Luxury apparel brand files for Chapter 11 bankruptcy

The luxury fashion retail industry has faced many of the same challenges this year as other industries, which include dealing with inflation, rising interest rates, and the lingering effects from the Covid-19 pandemic.

Retail businesses have also dealt with other issues creating financial distress that other service industries have not encountered, such as keeping their brick-and-mortar locations relevant and battling shrinkage, better known as retail theft.

The luxury fashion segment suffered a loss earlier this year as high-end apparel chain Ted Baker Canada, which operated 31 Ted Baker stores in the U.S. and 25 in Canada, along with eight Brooks Brothers Canada shops, and seven Lucky Brand Canada stores, in April filed for restructuring under Canada's Companies' Creditors Arrangement Act and for Chapter 15 bankruptcy to liquidate and close all of the North American stores.

Also, Anne Fontaine USA, the U.S. affiliate of the Paris-based luxury boutique chain, on Jan. 16 filed for Chapter 11 Subchapter V bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, to reorganize, asserting that the company has not been able to recover from financial distress caused by the Covid-19 pandemic.

Anne Fontaine operates 17 luxury boutique locations in the U.S., 19 in Europe, three in the Middle East and three in Asia, according to its website.

People walk with shopping bags. Lead.
Image source&colon; Getty Images

McMullen files Chapter 11 bankruptcy

And now, luxury fashion retailer McMullen on Aug. 21 has filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Northern District of California, reportedly facing a lawsuit filed by online competitor Moda Operandi over alleged copyright infringement.

The Oakland, Calif.-based debtor listed $500,000 to $1 million in assets and $1 million to $10 million in liabilities in its petition and indicated that funds will be available for unsecured creditors.

The debtor filed its petition about two weeks after luxury fashion retailer Moda Operandi filed a lawsuit against McMullen in the U.S. District Court for the Northern District of California alleging copyright infringement for using copyrighted product photos without the retailer's consent.

The Brooklyn, N.Y.-based luxury apparel retailer filed its complaint on Aug. 7, Sourcing Journal reported, alleging that McMullen "committed copyright infringement with actual or constructive knowledge of, or with reckless disregard or willful blindness for (Moda Operandi's) rights in the (photos), such that said acts of copyright infringement were willful."

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The plaintiff in its complaint attached 19 of its copyrighted images, featuring skirts, dresses, tops, pants, sweaters and jackets, next to screenshots it alleges came from McMullen's website. Moda Operandi believes the images McMullen used were identical or nearly identical to its images.

Moda Operandi seeks damages to be established at trial. The plaintiff has asked for an enjoinment to prevent McMullen from using the 19 images without permission from the plaintiff.

All litigation against McMullen is subject to an automatic stay while the debtor's Chapter 11 case proceeds.

McMullen, which was founded in 2007 by Sherri McMullen, has been praised by fashion magazines, such as Vogue, Women's Wear Daily and Harper's Bazaar, according to its website.

The retailer features women's luxury apparel from brands such as Christopher John Rogers, Dries Van Noten, The Row, Aisling Camps and Diotima. It also features a line of luxury men's attire from Dries Van Noten.

In addition to its flagship Oakland boutique, McMullen on Aug. 12 opened a second boutique in the Presidio Heights district of San Francisco. The fashion retailer also operates a e-commerce platform on its website.

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