Current and former outside directors of American Apparel defend allegations of breach of fiduciary duty

Client(s) Current and former outside directors of American Apparel

Jones Day represented the current and former outside directors of American Apparel in a shareholder plaintiffs' claim alleging that the board of directors, in suspending and ultimately terminating the company’s founder and chief executive officer, breached their fiduciary duties by failing to act sooner and by failing to adopt certain corporate governance safeguards to protect against a potential takeover and the triggering of a default on the company's line of credit. On April 28, 2015, the court granted defendants' motion to dismiss, holding that plaintiffs failed to satisfy the pleading burdens applicable to derivative claims for breach of fiduciary duty by failing to allege that the directors faced a substantial likelihood of liability and failing to make a demand on the board of directors.

In Re American Apparel, Inc. 2014 Derivative Shareholder Litigation, No. 2:14-cv-05230-MWF (JEMx) (C.D. Cal.)