California Apparel News

More than five months after taking over as chief executive of American Apparel, Paula Schneider now sits on the clothing company’s board of directors.

On June 14, David Danziger, an auditor who had been on the board since 2011 and was the co-chairman with Allan Mayer until last December, stepped down. After Danziger’s resignation, the remaining directors appointed Schneider to join the board.

Danziger’s departure comes after American Apparel signed a letter agreement on June 7 with former employee and current stockholder Jeffrey Kolb. In the agreement, Kolb said he would withdraw two candidates he intended to nominate to the company’s board of directors at the annual meeting in New York on July 16. Those two candidates were Gene Montesano, co-founder of Los Angeles blue-jeans companies Lucky Brand and Civilianaire, and Adrian Kowalewski, a former chief financial officer and executive vice president at American Apparel from December 2008 to February 2011.

In return, American Apparel’s board agreed to identify and appoint a new independent director with significant retail experience to fill a subsequent vacancy before the company’s annual stockholders meeting in 2016.

The board also consented to form a new advisory committee comprised of industry executives, company employees and other qualified personnel who will provide insights, guidance and strategic input to Schneider. Montesano will lead the advisory committee if he is willing and able, according to documents filed with the Securities and Exchange Commission.

All these agreements come after ousted American Apparel founder and former chief executive Dov Charney filed several lawsuits against the company and investors.

Other shareholders have filed lawsuits, too, contending that the directors sitting on the board last June committed proxy fraud by saying they would support Charney as the chairman of the board and chief executive when in fact they were planning to suspend him while an investigation was conducted into his alleged misuse of funds and failing to stop defamatory blog posts by a former employee. Charney, who denies the charges, was fired in December, and Schneider was appointed chief executive on Jan. 5.

With a flurry of lawsuits filed by Charney, American Apparel sought and obtained a temporary restraining order on June 1 preventing Charney from trying to oust board members and criticizing the company until after the annual meeting in July.

Nevertheless, on June 4, Charney filed another lawsuit in Delaware Chancery Court seeking an advance of fees and expenses he has had to pay in defending a May lawsuit filed against him by American Apparel. The Los Angeles clothing company asked in its lawsuit that Charney be barred from disrupting American Apparel’s turnaround and trying to remove board members from the ailing company, which employs 10,000 people and operates a huge clothing factory near downtown Los Angeles.

All this legal drama comes at a time when American Apparel is fighting to be profitable. In 2014, the company lost $68.8 million on $608.9 million in revenues, and in 2013 it lost $106.3 million on $633.9 million in revenues.

Its stock price has been trading at around 53 cents a share, near its 52-week low of 50 cents.