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Voices In Dov Charney’s Head Cannot Execute Valid Verbal Contract

Dov Charney himself can, and did, execute some valid paper contracts that he’s gonna have to live up to, though.
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Dov Charney went to great lengths and tried a great number of things to reclaim his company, American Apparel, in the face all of those rather icky allegations against him. The first was to join forces with a hedge fund, handing control over his shares in the company to Standard General. In addition, the hedge fund lent Charney $19.5 million to buy more of those shares, and promised to think about letting him become CEO again after it used his shares to take control of the retailer. But while he was signing no fewer than eight agreements with Standard General that did not include them, Charney claims the hedge fund was verbally promising him the sun, the moon and the stars, specifically that he’d be allowed to trade the $19.5 million in shares he bought with Standard General’s money to Standard General in exchange for the CEO post. And since he never got said post, he shouldn’t have to pay it back under the following legal theory. (Needless to say, the shares themselves are now quite worthless.)


"They lent me money to aggrandize my ownership," he told Retail Dive of Standard General in an interview on Tuesday…. "We were successful or they were successful — we did retake control. But then they tossed me out of the getaway car — and therein lies the fraud," Charney asserted.

Suffice it to say, Delaware Chancellor Andre Bouchard didn’t agree, and neither does the Delaware Supreme Court, which this week told Charney to pay up.

I conclude that Charney could not have reasonably relied on any of these alleged false promises because they directly conflict with the terms of the eight written Agreements he signed, and that his other affirmative defenses fail as a matter of law and undisputed fact.

Of course, the indomitable Dov is undeterred, and not only because he probably can’tactuallypay anyone nearly $20 million.

Charney said that, when it comes to litigation, he is focused on a fraud claim being litigated in California…. In that case, Charney is suing American Apparel, members of the board at the time and Standard General. He alleges that, the Delaware courts' views notwithstanding, American Apparel and the hedge fund ran the company into the ground after his 2014 ouster.

Dov Charney ordered to pay $19.5M over American Apparel suit [Retail Dive]


By William Murphy (Flickr: American Apparel) [CC BY-SA 2.0], via Wikimedia Commons

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