Wet Seal Staff Defections Bring Out The Lawyers

Discussion
Apr 13, 2004
George Anderson

By George Anderson

Greg Scott did a great job when he was the president of Arden B. stores, a 99-store chain selling upscale young women’s clothing.

When he left in January to take over as president and chief executive officer of rival Bebe Stores, the parent of Arden B., Wet Seal, knew it was losing a valuable executive to a tough competitor.

Wet Seal didn’t expect, however, that its vice president of production and design, members of its design team and a project manager would be following Mr. Scott. After all, he had signed a non-compete clause prohibiting him from recruiting Arden B. employees for up to 12 months after leaving the company.

To stem any further defections, Wet Seal sought a restraining order barring Mr. Scott and Bebe Stores from hiring any current Arden B. employees.

According to a report in the Los Angeles Times, the suit alleged Mr. Scott took “proprietary information,” with him to Bebe Stores including knowledge about “fashion concepts, designs for future sales seasons, marketing methods, plans for new Arden B. store openings and information about the compensation of other Wet Seal employees.”

A judge in the Orange County Superior Court denied Wet Seal’s motion for a preliminary injunction against Bebe Stores and Greg Scott. It also all nullified all previous temporary restraining orders against Mr. Scott and the retailer.

Moderator’s Comment: What are your thoughts on the need and/or validity of so-called non-compete clauses in executive
contracts?

Antonio Sarabia, a lawyer who specializes in apparel industry intellectual property, pretty much predicted how the Superior Court ruling would go. Before
the ruling was announced, he told the Los Angeles Times, “I think it’s the position of California to encourage competition because the view is that competition is better for everyone.”

Ultimately, Mr. Sarabia said, the case would be decided by the answer to a single question. Did the employees who left Arden B. call Greg Scott first or
did he call them about going to work at Bebe Stores?
George
Anderson – Moderator

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