Contract Battle: Limited Beats May in Court and Gets Exec

May Co. lost its court attempt to prevent a former executive from working at Victoria’s Secret. The ruling has implications for non-compete clauses.

NEW YORK — In a ruling that could have significant implications for industry non-compete provisions in contracts, Limited Brands scored a court victory late last week over May Co. regarding the recruitment of a senior executive.

As reported, May Co. attempted to prevent Mark Weikel, former chairman of its Foley’s division based in Houston, from joining Limited’s Victoria’s Secret Stores division, on the grounds that he was violating a non-compete clause in his contract. But Limited sued May Co. in retaliation.

A two-day court trial was held in October in the Circuit Court of St. Louis County. Last Thursday, the court ruled that VS Stores and May Co. are not competitors and that Weikel didn’t breach his contract, meaning he’s free to join VS Stores. He’s expected to soon be named chief operating officer, a new position at the lingerie chain.

“We’re pleased with the decision and look forward to Mark joining the Victoria’s Secret Stores executive team,” Grace Nichols, president and chief executive officer, said in a statement Friday.

A May Co. spokeswoman said, “We are disappointed with the court’s decision and we are evaluating our options.” It’s possible that May Co. will appeal.

Not only does VS Stores get a seasoned, senior-level executive to support growth plans, but the court also ruled that May Co. must reimburse Limited Brands for costs associated with the case, including travel and hotel expenses. “It’s everything except legal fees,” said a Limited Brands spokesman.

Retail sources said last week that non-compete clauses are often vague and hard to interpret. However, executives are pressured to sign contracts that include the clauses, or else not take the job.

Last week’s decision was particularly important to Limited Brands. For the past few years, the company has been actively recruiting executive talent and wants to continue to beef up the ranks. Also, in about 160 “A” malls, Limited Brands is looking to pump up stores, including VS units, through expansions and renovations, and has boosted its capital expenditure budget.

In its decision, the court wrote: “May and VS Stores do not compete in any material or meaningful way. The targeted customer profiles of the two companies are completely different. They do not compete for suppliers, vendors or other resources. VSS has its own designs manufactured overseas for exclusive sales in its own stores. Intimate apparel is the primary product of VSS, while it comprises only approximately 3 percent of May’s overall company sales.”
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