Bankruptcy dilemma: Will the real Ellen Tracy please stand up!

Today, the U.S. Bankruptcy Court for the Southern District of New York granted a petition against Ellen Tracy LLC for a Chapter 7 involuntary petition for bankruptcy. The petition was filed by three creditors seeking nearly $4 million in claims. The creditors were manufacturers of Ellen Tracy products.

The confusing thing, however, is that the entity being forced into bankruptcy, Ellen Tracy LLC, is a former licensee of the Ellen Tracy name which ceased its operations some time ago. It has nothing to do with the brand anymore. Brand Matter LLC, on the other hand, is the entity that owns, manages, markets and licenses the intellectual property of Ellen Tracy.

Guess there's a lesson to be learned here: Never let a licensee use your brand's name in the name of its legal partnership.

"Brand Matter LLC had to terminate the license agreement with Ellen Tracy LLC earlier this year," says Bill Sweedler, chairman and chief executive of Westport, Ct.-based Wind Song Brands, the private equity firm that is a co-owner of Brand Matter. In addition to the Ellen Tracy brand, Windsong owns or holds stakes in Caribbean Joe, CJ Breeze, Joe's Jeans, Field & Stream, The Sharper Image and Como Sport.

The bankruptcy trustee will presumably investigate what happened to the license, the inventory and the receivables, says Kenneth A. Rosen, attorney with Roseland, N.J.-based Lowenstein Sandler PC, who is representing the creditors.

"One question we have is who liquidated Ellen Tracy's inventory and who collected the receivables," says Rosen. "Where did they go and at what price? Were they sold in bulk or at auction? These are questions that need to be answered."

Since he filed the petition in August, Rosen has been contacted by several additional creditors. "It started with three creditors, but twelve more have reached out to me," says Rosen, who adds that the total amount of petitioners' claims will likely exceed $10 million.

While the situation is bleak for Ellen Tracy LLC, the Ellen Tracy brand is alive and well.

"We have found a new partner to produce and market the Ellen Tracy sportswear category," says Sweedler. The new sportswear licensee of the Ellen Tracy brand is RVC Enterprises.

Yesterday, Brand Matter LLC and RVC Enterprises announced a deal with Macy's (M), under which Macy's will be the exclusive department store retailer of Ellen Tracy branded women's sportswear. Beginning in March 2010, Macy's will offer its customers an exclusive array of Ellen Tracy better sportswear focused on modern, related separates in 100 Macy's stores and at its website, The deal includes jackets, shirts, pants, sweaters, woven tops, knit tops and bottoms. Price points will be in the range of $99 to $149 for jackets and $50 to $99 for pants.

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