Canadian company Gildan Activewear will acquire the two-time bankrupt retailer for $88 million.
The company has a $66 million offer for the intellectual property rights of its brand and other assets, but the fate of its stores is unclear.
A judge says the retailer can proceed with its bankruptcy exit plan, leaving founder Dov Charney out in the cold.
The former CEO and his investors say the offer is superior to the company's reorganization plan, setting up a possible bankruptcy court showdown.
Another teen fashion retailer seeks to reorganize under Chapter 11 protection.
American Apparel doesn't have enough cash on hand to make its next debt payment, $13.9 million due on Oct. 15.
The embattled retailer may not have sufficient financing commitments to meet its needs over the next 12 months.
Lawsuit is the latest in a series of bizarre events surrounding the company.
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