Private Label Nutraceuticals, LLC v. Hangover Joe's Holding Corporation Et Al Doc 13

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

PRIVATE LABEL ) NUTRACEUTICALS, LLC, ) )

Plaintiff/ ) Counterclaim-Defendant, )

) CIVIL ACTION NO: v. ) 1:14-cv-00683-ODE ) HANGOVER JOES HOLDING ) DEMAND FOR JURY TRIAL CORPORATION and ) HANGOVER JOES, INC., ) ) Defendants/ )

Counterclaim-Plaintiffs/ ) Third-Party Plaintiffs, )

) v. ) ) BJARTE RENE and ) KEVIN HARDEN, ) ) Third-Party Defendants. ) ______________________________ )

DEFENDANTS FIRST AMENDED ANSWER, COUNTERCLAIMS AND THIRD-PARTY COMPLAINT

Defendants Hangover Joes Holding Corporation and Hangover Joes, Inc.

(Hangover Joes, Defendants, or Counter-Plaintiffs) file this amended

response (Answer under Fed. R. Civ. P. 15(a)(1)(B) to the pleading titled

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 1 of 48

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Verified Complaint on Account (Complaint), filed on February 7, 2014 in the

State Court of Gwinnett County, Georgia, Civil Action No. 14-C-00658-6, and

brought by Plaintiff Private Label Nutraceuticals, LLC (Plaintiff or PLN).

Defendants also amend their ten claims against PLN and third-party claims against

Bjarte Rene (Rene) and Kevin Harden (Harden; collectively with Rene and

PLN, Counter-Defendants) as set forth below.

DEFENDANTS RESPONSES TO ALLEGATIONS IN THE COMPLAINT

1.

Defendants are without knowledge or information sufficient to admit or

deny the allegations in paragraph 1 of the Complaint, and therefore deny those

allegations.

2.

In response to paragraph 2 of the Complaint, Defendants admit only that

both entities are incorporated in Colorado and their principle places of business are

located in Colorado. Defendants further aver that their flagship product, The

Hangover Recovery Shot, is an all-natural two-ounce liquid supplement that

effectively restores essential antioxidants to the body and promotes relief of

symptoms associated with the effects of drinking alcohol. Defendants deny the

remaining allegations in paragraph 2 of the Complaint.


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3.

Defendants admit that, before removal of the case to this Court, Plaintiff

sought to invoke the jurisdiction of the State Court of Gwinnett County.

Defendants deny the remaining allegations in paragraph 3 of the Complaint.

4.

Defendants admit that, before removal of the case to this Court, Plaintiff

sought to invoke venue in Gwinnett County. Defendants deny the remaining

allegations in paragraph 4 of the Complaint.

5.

Defendants admit Theresa M. Mehringer, who is located at 6400 S. Fiddlers

Green Circle, Suite 1000, Greenwood Village, Colorado 80111 is the registered

agent of record for Defendants. Defendants deny the remaining allegations in

paragraph 5 of the Complaint.

6.

Defendants admit they engaged Plaintiff to provide goods and services.

Defendants specifically deny any liability for the amounts referenced and deny the


7.

Defendants deny the allegations in paragraph 7 of the Complaint.


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8.

Defendants aver that the content of the referenced correspondence speaks for

itself. Defendants specifically deny any liability to Plaintiff and deny the


9.

Defendants deny the allegations in paragraph 9 of the Complaint.

10.

Defendants deny that Plaintiff is entitled to the relief set forth in his

unnumbered prayer for relief on page 3 of the Complaint.

11.

Any allegations in the Complaint not specifically answered, qualified or

denied are hereby denied.

AFFIRMATIVE AND OTHER DEFENSES

Defendants specifically deny any and all allegations of liability in the

Complaint. In asserting the following defenses, Hangover Joes does not admit

that the burden of proving the allegations or denials contained in them is upon

Defendants. Rather, the burden of proving the facts relevant to and/or the inverse

of the allegations contained in the following defenses and other matters is on


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Plaintiff. Moreover, Defendants do not admit any liability in asserting the

following affirmative and other defenses.

FIRST DEFENSE

Plaintiffs Complaint and each specific cause of action fail to state a claim

upon which relief can be granted.

SECOND DEFENSE

Some or all of Plaintiffs claims are barred by the applicable statutes of

limitations.

THIRD DEFENSE

Plaintiff has failed to timely perfect service and/or service of process on

Defendants.

FOURTH DEFENSE

Any duties or obligations, contractual or otherwise, that Plaintiff claims are

owed to it have been fully performed, satisfied, and/or discharged.

FIFTH DEFENSE

Plaintiffs claims may be barred, in whole or in part, by Plaintiffs own

wrongful acts or omissions, including acts of fraud.


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SIXTH DEFENSE

Some or all of Plaintiffs claims are barred by the doctrines of waiver,

consent, ratification, release, estoppel, fraud, illegality, injury by fellow servant,

laches, license, payment and/or accord and satisfaction.

SEVENTH DEFENSE

Plaintiffs Complaint fails to provide sufficient basis to state a claim for

punitive, actual, special, exemplary, liquidated, and/or compensatory damages.

