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On March 13, Vernon Bruce Hoeksema ("Hoeksema") commenced an action in the Southern District of New York (12 CIV 1841) against Asprey International Ltd. ('Asprey")and John P. Rigas ("Rigas") asserting claims of breach of contract, common law fraud, fraud in the inducement, negligent misrepresentation, promissory estoppel, unfair competition and unjust enrichment, and demanding an accounting.
The gravamen of the complaint is that Hoeksema, who left Valentino after that business was sold by its founders and founded his own company, VBH Omnia NV ("VBH"), entered into a term sheet with Sciens Capital Management LLC ("Sciens"), of which Rigas was Managing Director, with a view to Sciens making an equity investment In VBH. The term sheet contained an exclusivity provision barring VBH from soliciting investments from third parties. Hoeksema also entered into a consulting agreement with Asprey, in which Sciens had invested, providing for a consulting fee and equity in Asprey for Hoeksema. Hoeksema alleges that Rigas caused Sciens (which, interestingly, is not a party to the action) to delay making the contemplated equity investment and to use the financial constraint imposed by the exclusivity clause to extract unfair concessions from Hoeksema and VHB. Specifically, Hoeksema alleges that Sciences forced VBH to enter into a loan agreement, convertible to equity, with Sciens, diverted resources of VBH, as well as Hoeksema's own time and creativity, to benefit Asprey, and finally terminated Hoeksema's consulting agreement in breach of its terms and without issuing Asprey equity to Hoeksema.
It is unwise to draw conclusions as to the merits of a dispute based on the allegations of a complaint. It is to be expected that Asprey's and Rigas's response will contest many of Hoeksema's allegations, and the resolution of the dispute will be primarily if not exclusively of interest to the parties. Nevertheless, even at this early stage, there are lessons to be drawn. Fashion designers, like other start-ups, are dependent on venture capital financing. Venture capital firms frequently have multiple investments in the same industry, and are much more sophisticated in the terms of financing than the start-up entrepreneur. This is an environment conducive to misunderstandings and conflicts, and it is important for the designer setting up his or her own shop to be well versed in the ways of venture capital.
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