An appellate panel reinstated a breach of contract lawsuit against Mitchell Silberberg & Knupp LLP in a dispute involving the lavish lifestyle of a retail operator who lost his licensing agreement with Guess Inc.


The Nov. 5 decision pits the Los Angeles law firm against one of its former clients, the owner of Pour Le Bebe Inc., which operated Baby Guess and Guess Home Collections stores during the 1990s as a Guess licensee.


The dispute began in 1998 when Guess claimed that Pour Le Bebe owed it unpaid royalties; an arbitrator awarded Guess $7.7 million in damages.


During the arbitration, Michel Benasra, Pour Le Bebe's owner, argued Mitchell Silberberg should be disqualified from representing Guess because it had represented him or his company in an earlier sexual harassment claim, the purchase of a corporate jet and immigration issues.


The arbitrator rejected the request, and Pour Le Bebe responded by filing a breach of contract and malpractice suit against Mitchell Silberberg in January 2000. A Los Angeles Superior Court judge also rejected its claims, arguing the matter should remain part of the arbitration. But a three-judge panel in 2nd Appellate District reversed the opinion on grounds that only the company, not Benasra or Denys Goulin, another PLB officer in the legal dispute, was a party to the arbitration.


Pour Le Bebe attempted to disqualify the firm a second time in Los Angeles Superior Court, where it amended its suit to include Daniel Petrocelli and Robert Welsh, the Guess lawyers at Mitchell Silberberg who had recently moved to O'Melveny & Myers LLP.


Pour Le Bebe, which went out of business in 2000, claimed in court papers to have incurred $250,000 in attorneys' fees. Jerold Fagelbaum, a partner at Fagelbaum & Heller representing Pour Le Bebe and its officers, declined to say how much he is seeking but added, "Mitchell Silberberg and Mr. Petrocelli have collectively made millions of dollars representing Guess adverse to Baby Guess."


Petrocelli, Welsh and Mitchell Silberberg filed a motion in Los Angeles Superior Court to throw out the suit as a Strategic Lawsuit Against Public Participation, or SLAPP, because it violated their free speech rights.


The trial court judge agreed, but the appellate panel reversed the decision and sent the matter back to Los Angeles Superior Court for trial.


Peter Gelblum, a partner at Mitchell Silberberg representing the firm, said he plans to petition the California Supreme Court.


O'Melveny Adds


Assistant U.S. Attorney Steven Olson, who helped prosecute EarthLink Inc. co-founder Reed Slatkin, has joined O'Melveny & Myers LLP's global enforcement and criminal defense group as a partner.


Olson worked in the major frauds section of the Central District of California, in Los Angeles, since 1999. As part of that group, Olson helped obtain a guilty plea from Slatkin to 15 charges, including six counts of money laundering, in 2002.

Staff reporter Amanda Bronstad can be reached at (323) 549-5225, ext. 225, or at abronstad@labusinessjournal.com .

For reprint and licensing requests for this article, CLICK HERE.