Forever 21's Fast (and Loose) Fashion Empire

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Emily Shur

Do Won Chang: Jamie Mccarthy/Getty Images; Linda And Esther Chang: Photograph By Emily Shur For Bloomberg Businessweek

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The garment workers kept up the boycott for three years, during which time Forever 21 sued them for defamation and several of the manufacturers settled (in one instance, paying seven of the women a total of $175,400). When a judge finally ruled that the case could proceed in 2004, Forever 21 settled. The terms of the agreement are confidential. Forever 21 and the workers issued a statement that read in part: "The parties have agreed to take steps to promote greater worker protection in the local garment industry....The parties share a belief that garment workers should labor in lawful conditions and should be treated fairly and with dignity." Three years later, a documentary about the lawsuit and boycott, Made in LA, was shown on public television. It won an Emmy in 2008.

By then, Forever 21 was facing a new and altogether different wave of litigation. Starting in about 2004, the Changs decided to create different brands to appeal to slightly more sophisticated and older shoppers. Over the next couple of years, labels ranging from Diane von Furstenberg to Anna Sui to Anthropologie, about 50 in all, separately sued Forever 21 for copying their clothes. The company said that its buyers had to trust its vendors and couldn't possibly know how those vendors came up with all their designs.

U.S. copyright law protects only original prints and graphics, not designs themselves, making some cases hard to prove. Von Furstenberg, Sui, and Anthropologie did win settlements, though, which also remain confidential. The legal documents are sealed now, but when they were available, Women's Wear Daily excerpted a reprimand of Forever 21 by the U.S. District Court judge hearing Anthropologie's case. "We note the extraordinary litigating history of this company, which raises the most serious questions as to whether it is a business that is predicated in large measure on the systematic infringement of competitors' intellectual property," Judge Michael H. Dolinger wrote on Mar. 12, 2009. Meyer responds: "The number of claims against us is relatively small compared to the number of items we sell. Now we have a process to ensure that our products do not violate the intellectual property rights of others."

"Of the various fast fashion chains, Forever 21 is the one who treats liability as a cost of doing business," says Scafidi, the copyright law expert. "Illegal copying has been incorporated into their business model. But it's not necessarily a terrible result for designers who do receive payment."

One of those designers is Virginia Johnson. In 2005, her intern spotted a skirt in a Manhattan Forever 21 with a print much like one that Johnson had sold the previous season at Barneys. Johnson's skirt went for about $175; Forever 21's version was less than $18. When Johnson's lawyer, Robert C. Edmonds, contacted Forever 21, he learned that the company had a policy in place for just such scenarios. They would pay Johnson 10 percent of the $40,000 worth of skirts they said they had sold. When Johnson rejected that as too low, they offered $9,000, which she accepted. "I was surprised how matter-of-fact they were," she says. Meyer says there is no such policy, but that "all claims are reviewed and, where appropriate, resolved after careful analysis."

The company has largely avoided going to trial. In one instance, though, Trovata, a small label in Newport Beach, accused Forever 21 of copying its unique button placements, decorative stitching, and a tag that included one of the founders' names. In May 2009, Mrs. Chang was forced to testify in the U.S. District Court in Santa Ana. This was her first—and quite possibly last—time speaking in public. From the transcript:

Frank Colucci (Trovata's lawyer): Do you know who the other officers of Forever 21 are?

Mrs. Chang: I don't know for sure.

Colucci: Well, do you know any of the other officers?

Mrs. Chang: I don't know about that matter very well.