EIGHTH DEFENSE

To the extent Plaintiff seeks equitable relief, Plaintiff has unclean hands due

to its own wrongful conduct.

NINTH DEFENSE

The claims raised by Plaintiff are barred by the statute of frauds.

TENTH DEFENSE

Plaintiffs Complaint is barred in whole or in part because of Plaintiffs

breaches of contract.

ELEVENTH DEFENSE

Some or all of Plaintiffs claims are barred by its willful breach of duty,

habitual neglect of duty or continued incapacity to perform its duty.


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TWELFTH DEFENSE

Some or all of Plaintiffs claims are barred by its failure to perform the

requirements of its contract.

THIRTEENTH DEFENSE

Plaintiff filed his Complaint in an improper forum.

FOURTEENTH DEFENSE

One or both Defendants are not proper parties to this action.

FIFTHTEENTH DEFENSE

As additional information is disclosed in the discovery process, Defendants

reserve the right to assert any additional or affirmative defenses as permitted by

Rule 8 of the Federal Rules of Civil Procedure and applicable Local Rules.

DEFENDANTS FIRST AMENDED COUNTERCLAIMS AND THIRD-PARTY COMPLAINT

1.

Hangover Joes files the following counterclaims against Plaintiff and Third-

Party Complaint against Bjarte Rene and Kevin Harden and respectfully shows the

Court the following:


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PARTIES

2.

Counter-Plaintiffs are both corporations organized under the laws of the

state of Colorado. To date, Hangover Joes flagship product has been The

Hangover Recovery Shot, an all-natural two-ounce liquid supplement that

effectively restores essential antioxidants to the body and promotes relief of

symptoms associated with the effects of drinking alcohol. Due to the quality of the

product and the strength of its branding, The Hangover Recovery Shot is an

officially licensed product of the successful The Hangover movie franchise

owned by Warner Brothers.

3.

PLN is a corporation organized under the laws of the State of Georgia with

its principal place of business located at 1900 Beaver Ridge Circle, Norcross,

Georgia 30071. PLN is a vitamin and supplement manufacturer that holds itself

out as having sufficient resources to prepare and manufacture customized

supplement formulas pursuant to a clients specifications.

4.

Rene is the CEO and owner of PLN and, upon information and belief, at all

relevant times to this action, has been a resident of San Diego, California.


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5.

Harden is the Vice President of Sales and partial owner of PLN and, upon

information and belief, at all relevant times to the claims in this lawsuit, has been a

resident of the Northern District of Georgia, Atlanta Division.

JURISDICTION AND VENUE

6.

Counter-Plaintiffs contend that jurisdiction of this case is proper in the

Northern District of Georgia. The Northern District of Georgia has subject matter

jurisdiction, pursuant to 28 U.S.C. 1332(a), as Counter-Plaintiffs and Counter-

Defendants are citizens of different states and the amount in controversy, exclusive

of interest and costs, exceeds $75,000.

7.

Counter-Plaintiffs further contend that, pursuant to 28 U.S.C. 1391 and

Rule 19 of the Federal Rules of Civil Procedure, venue is proper in the Northern

District of Georgia, and the Northern District of Georgia may properly exercise

personal jurisdiction over all Counter-Defendants.


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BACKGROUND INFORMATION

8.

In late 2011, Hangover Joes reached agreement with PLN to manufacture,

bottle, and label The Hangover Recovery Shot.

9.

PLN signed a document entitled Agreement to Manufacture with

Hangover Joes, contracting to engage in the production and bottling of the Get

Up and Go Blend known as The Hangover Recovery Shot in accordance with

common industry standards of workmanship and in compliance with all laws

and regulations.

10.

Harden signed the Agreement to Manufacture and was the primary PLN

point of contact for Hangover Joes. Rene also communicated with Hangover

Joes representatives, including Shawn Adamson, Hangover Joes Co-Founder and

Vice President of Sales and Marketing (Adamson).

11.

The product is sold in a two-ounce bottle sealed with a plastic sleeve label

and with perforations at the top of the bottle so that the sealed product can be

opened by twisting the top of the bottle.


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12.

PLN represented that it did not manufacture perforated plastic sleeve labels.

PLN introduced Hangover Joes to representatives of a company named KDM

Pop Solutions Group (KDM) and recommended Plaintiff engage KDM to

manufacture the perforated plastic sleeve label that PLN would use to seal the two-

ounce bottles that contained the products liquid formulation.

13.

In or around May 2012, KDM informed PLN and Hangover Joes that they

would no longer be manufacturing perforated plastic sleeve labels.

14.

Perforation of the plastic sleeve labels is necessary for the consumer to be

able to open the product. Without perforations, the product is not in a condition to

be sold. Harden told Adamson via telephone in or around May 2012 that PLN

would be responsible for the perforations and that PLN would add a machine to

their manufacturing process for that purpose.

15.

Harden introduced Hangover Joes to their partner, Metaugus, Inc., which

Harden explained performed the manufacturing side of PLNs business.


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16.

Harden told Adamson that Metaugus was part of PLN and that PLN had a

significant financial interest in Metaugus. PLN held Metaugus out as its business

partner.

17.

