On November 5, 2012, fashion designer Tory Burch filed a counterclaim against ex-husband J. Christopher Burch in the Court of Chancery of the State of Delaware. Ms. Burch’s allegations include: Breach of Fiduciary Duty; Breach of Contract; Unfair Competition; and Misappropriation of Trade Secrets pursuant to the Delaware Uniform Trade Secrets Act (“DUTSA”). The counterclaim is in response to Mr. Burch’s original complaint that accused Ms. Burch of Breach of Contract and Tortious Interference.
The conflict stemmed from the October 2011 launch of Mr. Burch’s brand “C-Wonder,” which included a storefront in New York City near Ms. Burch’s original SoHo shop. Ms. Burch alleges that – although she original gave Mr. Burch her approval to launch C-Wonder – he had mislead Ms. Burch by claiming the store would be selling “an assortment of diverse products, including home goods . . . [and] nondescript apparel . . . .” However, Ms. Burch claims that Mr. Burch actually used confidential information that he obtained while serving as both Co-chairperson of, and consultant to, Tory Burch LLC to create a “knock-off” store that sold “cheapened, lower-quality version[s] of . . . Tory Burch brand [items].” Both positions (Co-chairperson and consultant) required Mr. Burch to sign agreements with explicit confidentiality provisions. Ms. Burch claims that her ex-husband personally admitted to “wrongdoing on several occasions.”
Pursuant to the DUTSA, the counterclaim alleges that Mr. Burch used improper means to acquire Tory Burch LLC’s trade secrets, which the company had taken reasonable efforts to protect. Ms. Burch alleges her trade secret information includes “highly confidential data compilations, business methods, techniques . . . .” She is seeking both injunctive and equitable relief.
On December 31, 2012, both parties agreed to a confidential settlement. Businessweek reports that Mr. Burch has agreed to sell half of his share in Tory Burch, LLC, and there’s no indication he will be forced to close his C. Wonder product line.