A California bankruptcy judge questioned American Apparel founder Dov Charney’s motive for filing for chapter 11, saying the fashion entrepreneur wanted to thwart litigation against him by a hedge-fund manager that backed his failed bid to be reinstated as the company’s chief executive, WSJ Pro Bankruptcy reported. Judge Vincent Zurzolo of the U.S. Bankruptcy Court in Los Angeles said Mr. Charney’s bankruptcy was a legal tactic meant to hinder or delay collection efforts by hedge-fund manager Standard General LP to enforce about $30 million in judgments. “Clearly, these were strategic efforts to delay and thwart creditor action, rather than a legitimate and reasonable effort to reorganize,” Judge Zurzolo said from the bench. Charney is still protected by the automatic bankruptcy stay that has paused the Standard General litigation. On Tuesday, Judge Zurzolo didn’t consider a request by Standard General to lift the bankruptcy stay, which Charney has opposed. Standard General has accused Charney of attempting to evade judgments against him and said its litigation against him belongs in state court, rather than in his personal bankruptcy case.