Harden explained that the Metaugus side of PLN would bottle and label the

product. Harden also stated that Jay Connaughton (Connaughton) managed the

Metaugus side of PLNs operations. Connaughton had a PLN e-mail address,

indicating that he worked directly with PLN, and he used this address to

communicate with Hangover Joes, Rene, Harden, and others involved in the

relationship.

18.

Harden and Connaughton confirmed to Adamson via telephone in or around

May 2012 that Metaugus had a machine that could manufacture perforated plastic

sleeve labels for the product.

19.

Based on these representations, Hangover Joes did not move its business

and continued to use PLN to manufacture, bottle and label the product.


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20.

Near this time, in or around May 2012, Hangover Joes was presented with

a significant opportunity to begin to sell the product in the Australian market. On

or about May 30, 2012, A2 Trade Partners, an Australian distribution company,

ordered 5,700 cases of the product to test the market, with the initial order

amounting to over $116,280.00.

21.

Adamson disclosed this confidential new opportunity to Harden and PLN

and stated that he would be relying on them to the fill the substantial new orders.

Harden indicated that Hangover Joes could count on PLN to fulfill the orders and

that they would be Hangover Joes trusted business partner in manufacturing

product for the Australian job. As a result, Hangover Joes did not seek other

manufacturing and/or bottling companies, remained with PLN, Rene, and Harden,

and continued to provide them trade secrets regarding product and customer orders

due to PLNs and Hardens representations that they were Hangover Joes trusted

business partner.

22.

By about June 2012, Hangover Joes had ordered 7,200 bottles labeled for

Australia that Harden said would be ready for shipment by July 1, 2012. However,


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the product was not ready for shipment to Australia as promised, and on or about

July 25, 2012, Hangover Joes had to ship three pallets of their United States

product by airfreight at Hangover Joes expense so that A2 Trade Partners would

not be empty-handed for a previously scheduled tradeshow.

23.

By about August 9, 2012, the initial Australian order was still not complete,

so Hangover Joes asked PLN to airfreight five of the 20 pallets A2 Trade Partners

was expecting because they were so behind in supplying customers and could not

wait on completion of the entire order.

24.

PLN commenced shipment of the 20-pallet order on or about September 4,

2012.

25.

On or about September 5, 2012, the first five pallets of product from PLN

arrived in Australia. A2 Trade Partners informed Hangover Joes that none of the

144,000 bottles that were shipped had perforated labels and that they were all

virtually impossible to open they were all defective.


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26.

When it became apparent that the labels for the bottles on the remaining

pallets of the 20-pallet order that were set for shipment on September 4, 2012 were

not perforated, the pallets were pulled off the freighter before shipment at

Hangover Joes expense. Harden committed to relabeling the bottles with

perforations.

27.

Harden then told Hangover Joes by e-mail in or around the second week of

September 2012 that he could send three perforated pallets to Australia. These

three pallets were shipped on or about September 17, 2012. However, when they

arrived on or about November 17, 2012, the Australian distributor also found that

there were not sufficient perforations on the labels for the bottles, preventing the

consumer from breaking the seal.

28.

Unperforated bottles were shipped from PLN/Metaugus throughout the

United States and Canada, affecting shipments to multiple customers of Hangover

Joes.


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29.

After each nonconforming shipment, Hangover Joes immediately contacted

Connaughton and Harden about the defective product, rejecting it as unacceptable

and not in conformance with the specifications provided by Hangover Joes.

30.

Each time, Connaughton and Harden responded by saying that they did

indeed have a unit that could perforate but that it was an additional step in the

process that had been missed. PLN/Metaugus agreed to correct and reship the

product and assured Adamson and Hangover Joes that the bottles would be

perforated in the future.

31.

In reliance on the representations of PLN and Harden, Hangover Joes

purchased almost half a million dollars worth of product from PLN through

January 2013.

32.

Despite Hardens assurances, the replacement product was not ready or

shipped within the timeline provided by Hangover Joes. Hangover Joes had to

pay significant expedited shipping costs to minimize the delays.


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33.

In late November 2012, five additional pallets arrived in Australia. The

bottles again were not properly perforated. The bottles were still virtually

impossible to open, and it appeared as if someone had attempted to create

perforations in the label with a hand-tool. Further, the shipment was still about 22

cases short.

34.

Adamson rejected the product and demanded assurances that PLN/Metaugus

would make things right.

35.

Further, Michael Jaynes, Hangover Joes Co-Founder, Chairman, and

Director of Operations (Jaynes), e-mailed Harden and demanded that

PLN/Metaugus rectify the situation immediately. Jaynes explained that Hangover

Joes relationships with Warner Bros. and their Australian distributor were in

jeopardy because of the failure to ship product in a merchantable condition. Jaynes

reminded them that millions of dollars were at stake in getting the shipments right.


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36.

In early December 2012, Harden assured Hangover Joes by e-mail that PLN

would get it right and that PLN/Metaugus were doing a rush reprint of the entire

label for all bottles.

37.

By early January 2013, PLN/Metaugus was failing to meet deadlines for

shipments to numerous United States and Canadian customers of Hangover Joes.

