Fashion Feud Erupts Into a Court Battle : Retailing: Suit names neither party, but documents point to Clothestime, Styles for Less.


A long-simmering feud involving one of Orange County's most successful retailing families has apparently erupted into a highly unusual court battle, with one women's fashion chain accusing a competitor of stealing trade secrets and fashion tips.

A civil suit filed June 5 in Superior Court in Santa Ana lists Doe Corp. No. 1 as the plaintiff and Doe Corp. No. 2 as the defendant. The court document does not identify either of the firms, but details in the document seem to paint a portrait of Clothestime Inc. and Styles for Less, two Anaheim-based junior women's fashion retail chains founded by members of the DeAngelo family.

Courthouse observers describe the civil suit, which seeks unspecified damages, as puzzling because neither the plaintiff nor the defendant is identified.

"I've written a five-volume textbook on civil procedures . . . and I've read my competitors' books, but I've never heard of this kind of filing," said Michael P. Thomas, a Huntington Beach-based lawyer and adjunct professor at Western State University College of Law.

The suit alleges that the defendant company illegally interviewed employees of the plaintiff under the guise of job interviews. The document alleges that the defendant illegally tried to extract trade secrets and information on upcoming fashion trends during those interviews, using potential job offers to draw out information.

The suit also alleges that the defendant illicitly used the plaintiff's proprietary information to help situate its own stores near the plaintiff's highest-volume stores.

Industry sources have known that Clothestime, under Chairman and Chief Executive John Ortega II, is feuding with Styles for Less, which Michael DeAngelo and Michael Leff, two former Clothestime executives, founded in 1992.

Members of the DeAngelo family, the two competing retail chains and their attorneys either refused to comment on the suit or were unavailable for comment.

"I can't confirm or deny that the suit involves Clothestime and Styles for Less," said Clothestime spokesman Jeff Dake. But after being read portions of the suit, Dake acknowledged that, "from what you're telling me, I don't know who else it could be."

Richard J. Grabowski, whose Irvine-based law firm serves as Clothestime's external counsel, acknowledged that he signed the complaint. But Grabowski declined to comment on the filing, adding that "you shouldn't infer from my silence that this case has anything to do with Clothestime or Styles for Less."

Leff, chief operating officer at Styles for Less, said he knew of "no suit filed against us or by us. . . . I don't know what to say because I don't know what's going on."

Retail industry analysts said Wednesday that Clothestime co-founder Ortega, who has been with the firm since its inception in 1978, was known to be upset by Michael DeAngelo's decision to emerge from retirement in 1992 and compete against Clothestime.

"Mike opened a store that looks a lot like Clothestime," said an industry analyst who asked to remain anonymous. The analyst said the move caused some problems between the two retailers. "I don't know, though, if that [situation] got worse."

Clothestime officials in the past have declined to comment on the competitive or personal relationship between Ortega and Michael DeAngelo. Dake on Wednesday declined to discuss Michael DeAngelo's business.

But the suit includes language that seems to describe Clothestime and Styles for Less.

The suit states that Doe Corp. No. 1, for example, is an Orange County-based specialty retailer that sells off-price and discount women's junior wear to customers ages 18 to 35 at carefully selected strip shopping centers. That is nearly word-for-word how Clothestime describes itself in its most recent annual report.

The suit describes the defendant as a newer chain founded by an unidentified "Doe No. 3" who previously had served as the plaintiff's former general merchandise manager and now serves as the defendant's chief operating officer. At Styles for Less, Leff is chief operating officer. He formerly was Clothestime's general merchandise manager.

The suit also alleges that the newer competitor has opened many of its stores in shopping centers where the plaintiff operates many of its highest-volume stores. Styles for Less has opened stores in strip shopping centers where Clothestime operates. On Wednesday, a sales clerk described the Styles for Less store in Santa Ana as being "next-door to Clothestime."


While Clothestime has been hurt by an ongoing slump in the specialty retail sector, the rag business has been good to the DeAngelos.

The family broke into the local retail scene during the mid-1970s with a booth at an Orange County flea market. In 1978, August DeAngelo, along with sons Raymond A. and Michael, founded Clothestime with Ortega. The company prided itself on an ability to read the notoriously fickle women's fashion trends. Clothestime now has more than 560 stores as well as nine Lingerie Time outlets.

Gradually, the DeAngelo family was withdrawn from active company management.

August DeAngelo, now retired but still on the company's board, owns 395,133, or 2.8%, of the company's shares. Raymond, who on Jan. 6 resigned as chief executive, received a one-time $250,000 payment and will be paid an additional $1 million over the next two years.

Michael DeAngelo severed his ties with Clothestime in 1991, when, at age 42 he settled into retirement in a 30,000-square-foot home in Orange that once was featured on the "Lifestyles of the Rich and Famous" television show.

But the retirement didn't stick, and within a year, he was back in the retail game with Styles for Less, a chain that competes head-to-head with Clothestime, which sells fashion-oriented clothing to women in their late teens through mid-30s.

In recent years, most specialty retailers have been battered by a sales slump and increased competition from some of the nation's most successful retail giants, including J.C. Penney with its popular Jaclyn Smith clothing line, and Wal-Mart, which recently introduced a line featuring television celebrity Kathie Lee Gifford.

"Nothing in the current economy says that Clothestime and the other specialty retailers are going to come back really quickly," said the apparel industry analyst.

Clothestime reported a $4.4-million loss on $72.3 million in revenue for the first fiscal quarter ended April 29. Ortega recently said that a new product mix and some additions to the corporate staff should help revive sales and profit after a "disappointing and difficult" 1994.

Styles for Less, which is privately held, declined Wednesday to state sales figures or say how many stores it has.

Some of the mystery could be cleared away when the case moves into Judge Floyd H. Schenk's courtroom, Thomas said, because "even when a [plaintiff] names a 'Doe' defendant, they have to file a paper with the court identifying who it is.

"It will be interesting to see how the judge reacts," Thomas said. "There's a lot of judicial resistance to secrecy these days. Civil litigation is the public's business, and it's best carried out in an open, public courtroom."

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