amazon to address allegations that the company has fired employees for calling attention to perceived inadequacies in safety and health procedures.
For instance, in March, Christian Small, an employee at Amazon’s Staten Island, N.Y. warehouse, was fired shortly after leading a protest in response to a coworker contracting COVID-19. According to Amazon, Smalls was terminated after receiving “multiple warnings for violating social distancing guidelines.” In November, Small filed a proposed class action against Amazon accusing the company of discrimination for firing him and for putting Black and Hispanic workers at an increased risk of contracting COVID-19. In a proposed class action filed in Brooklyn federal court, Christian Smalls alleged Amazon failed to provide needed protective gear to its “predominantly minority” workforce, subjecting them to inferior working conditions than its mainly white managers. Amazon confirmed in October that nearly 20,000 of its workers, including at Whole Foods, in the U.S. contracted COVID-19 since March. The number equates to 1.44% of its 1.37 million workers.