The story of the founding of the women’s clothing company Lauren James of Fayetteville reads like a business fairy tale.
Lauren Stokes was pregnant and on doctor-ordered bed rest when she began drawing dress designs to pass the time. After her son was born in 2013, her husband suggested she leave a nursing career for fashion design. “He said, ‘If this is what you want to do, do it,’” she told Arkansas Business in 2015.
Over four years, Lauren James Enterprises Inc. blossomed into a $13 million Southern women’s lifestyle line with national reach, and happily-ever-after seemed in sight.
But a series of now-settled lawsuits, pitting business partner against business partner, suggests a far less happy founding story.
In a lawsuit filed in April 2014, Chelsea McShane of Fayetteville, who previously was in business with Lauren Stokes’ husband, Lance Stokes, accused him of breach of fiduciary duty. McShane said Lance Stokes shared with his wife the clothing designs that McShane had created. Lauren James also was named as a defendant in the suit.
Lance Stokes denied the allegations in court filings in Pulaski County Circuit Court, and the case reached a confidential settlement in July 2016. He had sued McShane in January 2014, in Dallas County District Court in Texas, accusing her of engaging “in a campaign of harassment and abuse.” McShane was never served with the lawsuit and that case was dismissed in August 2014.
Another business partner of Lance Stokes’, Larry Ripaldi of Plano, Texas, said in a lawsuit filed in Texas that he invested $50,000 in 2013 in Stokes’ startup called Cotton Snaps Inc., only to discover later that Stokes was working on launching Lauren James rather than Cotton Snaps. (McShane said that she helped develop the Cotton Snaps product, a magnetic strap designed to hold sunglasses around the wearer’s neck, similar to the chain used for reading glasses.)
Ripaldi’s lawsuit was settled in April 2015. Ripaldi said that after his initial investment he spent another $50,000 or so on legal fees and paying off debts from Cotton Snaps.
“I don’t know how much [money] I got into this stupid thing,” he recently told Arkansas Business. “But it was a disaster.”
Lauren James issued a statement to Arkansas Business last week that said it stands “behind our history, our brand and our mission.
“Make no mistake, the people responsible for our success are our founders, our employees and our wonderful customers across the country who continue to support our brand,” the statement said. “These allegations, with which we vehemently disagree, were resolved through litigation several years ago. It is unfortunate that we are still discussing these allegations instead of the efforts of our 115 employees who have helped build a homegrown, Arkansas brand.”
‘It Was Chelsea’s Idea’
McShane said she couldn’t comment on the lawsuit because she had entered into a confidential settlement agreement. McShane’s mother, Kim Silvestri of Conway, was under no such obligation.
Silvestri said in a statement to Arkansas Business that she was with McShane when in June 2015 she read an article about the founding of the company.
“As a mom, it was gut-wrenching to watch my daughter realize what these people had done,” she said. “I know it was Chelsea’s idea of an overall seersucker theme and to infuse seersucker in products.” Seersucker is a Lauren James motif.
Silvestri also said that it was her daughter’s idea to do seersucker bow shorts and “ruffle top removable bow skirts.” McShane also came up with the game day-, state- and holiday-themed items, her mother said.
“Other ideas she shared with her partner were seersucker bridesmaids dresses with big bows,” Silvestri said.
Lauren James sells bridesmaids dresses and has a collegiate line.
She said her daughter’s themes were apparent throughout Lauren James’ product line. “To me, it’s been like watching someone else live my daughter’s creative business dreams,” Silvestri said.
In September, Inc. magazine ranked Lauren James as the 53rd fastest-growing private company in the United States with a three-year growth record of 6,000 percent and revenue of $13.2 million. Inc. also featured Lauren Stokes in an article headlined “How This Mother of a Newborn Launched a $13 Million Business.”
Last year Forbes named Lauren Stokes a 30 Under 30 for Retail & Ecommerce.
Both Lauren and Lance Stokes have been honored as Arkansas Business’ 20 in Their 20s, Lauren in 2015 and Lance, the company’s chief operating officer, in 2017.
Southern Dignity
In October 2010, when he was just 23, Lance Stokes incorporated the clothing retailer Southern Dignity Clothiers LLC of Roland.
Stokes and the company’s co-founder, Ben Brundick, started the company because they “felt there was a gap in traditional styling made famous by Ralph Lauren and the direction of Southern brands currently on the market. We put pen to paper, and the rest is history,” according to a Sept. 27, 2011, article on the website Prep in the Midwest, an online blog that featured “all things preppy,” including designers, shops and restaurants.
The article also said the company was working on expanding its line to include items such as women’s clothes and dresses to be worn at sporting events.
Kim Silvestri said her daughter’s designs caught Stokes’ eye.
While McShane was studying nursing at the University of Central Arkansas in the late 2000s, she would use college T-shirts and other material to create dresses. They proved to be a hit with her friends, and soon she had her own at-home business. Silvestri and her daughter was making about 50 dresses a week.
“It eventually became so popular that she couldn’t keep up with the orders and she began searching for a way to expand,” Silvestri said.
About that time, Stokes contacted her and wanted her to “help out with women’s designs for his company,” Silvestri said in the statement.
At first, McShane declined. But then she changed her mind in 2011, thinking that partnering with Stokes’ Southern Dignity would solve her expansion problems.
It wouldn’t.
