Charming Shoppes Inc. filed a lawsuit against two hedge funds on Friday, alleging they are trying to elect three directors to the retailer’s board and influence decisions in the funds’ favor.

This story first appeared in the March 11, 2008 issue of WWD. Subscribe Today.

Charming Shoppes filed the lawsuit in a Pennsylvania federal court against Crescendo Partners, Myca Partners and their principals for violating securities laws, according to legal documents. The lawsuit named as defendants Arnaud Ajdler, Eric Rosenfeld, Robert Frankfurt and the two hedge funds, operating jointly as The Charming Shoppes Full Value Committee.

Charming Shoppes alleged that the hedge funds sought to elect Ajdler, Frankfurt and Michael Appel to its board to force the company to make decisions that would benefit them financially, such as selling off assets or buying the defendants’ shares back.

“The committee is committed to standing up for and protecting the rights of all shareholders, and this lawsuit will in no way deter us and the other shareholders from expressing our views in a democratic process. We only wish the board and management of Charming Shoppes would focus their energy and resources on improving the business rather than spending shareholders’ money on this frivolous lawsuit. We urge all shareholders to ask themselves whose interests Ms. [Dorrit] Bern [chairman, chief executive officer and president of Charming Shoppes] and the company are really trying to protect,” said Eric Rosenfeld, president and ceo of Crescendo Partners, on behalf of the defendants named in the lawsuit.

The lawsuit asked the court to bar the defendants from electing board members or taking other steps to further their alleged “scheme,” and to order them to sell off their shares of Charming Shoppes stock.

The lawsuit follows previously released statements from Charming Shoppes about Crescendo Group’s actions regarding the retailer’s board. In mid-January the company commented on notice it received from Crescendo that it intended to nominate the three individuals. At the time, the retailer said it would not be “distracted by the threat of a proxy contest from a dissident shareholder group.”

The Charming Shoppes Full Value Committee subsequently filed a presentation with the Securities and Exchange Commission on Feb. 28 regarding the election of the three board members. At the time, the committee said its presentation outlined Charming Shoppes’ “history of significant financial underperformance [and noted] that significant operational and governance problems exist at the company that continue to impair stockholder value.”