[amayausers.com] Re: American Apparel
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- Date: Tue, 4 Nov 2008 16:19:45 UT
This message was posted by Mr. Sew & Sew on AmayaUsers.com. PLEASE DO NOT REPLY
VIA EMAIL. Instead, respond to the thread on the WEBSITE by clicking here:
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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.
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