American Apparel Case Goes to Court
After rejecting its founder and former CEO Dov Charney's $300 million takeover bid, American Apparel went to bankruptcy court in Delaware on Wednesday, and the two parties debated the future of the Los Angeles-based apparel company.
American Apparel filed for Chapter 11 bankruptcy in October 2015, and introduced a reorganization plan that would pass control to its bondholders. Charney, backed by a team of investors, fought to reclaim his position at the company he founded. Now, U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Del., has to decide which plan is the most fair and realistic.
According to Reuters, American Apparel's current CEO, Paula Schneider, told the court that when she joined the company last year, it was short on funds, and lacked a cohesive plan and structure.
"There was no org chart," she told Reuters. "Seventy people told me they reported to Dov Charney."
The company has not been profitable since 2009, and places some blame on the cost of lawsuits linked to Charney's behavior during his time at the company.
Charney was supposed to take the stand yesterday, but the court pushed his testimony until today. During yesterday's proceedings, Reuters reported that Charney wrote notes on a legal pad and passed notes to his attorney.
"I'm anxious," Charney told Reuters. "I put a lot of years into this company."
We will continue to cover this story as it unfolds.