American Apparel Gets Restraining Order Against Ex-CEO

The turmoil surrounding Stitches Top 25 apparel supplier American Apparel (asi/35297) continues to grow, with the company winning a temporary restraining order against ousted CEO and founder Dov Charney in June. Charney was barred from criticizing the company and its employees or seeking to replace directors ahead of the board’s annual meeting in July, according to a filing in Delaware Chancery Court.

Dov Charney, former CEO of American Apparel (asi/35297)

Charney was initially suspended as CEO last June, after which he teamed up with hedge fund Standard General to buy additional shares of the company in an attempted comeback. As part of a standstill deal between both companies, Charney stepped down as a board member and agreed to a number of other restrictions, including not disparaging American Apparel. His comeback attempt failed, and Charney was fired in December by American Apparel’s board of directors for alleged misconduct and violations of company policy. In May, American Apparel sued Charney for violating terms of the standstill agreement.

Stephen Brauerman, a Delaware attorney representing Charney, said his client planned to comply fully with the court order. However, he added in a written statement, “We do not believe this decision has any effect on the other litigation he has filed against the company.” Charney has been seeking millions of dollars in damages in defamation lawsuits against American Apparel and Standard General.

Amid the controversy, American Apparel continues to struggle, suffering a $26 million net loss in the first quarter of 2015. The company laid off 180 employees recently in an effort to boost profits. The company’s wholesale division, which serves the advertising specialty industry, experienced slight year-over-year growth of 0.6% in the first quarter.