American Apparel Inc. said it sued its ousted founder, Dov Charney, for violations of his standstill agreement with the company.
The suit was filed in the Delaware Court of Chancery. The court papers were not immediately available.
Charney was deposed ceo of the company last June amid allegations of misconduct. In an effort to get back into the company, he inked a deal with investor Standard General with brought something of a cessation of hostilities and the standstill agreement in July.
The agreement secured financial support for the company from Standard General and gave the hedge fund a hand in reshaping the board. It is not clear what part of the standstill agreement Charney is accused of breaking,
Charney thought Standard General would be his way back in, but that changed and the new board ultimately fired the former ceo for cause in December.
The founder has been trying to win the hearts and minds of employees, at least some of whom have complained about moves made by new management, including a reduction in hours at the company’s plant. The firm has said it had to cut back and less popular styles to get its inventories and finances in line.
This week, Charney sued the company and its chairman, Colleen Brown in California Superior Court, alleging defamation and false light and seeking $20 million plus lawyers fees.
Brown said in a memo to employees last month that, “The old way of doing business [under Charney] was not sustainable and brought the company to the edge of financial ruin.”