Less than two months after The New York Times exposed the owners of Chicago retailer Jake of taking deliveries from various designers without payment, the designers affected have now decided they are fed up. 28 designers have banded together—hailing from New York, Los Angeles, Paris, London and Sydney—to file an involuntary bankrupt petition against Jake owners Lance Lawson and Jim Wetzel. The petition is seeking 516,000 in unpaid expenses. The labels include many familiar names like Phillip Lim, Lutz & Patmos, Behnaz Sarafpour, Chris Benz, Band of Outsiders, Costello Tagliapietra, Erin Fetherston and Loeffler Randall, each suffering a loss ranging from $860 to $48,000. And it couldn't have come at a worse time. With even the wealthiest luxury companies reeling during the current economic climate, smaller, independent labels have had tough times keeping their names afloat, especially when they are short changed $20,000, as is the case for Costello Tagliapietra co-founder Jeffrey Costello his business partner Robert Tagliapietra. I know that sounds small, but to a company like ours, that’s a big chunk of change,” Costello told WWD on the amount owed to the company.
The new camaraderie that has been born between the rallying designers has seemed to assuage some mutual frustration with the store owners. Yet in a phone interview with WWD on Tuesday, owner Lawson said the designers' efforts are futile. “The old company doesn’t exist anymore,” he said. “It’s bad debt. At the end of the day, there is no money to pay anyone. The bank didn’t recover the money owed to them as a lender.” The "bad debt" refers to the former three freestanding Jake shops owned by company Price Allen Inc., which disbanded after after MB Financial called in a $1.6 million loan and credit line, when Jake did not meet profit quotas for the second quarter of last year. After shutting down the store's Southport location at the end of 2008, a small group of private investors saved the company and started operations under new ownership, Jake Retail Group. But according to Lawson, the new company did not, conveniently, acquire any of the old Price Allen Inc. debt which seems exactly what the designers are trying to obtain.
Incredibly, Lawson claimed that 60 percent of the labels involved in the legal action were not profitable in Jake stores, insinuating that it was perhaps their fault that the store was unable to pay its bills in the first place. Lawson himself personally lost $1 million during the ownership changeover though no one seems the least bit sympathetic. As one outraged WWD reader wrote, "To hear Lawson complain that the lines weren't profitable is laughable and insulting. It's a risk you take as a business-owner and a buyer. Would you ever expect a bank to wipe away your debt because your business turned out to be a dud? I don't think so."
In the meantime, the designers affected by Lawson and Wetzel's irresponsible behavior are trying to learn from the experience. Tagliapietra noted some stores have admitted to having trouble paying their bills, and his company has agreed to payment plans. “It’s an honorable way to work things out. It’s not great that we’re not getting the money all at once, but we are getting some of the money,” he said. The bright side to this dismal situation is that the designers involved now have an international network of fellow business owners they can check in with to inquire about the financial credibility of a retailer they may be considering working with for the first time, or to provide a warning if a store starts bouncing checks. As for personal retribution, some of the jilted companies would like to be compensated for reasons beyond the monetary realm. Phillip Lim’s brand director Maria Vu stated, “Obviously, we would like to see a financial victory, but there is also a moral victory whether we win or not. This is a matter of principle,” she said, adding, “Being able to have this network that lets people know ‘You are not alone’ has been really good for a lot of people.”
Shady, shady, shady.
Article and Photo Source: WWD