Other packaging issues also emerged, and product belonging to Hangover Joes

was damaged. PLN failed to properly glue 2-packs together, label the bottles with

the correct codes, and ship quantities consistent with packing slips. Hangover

Joes had to use third party companies to pick up the products, repack, and

redeliver, at significant expense. Hangover Joes also missed providing inventory

for the profitable holiday sales period.

38.

Despite Hardens repeated assurances throughout the parties relationship

that PLN had the capability to comply with Hangover Joes ordering, scheduling

and bottling needs, they apparently could not keep up with demand. As Hangover

Joes orders increased due to the Australian marketing initiative and other orders,

Rene and Harden knew that PLN was not, in fact, capable of performing their


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commitments because neither PLN nor Metaugus had a machine to perform

perforation or the capacity to produce the volume of product Hangover Joes was

ordering within a reasonable amount of time. PLN/Metaugus, Rene, and Harden

therefore lied to, defrauded, and intended to mislead Hangover Joes about their

manufacturing capacity and capabilities in order to continue receiving

remuneration from Hangover Joes.

39.

With Hangover Joes ability to meet their customers orders in jeopardy,

Adamson traveled to Georgia to meet with Harden and Connaughton to try and

salvage what was left of the product PLN was allegedly in the process of

manufacturing and bottling.

40.

Adamson traveled to Cedartown, Georgia where the PLN/Metaugus plant

was located. While inspecting the plant, he asked to see the unit that perforated

labels. PLN/Metaugus was unable to produce one, and Harden and Connaughton

ultimately admitted they did not have such a machine and had misrepresented

having one. Harden explained that they had been using manual labor to attempt to

perforate the labels by hand.


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41.

Adamson and Hangover Joes were shocked at the admission that

PLN/Metaugus had tried to perforate hundreds of thousands of bottles by hand, but

in an effort to mitigate Hangover Joes losses, Adamson agreed to have

PLN/Metaugus move forward with their offer to send the unperforated bottles to

another plant to complete perforation at PLNs expense.

42.

However, PLN/Metaugus never did a rush reprint of the labels on the

unperforated bottles or any reprints at all at Metaugus or any other facility.

PLN/Metaugus, Rene, and Harden knew they could not and were not going to

complete the reprints and perforations when they promised to do the rush reprint

and were attempting to collect as much money as possible from Hangover Joes

before Hangover Joes discovered the full extent of PLNs, Renes, and Hardens

fraudulent conduct.

43.

When PLN failed to perform in accordance with assurances, Hangover Joes

sought to reduce the damages and asked for the liquid that would be put into the

bottles so that it could send it to another manufacturer to bottle and label it. PLN,

Rene, and Harden agreed to provide it by 1:00 PM on January 29, 2013.


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44.

When PLN had not provided the liquid by February 8, 2013, Jaynes sent a

letter to Harden and Connaughton canceling the 3,000 gallon purchase of the liquid

in order to move forward with another manufacturer. Jaynes requested a refund of

the down payment that had secured production of the order.

45.

As a result of PLNs, Hardens, and Renes actions, A2 Trade Partners

canceled their second order with Hangover Joes and have declined to do business

with Hangover Joes since.

46.

PLNs, Hardens, and Renes actions also caused thousands of dollars worth

of damages to product belonging to Hangover Joes by making it unsalable.

47.

Based on the ordering schedule A2 Trade Partners provided to Hangover

Joes in June 2012, Hangover Joes lost millions of dollars because of Counter-

Defendants failure to meet their commitments and obligations. Hangover Joes

suffered additional losses by having to cover PLNs failure to meet its

commitments.


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48.

Hangover Joes has also suffered substantial reputational damages to its

brand and loss of customers and customer goodwill because of Counter-

Defendants acts. These losses are reflected in the significant drop in Hangover

Joes stock price and other indicators.

49.

Since Hangover Joes relationship with PLN ended, it has learned that other

customers, upon information and belief, suffered similar losses as a result of PLNs

fraudulent actions and breaches of commitments and that Counter-Defendants

fraudulent activities are ongoing.

50.

A company called Activlab, LLC was also defrauded by PLN, Rene, and

Harden in a similar scheme where PLN promised it had the capability to prepare

orders to customers specifications when it did not. A lawsuit against PLN

regarding this matter is currently pending in the Western District of Tennessee,

Case No. 2:14-cv-02271-STA-CGC. Activlab, LLC alleges, among other

wrongful acts, as follows: By delivering products adulterated with glycine,

mislabeling the products, and failing to provide products that abided by the


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contractual requirements, PLN caused Activlab to incur damages. (Id., Doc. 1-

1 20.)

51.

PLN and Bjarte Rene have both been written up in publications such as the

ripoffreport.com, scambook.com, and complaintsboard.com for using fake

ingredients in products, shipping discrepancies, and lack of compliance with

applicable federal regulations. (See Exhibit 1.)

52.

PLN has also admitted in public filings that it tendered deficient goods to its

customers that were provided to it by Metaugus. See Private Label Nutraceuticals,

Inc. v. Metaugus, Inc., et al., Case No. 1:13-AP-43341-PWB, U.S. Bankruptcy

Court for the N.D. Ga., Doc. 66 24; Case No. 1:14-AP-04006-PWB, U.S.

