The Business of Fashion
Agenda-setting intelligence, analysis and advice for the global fashion community.
Agenda-setting intelligence, analysis and advice for the global fashion community.
LOS ANGELES, United States — Sometimes law firms are counsel to bankrupt companies, but sometimes they're unsecured creditors.
In the bankruptcy of embattled clothing manufacturer American Apparel Inc.; Skadden, Arps, Slate, Meagher & Flom LLP; White & Case LLP; and Paul Hastings LLP are among the latter.
The clothing company owes approximately $6 million in total to the three firms for legal services. At $3.8 million, Skadden’s claim ranks third among all unsecured creditors. White & Case, which says its owed $1.4 million, is also in the top 10. And Paul Hastings says it’s due just under $700,000 for its work for the company.
Over the years, Skadden represented the company in several matters, including a battle with controversial founder Dov Charney over reimbursement of legal fees after he was fired from the company. Charney lost that dispute in September. Among other matters, the Wall Street Journal reported last year that Skadden also represented the company when it was initially considering its restructuring options. Jones Day has been chosen to represent the company in the bankruptcy.
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A White & Case spokeswoman, Francine Minadeo, declined to comment in an e-mail. The firm’s website, however, says partner Scott Hershman represented American Apparel’s directors “in connection with a dispute with the former CEO.” Hershman declined to comment on his role.
Paul Hastings has represented the company in matters including its defeat of Charney’s defamation suit in state court in California. A firm spokeswoman, Lindsey Meyers, declined to comment on the money owed.
American Apparel filed for court protection on Monday, putting it among the 10 largest apparel retailer bankruptcies in the past five years, according to data compiled by Bloomberg.
After the filing, the Los Angeles-based chain won quick court approval to tap into loans of as much as $90 million while it tries to reorganize its finances.
On Tuesday, U.S. Bankruptcy Judge Brendan Shannon in Wilmington, Delaware, gave initial approval to the $90 million in financing, saying it wasn’t typical to move so quickly in a case like this. But, he said, his decision “clears the runway” for the company to start taking care of bills, including payroll. American Apparel employs about 8,500 people at its stores and factories, with about 7,000 in the U.S.
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