The creators of Guess jeans on Wednesday claimed a major legal victory in a bitter, multimillion-dollar feud to regain control of the company from the owners of Jordache jeans.
After five days of deliberation, a Los Angeles County Superior Court jury supported claims by the Marciano family--four brothers from Beverly Hills who founded Guess--that the owners of Jordache bought 51% of their firm with the intent of stealing its designs. The verdict, however, does not resolve the case.
The three-month-long trial will soon enter a second phase that lawyers for the Jordache owners say will have a major impact on the final outcome. The jury must still also determine damages, if any, and the fate of about $80 million in dividends that Guess owes the three Nakash brothers who operate the firm. Those dividends have been held in a trust.
The Marcianos are seeking the cancellation of a 1983 agreement selling the majority of their firm to the Nakashes.
“We are within striking distance now of obtaining 100% ownership for the Marcianos,” said their attorney, Marshall B. Grossman, after the jury handed down its decision late Wednesday afternoon. “The outcome of the fraud trial is of critical importance.”
Grossman “may say that they are one step away but that is one giant step away,” said Nakash lawyer Thomas J. Nolan. “This is only the first stage of the litigation.”
Nolan said the firm had not yet decided whether to appeal Wednesday’s decision.
The jury verdict comes after years of legal wrangling and hostility between both camps. The feud has spread beyond the courtroom and has sparked investigations of both firms for possible tax fraud.
A congressional subcommittee also is looking for evidence of potential misconduct of top Internal Revenue Service officials in Los Angeles stemming from a relationship between those officials and Guess.
And the FBI is also trying to find out how the Immigration and Naturalization Service received false claims that Georges Marciano had been arrested in France for possession of explosives.
The Marcianos and Nakashes joined forces in the early 1980s following the successful introduction of Guess--whose logo is written “Guess?"--in the upscale segment of the jeans market. The Marcianos wanted to tap Jordache’s administrative and computer expertise and gain the clout such a relationship offered with suppliers and vendors. The Marcianos sold 51% to the Nakash brothers of New York for $5 million.
It proved to be a very lucrative relationship. Guess saw sales grow from $15 million to more than $200 million. Sales in 1988 were expected to surpass $400 million.
Although Guess sales zoomed, so did tensions between the two sets of brothers.
The Nakash brothers claimed the Marcianos had improperly paid themselves large portions of the company’s profits.
Later, the Marcianos claimed Jordache had stolen Guess designs and used them under the Jordache label.
On Wednesday, the jury found that the Nakash brothers had violated the California Corporate Securities Act, practiced concealment, intentionally misrepresented themselves and made false promises.
“We feel totally satisfied and are extremely impressed by the jury,” said Paul Marciano on Wednesday. “It’s been a long road after 4 1/2-years of litigation.”
The second phase of the trial will deal with Nakash claims that much of the dispute was settled in a 1984 federal court action that the Marcianos brought unsuccessfully, according to Nolan. “These issues were already settled, and this jury was not allowed to be told of the previous lawsuit,” he said.