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March 2013: Fashion Industry Settlement Victory

March 2013

The firm secured a favorable settlement for clients J. Christopher Burch and C. Wonder LLC in a high stakes and well-publicized dispute in the fashion world. The litigation arose out of Mr. Burch’s attempts to sell a portion of his interest in Tory Burch LLC, the preppy-chic fashion brand that he co-founded with his ex-wife, Tory Burch. When the Company blocked that sale effort by tying approval of the sale to Mr. Burch’s giving up certain rights in his independent fashion brand, C. Wonder, the clients retained Quinn Emanuel. Quinn Emanuel quickly brought pressure to bear by filing a complaint in the Delaware Court of Chancery against Tory Burch, the Company, and certain directors for breach of the Company’s LLC Agreement (which expressly granted shareholders the right to compete against the Company), breach of fiduciary duty, and tortious interference with business relationships. The complaint alleged that Ms. Burch and her co-defendants’ wrongful interference was an improper attempt to hold up the sale as leverage to force Mr. Burch to relinquish valuable rights in C. Wonder. For relief, Quinn Emanuel sought, among other things, a declaration that Mr. Burch had the right to compete by operating C. Wonder and an injunction directing Tory Burch LLC to approve the sale of Mr. Burch’s interests in that Company. The Company countersued, claiming unfair competition and misappropriation of trade secrets by Mr. Burch and C. Wonder. Over the Company’s opposition, Quinn Emanuel won a motion for expedited proceedings, which put the case on track for trial within six months before Chancellor Leo Strine.

Quinn Emanuel’s aggressive and effective pursuit of the action for Mr. Burch led to an early, successful resolution. Less than four months after Quinn Emanuel was initially retained, the parties entered into a settlement that both permitted Mr. Burch to sell a substantial portion of his stake in Tory Burch LLC and allowed him to continue to operate his C. Wonder brand. On December 31, 2012, the parties announced a sale transaction in which Mr. Burch and others sold certain of their interests in the Company to private equity investors, BDT Capital and General Atlantic. (Terms of the settlement and sale transaction are confidential).