Bankruptcy Court for the N.D. Ga., Doc. 24 at 3 (Metaugus fraudulently

represented to PLN that certain goods it manufactured for PLN were made in

accordance with the specifications provided by PLNs customers to PLN and

subsequently to Metaugus when, in reality and unbeknownst to PLN, goods

manufactured by Metaugus for PLN apparently contained inferior, substituted

and/or missing ingredients, and otherwise failed to meet the required contractual

specifications.).


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53.

As PLN, Rene, and Harden held Metaugus out as the manufacturing side of

PLNs business and even permitted Metaugus representatives to use PLN e-mail

addresses, all acts of Metaugus and Connaughton are indistinguishable from the

acts of PLN, Rene, and Harden, and PLN, Rene, and/or Harden are liable for any

acts of Metaugus to the extent Metaugus is somehow distinguishable.

54.

Further, upon information and belief, PLN/Metaugus is currently under

investigation by the United States Food and Drug Administration for misbranding

products.

COUNT I: BREACH OF CONTRACT (Against PLN)

55.

Counter-Plaintiffs incorporate by reference and re-allege each and every

allegation in the above paragraphs as if fully set forth in this paragraph.

56.

PLN had an agreement with Hangover Joes to manufacture and bottle the

product within a reasonable time period and pursuant to Hangover Joes

specifications in exchange for Hangover Joes payments, amounting to at least

$443,418.17 over less than a one-year period.


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57.

Counter-Plaintiffs fully performed all terms and conditions of the agreement

and have been ready and willing to receive the goods and services purchased from

PLN pursuant to the specifications provided.

58.

PLN breached its agreement with Counter-Plaintiffs by failing to manufacture

or bottle the product pursuant to Hangover Joes specifications or in a state fit for the

ordinary purposes for which the product is used.

59.

PLN further breached its agreement with Counter-Plaintiffs by failing to

manufacture or bottle the product ordered within the time specified by Counter-

Plaintiffs and/or within a reasonable time.

60.

Hangover Joes notified PLN on numerous occasions of its breaches, which

PLN failed to remedy at any reasonable time thereafter or to date.

61.

As a direct result of PLNs breach of the parties agreement to manufacture

and bottle the product within a reasonable time period, pursuant to Hangover Joes


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specifications, and/or in a merchantable condition, Hangover Joes has been damaged

in an amount to be determined by a jury at trial.

COUNT II: EQUITABLE RESCISSION

62.



63.

Under Georgia law, Hangover Joes is entitled to plead alternative theories of

recovery and seek alternative remedies.

64.

PLNs actions and omissions amount to fraud, deceit, fraudulent

inducement, fraudulent misrepresentation, and/or negligent misrepresentation,

entitling Hangover Joes to equitable rescission of the agreement with PLN to

manufacture and bottle the product within a reasonable time period and pursuant to

Hangover Joes specifications.

65.

Hangover Joes justifiably relied on PLNs representations constituting

PLNs agreement to manufacture and bottle the product within a reasonable time

period and pursuant to Hangover Joes specifications.


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66.

PLNs actions and omissions have actually and proximately caused injury

and damage to Hangover Joes.

67.

Hangover Joes is entitled to a full refund of all payments made pursuant to

the parties agreement and all damages allowed by law to place Hangover Joes in

the position it was in prior to entering into the agreement, including general,

nominal, special, actual, consequential, compensatory and punitive damages for

PLNs specific intent to harm Hangover Joes.

COUNT III: UNJUST ENRICHMENT (Against All Counter-Defendants)

68.



69.

Under Georgia law, Hangover Joes is entitled to plead alternative theories of

recovery and seek alternative remedies and pleads this Count III under the theory

that any contract or agreement referenced in these Amended Counterclaims was not

valid or enforceable. Specifically, Hangover Joes had invalid and/or unenforceable

agreements with PLN, Rene, and Harden to manufacture and bottle the product


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within a reasonable time period and pursuant to Hangover Joes specifications in

exchange for Hangover Joes payments.

70.

PLN, Rene, and/or Harden have retained possession of payments made by

Hangover Joes for the manufacturing and bottling of the product purchased by

Hangover Joes but which was never delivered and/or not delivered in a form fit for

the ordinary purposes for which the product was intended to be used. These monies

were not earned, nor were they contractually due.

71.

PLN, Rene, and/or Harden have been unjustly enriched by their retention of

the monies paid by Hangover Joes.

72.

Hangover Joes has been damaged by the retention of such monies in an

amount to be determined by a jury at trial.

COUNT IV: NEGLIGENT MISREPRESENTATION (Against PLN and Harden)

73.




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74.

PLN and Harden, themselves and through their authorized representatives,

negligently made false representations to Hangover Joes, even if they believed

them to be true, in order to induce Hangover Joes to continue paying PLN to

manufacture and bottle the product.

75.

