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Folks - I think there have been discussions on this board and others about the sexual nature of the advertising done by American Apparel. In today's Wall Street Journal there is an article (shown below) that shows how the CEO of the company is a habitual sexual harrasser and other tawdry details about the management of the company. You should read it and then decide about placing future orders with this company.
Be well
Tom Dauria
NOVEMBER 4, 2008
Court Criticizes Arbitration Pact in American Apparel Harassment Case
By NICHOLAS CASEY
Hip clothing retailer American Apparel Inc. earlier this year agreed to pay a former female employee $1.3 million to settle a sexual-harassment claim involving its chief executive. But there was a catch: She had to keep the settlement's existence a secret, and instead participate in an arbitration proceeding, with a preordained outcome that would allow Chief Executive Dov Charney to publicly declare victory.
The unusual move to both settle the case and make it appear that American Apparel had won it on its merits ultimately ran aground, however.
The plaintiff in the harassment case refused to go through with the arbitration, even though American Apparel claims the scheme was her attorney's idea in the first place.
The odd situation is only now coming to light because of a recent California appeals court ruling to resolve the question of whether the plaintiff broke her agreement by refusing to attend the arbitration.
It's the latest chapter in the unorthodox history of American Apparel, a maker of T-shirts and other clothes run by Mr. Charney. The Los Angeles company is known both for its racy advertising and the frank, sexualized comments and actions by Mr. Charney, who has staged provocative photo shoots in the basement of his mansion.
Mr. Charney has faced numerous sexual-harassment allegations, which were either settled, dismissed or are in arbitration.
Last January, the company and Mr. Charney were on the eve of trial in a suit that was originally filed in 2005 by Mary Nelson, a sales manager who claimed Mr. Charney made sexual advances and inappropriate comments to her prior to firing her from the job. The company denied the allegations.
The day before the trial was to begin, according to court documents, the parties struck a deal in which American Apparel agreed to pay Ms. Nelson $1.3 million, without admitting liability.
However, according to the agreement, which was quoted in a recent appeals court opinion, the parties agreed to conduct an arbitration before a retired judge selected by American Apparel. The arbitrator would decide the case solely on one precedent case that American Apparel presumably saw as favorable, and it would result in a decision stating, among other things, that Mr. Charney "never sexualized, propositioned or made any sexual advances of any nature whatsoever towards Mary Nelson."
American Apparel would then be able to issue a press release stating that the arbitrator's decision "puts an end to the sexual harassment claims against Charney and the company" and declaring that the ruling brings "clarity to the role of the First Amendment in the American workplace."
Though Ms. Nelson's attorney, Keith A. Fink, agreed to the arbitration's unusual terms, he and Ms. Nelson later refused to attend the meetings, according to background given in the appeals court finding. The arbitration was aborted and the $1.3 million was never paid, American Apparel says.
American Apparel went to the California appeals court to force the plaintiff to sit down to a new arbitration to determine whether her absence from the first arbitration breached the initial agreement. In a ruling dated Oct. 28, a three-judge panel of California's Second Appellate District in Los Angeles said the alleged breach of the settlement should be reviewed by a third party.
The court compelled Ms. Nelson to attend a new arbitration that would decide whether she had broken her agreement with the company.
In the process, however, the appeals court took issue with what it described as the "potential illegality of the 'arbitration' clause ... with its goal of issuing a press release for the purpose of misleading journalists and the public."
The court went on to say that "the proposed press release is materially misleading -- among other things, no real arbitration of a dispute occurred and [the] plaintiff received $1.3 million in compensation."
News of the court's decision was reported last week on On Point, a legal blog. The court didn't rule on the legality or enforceability of the settlement agreement.
In an interview, American Apparel confirmed the terms of the settlement but took issue with the court's implication that the arbitration was potentially illegal. Company General Counsel Joyce Crucillo said in an interview that the plaintiff's lawyer, Mr. Fink, had contacted the company on the eve of trial "practically begging me to settle this case and not proceed to trial."
But "Dov Charney was very anxious to try to present his side of the case [to a jury] and to be vindicated," Ms. Crucillo said. She told Mr. Fink that the company wasn't open to a settlement.
She says Mr. Fink proposed the idea of an arbitration, in which the plaintiff would be given a sum to "defray legal costs" in exchange for a confession that would clear Mr. Charney's name. The company then changed its mind about settling.
The press release was also Mr. Fink's idea, Ms. Crucillo said. "You want to get paid, we want vindication," she recalls saying to Mr. Fink.
Mr. Fink declined to comment.
The court's opinion said the settlement agreement described the $1.3 million as "emotional distress damages." The court said Mr. Fink refused to participate in the arbitration on the grounds that it was a "sham."
The company's settlement wasn't disclosed to investors or the U.S. Securities Exchange Commission. In a filing March 17, nearly two months after the agreement had been made, the company updated investors on the status of the case: "The trial has been stayed, pending review by the Appellate Court of the State of California of the Superior Court's denial of American Apparel's motion to compel arbitration pursuant to an agreement among the parties." No reference to the aborted payment is made.
American Apparel says the company made all appropriate disclosures to investors. "The monetary amount of the proposed settlement did not meet the threshold of materiality and accordingly was not disclosed. At the time that the disclosure was made, the plaintiff had also already breached key terms of the settlement agreement," said Adrian Kowalewski, the company's corporate finance director.
