The Battle of the Burches Comes to an End

The Battle of the Burches Comes to an End

Burch vs. Burch has finally come to an end! Tory Burch and her ex-husband Chris Burch settled their contentious lawsuit over the sale of his stake in Tory Burch LLC with the addition of two new minority investors.

The terms of deal are confidential, reports WWD, but investment firms BDT Capital Partners LLC and General Atlantic LLC have made minority investments in the brand. Both Burches owned a 28.3 percent stake in the company, which the then married couple created in 2003.

Chris Burch retains a stake in Tory Burch, although a spokesman for the entrepreneur declined to reveal how much of that stake remains.

"They are completely aligned with our long-term approach to building our brand and share our vision for growth globally," chief executive officer Tory Burch said of the new minority investors.

Calling the deal a "milestone transaction," Chris Burch said he is "confident" in the New York-based brand's "continued success" as he stays on as a "significant investor."

Aptly dubbed the Battle of the Burches, the lawsuit, which was filed on Oct. 2 in Delaware Chancery Court, quickly became a courtroom melodrama, replete with gossip, media buzz and an eccentric judge.

What led to the lawsuit? It was no secret to anyone who followed the Burches that their business partnership was beginning to crack. Chris had just started C. Wonder, a new retail concept that opened in fall 2011 that's seeming likeness to the Tory Burch brand upset his former wife. The resemblence included things like the gilded logos, in-store light fixtures and candy-colored decors. Such similiarities were even highlighted in a New York Magazine profile on the former couple published in early 2012 that took an inside look at the couple and both brands.

At the same time, Chris Burch was in the process of trying to sell part of his stake in Tory Burch, but could not reach a deal.

At the time, there was much speculation that Tory be the first to sue, claiming, among other things, trade dress violation, unfair competition and breach of fiduciary duty. In the end, it was Chris who sued first.

After what Chris Burch's legal team described as "constantly" changing, "onerous and unreasonable" demands to alter C. Wonder, Chris sued his ex-wife for blocking the sale process of his stake in Tory Burch, which had been dubbed "Project Amethyst" by the financial community.

Tory's legal team countersued Chris in November, alleging he used his role in her company as a director and consultant to develop "copycat" products for C. Wonder.

Burch denied that her company prevented her former husband from selling his stake, claiming Project Amethyst "died" because Chris did not meet the criteria laid out by the majority shareholders. According to Tory, the majority shareholders considered C. Wonder competition to Tory Burch.

"Tory Burch is saying it won't let Christopher Burch sell out his interest and get hundreds of millions of dollars and continue to compete against the company," Tory Burch's lawyer Marc Wolinsky told WWD at the time. "This guy ripped off Tory Burch. His product looks like our product, his stores look like our stores."

Chris Burch's lawyer, Andrew Rossman, said both brands' products reflected "timeless styles that other people invented."

"I don't think Tory Burch invented the cardigan, the gold button or the ballet flat," he offered.

If that back and forth wasn't enough, presiding judge Leo Strine weighed in during a scheduling conference with a colorful rant about preppy clothing and the definition of a WASP.

"Real WASPs actually don't go and pay full Polo price," Strine said in November. "They actually will find a bargain. That's how they got to be, you know, WASPs. When Tory Burch became popular, no one said, 'Oh, my gosh, this is the newest thing that ever happened.'"

Calling the impending trial a "drunken WASP fest," Strine asked the court, "Are the Burches WASPs? Do we know?....I think you're going to have to have interrogatories about who's a WASP. And I'll certainly be attacked as anti-WASP, probably, and then I love all WASPs."

It was unclear when the settlement talks began, but it has enabled both Burches to avoid a nasty courtroom battle. Attracting investors hasn't been difficult for the Tory Burch brand, which has been of perpetual interest to the investment set for some time. It seems just a matter of time before it goes public.

New minority investors BDT and General Atlantic said they see strong growth opportunities in the lifestyle brand, which has been rumored to be worth upward of $2 billion.

"BDT Capital is committed to investing alongside and advising entrepreneurs and closely held companies with high-quality brands and strong leadership who seek a trusted, long-term partner," said Byron Trott, chairman and ceo of BDT Capital Partners.

BDT and Barclays acted as advisers in the settlement.

"As a long-term partner to great management teams, General Atlantic helps propel exceptional companies to their next phase of growth," said Bill Ford, ceo of General Atlantic, which has invested in companies such as Gilt Groupe, Facebook and Alibaba Group.

"Tory and her team have a unique ability to create accessible luxury clothing and accessories that have broad and lasting appeal," Ford concluded. "We look forward to working with the company to continue to build its exceptional brand globally."