Deciem founder Brandon Truaxe has been effectively stripped of all his roles and powers after an Ontario Superior Court judge granted an interim order Friday morning brought forth by Estée Lauder Cosmetics Inc. Deciem itself, in the meantime, is back online and in business.
The order for injunctive relief, which was granted by Justice Michael Penny in Toronto on October 12, removes Truaxe from Deciem’s board of directors and ends his role as president and CEO. The order also appoints Nicola Kilner as the sole interim CEO of the business, and prohibits Truaxe or any other corporation or entity that he owns or controls from taking any action to appoint or remove to replace anyone on the board of directors. Truaxe did not appear in court and was not represented by counsel.
The actions follow Truaxe posting a video on Instagram on October 8 announcing the company was closing all of its operations immediately until further notice. “Please take me seriously,” he says, before accusing everyone at the company of being involved in criminal activity, including financial crimes. “You have no idea what a soldier I’ve been for more than 13 years.”
With the approved court order, Deciem’s board of directors now consists of Pasquale Cusano and Andrew Ross, Estée Lauder’s senior vice president of strategy and new business. Estée Lauder purchased a 28% minority stake in the low-cost, direct-to-consumer skin-care brand in July 2017. The company reported revenues of nearly $3.3 billion in the second quarter of 2018.
Mark Gelowitz, the lawyer who represented Estée Lauder and presented the company’s notice of application in court, requested interim relief under the Canada Business Corporations Act. He cited negative coverage in both mainstream and fashion media worldwide of the company as evidence of Truaxe’s personal behaviour having both detrimental effects on Deciem and “imponderable damage” to Estée Lauder because of its ownership position. “The business is being destroyed as each moment passes,” he said inside the courtroom at Friday's hearing. (In a moment of levity, Gelowitz joked that he failed to gain any new Twitter followers after Truaxe shared his email address via Instagram.)
Gelowitz also said he knew Truaxe had received the application materials, because he posted screenshots of them on Instagram yesterday. Truaxe stated on the social media platform, "I have no further legal comments at this juncture but will advise you the instant I do," and also accused Deciem's Board of Directors of having "committed or been accomplice to financial crimes and otherwise."
“He has essentially lit the company on fire,” Gelowitz said, citing the shutdown notice sent by Truaxe on Monday, resulting in the closure of dozens of stores around the world and immediate loss of work for Deciem’s approximately 400 employees. “All hell broke loose.”
Gelowitz also stated Friday that Truaxe may have forged board member Cusano's signature in documents and sought to further undermine him, adding, "when Cusano sought to attend a board meeting to regularise and normalise the chaotic activity at Deciem, Brandon purported to use powers that would give him the right to stack the Deciem board, replacing Cusano with a Deciem employee loyal to Brandon."
This is not the first time that Truaxe has taken to the popular social media site to puzzling effect. Over the last several months, Truaxe has posted several videos of himself on Instagram that Gelowitz described as “rambling and incoherent."
As a result of Truaxe’s shutdown order on Monday, Gelowitz says suppliers and landowners are threatening legal proceedings against the company due to The Ordinary stores breaching their operating covenants. “Monday was a tipping point for a lot of us,” Gelowitz said, describing Truaxe as a “diabolical marketing genius” but someone who has “gone too far."
In one of the affidavits, former Deciem co-CEO Nicola Kilner, who was fired, rehired, and fired again without the unanimous agreement of the other two board members, showed she was recently approached by Ross and confirmed that she would be willing to step in as interim CEO.
The order also prevents Truaxe from employing or terminating the employment of any employees or officers of Deciem; communicating with its employees, suppliers, other business partners, or current and prospective landlords; issuing statements or circulating media on any of the company’s social media accounts and holding himself out as a director, officer, or employee.
Most importantly, it was aimed at guarding Truaxe from telling everyone not to show up to work again, given his propensity for what Gelowitz described as “highly unpredictable and erratic communication." Justice Penny remarked that "people do what [Truaxe] says even though he's crazy," to which Gelowitz said, "That's the problem."
There was expressed concern from Gelowitz on behalf of Estée Lauder of Truaxe’s prior career as a computer programmer, which is why the order explicitly prohibits him from destroying, deleting, disabling, over-writing, or otherwise modifying electronic computer systems or infrastructure (email, e-commerce, or other operations systems) or documents or records related to Deciem, including emails, posts on Deciem’s social media accounts or website, or other electronic records.
The judge also approved the request of an investigation into Truaxe’s claims of criminal activity and the financial condition of the company by PricewaterhouseCoopers LLP. Deciem is required to pay the costs of this investigation, which will be reported to its board of directors. Truaxe will also pay the cost of Cusano and Deciem an amount to be set following further submissions, plus any applicable taxes.
After the granting of this order, Deciem should be able to get the password changed to its social media accounts, either through its own facilities or through Instagram itself, as these are considered corporate assets. For fans of The Ordinary’s products, one impact of the order was fairly swift: The company’s website, which displayed a black and then red screen since the closure announcement on Monday, was back online by Friday afternoon. Any changes to Instagram remain to be seen.