One American Apparel vendor has taken a new tack in an effort to get its bills paid by the Los Angeles T-shirt maker.
Documents filed in U.S. Bankruptcy Court Friday has American Apparel asking a judge to rule in its favor to stop scanner repair service company iTek Services Inc. from withholding 50 scanners used in the company’s La Mirada distribution center.
The company said iTek is withholding the scanners in order to get American Apparel to address an unpaid balance that existed prior to it filing for its second bankruptcy this month. The company is also asking a judge to award damages and attorney’s fees for iTek’s actions, arguing the ability to process merchandise in its distribution center are “being imminently hindered ahead of the Black Friday and Cyber Monday shopping days.” Attorneys for American Apparel went on to argue in its court filing the withheld scanners are causing delays in shipments to stores and fulfillment of online orders by customers. The company’s complaint went on to say, “iTek’s unlawful collection activities will lead to significant lost sales and disrupted operations on what are indisputably the most important shopping days in the calendar.”
American Apparel said it has access to 130 scanners and is “scrambling” to repair another 20. A normal shift at the distribution center requires 100 scanners, but that need doubles around the time of the holiday selling period. American Apparel claimed in court documents 25 percent of its workforce will be unable to work due to the equipment shortage.
Lake Forest, Calif.-based iTek is owed $6,000 by American Apparel, according to the complaint.
American Apparel filed for its second bankruptcy less than a year after emerging from its first after admitting to a failed turnaround attempt that now has the firm set to go up for sale in a bankruptcy auction. The company struck a deal with Montreal basics company Gildan Activewear Inc. to purchase its intellectual property and some of its other assets for $66 million, making it the stalking horse bidder in the auction. The deal with Gildan does not include the company’s retail stores.