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Report on Business Estée Lauder sues Toronto’s Deciem, seeks to remove founder after ‘erratic’ behaviour

The beauty supply store Deciem unexpectedly closed all locations in Toronto on Monday.

Nathan Denette/The Canadian Press

Estée Lauder Cos. Inc. filed a lawsuit Thursday against Toronto-based skin care company Deciem Beauty Group Inc., seeking to remove its founder and chief executive officer. Estée Lauder alleges Brandon Truaxe has engaged in “extremely erratic, disturbing and offensive behaviour” and that Deciem’s business “is currently being destroyed.”

Estée Lauder is a minority shareholder in Deciem, which employs 400 people in Canada and has gripped social media for much of the week. On Sunday, Mr. Truaxe posted a video to Deciem’s corporate Instagram account stating the company would shut down until further notice. Mr. Truaxe, who appeared gaunt and sounded hoarse, also claimed that “almost everyone at Deciem has been involved in major criminal activity, which includes financial crimes.” The video has been viewed more than 220,000 times and attracted more than 5,000 comments.

The majority of Deciem’s 29 locations around the world, including 10 in Canada, as well as in the United States, Britain and Australia, did not open after Mr. Truaxe’s post, and remain closed. A few employees have been working from Deciem’s head office in Toronto this week, according to an employee who was not authorized to speak for the company. Employees are also working from home, and the company’s main production facility in Toronto is operating and online orders are being fulfilled, according to the employee.

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New York-based Estée Lauder, which filed a notice of application in the Ontario Superior Court of Justice, is seeking an interim order removing Mr. Truaxe from both the board of directors and as an officer or employee of Deciem. The suit also seeks to appoint Nicola Kilner, Deciem’s co-CEO, as the sole interim leader.

Estée Lauder claims that Mr. Truaxe’s actions are not only causing “irreparable harm” to its investment in Deciem, but damaging its reputation as well. Estée Lauder owns a 28-per-cent stake, according to Deciem, and has a representative on the company’s board. Pasquale Cusano, a Vancouver-based entrepreneur and founder and publisher of Nuvo magazine, is also an investor and board member. Mr. Truaxe owns the rest of the company.

Mr. Cusano took legal action against Mr. Truaxe in June, alleging the CEO improperly attempted to remove him from the board and used corporate documents bearing a forged signature. Mr. Cusano declined comment through a lawyer. Mr. Truaxe has not filed a response to Mr. Cusano’s legal action.

Estée Lauder declined to comment on its lawsuit, but issued a statement earlier this week. “The Estée Lauder Companies is a minority investor in Deciem, and, as such, we do not control the company’s operations, social media or personnel decisions,” according to a company spokesperson. “We are deeply concerned by the material that has recently been posted on social media and will defend our rights as a minority investor.”

Mr. Truaxe did not immediately respond to an e-mail request for comment. A spokesperson for Deciem could not be reached.

Deciem, founded in 2013, owns a handful of beauty brands, the most popular of which is The Ordinary. The product line became an overnight sensation owing to its low prices. Deciem largely eschews traditional marketing, allowing it to charge far less for some of its products than competitors. Deciem’s production facilities initially struggled to keep up with demand for The Ordinary, making it a hot commodity. The product line has developed a loyal following, particularly among younger consumers.

Estée Lauder alleges that Mr. Truaxe has made “hundreds of outrageous, disturbing and/or defamatory and/or offensive posts” on the company’s social-media accounts. The suit claims none of these posts, some of which have disclosed confidential information, were made with the consent of Deciem’s board. According to the lawsuit, Mr. Truaxe was “detained by authorities” in Britain in May because of his erratic behaviour, and stayed in a psychiatric hospital in London for several days. Mr. Truaxe stayed at another psychiatric facility in Canada a few weeks later for approximately three days, the lawsuit alleges.

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Mr. Truaxe also allegedly entered into lease agreements, including for a new headquarters, without considering the company’s liquidity position and without consulting the board. Estée Lauder is seeking the appointment of an auditor to investigate Mr. Truaxe’s claims of financial crimes, and to report on Deciem’s fiscal condition.

The lawsuit is the latest development in a chaotic year for Deciem. In February, Mr. Truaxe fired Ms. Kilner as co-CEO, and the company’s chief financial officer resigned. Ms. Kilner returned to her previous role in July.

In an e-mail sent to Deciem employees earlier this week and obtained by The Globe and Mail, Mr. Truaxe listed Ms. Kilner as one of several employees who were “terminated as of immediately, for cause.” (The employee who had been acting as Deciem’s spokesperson was also listed.)

Mr. Truaxe, who appears to have been in Amsterdam earlier this week, according to his personal Instagram account, sent another e-mail to staff on Tuesday reiterating that “all offices, production facilities and stores” were shut down. “If one more instruction that any of you received from me is not followed with precise attention to time efficiency and to the best of your abilities, I will terminate your employment immediately and will communicate every past and future communication between you and DECIEM … through our social channels,” he wrote.

In an open letter announcing Estée Lauder’s investment in Deciem last year, Mr. Truaxe emphasized the cosmetics giant held a minority stake and would not control Deciem’s decisions. He added, “there is documentation in place to make it nearly impossible to fire me.”

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