Former CEO Dov Charney has filed a defamation lawsuit against American Apparel.
The retailer said in a regulatory filing Wednesday that the claims are without merit and that it will "vigorously dispute" the charges.
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The Los Angeles-based chain known for American-made clothing and raunchy ads said that if there's an unfavorable outcome from the lawsuit, it may face financial liability and have its reputation harmed.
Charney, who was fired from the retailer in December, has been the subject of lawsuits that allege he had inappropriate sexual conduct with female employees. He has said he had consensual sexual relationships with workers.
Last week Charney filed a $30 million defamation lawsuit against investment firm Standard General, one of American Apparel's biggest shareholders.