A Los Angeles appeals court shot down Dov Charney’s $30 million lawsuit, which argued former partner Standard General had defamed him when he was fired from American Apparel, the company he founded, in the wake of sexual harassment allegations.
Charney accused hedge fund Standard General of defamation and interfering with his economic relations when it issued a press release in 2014 announcing his firing from the company “for cause” after an independent investigation into his business conduct.
While the release did not detail what the investigation had uncovered, Charney’s firing came after the board of American Apparel suspended him from his role as chief executive officer but kept him on as a consultant in the wake of a string of sexual harassment claims and lawsuits by employees.
The suspension letter Charney received said the action was being taken because he authorized “significant” severance payments to ensure he would not be liable for personal misconduct toward female employees and “repeated violations” of sexual harassment and discrimination policies, according to court records.
Charney subsequently launched the defamation suit against Standard General in a local Los Angeles court, saying the company’s statements “portrayed [him] as someone found liable and/or guilty…of committing financial malfeasance and illegal sexual harassment and discrimination sufficient to terminate his employment for ‘cause.’”
A Los Angeles appeals court disagreed on Tuesday and upheld an underlying ruling that found Standard General’s statements were protected under California’s statute against any strategic lawsuit against public participation, better known as the anti-SLAPP statute, which protects free speech activity.
The appeals court characterized Charney’s claim that the press release wrongly indicated he was terminated for cause as “problematic” considering Standard General did not detail the underlying reasons for his dismissal.
“The statement cannot be proven false as it does not state that Charney engaged in criminal conduct or that his conduct violated certain standards, or even that there existed any particular conduct that caused his termination,” the court said in its order. “Because the press release does not articulate why Charney was terminated, Charney’s allegation that it falsely states he was terminated for ‘cause’ does not constitute an actionable defamation.”
As for Charney’s claims that the “investigation” referenced by Standard General was not independent because Jones Day, a law firm already working with American Apparel, oversaw and allegedly conducted the investigation, the court said that was “a matter of opinion.”
Counsel for Charney and Standard General could not be reached for comment.
After Charney was fired, American Apparel went on to file for bankruptcy twice — once in 2014 and again last year. Gildan Activewear bought a majority of the company’s assets for $88 million and said in February that it plans to grow the brand in the U.S. and internationally.
What will happen to the rest of the company remains to be seen and Standard General recently launched its own lawsuit against American Apparel’s lenders, accusing them of merely adding to the company’s debt load in order to sell the business to the highest bidder.
Standard General is urging the court overseeing the brand’s bankruptcy to force American Apparel to file a formal plan of liquidation for remaining assets or “step aside” and let creditors get on with it.
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