American Apparel Target of Class-action Suit by Stockholders

A class-action lawsuit has been filed against Los Angeles-based American Apparel by one of its shareholders for the company's alleged violations of anti-fraud securities laws. The suit claims that from December 20, 2006 to August 17, 2010, American Apparel, as well as other individual defendants within the company targeted by the complaint, made "false and misleading" statements to stockholders about the company's hiring of undocumented workers and the effect said act had on financial performance. The suit quotes the company telling shareholders that "diligent efforts" were made to comply with labor and employment laws prior to the fourth-quarter 2009 dismissal of 1,500 manufacturing employees due to a U.S. Immigration and Customs Enforcement investigation. American Apparel claims these dismissals had a negative impact on its labor efficiency and gross margins for first quarter 2010. The plaintiff is claiming shareholder responsibility for this loss is unfair and illegal, since it stems allegedly from illegal activities concealed by the defendants.