American Apparel (APP) Sues Its Former CEO

A one-line, Friday evening press release from American Apparel (APP) briefly mentioned a countersuit against former CEO Dov Charney. Charney, who was fired late last year for a laundry list of reasons, has filed suit in order to regain control of the company he founded. All of this drama played out quietly, since American Apparel has refused to comment on the countersuit aside from their extremely brief press release designed to get lost in a crush of weekend news.

Dueling Lawsuits

The countersuit, which was filed in response to a suit from Charney, seeks to ban the former CEO from taking part in company business or interfering in any way with American Apparel.
The board got rid of Charney in December of 2014 after allegations of misconduct went public and Charney filed suit shortly thereafter.

CEO Was Fired For Liaisons, Improper Spending

Charney was let go in a board vote for numerous indiscretions, including having romantic encounters with employees which were filmed with company equipment, has been vocal about wanting his job back as head of the company that he founded. In addition to sexual indiscretions on company time, Charney was also accused of using the company as his own personal bank account. The board of directors remains unconvinced that Charney can be an effective leader -- or even trusted with the company checkbook.

Charney Accused Of Violating A Previous Agreement

In a recent statement by their legal team, American Apparel (APP) accused Charney of “... attempting in many respects to act as the ‘man behind the curtain,' manipulating friends and company employees behind the scenes in a lame effort to obfuscate the fact that he is violating the Standstill Agreement in order to regain control of the company.” The agreement mentioned was put in place at the end of Charney's tenure, and seeks to block the former CEO from having anything to do with the company.

Management Calls CEO's Lawsuit “Lame”

Senior management at American Apparel is clearly tired of Charney's presence, and went so far as to call his lawsuit seeking to regain control of the company “lame.” If the countersuit is any indication, they are completely fed up with Charney's continued presence and attempt to use the courts in order to get his old job back.

In a previous statement about the initial lawsuit, a lawyer for the company said, “In an unprecedented effort to disrupt and harm the company, Mr. Charney has launched a scorched earth campaign that exceeds all bounds of propriety.”

Both Parties To Get Their Day In Court

Regardless of who's in the right, both parties are set to settle their disputes in a courtroom. At the time this article was filed, court dates have yet to be set for either lawsuit. An email to American Apparel (APP) requesting comment in regards to the countersuit got no response.
Published on May 21, 2015
By Aaron Phillips
Aaron Phillips is a financial researcher and journalist based out of Michigan. He regularly writes the IG Daily and IG Weekly columns.

Copyrighted 2020. Content published with author's permission.

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