A woman who brought a $250 million sexual harassment lawsuit against American Apparel Inc Chief Executive Dov Charney could be forced to take the case to arbitration, rather than pursue it in court.
A Brooklyn, New York judge said at a court hearing on Friday she may dismiss the lawsuit, which accused Charney of keeping a teenage saleswoman at the company as a sex slave.
The struggling clothing chain said the case should be heard by an arbitrator and does not belong in court.
Stuart Slotnick, a lawyer for American Apparel and Charney, complained that the case has become a media event, with the plaintiff Irene Morales, now 20, talking to newspapers and appearing on NBC's Today morning news show.
He also told the judge it was Morales who chased Charney.
The plaintiff was stalking my client, and saying, 'please let me be your slave, I'll do anything for you,' Slotnick told Justice Bernadette Bayne at the hearing.
Maybe she should be on the 'Today' show! the judge replied, prompting a howl of laughter in the courtroom.
Morales has accused Charney of forcing her to perform sexual acts over eight months, including oral sex in his Manhattan apartment just after she turned 18, amid fear she might otherwise lose her job.
She also sued American Apparel and its directors for failing to stop Charney from acting as a sexual predator.
The company is trying to silence her in a confidential arbitration proceeding, her lawyer Eric Baum told the judge.
Morales left Los Angeles-based American Apparel in January 2009 and returned briefly last summer as an independent contractor, only to suffer psychological abuse, Baum said.
Charney, 42, has been repeatedly targeted in sexual harassment lawsuits. He owns about 51.8 percent of American Apparel, a regulatory filing shows.
After the hearing, Slotnick said Morales sent Charney emails that betray her stance as a victim.
She is trying to shake down the company, and offered sex in exchange for money, clothes and plane tickets, he said.
Baum said Morales had limited communication with Charney after she first left the company.
Victims of sexual harassment and assault in the workplace often don't take action to protect themselves, he said. This does not give Dov Charney the right to sexually assault and abuse his employees.
Baum said Morales is unemployed and looking for work. On Wednesday, he filed a similar lawsuit in Los Angeles against American Apparel and Charney on behalf of four other women.
At Friday's hearing, Bayne said she will review what American Apparel called two agreements under which Morales agreed to arbitrate disputes.
I think you should go to arbitration, the judge said. She later qualified her statement, saying, Let me look at the papers. I want to see the whole picture here.
The judge did not say when she will rule.
American Apparel is trying to refinance its debt after struggling with losses and falling sales. It has said it may not have enough liquidity to sustain operations through 2011, and that there is substantial doubt it will stay in business.
The case is Morales v. American Apparel Inc et al, New York State Supreme Court, Kings County, No. 5018/2011.
(Reporting by Jonathan Stempel in New York; Editing by Bernard Orr)