Be well
Tom Dauria
NOVEMBER 4, 2008
Court Criticizes Arbitration Pact in American Apparel Harassment Case
By NICHOLAS CASEY
Hip clothing retailer American Apparel Inc. earlier this year agreed to pay a former female employee $1.3 million to settle a sexual-harassment claim involving its chief executive. But there was a catch: She had to keep the settlement's existence a secret, and instead participate in an arbitration proceeding, with a preordained outcome that would allow Chief Executive Dov Charney to publicly declare victory.
The unusual move to both settle the case and make it appear that American Apparel had won it on its merits ultimately ran aground, however.
The plaintiff in the harassment case refused to go through with the arbitration, even though American Apparel claims the scheme was her attorney's idea in the first place.
The odd situation is only now coming to light because of a recent California appeals court ruling to resolve the question of whether the plaintiff broke her agreement by refusing to attend the arbitration.
It's the latest chapter in the unorthodox history of American Apparel, a maker of T-shirts and other clothes run by Mr. Charney. The Los Angeles company is known both for its racy advertising and the frank, sexualized comments and actions by Mr. Charney, who has staged provocative photo shoots in the basement of his mansion.
Mr. Charney has faced numerous sexual-harassment allegations, which were either settled, dismissed or are in arbitration.
Last January, the company and Mr. Charney were on the eve of trial in a suit that was originally filed in 2005 by Mary Nelson, a sales manager who claimed Mr. Charney made sexual advances and inappropriate comments to her prior to firing her from the job. The company denied the allegations.
The day before the trial was to begin, according to court documents, the parties struck a deal in which American Apparel agreed to pay Ms. Nelson $1.3 million, without admitting liability.
However, according to the agreement, which was quoted in a recent appeals court opinion, the parties agreed to conduct an arbitration before a retired judge selected by American Apparel. The arbitrator would decide the case solely on one precedent case that American Apparel presumably saw as favorable, and it would result in a decision stating, among other things, that Mr. Charney "never sexualized, propositioned or made any sexual advances of any nature whatsoever towards Mary Nelson."
American Apparel would then be able to issue a press release stating that the arbitrator's decision "puts an end to the sexual harassment claims against Charney and the company" and declaring that the ruling brings "clarity to the role of the First Amendment in the American workplace."
Though Ms. Nelson's attorney, Keith A. Fink, agreed to the arbitration's unusual terms, he and Ms. Nelson later refused to attend the meetings, according to background given in the appeals court finding. The arbitration was aborted and the $1.3 million was never paid, American Apparel says.
American Apparel went to the California appeals court to force the plaintiff to sit down to a new arbitration to determine whether her absence from the first arbitration breached the initial agreement. In a ruling dated Oct. 28, a three-judge panel of California's Second Appellate District in Los Angeles said the alleged breach of the settlement should be reviewed by a third party.
The court compelled Ms. Nelson to attend a new arbitration that would decide whether she had broken her agreement with the company.
In the process, however, the appeals court took issue with what it described as the "potential illegality of the 'arbitration' clause ... with its goal of issuing a press release for the purpose of misleading journalists and the public."
The court went on to say that "the proposed press release is materially misleading -- among other things, no real arbitration of a dispute occurred and [the] plaintiff received $1.3 million in compensation."
News of the court's decision was reported last week on On Point, a legal blog. The court didn't rule on the legality or enforceability of the settlement agreement.
In an interview, American Apparel confirmed the terms of the settlement but took issue with the court's implication that the arbitration was potentially illegal. Company General Counsel Joyce Crucillo said in an interview that the plaintiff's lawyer, Mr. Fink, had contacted the company on the eve of trial "practically begging me to settle this case and not proceed to trial."
But "Dov Charney was very anxious to try to present his side of the case [to a jury] and to be vindicated," Ms. Crucillo said. She told Mr. Fink that the company wasn't open to a settlement.
She says Mr. Fink proposed the idea of an arbitration, in which the plaintiff would be given a sum to "defray legal costs" in exchange for a confession that would clear Mr. Charney's name. The company then changed its mind about settling.
The press release was also Mr. Fink's idea, Ms. Crucillo said. "You want to get paid, we want vindication," she recalls saying to Mr. Fink.
Mr. Fink declined to comment.
The court's opinion said the settlement agreement described the $1.3 million as "emotional distress damages." The court said Mr. Fink refused to participate in the arbitration on the grounds that it was a "sham."
The company's settlement wasn't disclosed to investors or the U.S. Securities Exchange Commission. In a filing March 17, nearly two months after the agreement had been made, the company updated investors on the status of the case: "The trial has been stayed, pending review by the Appellate Court of the State of California of the Superior Court's denial of American Apparel's motion to compel arbitration pursuant to an agreement among the parties." No reference to the aborted payment is made.
American Apparel says the company made all appropriate disclosures to investors. "The monetary amount of the proposed settlement did not meet the threshold of materiality and accordingly was not disclosed. At the time that the disclosure was made, the plaintiff had also already breached key terms of the settlement agreement," said Adrian Kowalewski, the company's corporate finance director.
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