Starting Cotton Snaps
In March 2012, McShane invested $11,545 to become a 20 percent owner in Southern Dignity. Stokes would own 80 percent of the company, which sold clothes only online.
Shortly after she began as a partner in Southern Dignity, McShane and Stokes worked together on the sunglass strap prototype that would become Cotton Snaps. McShane said in court filings that she thought Cotton Snaps would be sold through Southern Dignity.
After filing a provisional patent application in May 2012, Stokes and McShane began selling Cotton Snaps and other Southern Dignity items to boutiques across the country.
“The products proved very popular,” McShane said in the lawsuit.
In June 2012, Stokes asked his uncle, Gary Stokes of Plano, Texas, to invest in the product line. Gary Stokes could not be reached for comment.
According to Silvestri, Stokes told McShane she couldn’t have an ownership interest in Cotton Snaps because his uncle didn’t want other investors.
But Stokes told McShane not to worry. “I will not let you get screwed on the deal,” he wrote in a June 16, 2012, text message to McShane. “Everyone will profit from this, I promise you that.”
He also said that he would own 75 percent of Cotton Snaps, which he would use to “fund the entire womens [sic] line designed by you.”
The deal would be good for both companies, Stokes said. “Chelsea, in the end I’m going with the money that will allow me to expand southern dignity,” Stokes said in the text message. “And if its [sic] through a separate deal on these snaps then that’s what has to be done.
“What’s good for sd is good for the both of us. I’m not cutting you out of anything,” the text message said.
Silvestri said that was about the time her daughter lost her trust in Stokes.
In August 2012, McShane had Stokes sign a promissory note saying he would pay her $14,266 to reimburse her for the expenses she had incurred because of Southern Dignity. He was supposed to start making the payments on Jan 1, 2013, and have the debt paid by Jan. 1, 2014.
Business Relationship Sours
The business relationship didn’t improve between Stokes and McShane in 2013.
On Jan. 2, 2013, Stokes texted McShane and said he wasn’t sending the payment for the promissory note because Southern Dignity was “breaking even” and he didn’t have access to anything related to Cotton Snaps, although the lawsuit didn’t explain what he meant.
McShane and Stokes still discussed Southern Dignity, but Silvestri said “not much happened” with the company because Stokes was working on Cotton Snaps.
“Chelsea continued to discuss designs and ideas for materials to be used in dress designs,” she said. “And the seersucker dresses were at the top of their list to produce.”
The designs weren’t attached as exhibits to the lawsuit.
In March 2013, Stokes told McShane that he had found a pattern maker and a manufacturer in Dallas to make the dresses, Silvestri said.
Silvestri said McShane and Stokes argued, marking the end of their business relationship.
That was the month Stokes became a father when his fiancee, Lauren Wilkins, gave birth to their son, Lofton James Stokes. On March 26, 2013, the domain name LaurenJames.com was created, according to the website WhoIs.net.
A New Investor
Larry Ripaldi told Arkansas Business that he was a neighbor of Lance Stokes’ uncle, Gary Stokes. In the spring of 2013, Lance Stokes asked Ripaldi to make an investment.
“They supposedly were making a lot of money and wanted me to get involved with it,” Ripaldi said. With the understanding that Cotton Snaps had revenue of about $300,000, Ripaldi decided to invest.
In June 2013, at the time Ripaldi agreed to invest $50,000, Lance Stokes had just married Lauren.
Ripaldi said in the lawsuit that Lance Stokes told him that after the wedding, he was going to Hawaii to live for at least six months “in order to develop new markets for [Cotton Snaps’] products.
Ripaldi told Arkansas Business that he didn’t know why Stokes went to Hawaii, but after he gave Stokes the investment money, he didn’t see him for for several months and didn’t receive any updates on how Cotton Snaps was doing.
“He really didn’t do anything,” Ripaldi said. “And that’s when I started finding out a lot of stuff where he was working on trying to start” Lauren James.
Lauren James
Lauren Stokes, under her maiden name, incorporated Lauren James Co. on July 2, 2013, with the Arkansas secretary of state’s office. (The company was later incorporated as Lauren James Enterprises.)
Ripaldi alleged in his lawsuit that because Lance Stokes was pursuing business opportunities for Lauren James, he failed to perform his duties as president of Cotton Snaps, making Ripaldi’s stock purchase “virtually worthless.”
Ripaldi sued Lance Stokes at the end of 2013 and eventually removed him as president. Ripaldi, who had 20 percent of the company, settled the suit for an additional 30 percent.
Cotton Snaps still exists, but “it’s really not doing any business,” Ripaldi said.
Meanwhile, Chelsea McShane said in court papers that she had discovered that Lauren James was “selling clothing substantially similar to clothing” that she had designed for Southern Dignity.
Lance Stokes said McShane contacted him “continuously and repeatedly and has likewise communicated with [Lauren Stokes] and business associates,” his lawsuit said. The lawsuit didn’t say when the alleged contacts occurred.
Lance Stokes sued McShane first in an attempt to get a judge to determine their legal relationship. McShane was never served with the lawsuit, and it was dismissed in August 2014, by which time she had filed the lawsuit that was settled confidentially.
Silvestri said her daughter’s experience with the Stokeses had been difficult for her.
“As an artist, she has felt violated, and for so long it has stifled her creativity,” Silvestri said.
But she said McShane recently started sewing and painting again. “She is moving on,” Silvestri said.