These negligent representations include, but may not be limited to, the

following statements:

(a) Harden told Adamson in or around May 2012 via telephone that PLN was adding a machine to their bottling line that could perforate labels;

(b) Harden told Adamson in or around May 2012 via telephone and e-mail

that Metaugus was part of the same operation as PLN and that PLN had a significant financial interest in Metaugus;

(c) Harden confirmed to Adamson in or around May 2012 via telephone that

Metaugus had a machine that could perforate labels for the product on the bottling line;

(d) Harden stated in or around May 2012 and on multiple occasions

thereafter via telephone and in person that PLN could handle the increased orders and production volume that Hangover Joes was expecting;

(e) Harden stated in or around September 2012 via e-mail and telephone that

he was shipping perforated pallets of product to Australia, when in fact the product was unperforated;


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(f) Both Connaughton and Harden stated on multiple occasions during the

period June-December 2012 via e-mail and in person that PLN/Metaugus had a unit that could perforate;

(g) As one specific example out of many instances, Connaughton e-mailed

Adamson on September 6, 2012 stating, As I mentioned, we have a unit that can perf [sic];

(h) In December 2012, Harden assured Hangover Joes via e-mail and

telephone that PLN/Metaugus was doing a rush reprint of the entire label for all bottles; and

(i) Hardens repeated assurances via e-mail, telephone, and in-person

throughout the parties relationship that PLN had the capability to comply with Hangover Joes order schedule and bottling needs.

76.

PLN and Harden negligently made the above statements and intended

Hangover Joes to rely on such statements to induce Hangover Joes to act or fail

to act.

77.

Hangover Joes justifiably relied upon these false statements to its detriment.

78.

As a proximate result of these negligent representations, Hangover Joes has

been damaged in an amount to be determined at trial.


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COUNT V: FRAUD (Against PLN and Harden)

79.



80.

Counter-Defendants made false representations to Counter-Plaintiffs in order

to induce them to pay and/or continue paying for manufacturing and bottling which

Counter-Defendants did not have the capability or capacity to adequately perform

including, but not limited to, the following statements:









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(e) Harden stated in or around September 2012 via e-mail and telephone that he was shipping perforated pallets of product to Australia, when in fact the product was unperforated;









81.

Counter-Defendants knew the above statements were false and made them

with the intent to defraud Counter-Plaintiffs.

82.

Counter-Plaintiffs justifiably relied upon Counter-Defendants false statements

to their detriment and made payments on the invoices sent by Counter-Defendants

based on the false statements indicating generally that Counter-Defendants had the


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capacity and capability to sufficiently and timely manufacture and bottle the product

pursuant to Hangover Joes specifications.

83.

As a proximate result of Counter-Defendants materially false representations,

Counter-Plaintiffs have been damaged in an amount to be determined at trial.

84.

Counter-Defendants fraudulent representations were committed willfully or

with malice, fraud, wantonness, or oppression, and, therefore, Counter-Plaintiffs

additionally are entitled to punitive damages against Counter-Defendants.

COUNT VI: CONSTRUCTIVE FRAUD (Against All Counter-Defendants)

85.



86.

A confidential relationship and duty to disclose existed between Hangover

Joes and PLN, Rene, and Harden as a result of the trade secrets Hangover Joes

provided to Counter-Defendants as a trusted business partner, as well as Counter-

Defendants acceptance of that confidential information with the understanding that

Hangover Joes was relying on and trusting Counter-Defendants as their business


34

partner to perform as promised.

87.

The confidential relationship between Hangover Joes, PLN, Rene, and/or

Harden obligated PLN, Rene, and/or Harden to disclose to Hangover Joes complete

and accurate information about the companys capacity, capability, and intentions

with respect to the manufacturing and bottling ordered by Hangover Joes and the

previous federal investigations and customer complaints against PLN and Metaugus

to Hangover Joes.

88.

PLN, Rene, and/or Harden violated their confidential relationship with

Hangover Joes by failing to inform Hangover Joes that:

(a) they did not have the capacity or capability to perform the manufacturing and bottling ordered by Hangover Joes sufficiently and/or in a timely manner;

(b) they did not have a machine that could perforate labels; (c) they did not intend to provide the product ordered to Hangover Joes as

specified and/or in a timely manner; and (d) PLN and/or Metaugus had been or were being investigated by federal

agencies and were embroiled in disputes with other customers as a result of their failure to manufacture and bottle supplements ordered and paid for.

89.

Hangover Joes reasonably relied on the completeness and accuracy of the


35

information provided to it by PLN, Rene, and/or Harden in placing orders.

90.

By taking advantage of their confidential relationship with Hangover Joes,

PLN, Rene, and/or Harden induced Hangover Joes to reasonably rely, and Hangover

Joes did reasonably rely, on the failure to communicate the facts set forth in sections

(a) through (d) of paragraph 88. Hangover Joes therefore continued to pay Counter-

Defendants and failed to seek an alternative manufacturer based on Counter-

Defendants failure to disclose. All the while, Counter-Defendants knew they could

not provide the products and services Hangover Joes paid for and that Counter-

Defendants agreed to provide.

91.

As a proximate result of PLNs, Renes, and/or Hardens constructive fraud,

Hangover Joes has been damaged, and continues to be damaged, in an amount to be

determined at trial, with all available legal and/or equitable relief awarded.


36

COUNT VII: BREACH OF THE IMPLIED COVENANTS OF GOOD FAITH AND FAIR DEALING

(Against PLN)

92.



93.

