Judge Awards Former Seven Partners Millions in Profits

A judge tentatively decided on Aug. 5 that Peter Koral, one of three people who started the Seven for All Mankind blue jeans label, must pay his two former partners $5.5 million in profits they didn’t receive in 2002.

In addition, Los Angeles Superior Court Judge James R. Dunn must decide whether Koral should pay his former business associates, Jerome Dahan and Michael Glasser, half the value of the blue jean venture. To do that, the judge first must establish the monetary value of the enterprise, which was started in 2000 and became hugely successful in a short period of time. At one point, annual sales exceeded $100 million a year. Experts who testified in court estimated the value of the company could be anywhere from $26 million to $130 million.

Koral, owner of L’Koral Inc. in Vernon, Calif., and financial backer of the blue jeans start-up, was obviously disappointed with the ruling, which was based on a jury’s advisory verdict delivered on June 29.

“I have a wonderful business, and I want to keep it,” said Koral outside the courtroom in downtown Los Angeles. “I’m sad I financed those guys, and they left. This just means that guys like me won’t be so eager to back people. That is the sad part to me.”

But Glasser and Dahan, who filed a lawsuit in late 2002 accusing Koral of using Seven profits to cover personal and other business expenses, were pleased with the outcome. “I think basically this is finally going to come to an end. We are going to be rewarded what we deserve, and everyone is going to go on with their life,” said Dahan, the blue jeans designer who created the Seven for All Mankind label.

“What the jury awarded us is the right award, and hopefully we’ll end up getting what we rightfully deserve,” said Glasser, who was the marketing guru behind the label.

Dahan and Glasser were the two who came up with the idea for the Seven blue jeans label. They went to Koral, whose L’Koral makes women’s and children’s knitwear, to help finance the venture.

The agreement was that Dahan and Glasser would provide their expertise for a 50 percent interest in the venture while Koral would own the other 50 percent. When the division generated $12 million, it was supposed to be spun off into a separate company with Koral owning 50 percent and Dahan and Glasser the other half.

Koral’s attorney, Skip Miller, argued that Dahan and Glasser no longer had any claim to ownership because they walked away from the venture on Dec. 6, 2002, to form a new high-end blue jeans label called Citizens of Humanity. “There is no doubt that Glasser and Dahan had a partnership in the company. They were going to become owners, but they left,” Miller said.

But Peter Ross, one of the attorneys representing Dahan and Glasser, asked the judge to award the two blue jeans makers at least $65 million, one-half of the company’s $130 million valuation, or liquidate the venture.

The jury’s advisory decision in late June was that Glasser and Dahan had been partners in Seven for All Mankind since 2000.