High-End Hermès Handbags at Center of Suit Against Christie’s

Locked behind glass, illuminated like a jewel, lies an Hermès Birkin — totem of wealth, bestower of status, and one seriously expensive handbag.

This particular specimen is a coveted Hermès White Himalayan Birkin, dyed in brown and beige crocodile. Gently, if ever, used, it is offered at $115,000.

Wait — used?

That word is never spoken, not here inside the hushed Midtown Manhattan showroom of Heritage Auctions. The preferred term is “rare” or “vintage” — in this case, applied to a handbag made all the way back in 2013.

No one, it is said, knows more about the buying and selling of pre-owned Hermès bags than Matthew Rubinger, Heritage’s Birkin whisperer. But now Mr. Rubinger, 26, has left for another more famous auction house — Christie’s International — and the battle of the Birkins has begun.

Heritage on Friday filed a lawsuit against Christie’s, claiming Mr. Rubinger breached his contract and stole trade secrets. Christie’s, whose auctions tend to run more to Picasso than purses, is expanding its push into high-end accessories, Heritage’s sweet spot. Heritage is seeking a Birkinesque $60 million in damages and lost profits from Christie’s, Mr. Rubinger and two other former employees.

This Hermès 10-inch White Nile Crocodile Himalayan Birkin handbag is selling for $115,000 at Heritage Auctions in Manhattan. Credit Nancy Borowick for The New York Times

A spokeswoman for Christie’s said, “We have reviewed the complaint and find it to be wholly without merit. We are prepared to vigorously defend these claims and Christie’s decision to expand our existing handbag department.” Mr. Rubinger did not respond to an email.

The brouhaha partly reflects how the world’s wealthy are spending their money. But it also underscores how Christie’s and its traditional rival, Sotheby’s, are coming under pressure. While art prices keep rising, competition among auction houses has squeezed commissions. Daniel S. Loeb, a hedge fund manager who owns 9.6 percent of Sotheby’s, got a seat on the company’s board after attacking Sotheby’s executives for, among other things, giving up profit.

For Heritage, the flourishing designer handbag market has produced record sales and big profits. At a Heritage auction in late 2011, a brilliant red crocodile Hermès Birkin, with 18-karat white-gold and diamond-encrusted hardware, sold for a record $203,000. Last December, a one-of-a-kind Hermès Kelly bag, in porosus crocodile and black Togo leather, with geranium-colored feet, went for $125,000.

Hermès International has ensured demand by limiting production at its atelier in the Pantin suburb northeast of Paris. There, workers take fine cuts of leather and exotic skins and transform them with meticulous detail, buffing the hides with an agate stone. The whispered wait lists — Who gets on? Is it really three years? — add to the mystique.

Heritage executives say that while Hermès frowns on reselling its handbags, Hermès has directed buyers to Heritage’s door.

“Our buyers tend to seek immediate gratification,” said Kathleen Guzman, a managing director of Heritage’s offices in New York. The high-end handbags are sought by collectors and even investors, say Heritage executives, who estimate the average buyer has a net worth of $12 million.

“If you buy one Hermès bag for $20,000, depending on the popularity, the skin, the color, the size, you can resell it down the road for an average of 60 percent to 150 percent of what you paid for it,” Gregory Rohan, the president of Heritage, said in a phone interview Thursday from Paris.

Four years ago, the luxury accessories category did not even exist. Then Mr. Rohan met Mr. Rubinger, a recent graduate of Vanderbilt University. In high school, Mr. Rubinger started buying and reselling inexpensive purses. Later, he moved into designer bags for sale on eBay, with his bedroom as operations center.

“To make more, to scale what I was doing, I had to move up in price point,” Mr. Rubinger recalled in an interview this spring at Heritage’s offices in New York.

At the end of his first year at Vanderbilt, Mr. Rubinger became a summer intern at the online resale hub DropShop, the precursor to the retail website Portero, which was then based in Armonk, N.Y, a suburb north of Manhattan, and near Mr. Rubinger’s childhood home in Chappaqua.

He stayed more than a year and began its luxury category, which grew to be the company’s second-strongest seller, after timepieces.

In 2010, a mutual friend introduced Mr. Rubinger to Mr. Rohan. They met at the Carlyle Hotel on the Upper East Side.

“He started to tell me what he was doing and I thought, ‘Gosh, this is a perfect complement to what we already have,’ ” Mr. Rohan said.

Put in charge of Heritage’s luxury accessories business, Mr. Rubinger was given the star treatment. In its lawsuit, Heritage says it invested in his identity, seeking to brand him as a “star”; provided him with training and introduction to sources in Hong Kong and Japan; and shared all of Heritage’s corporate plans for expansion and branding, even beyond luxury accessories.

With an annual growth rate of more than 50 percent, the luxury accessories category was seen within Heritage as especially promising. So much so that Mr. Rohan made the area his primary focus and had his New York office divided so that he and Mr. Rubinger could be closer to collaborate, the lawsuit states.

When asked if he was grooming Mr. Rubinger to take a bigger role, or if he viewed him as a protégé, Mr. Rohan, grew quiet.

“I thought he was a close, personal friend. We socialized. We had lunch and dinners together frequently. We collaborated on everything,” said Mr. Rohan, 52. “Honestly, my wife and I don’t have children, and I thought of him as a son.”

At 8:45 a.m. on Monday, May 19, Mr. Rohan answered his phone at his home in Dallas. On the other end was Mr. Rubinger, saying he had left to take a job at Christie’s. Within the next hour, two other high-level associates announced that they, too, were leaving.

Without warning, Heritage’s entire luxury accessories team had walked out the door.

But in its suit, Heritage claims Mr. Rubinger, in the week before he left, sought and received permission for one of the associates who departed with him to attend an executive meeting and gain access to confidential strategic plans.

“While certainly other auction companies, including Christie’s, have held estate sales that might have a Kelly bag in it or had an online auction that sold a modest amount of handbags, we elevated the collection of handbags to a place nobody had done it before,” Mr. Rohan said. “We created a dynamic worldwide market that everyone would like to own.”

http://www.nytimes.com/2014/06/14/business/high-end-hermes-handbags-at-center-of-suit-against-christies.html