PLN had an agreement with Hangover Joes to manufacture and bottle the

product within a reasonable time period and pursuant to Hangover Joes

specifications in exchange for Hangover Joes payments, amounting to at least

$443,418.17 over less than a one year period.

94.

Hangover Joes has fully performed all terms and conditions of the agreement

and has been ready and willing to receive the correct goods and services purchased

from PLN or, alternatively, accept a refund and damages for having to cover its

losses plus consequential damages.

95.

The agreement between Hangover Joes and PLN contained an implied

warranty of good faith and fair dealing under which each party agreed to satisfy their

respective obligations under the agreement and not to interfere with each others right


37

to receive the benefits under the agreement.

96.

PLN unfairly interfered with Hangover Joes right to receive the benefits of the

agreement and failed to satisfy their obligations by failing to manufacture and bottle

the product in a form fit for the ordinary purpose for which the product was intended

to be used and in a reasonably timely manner as promised and still have not done so

to date.

97.

As a result of PLNs conduct, Hangover Joes has been damaged in an amount

to be determined by a jury at trial.

COUNT VIII: VIOLATION OF RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT MAIL AND WIRE FRAUD

(Against All Counter-Defendants)

98.



99.

This cause of action arises under the Racketeer Influenced and Corrupt

Organizations Act, 18 U.S.C. 1961, et seq. (RICO).


38

100.

Counter-Defendants actions, including but not limited to the following,

constitute violations of RICO:

(a) Counter-Defendants violated 18 U.S.C. 1962(a) by receiving income

from racketeering activities, which include but are not limited to the

practice of purporting to sell and receiving payment for supplement

manufacturing and bottling services through the United States mail,

electronic mail, and online websites, that they neither have the capacity

nor capability to perform, nor intend to perform, and by reinvesting the

income received from these fraudulent sales in an organization that

pursues racketeering activities.

(b) Counter-Defendants violated 18 U.S.C. 1962(b) by maintaining

control of an entity that affects interstate commerce through a pattern of

racketeering activity, which includes but is not limited to the practice of

purporting to sell and receiving payment for supplement manufacturing

and bottling services through the United States mail, electronic mail,

and online websites, that they neither have the capacity nor capability to

perform, nor intend to perform.


39

(c) Counter-Defendants violated 18 U.S.C. 1962(c) through Counter-

Defendants, Counter-Defendants agents, associates, and representatives

conspiring to conduct the affairs of Counter-Defendants through a

pattern of racketeering activity. Specifically, Counter-Defendants and

their agents have made fraudulent representations to Counter-Plaintiffs,

other customers, and the general public through their public

advertisements, web-based communications and sales forums, print

media, and e-mail and mail communications in violation of 18 U.S.C.

1341 and 1343 regarding the capabilities, qualities, and existence of

the equipment and manufacturing services Counter-Defendants purport

to offer.

101.

The fraudulent statements made to elicit payments from Hangover Joes, which

constitute mail and/or wire fraud, include, but may not be limited to, the following:





40

(c) Harden confirmed to Adamson in or around May 2012 via telephone that Metaugus had a machine that could perforate labels for the product on the bottling line;











Hardens repeated assurances via e-mail, telephone, and in-person throughout the

parties relationship that PLN had the capability to comply with Hangover Joes

order schedule and bottling needs.

102.

Upon information and belief, Rene is the founder, CEO, and owner of PLN


41

and orchestrated and/or authorized all of the fraudulent statements referenced above.

Harden is an owner and Vice President of Sales at PLN and either made,

orchestrated, and/or authorized all of the fraudulent statement referenced above.

Together they controlled and control all aspects of PLNs practices, activities, and

operations.

103.

Counter-Defendants voluntarily and intentionally devised the scheme to make

misrepresentations constituting mail and wire fraud to Hangover Joes about their

ability and capacity to perform as agreed in order to receive payments from

Hangover Joes, with full knowledge that they could not perform as they promised.

Counter-Defendants intended to defraud Hangover Joes.

104.

Counter-Defendants criminal scheme to defraud customers is ongoing, as the

Activlab, LLC lawsuit and federal investigation of PLN make clear.

105.

It was reasonably foreseeable that interstate wire and mail communications

would be used to perpetuate Counter-Defendants fraudulent communications, and

interstate wire and mail communications were, in fact, used to relay fraudulent

misrepresentations.


42

106.

Rene and Harden are individuals who have profited from the scheme to accept

payment for supplement manufacturing and bottling services through the United

States mail, electronic mail, and online websites, that they neither have the capacity

nor capability to perform, nor intend to perform, and therefore are persons who have

received income, from a pattern of racketeering as defined in 18 U.S.C. 1961(3).

107.

As a result of the foregoing violations of RICO, Counter-Defendants

proximately caused injury to Hangover Joes and are liable to Hangover Joes

pursuant to 18 U.S.C. 1964 for declaratory judgment that Counter-Defendants

conduct violated RICO, treble compensatory and punitive damages, and costs of

attorneys fees.

COUNT IX: VIOLATION OF GEORGIA RICO ACT (Against All Counter-Defendants)

108.



109.

