Charney Eyes Legal Battle With American Apparel

Says Firing Was Violation Of Age Discrimination in Employment Act

Dov CharneyOusted American Apparel (asi/35297) CEO Dov Charney is poised to wage a legal fight against the clothing company he founded, now threatening to sue the supplier firm unless he is reinstated. Charney’s attorney, Patricia Glaser, says her client was illegally fired last week by American Apparel’s board of directors – in part, she claims, because the termination violated the Age Discrimination in Employment Act.

The law, according to Glaser, requires American Apparel to provide 21 days to consider any proposed severance agreement. The board told Charney around midday on June 18 that he had until day’s end to accept a $4 million severance package that would have had him serve as a creative consultant for several years – or be terminated. He did not resign.

“By presenting Mr. Charney with this absurd and unreasonable demand, the company acted in a manner that was not merely unconscionable but illegal,” Glaser wrote in a letter to American Apparel’s counsel. Speaking to the Los Angeles Times, American Apparel co-Chairman Allan Mayer said the Top 40 supplier was on firm legal ground in its firing of Charney. “It’s what we would expect from Dov’s attorney in a situation like this,” said Mayer, “but we continue to believe firmly that we did the right thing, for the right reasons, in the right way.”

According to American Apparel’s board, Charney was relieved of his duties following an investigation that revealed multiple instances of misconduct. Such conduct – reported by various news outlets this week – allegedly included Charney using company funds to pay for flights for his parents, as well as providing corporate apartments for friends and staying in them himself when he wasn’t on business.

Additionally, reports suggest, Charney is purported to have known about – but done nothing to prevent – a blog put together by an employee that skewered American Apparel’s culture, while including nude photos of Irene Morales, who sued Charney over alleged sexual misconduct in 2012. Charney also is alleged to have used company funds to provide undeserved severance payments, salary increases, bonuses and commissions to induce employees to sign release agreements aimed at protecting him from personal liability for alleged misconduct. The board says quality employees left American Apparel because of Charney, adding that some financing sources have refused to become involved with the supplier as long as he was involved with the company.

Nonetheless, Glaser maintains Charney has been treated unfairly and illegally. “We question the legitimacy and thoroughness of any investigation that did not involve any discussion whatsoever with Mr. Charney,” Glaser wrote. The charges mostly “involve activities that occurred long ago (if at all) and about which the Board and the Company had knowledge for years.”

Charney, who has been a member of the Counselor Power 50 since the list’s inception in 2006, has not offered public comments since his firing. American Apparel ranks as the 14th-largest supplier in the industry, and reported its promotional market revenues for last year as $99.2 million.