A New York judge has temporarily halted a $250-million sexual harassment lawsuit brought by a former employee against Dov Charney, the controversial chief executive of American Apparel Inc.
The ruling came in response to a motion filed Wednesday by the Los Angeles clothing maker that contended that the issues raised by Irene Morales' lawsuit should be settled in confidential arbitration and not at trial. She alleged in her lawsuit that Charney forced her to perform oral sex in his New York apartment in 2008, when she was 18, and that he sexually harassed her for months, including demanding that she send him explicit photographs, e-mails and text messages.
American Apparel said in the motion that Morales had signed two "binding arbitration agreements" during her time with the company. By suing Charney, the company and its board of directors, the company argued, Morales violated her arbitration agreements "in an improper attempt to garner media attention and exert pressure" on American Apparel and Charney.
In court papers, American Apparel said Morales "brought this action after making a number of extortion-like threats to expose the company to a threatened avalanche of litigation and negative publicity."
In his ruling, state Supreme Court Judge Bert Bunyan delayed the case until March 25, when a hearing will be held to determine how it should proceed.
American Apparel's motion said Morales "should be sanctioned for frivolous litigation conduct" and sought to fine her for an undisclosed amount. The filing also contained copies of Morales' signed arbitration agreement and "release of all claims" form.
Eric Baum, a lawyer for Morales, could not be reached Thursday. On Wednesday, he released a statement saying he believed his client's arbitration agreement was "improper and unenforceable and designed only to silence Ms. Morales."
"We strongly believe this case should be heard by a jury," the statement said.
Shares of American Apparel fell 4 cents, or 3.7%, to $1.03 on Thursday.