Court Rules That Seven for All Mankind Owes Former Partners More Than $55 Million

Los Angeles manufacturer Peter Koral, maker of the high-end blue jeans label Seven for All Mankind, is weighing his options after a court ruled he must pay his former partners $55.5 million for their share of the business and profits.

Koral said he has been in touch with appeals attorneys and bankruptcy attorneys to consider his next step. “The battle is not over yet,” he said.

“We are considering all our options,” said Skip Miller, an attorney representing Koral.

One option is to seek Chapter 11 bankruptcy protection. The other choice is to appeal the ruling. Miller maintains that Jerome Dahan and Michael Glasser, Koral’s former partners, gave up their half of the business when they left in 2002.

To appeal, Koral would have to post a bond equal to 1.5 times the judgment. Or he could pay the judgment, appeal the decision and get the money back if he wins.

Los Angeles Superior Court Judge James R. Dunn ruled on Sept. 9 that Koral owes Dahan and Glasser $50 million for their 50 percent share of the blue jeans business, which all three started in 2000. In addition, Koral owes his former partners $5.5 million for their share of 2002 profits, which they did not receive when they left the venture and filed a lawsuit against Koral. The judge did not award Dahan and Glasser profits for 2003 and 2004.

Attorney Gary Freedman, representing Glasser and Dahan, said his clients were ecstatic.

The story behind the blue jeans brouhaha started four years ago, when apparel makers Dahan, a former designer for Lucky Brand Dungarees, and Glasser, a marketing executive who helped start denim label Democracy in 1990, approached Koral about starting a high-end jeans label with pieces that would sell for more than $100. They were short of cash but long on creativity, so they asked Koral to help finance the venture. Koral is head of L’Koral Inc. in Vernon, Calif., a moderate sportswear maker and one of the biggest knitting factories in the region.

The three struck a deal. They agreed that once Seven for All Mankind was financially viable and could stand on its own, the operation would be spun off into a separate company, according to court documents.

The partners launched the company in 2000, and it soon became a success, placing its must-have product in stores such as Nordstrom. Dahan and Glasser maintained in court papers that the company was generating more than $20 million in profits by 2002 but they had received nothing and a new company was not being formed. Koral said the profits were poured back into the denim company.

At the end of 2002, Dahan and Glasser decided to leave the company and start blue jeans label Citizens of Humanity. They also filed a lawsuit against Koral asking for their share of Seven for All Mankind’s business and profits.

The judge ruled that the value of the Seven for All Mankind venture on Jan. 15, 2003, was $100 million when the plaintiffs demanded a dissolution without delay. Dahan and Glasser were awarded half the $100 million as well as their half of the profits in 2002. —Deborah Belgum