American Apparel CEO seeks end to sex slave case

* Brooklyn, New York judge considers case dismissal

* Clothing retailer says case should go to arbitration

By Jonathan Stempel

NEW YORK, March 25 (Reuters) – A woman who brought a $250
million sexual harassment lawsuit against American Apparel Inc
(APP.A: Quote, Profile, Research) 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. [ID:nSGE64H0DB] 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)

American Apparel CEO seeks end to sex slave case