Charney Wednesday fired back in the Delaware Court of Chancery, in a lawsuit, now nearly a year old, against him by hedge fund Standard General in which it accuses Charney of, among other things, breach of contract. Charney, who continues to represent himself in the matter, names not only himself but also American Apparel as victims of Standard General in his legal response.
Charney and Standard General had at one time been seen as allies when the former ceo borrowed money from the firm in 2014 to buy American Apparel shares and boost his stake in the company in a bid to get back in after being suspended. He was later fired for cause at the end of that same year.
“Rather than facilitate his retaking of American Apparel, the hedge fund acted in bad faith and dealt unfairly with Charney,” the court filing Wednesday said.
Charney’s defense for himself includes fraudulent inducement, breach of fiduciary duty and the aiding and abetting of American Apparel’s breach of fiduciary duty, along with eight other arguments listed in the response.
Standard General, through its spokesman, declined comment.
Meanwhile, in bankruptcy court, American Apparel is looking for a way to quickly resolve nearly two dozen legal complaints filed against it last year, so that it can move along with its turnaround.
The Los Angeles firm asked a bankruptcy court judge to send most of the 23 claims — filed by a mix of former employees, including Charney — to arbitration, arguing its insurance carrier has not yet made a decision on coverage for any of the claims.
Last year was a rocky one for the company, as Charney and his supporters waged a very public battle to bring him back to the firm and lawsuits were lodged against American Apparel and some of its executives in a mix of venues, including Los Angeles Superior Court. Those claims include wrongful termination, breach of contract and defamation. The company filed for Chapter 11 bankruptcy protection in October and emerged from it earlier this year.
A spokeswoman for the firm declined comment. Charney deferred comment to his attorney Keith Fink, who could not be immediately reached for comment.
American Apparel argued in its motion in court that those claims that can be resolved in arbitration could help move all parties to a speedier resolution, cut costs and avoid any negative press.
The company said it was “negative publicity that has plagued the debtors for years, and which ultimately contributed to their bankruptcy filings.”
Charney alone has six different claims out against the company, which “are part of the seemingly endless litany of claims Mr. Charney asserted against the company and its directors in the wake of his December 2014 termination for cause.”
The company described in its filing the lawsuits created a work environment that “made many employees fear that they would lose their jobs” and also created divisions within the workforce as employees “began taking sides — either for or against the company.” Similar fears also wreaked havoc on its wholesale business, American Apparel argued.
If the claims are pursued publicly, the company is “concerned that damaging press coverage — and the resultant operational and sales issues — would resume.”
A hearing on the matter, originally scheduled for Thursday, was canceled and has not yet been rescheduled.