Dive Brief:
- American Apparel shareholders Jan Hubner and Eric Ribner have filed a lawsuit alleging that, in June, the retailer’s then-CFO John Luttrell orchestrated the ouster of founder and CEO Dov Charney because Charney was refusing to sell the company.
- The shareholders say that the retailer failed to disclose that Charney was under investigation for misconduct, and allege that amounts to proxy fraud.
- The court filings also allege that Luttrell rebuffed an offer from bondholders to negotiate an interest payment that would avoid a default, sold shares instead, and diluted Charney's stake.
Dive Insight:
This latest lawsuit—plus one revealed earlier this week—make good on Dov Charney’s attorney’s promise to Reuters earlier this year that the retailer would be seeing a lot of lawsuits. The Securities and Exchange Commission is on the case too, looking into potential improprieties related to Charney’s firing. In the lawsuits, ex-CFO John Luttrell is in focus.
The whole situation has been messy from the beginning, but if these actions have any merit, it could quickly become messier than anyone thought. Meanwhile, American Apparel has been charging ahead with much-needed change. It's not clear yet if these latest moves—and any potential counter-moves or consequences that come out of it—will be a drag on the company. Certainly, the retailer's board may have some explaining to do.