Employees' Retirement System of Rhode Island v. Marciano

Guess agreed to a $30 million monetary settlement and implementation of substantial corporate governance reforms.

Settlement in response to allegations of breach of fiduciary duty arising from an alleged “pattern of sexual harassment” by Guess’s co-founder and Chief Creative Officer Paul Marciano.

Guess?, Inc. (Guess or the Company) (NYSE: GES) shareholders and the Company have agreed to a $30 million monetary settlement and implementation of robust corporate governance reforms.  The corporate governance reforms have been heavily negotiated and provide that: (1) Paul Marciano’s interactions with employees and models will be heavily regulated such that he will not meet with models in non-public settings alone, his communications with models will be preserved and accessible for review, and models will be given access to the Company’s sexual harassment policy; (2) Guess will add a new independent director to the Board; (3) the new director will be part of a newly formed Diversity, Equity, and Inclusion Council that will be empowered to review and recommend improvements to the Company’s policies and oversee investigations into future misconduct; (4) the Human Resources Department will no longer report to Paul Marciano; and (5) the Company will enhance its policies to make its commitment to a harassment-free environment clear and prohibit tactics such as imposing non-disclosure agreements used to silence accusers.

The settlement is with the Employees’ Retirement System of Rhode Island following a derivative complaint filed on September 19, 2022, alleging a pattern of sexual harassment by Guess’s co-founder and Chief Creative Officer Paul Marciano.  In 2018, model Kate Upton accused Marciano of groping and forcibly kissing her years earlier, starting when she was a teenager.  Other models soon echoed Upton’s claims, prompting Guess directors to launch an internal probe, according to court filings.  But directors didn’t take the investigation seriously, failing to interview several accusers and producing a “shockingly brief” report that downplayed the allegations.

“The actions by Marciano and Guess are deeply troubling and reprehensible.  This settlement represents a significant step towards implementing crucial reforms that will finally ensure Marciano and Guess are held accountable for the harm they have caused to numerous employees,” said General Treasurer Diossa.  “The Employees’ Retirement System of Rhode Island stands in solidarity with the victims of Marciano's actions, and we hope this settlement allows them to begin closing this painful chapter and moving forward with their lives.  We advocated vigorously for these comprehensive reforms to ensure a fair and secure workplace for Guess's employees.  No employee should endure an unsafe environment or live in fear of reprisal for voicing concerns.”

The Employees’ Retirement System of Rhode Island is represented in the action by Labaton Keller Sucharow LLP.  Labaton Keller Sucharow partner, Eric J Belfi noted “We are pleased to have reached an agreement that recognizes the importance of board leadership in firmly rejecting a culture of sexual harassment.  The governance reforms achieved through this important settlement will protect employees and investors in the future.”

The settlement resolves litigation pending in the Delaware Court of Chancery, styled as Employees' Retirement System of Rhode Island v. Marciano et al., C.A. No. 2022-0839-LWW.