So what will Dov do next?

This story first appeared in the December 22, 2014 issue of WWD. Subscribe Today.

While the rest of retail obsesses over the close of the holiday season, American Apparel Inc. has that and a litany of other pressing issues to deal with:

• A looming legal battle with ousted chief executive officer and founder Dov Charney.

• A tentative takeover offer from Irving Place Capital.

• A new ceo about to take the helm.

• A new round of press coverage as all the players in the American Apparel saga reset.

When the company’s board fired Charney as ceo last week, it didn’t so much end the war for the retailer’s soul as push it onto several new fronts. Now, the battle is raging all over the place.

The embattled board was set to have a prearranged conference call on Friday, and the board members had plenty to digest, especially the offer from Irving Place and also Charney’s legal plans, since the jilted founder is said to feel he could pursue “hundreds of millions of dollars” in damages from the courts — money the company doesn’t have.

American Apparel has long been seen as a strong brand in need of operational expertise. That could make it a logical fit for Irving Place, which is led by fashion mainstay and ceo John Howard. Irving Place is said to have tentatively offered $1.10 a share for the company when the retailer’s stock was trading at 55 cents earlier this month.

When that price was balked at, the offer was raised to $1.30 to $1.40, but was contingent on due diligence. The upper end of that offer would value the company’s stock at $245 million. American Apparel’s shares closed up 7 percent to $1.07 on Friday.

While other parties are interested in the company, Irving Place is believed to be the only player with anything like an official offer.

Howard is said to have spoken with Charney, but is not actively working with him. The private equity firm has yet to dig into the company’s private books, so it’s hard to say whether its offer will progress beyond the “let’s see” stage.

“This thing is such a mess. There’s no way anyone could ever do anything with this company from the outside,” one source said, explaining why seeing American Apparel’s detailed financials is key.

Both the board and Irving Place are said to be considering their options now that the takeover dance has been made public, although, ultimately, the fact that the offer is in the open might be a deal breaker.

Over it all looms Charney, who not only is threatening legal action but also owns 43 percent of the company and still has a broad base of support within it. One source familiar with the colorful founder said he will push hard to retake control of the company.

“He’ll go to bookies,” the source said. “He’ll go to anybody with money. I think he could find somebody [to lend him money]. He’s not motivated by money or value creation. It’s his bully pulpit.”

The company will need to deal with a large dissident shareholder as well. Bigger Capital Fund, owners of about 2 million shares of the company’s stock, complained in a letter to the company that there has been a “systematic failure to provide full disclosure of material information,” according to the document obtained by Bloomberg. Bigger said the lack of communication could constitute a violation of fiduciary duties and requested to see documents based on corporate law in Delaware, where American Apparel is incorporated.

But experts believe American Apparel could survive — and even flourish — without Charney. Paula Schneider will try her hand at the task beginning on Jan. 5, when she succeeds him as ceo.

“The brand of American Apparel — the irreverence, the sexiness — has been instilled into the company. It exists today. It is a fact,” said Mortimer Singer, ceo of Marvin Traub Associates and a former board member at the retailer.

Singer noted that, by and large, consumers aren’t very familiar with Charney and his colorful history, but they recognize his work.

“What he’s done is created one of the coolest brands in America,” Singer said. “That brand has huge viability in hands that are able to perpetuate and drive the tone that they have historically gone with because it works. It resonated. It’s just that the infrastructure didn’t work.”

Catherine Sadler, former global chief marketing officer at Coach, Ann Taylor and, most recently, Banana Republic, said the brand would benefit from some distance from Charney.

While the company he built has a strong antisweatshop position with domestically made goods, Charney himself is scandal-prone and famously libertine.

“The only way American Apparel can flourish in the future is without Dov,” Sadler said. “Women care more about equality and respect than they do about products being made in America or in a sweatshop.”

She said the company’s current management has plenty of raw material to work with and some easy fixes that would help the business.

“There is some great core product there that’s still in demand, and there’s a brand name with global appeal and equity,” Sadler said. “The brand positioning as well as the brand experience currently underdelivers both off-line and online. [American Apparel] can be irreverent without being inappropriate and disrespectful. There’s definitely a way in.”

Schneider’s challenge will be to change a corporate culture that was a Charney cult — and, to some degree, remains one.

A group of 34 American Apparel executives recently wrote a letter to the board, stating, “Each of us can tell countless, sometimes unbelievable stories of how, against all odds, we cobbled things together to help build a completely unique, globally recognized brand — and the common thread in all of our accounts is Dov Charney. In some stories he drives us crazy, while in others he mentors and encourages us, but one thing is undisputable — his vision, drive, determination and persistence has been the momentum behind every major progression this company has made since its inception.”

The latest skirmish only proves that Charney is one of fashion’s great survivors.

After being fired on Monday for misconduct that has never been publicly revealed, Charney carried on and took part in the company’s weekly conference call with store managers on Tuesday, not saying a word about his ouster, which came out hours later, according to sources.

The headline-making founder is extremely motivated and feels betrayed by former executives, who he believes misled him earlier this year regarding a stock offering that diluted his ownership, and by Standard General, with which he teamed up to build back his stake, sources said.

Standard General has great sway on the company’s board by virtue of a deal it made this summer, which included financial backing of $25 million. That board influence disrupted the balance between Charney and Standard General.

“He falls in love quickly,” said one industry observer. “He probably saw Standard General as his white knight and probably went into that a little naïvely. They’re in the business of making money and were probably pretty mercenary on the subject.”

Charney could, in effect, jam up American Apparel with litigation. But he would have to strike a delicate balance because the company represents his life’s work, and he doesn’t want to kill it.

Earlier this month, American Apparel was said to have been close to reaching a deal with Charney that would have let him stay on in some capacity. The deal was said by some sources to have unraveled when Schneider, the successor Charney is said to have recruited, was named ceo but given no role on the board. However, one source close to the company said the talks broke down not over a board seat for Schneider, but over the level of responsiblity that Charney would have at the company.

And as all this Sturm und Drang rages around her, Schneider will have her work cut out for her, stabilizing American Apparel and getting it to grow again.

The company’s latest round of promotions, featuring colored dots that correspond with a certain price discount, has not resonated with shoppers, according to a source. If the sales have soured and don’t improve, the pressure will only keep growing on the company’s board and Standard General.

And that might open up some more room for Charney to operate.

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