Counter-Defendants violated Georgias Racketeer Influenced and Corrupt

Organizations Act (State RICO). Specifically, Counter-Defendants violated


43

O.C.G.A. 16-14-4(a) - (c) by acquiring money through the scheme of accepting

payment for supplement manufacturing and bottling services that they neither have

the capacity nor capability to perform, nor intend to perform. Counter-Defendants

accomplish and have accomplished this through fraudulent representations to

Hangover Joes, other customers, and the general public in their public

advertisements, web-based communications and sales forums, print media, and e-

mail and United States mail communications.

110.

The fraudulent statements made to elicit payments from Hangover Joes,

which constitute mail and/or wire fraud, include, but may not be limited to, the

following:







thereafter via telephone and in person that PLN could handle the


44

increased orders and production volume that Hangover Joes was expecting;







(h) In December 2012, Harden assured Hangover Joes via e-mail and telephone that PLN/Metaugus was doing a rush reprint of the entire label for all bottles; and



111.

Upon information and belief, Rene is the founder, CEO, and owner of PLN

and orchestrated and/or authorized all of the fraudulent statements referenced above.

Harden is an owner and Vice President of Sales at PLN and either made,

orchestrated, and/or authorized all of the fraudulent statement referenced above.

Together they controlled and control all aspects of PLNs practices, activities, and


45

operations.

112.

Counter-Defendants voluntarily and intentionally devised the scheme to make

misrepresentations constituting mail and wire fraud to Hangover Joes about their

ability and capacity to perform as agreed in order to receive payments from

Hangover Joes, with full knowledge that they could not perform as they promised.

Counter-Defendants intended to defraud Hangover Joes.

113.

Counter-Defendants criminal scheme to defraud customers is ongoing, as the

Activlab, LLC lawsuit and federal investigation of PLN make clear.

114.

It was reasonably foreseeable that interstate wire and mail communications

would be used to perpetuate Counter-Defendants fraudulent communications, and

interstate wire and mail communications were, in fact, use to relay fraudulent

misrepresentations.

115.

As a result of the foregoing violations of State RICO, Counter-Defendants

proximately caused injury to Hangover Joes and are liable to Hangover Joes under

O.C.G.A. 16-14-6 for declaratory judgment that Counter-Defendants conduct


46

violated State RICO, treble compensatory and punitive damages, and costs of

attorneys fees.

COUNT X: ATTORNEYS FEES (Against All Counter-Defendants)

116.



117.

Counter-Defendants have acted in bad faith, have been stubbornly litigious,

and/or have caused Hangover Joes unnecessary trouble and expense.

118.

As a result of Counter-Defendants conduct, Hangover Joes is entitled to

recover expenses of litigation, including reasonable attorneys fees, from Counter-

Defendants, pursuant to O.C.G.A. 13-6-11.

ACCORDINGLY, Counter-Plaintiffs respectfully request that the Court:

A. enter judgment in favor of Counter-Plaintiffs against PLN, Rene and

Harden on all causes of action as well as for punitive damages and attorneys fees for

their wrongdoing;

B. grant to Counter-Plaintiffs actual, treble compensatory, and

consequential damages;


47

C. order PLN, Rene and Harden to pay Plaintiffs attorneys fees and

expenses incurred in pursuing this lawsuit; and

D. award any and all other relief that this Court may deem necessary and

proper.

DEMAND FOR TRIAL BY JURY

Counter-Plaintiffs respectfully submit a demand for a trial by jury as to all

counterclaims and third-party claims.

/s/ Theresia M. Moser Theresia M. Moser

Georgia Bar No. 526514 Elizabeth Bulat Turner

Georgia Bar No. 558428 Meyer Moser Lang LLP Southern Dairies Building 621 North Avenue, N.E. Suite C-150 Atlanta, Georgia 30308 (404) 537-5330 phone (404) 537-5340 facsimile [email protected] [email protected]

Attorneys for Hangover Joes Holding Corporation and Hangover Joes, Inc.


CERTIFICATE OF SERVICE

I certify that I used the CM/ECF system to serve a copy of DEFENDANTS

FIRST AMENDED ANSWER, COUNTERCLAIMS AND THIRD-PARTY

COMPLAINT on the Clerk of Court for the Northern District of Georgia and the

following CM/ECF participants:

David Allen Roberts Jonathan D. Letzring Hall, Arbery, Gilligan, Roberts & Shanlever LLP 3340 Peachtree Road, Suite 2570 Atlanta, Georgia 30326

This 6th day of June, 2014.

/s/ Theresia M. Moser Theresia M. Moser

Georgia Bar No. 526514 Elizabeth Bulat Turner

Georgia Bar No. 558428 Meyer Moser Lang LLP Southern Dairies Building 621 North Avenue, N.E. Suite C-150 Atlanta, Georgia 30308 (404) 537-5330 phone (404) 537-5340 facsimile [email protected] [email protected]

Attorneys for Hangover Joes Holding Corporation and Hangover Joes, Inc.


Private Label Nutraceuticals, LLC v. Hangover Joe's Holding Corporation Et Al Doc 13

Documents

thirdparty defendants

defendants responses

remaining allegations

verified complaint

account complaint

ode hangover joes

llc plaintiff

ode document