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Wednesday, June 24, 2015

Dov Charney Hits American Apparel With $30 Million-Plus Defamation Lawsuit

Dov Charney Hits American Apparel With $30 Million-Plus Defamation Lawsuit:

An American Apparel store. Photo: Andrew Burton/Getty Images An American Apparel store. Photo: Andrew Burton/Getty Images
Almost exactly a year ago, American Apparel founder Dov Charney was suspended from his roles as president and CEO of the company and replaced as chairman of the board on allegations of misconduct. He was officially terminated in December, and hasn't stopped trying to regain control of the company since, lodging a number of lawsuits against the brand and its executives.

The latest complaint, filed Friday, deals with the events of late June last year, when Charney was first pushed out of the company. This time around he's suing American Apparel and David Danziger, who resigned from the board of directors last week, for defamation and intentional interference with actual and prospective economic relations, among other issues.

The play by play goes like this, according to the suit: In time for the annual shareholder meeting on June 18, 2014, a number of board members pressured Charney to vote to re-elect Danziger, Robert Greene and Allan Mayer to the board, all while voicing their continued support for Charney as CEO. After Charney did vote them in — without his votes, the complaint says, they wouldn't have been able to get re-elected — Mayer informed him that he was being stripped of his employment.

So Charney turned to the second largest shareholder, Johannes Roth of FiveT Capital, to help him pass a vote to increase the size of the board from 9 to 13, which would enable him to take control of it again. When he learned about this, Danziger contacted Roth directly "and told him, with full knowledge that his statements were false, that Charney was being investigated for matters 'criminal in nature.'" Roth withdrew his support.

Friday's lawsuit claims that American Apparel has caused "severe, irreparable harm to Charney's personal and professional reputation" and has and will caused others from wanting to do business with him. He's seeking at least $30 million in damages.

Reached by email for comment, an American Apparel spokesperson said this of the lawsuit: "Friday’s complaint is yet another example of the habitual nuisance lawsuits that Dov Charney and his lawyer continue to file, and which we continue to defeat (as has been reflected by the recent rulings and stipulations in our favor)."

While the legal battles rages on with no end in sight, American Apparel's relationship with consumers isn't so hot, either. Sales fell 9 percent in the first quarter of the year, with losses coming in at $26 million. The company's stock price hit its lowest point of the year this month.

Update: Charney's wasn't the only filing on Friday. According to a report from the Los Angeles Times, American Apparel also filed court documents with the Los Angeles Superior Court making a number of allegations about Charney's behavior, including that he made racially degrading comments to accounting employees and that he stored footage of himself having sex with models and employees on company computers. Charney's lawyer denies that the allegations, which were a response to a previous defamation suit the ousted founder filed against American Apparel and chairwoman Colleen Brown, are true.

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