As of Thursday, August 18, 2016
In 2011, Fraser Ross hired Chris Lee to turn the Kitson chain of boutiques into a global brand.
But five years later Ross is suing Lee in Los Angeles County Superior Court for allegedly defrauding the Los Angeles company, which suddenly closed late last year.
Ross, who recently opened a new boutique called Kitross in the same spot on Robertson Boulevard where Kitson had its first location, requested a jury trial and more than $120 million in damages, which was the estimated value of Kitson before 2011, said Glenn Feldman, Ross’ Canadian counsel. Ross is from Canada.
The lawsuit was filed Aug. 9 by attorney Jeremy D. Smith of Krane & Smith in Encino, Calif.
Lee, who left Kitson last year, did not return phone calls requesting comment. According to his LinkedIn account, Lee works as an advisory partner at private-equity investor Goode Partners LLC.
In 2000, Ross moved to Los Angeles and launched Kitson. The store gained notoriety for selling emerging brands and pop-culture gifts and collectibles. Paparazzi often photographed celebrities shopping at Kitson, and the store was written up in the Wall Street Journal. At one time, Kitson had 19 locations and an online store.
In 2011, Ross hired Lee, a former senior vice president of fast-fashion giant retailer Forever 21, to expand the store fleet.
Lee maintained that Kitson was more than prepared to take a giant leap forward in the retail world. In 2013, Lee claimed that Kitson’s flagship store was making $1,000 a square foot in sales, which was double the average sales per square foot that year for other stores, according to the International Council of Shopping Centers.
“You can do a billion-plus dollars around a great merchant,” Lee told the California Apparel News in July 2013. “Fraser is one of those great merchants of retail.”
The lawsuit claims that Lee led a movement to push Ross out of his business. In 2012, Ross was hospitalized with an infection that paralyzed the right side of his body. The legal filing alleges that Lee took advantage of Ross’ incapacitated state.
The lawsuit alleges that Lee sneaked documents past Ross, including one that said Ross had resigned from the company and sold his interest in Kitson to Lee for $300, leaving the Kitson founder without a salary and benefits, Feldman said.
“He was left with nothing but a check for $300 for the shares that he held for Kitson,” Feldman said. “It raised immediate doubts in minds on how could Fraser be reduced to $300 for all the time and effort and notoriety that he put toward the brand.”
In 2015, Lee wanted Ross to sign a waiver of a conflict-of-interest document that would allow the firm ofJeffer Mangels Butler & Mitchell LLP to represent both Lee and Ross at the same time. The document was not signed in front of any attorney, the lawsuit states. Instead, it was completed outside the purview of a lawyer and completed with Ross’ forged signature.
After Ross recovered from much of his illness, the lawsuit said he came across the alleged forged document. Ross showed it to Feldman, who took it to a handwriting expert. The expert confirmed that the document did not contain Ross’ signature. For Feldman, the phony signature confirmed that there had been a plot against Ross.
The suit also describes other deals that hurt Ross. In May 2015, Lee put together a loan transaction with etailer Spencer Spirit Holdings Inc. The deal required that Ross remain involved in Kitson.
The lawsuit alleges that Lee gave Ross pain medication during a meeting where Ross signed a document stating that he would act as a consultant for the project. The deal also had Ross waiving his right to be reimbursed for a $2 million loan Ross extended to Kitson when the retailer was in trouble.
Ross was promised a speedy repayment on the loan with 6 percent interest, but it never came through.
In addition, the lawsuit maintains that Lee hid a personal enrichment scheme where he developed Kitson stores in South Korea.
Lee also allegedly blocked attractive deals for other companies to acquire the Kitson string of stores. Instead, the lawsuit said he did not consult with Ross about obtaining a $15 million loan in 2013 from Salus Capital Partners, a Massachusetts lender focused on lending to distressed companies.
By late 2015, Spencer Spirit was operating the retailer. The deal seemed to be running smoothly until Kitson ran out of money and shuttered its 17 stores in December, bringing an end to Kitson’s business.
The Lee lawsuit is only the latest part of this legal saga. In July, Ross sued Jeffer Mangels Butler & Mitchell for legal malpractice.