Dive Brief:

• The Knit House Corp, a fabric supplier based in southern California, is suing American Apparel over unpaid bills.

• The longtime vendor of the struggling retailer says American Apparel has refused to pay an outstanding balance for supplies on a $134,622 invoice, on which it paid $53,666, according to the filed complaint.

• American Apparel recently warned that it’s running out of cash, but its shareholders tied its hands in July by refusing a proposal to increase the total number of shares it can sell.

Dive Insight:

Earlier this summer American Apparel CEO Paula Schneider said that for the first time the retailer is planning a fall line and that, in addition to closing underperforming stores, it would open new stores in key markets.

But that could prove difficult if vendors are as nervous as the Knit House indicates they are. The retailer has little recourse, already saddled with heavy debt and unable to sell more shares. Vendors worried that they’ll be left unpaid as the result of any bankruptcy protection, which is likely imminent, are unlikely to provide the materials needed for what Schneider has promised will be improved merchandise.