American Apparel won a small victory Friday when a Delaware Court of Chancery judge denied a claim by the company’s founder and former chief executive officer Dov Charney to have the troubled Los Angeles-based firm pay his legal fees.
This story first appeared in the September 14, 2015 issue of WWD. Subscribe Today.
Charney, who was officially fired from the company last year, has been engaged in a legal battle to regain control of the company he founded hitting former and current executives at the company with lawsuits. Charney has maintained all along that the company’s former chief financial officer and later interim ceo John Luttrell had colluded with hedge fund Standard General to oust Charney from the company so that it could be sold.
All of that’s in addition to separate legal complaints filed by former American Apparel employees against the company and some of its executives and Standard General.
American Apparel has since fought back and earlier in the year was granted a temporary restraining order against Charney after arguing he was in violation of a standstill agreement based on a number of activities, including making disparaging remarks about the company to the media.
Friday’s ruling addressed Charney’s claim that he was entitled to have the company pay his legal fees under an indemnification agreement that would have required American Apparel to pay under an advancement provision for “events or occurrences” related to Charney being a director or officer of the company.
Charney maintains some of those activities the company alleges violated the standstill agreement occurred while he was still an officer of the company.
Delaware Court Judge Andre Bouchard ruled Charney’s actions to be in a personal capacity and there “was no corporate power used or abused here when Charney, after his suspension as an officer and resignation as a director, privately discussed a potential takeover with Irving Place Capital, tried to influence stockholders at employee meetings, disparaged the company, sought to replace directors or solicited director nominees.”