The founder and former chief executive of American Apparel, Dov Charney, plans to file a lawsuit claiming $40 million in damages for breaches of his employment contract.
Photograph by Keith Bedford — Bloomberg via Getty Images
By John Kell
June 20, 2014

American Apparel’s recently-ousted President and Chief Executive Dov Charney is reportedly looking to stir up shareholder support to win back control of the struggling apparel retailer.

While Charney can’t oust current directors, who earlier this week said they intend to suspend and terminate the controversial executive, Charney is reportedly angling to gain a voting majority by backing the seven-member board with additional seats. Those efforts were reported by The New York Post, citing sources familiar with the matter.

Charney and American Apparel weren’t immediately available to comment on the report.

Charney, who owns a 27.2% stake in American Apparel, has fended off accusations of repeated sexual harassment of employees in the past, and of discriminating against less good-looking staff on the grounds that they undermined the “AA aesthetic.” It wasn’t clear what led the company, which courts controversy and publicity with ads featuring a lot of nudity, to make a decision this week to announce Charney’s ouster.

American Apparel’s (APP) stock traded as high as around $15 in late 2007, but has since languished for years as losses at the company have mounted. While American Apparel’s sales have risen the past three years, reaching nearly $634 million in 2013, the company has reported four consecutive annual losses. The loss last year swelled sharply to $106.3 million from $37.3 million in 2012.

American Apparel’s board has just seven members, including Charney, who is being asked to resign from the board concurrently with the time of his termination as CEO. The company is currently looking for CEO candidates. The role is currently filled by Chief Financial Officer John Luttrell on an interim basis.

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