Shareholder Class Action Filed Against American Apparel, Inc. by the Law Firm of Barroway Topaz Kessler Meltzer & Check, LLP

SAN FRANCISCO, Aug. 31 /PRNewswire/ -- The following statement was issued today by the law firm of Barroway Topaz Kessler Meltzer & Check, LLP:

Notice is hereby given that a class action lawsuit was filed in the United States District Court for the Central District of California on behalf of purchasers of the securities of American Apparel, Inc. (NYSE Amex: APP) ("American Apparel" or the "Company") between December 20, 2006 and August 17, 2010 inclusive (the "Class Period").

If you wish to discuss this action or have any questions concerning this notice or your rights or interests with respect to these matters, please contact Barroway Topaz Kessler Meltzer & Check, LLP (Ramzi Abadou, Esq. or Erik Peterson, Esq.) toll free at 1-888-299-7706 or 1-415-400-3005, or via e-mail at [email protected].

The Complaint charges American Apparel and certain of its officers and directors with violations of the Securities Exchange Act of 1934. American Apparel describes itself as a vertically integrated manufacturer, distributor, and retailer of branded fashion basic apparel based in downtown Los Angeles, California.  More specifically, the Complaint alleges that the Company failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them:  (1) that they had made "diligent efforts" to comply with labor and employment regulations, when in fact they had not done so; (2) that they failed to disclose to investors, and made false statements regarding facts surrounding the Company's illegal hiring practices and its effect on the Company's operating costs and margins; (3) that they failed to disclose or indicate that the Company lacked adequate internal and financial controls; (4) that they failed to disclose that, as a result of the foregoing, the Company's financial statements were materially false and misleading at all relevant times; and (5) that they failed to disclose that, as a result of the foregoing, their statements regarding the Company's prospects were false and misleading at all relevant times.

In July 2009, it was revealed that American Apparel was being investigated by United States Immigration and Customs Enforcement ("ICE") regarding the Company's compliance with U.S. immigration laws. Despite the concerns this raised, defendants continuously assured investors that they were making "diligent efforts" to comply with all employment and labor regulations, and that further, the investigation would not have a material impact on the Company's financial results or earnings.  Then, on May 19, 2010, the Company announced that gross margins for the first quarter 2010 were negatively impacted by reduced labor efficiency at the Company's production facilities. Defendants disclosed that 1,500 experienced manufacturing employees had been dismissed in the third and fourth quarters of 2009 following the completion of an ICE inspection. The Company further revealed that the impact of the lower manufacturing efficiency would be a reduction of net income by $4.4 million, and that the reduced efficiency could continue through 2011. Upon the release of this news, shares of the Company's stock declined $1.11 per share, or 40.51 percent, to close on May 19, 2010 at $1.63 per share, on unusually heavy trading volume.

Then, on July 28, 2010, the Company announced that effective July 22, 2010, Deloitte and Touche, LLP ("Deloitte") had resigned as the Company's independent public accountant. Defendants revealed that "Deloitte advised the Company that certain information has come to Deloitte's attention, that if further investigated may materially impact the reliability of either its previously issued audit report or the underlying consolidated financial statements for the year ended December 31, 2009 included in the Company's 2009 Form 10-K." Finally, on August 17, 2010, American Apparel shocked investors when it announced that despite quarterly net sales of $132 million to $143 million, it would report a net loss of $5 million to $7 million for the quarter. One of the primary reasons for the net loss was "lower labor efficiencies at the Company's production facilities," which was the result of the hiring of over 1,600 net new manufacturing workers during the second quarter. Further, the Company disclosed that it may not have sufficient liquidity necessary to sustain operations for the next twelve months, and that there existed substantial doubt that the Company will be able to continue as a going concern. On this news, shares of the Company's stock fell $0.36 per share, or 25.9 percent, to close on August 17, 2010 at $1.03 per share, on heavy trading volume. As the market continued to digest the news, the Company's stock fell an additional $0.2194 per share, or 21.3 percent, to close on April 18, 2010 at approximately $0.81 per share, on unusually heavy trading volume.

Plaintiff seeks to recover damages on behalf of class members and is represented by the law firm of Barroway Topaz Kessler Meltzer & Check which prosecutes class actions in both state and federal courts throughout the country.  Barroway Topaz Kessler Meltzer & Check is a driving force behind corporate governance reform, and has recovered billions of dollars on behalf of institutional and individual investors from the United States and around the world.

For more information about Barroway Topaz Kessler Meltzer & Check, or for additional information about participating in this action, please visit www.btkmc.com.

If you are a member of the class described above, you may, not later than October 25, 2010, move the Court to serve as lead plaintiff of the class, if you so choose.  A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation.  In order to be appointed lead plaintiff, the Court must determine that the class member's claim is typical of the claims of other class members, and that the class member will adequately represent the class.  Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff.  Any member of the purported class may move the court to serve as lead plaintiff through counsel of their choice, or may choose to do nothing and remain an absent class member.  

SOURCE Barroway Topaz Kessler Meltzer & Check, LLP