Dive Brief:

• UPDATE: American Apparel founder and ousted CEO Dov Charney appeared at the retailer’s bankruptcy hearing Thursday, the New York Times reports, in an animated testimony in which he skewered the company's treatment of him and said a takeover bid from investors allied with him isn't getting fair consideration.

• UPDATE: American Apparel attorney Scott Greenberg opted not to cross-examine Charney, but maintained that Charney's sometimes rambling testimony shows he wouldn't be helpful to the company’s turnaround. “At the end of the day, the Hagan-Charney proposal that came forward is an inferior proposal,” Greenberg said, according to the Times.  

• CEO Paula Schneider testified Wednesday at the hearing, saying that while the company board’s rejection of the Charney-aligned offer had nothing to do with Charney’s affiliation, there have been severe managerial and cultural problems that she said she’s had to reverse since her arrival. Wednesday U.S. Bankruptcy Judge Brendan Shannon also called Charney’s attorney’s line of questioning of the retailer’s investment banker “effective.”

Dive Insight:

Wednesday American Apparel appeared to walk a fine line here, testifying that Charney’s tenure was a problem, but that his potential return is not a factor in the rejection of the $300 million takeover bid from Hagan Capital Group and Silver Creek.

Charney and his group’s attorney reportedly conferred as the retailer, including Schneider and its investment banker, put forth their arguments against his offer, which tops the value range between $180 million and $270 million that the investment bank assessing potential bids for the retailer has previously estimated in court documents. He later told Reuters he was anxious, adding, ”I put a lot of years into this company.”

UPDATE: Charney's dedication to his company, and to his return, was evident in his testimony Thursday, and Shannon at times asked him to stop "free associating," the Times reports. 

“I’m a merchant, I’m a creative artist, I’m a photographer, I’m a marketer, I’m an industrialist,” Charney said at the two-day hearing: “I don’t want to hand over my company. This is coercion.”

Though less colorfully, his assertions of his unfair ouster were backed up by Hagan Capital managing partner Chadwick Hagan, reports the Times.

“There was a lack of dialogue and negotiation,” he said. “In my opinion, there was a freeze-out of anyone involved with Dov. I think they were trying to scare us away.”

The question before the bankruptcy court, though, is whether the bid from the Charney-allied investors is superior to that put forth by the retailer. While the company has struggled since 2009, things have only deteriorated under Schneider's tenure. 

She said Wednesday that the retailer has had to deal with fundamentals like adequate inventory in stores.

“We were out of key sellers. We were out of disco pants. We were out of pleated skirts,” she said, prompting Shannon to say, "Disco pants? You can’t have a shortage of those,” reports the Times. 

Aside from the continuing falling sales, though, is the question of whether the retailer can survive without the vision of its founder. In any case, the judge acknowledged the essential matter, saying, “I recognize that there is not consensus in the room.”