An executive change at Costa Mesa-based Vestal Watch Inc. has sparked a contentious legal fight at the maker of edgy watches and clothes.
Vestal’s former president of licensing, Rudy Theale, is suing the company and its controlling shareholder and Chairman Ira Robb, former president of Enterprise Rent-A-Car of Southern California.
The suit alleges Theale was wrongly fired as part of a conspiracy.
The litigation, filed in state Superior Court in Santa Ana, accuses Robb of concocting a “malicious plan and scheme” to oust Theale and force him to forfeit his ownership stake in Vestal.
Theale is seeking damages for breach of contract and fraud, according to the suit.
Vestal declined to comment for this story. So did Theale and his lawyers.
The company is known for watches made with metal and leather wristbands, studs and other rock ‘n’ roll touches.
The watches are worn by actress Juliette Lewis and her band Juliette & The Licks, as well as musicians from bands such as the Eagles of Death Metal and Shiny Toy Guns.
Vestal’s products are sold at stores of Seattle-based Nordstrom Inc., Fred Segal of Los Angeles and Costa Mesa-based The Closet.
The company has yearly sales of about $25 million.
Johnny Gehris, Vestal’s president, cofounded the business in 1997 with five friends, including designer David Bonaventura.
About six years ago, Vestal brought in two investors, who were bought out in 2004 by Robb. He owns a majority of the company.
Theale joined in 2005.
Vestal has grown by selling watches and clothes under its own name and by making watches for other brands, including Paul Frank, Vans and singer Gwen Stefani’s Lamb and Harajuku Lovers.
The lawsuit stems from the October 2007 suspension of Theale for allegedly sexually harassing a former employee, according to court documents.
Theale was fired in March and ordered to sell his $1.7 million stake in Vestal for “little or no money,” according to his lawsuit.
He alleges he wasn’t given a chance to refute the sexual harassment claim, which was settled without damages.
Theale contends the claim and his ouster were part of a “secret fraudulent plan” to collect his “valuable stock,” according to the lawsuit.
Theale sought an ownership stake in Vestal when he joined the company three years ago but was “purposely ignored” until he threatened to resign, according to the lawsuit.
Wrongful Termination
Robb is accused in the suit of coming up with agreements that provided him with the “legal basis to later wrongfully terminate (Theale)” and force him to sell his shares.
Theale contends his work at the company helped bring a buyout offer from North Carolina’s VF Corp., which owns Cypress-based Vans Inc. and other brands, according to the suit.
VF offered to buy Vestal for $19 million, the suit said. Robb allegedly rejected the offer because it would have paid out Theale’s shares, according to the suit.
Theale’s seeking “punitive damages” in an “amount sufficient to punish (Robb) for his acts of fraud and deceit,” the suit said.
Unclear Future
With Theale out, it’s unclear what will happen to Vestal’s business of making watches for other brands.
Vestal could slim down its licensing business and keep only a few brands that generate revenue and complement its own brand, a source familiar with the company said.
The company could seek to focus on building the Vestal brand, the source said.
Theale’s lawsuit isn’t likely to hurt Vestal’s business since its intellectual property and other operations aren’t at stake, the source familiar with the company said.
Still, the suit is a distraction for Vestal, which, like other accessory and apparel makers, faces a tough retail market where consumers have cut back on buying clothes and related products.
