Hard candy fitness membership fees

Case Brief

Case 1: Hard Candy, LLC v Hard Candy Fitness

Hard Candy is a Florida limited liability company with its principal place of business in Hollywood, Florida, that began with “Hard Candy” nail polish in 1995. Around that time, Hard Candy filed a U.S. trademark application for the nail polish. Sometime later, they filed other applications under the name “Hard Candy” for cosmetics, including lipstick, lip liner, and mascara. Hard Candy’s products are sold in Wal-Mart retail stores and on Wal-Mart’s website. Since 1997, Hard Candy has also operated a website at www.hardcandy. com, on which Hard Candy currently displays its products with a link to Wal-Mart’s website.

Hard Candy Fitness (HCF) is a network of luxury fitness clubs operated by Hard Candy Fitness, LLC (“HCF”), a Delaware limited liability company with its principal place of business in California. HCF’s clubs are located worldwide, but there has never been a club in Florida. NEV Hard Candy Fitness, LLC (“NEV-HC”) (a Delaware limited liability company) and MGHCandy (a Delaware limited liability company and owner of HCF) with its principal place of business in California, along with New Evolution Ventures, LLC (“NEV”) (a Delaware limited liability company with its principal place of business in California), are businesses associated with Madonna Louise Ciccone, popularly known as Madonna.

Ciccone (a resident of New York) has Guy Oseary (a resident of California) as MGHCandy’s “senior management representative.” Additionally, Oseary and Sara Zambreno have provided personal management services to Ciccone since around 2005, first as employees of Guyo Entertainment, Inc., and later in affiliation with third-party Live Nation. Although in some circumstances Oseary and Zambreno must consult with Ciccone before making decisions on her behalf, as a general matter both have considerable discretion to manage Ciccone’s affairs without her input.

In November 2008, NEV filed with the U.S. Patent and Trademark Office for use of the mark “Hard Candy Fitness” for “[h]ealth club services.” The “Hard Candy Fitness” mark was used for the first time over two years later. On October 12, 2011, MGHCandy granted HCF a license to use the mark “Hard Candy Fitness” in connection with the operation of fitness clubs, the sale

of related products, and the marketing and promotion of the clubs and products. In May 2014, MGHCandy assigned to HCF its rights in the unregistered mark “Hard Candy” for use on clothing, bags, jewelry, athletic gear, and accessories. All of these companies, Ciccone, Oseary, and Zambreno are the Defendants.

Hard Candy filed suit in Florida for infringement of the Hard Candy Marks by Hard Candy Fitness through the clubs, the apparel, the www.hardcandyfitness.com website, and the Hard Candy Fitness DVD, entitled Addicted to Sweat.

Madonna and her companies (Defendants) filed a motion to dismiss or, in the alternative, to transfer venue to the Northern District of California.

Judicial opinion

ALTONAGA, District Judge

The Florida long-arm statute recognizes two kinds of personal jurisdiction over a nonresident defendant: specific jurisdiction and general jurisdiction. The statute confers specific jurisdiction over a non-resident defendant if the claim asserted against the defendant arises from the defendant’s forum-related contacts (i.e., contacts with Florida). The statute expressly provides a defendant’s contacts may be based not only on the defendant’s personal activities, but also on the actions of the defendant’s agents. Hard Candy relies on this agency theory of jurisdiction.

To establish a defendant is “carrying on business” under the Florida long-arm statute, “the activities of the defendant must be considered collectively and show a general course of business activity in the state for pecuniary benefit. Relevant factors in this analysis include “the presence and operation of an office in Florida . . ., the possession and maintenance of a license to do business in Florida . . ., the number of Florida clients served . . ., and the percentage of overall revenue gleaned from Florida clients.”

The Defendants conduct significant business in this District by selling Hard Candy Fitness products and services here, both in stores and via the internet; MGH- Candy “actively participates in all of HCF’s decisions related to the use of the mark ‘Hard Candy,’ and the aesthetics of the mark and the products.” [MGHCandy, Ciccone,] and Oseary approve and control all aspects of the use of the mark “Hard Candy,” including the “artistic content,” aesthetics and images related to the use of the mark. Their approval and control rights specifically include the Addicted to Sweat DVD—from its creation, sale and marketing, to the content and cover— the locations for new fitness centers, and the scope of “Hard Candy Fitness” branded services and products, including apparel, sunglasses, bags, t-shirts and more.

“Generally, a foreign parent corporation is not subject to the jurisdiction of a forum state merely because a subsidiary is doing business there.” A subsidiary’s contacts may, however, be imputed to the foreign parent, and therefore potentially subject the parent to personal jurisdiction, “if the subsidiary is merely an agent through which the parent company conducts business in a particular jurisdiction or [the subsidiary’s] separate corporate status is formal only and without any semblance of individual identity.” This agency theory of personal jurisdiction is “not . . . limited to a parent-subsidiary relationship,” but rather may extend to other relationships, such as the relation- ship between members of a limited liability company and the company.

The fact the parent approves major policy decisions of the subsidiary and establishes the subsidiary’s goals and directives is not sufficient to render the subsidiary merely a formality. Similarly, operational control does not exist simply because the parent monitors the subsidiary and advises it when necessary.

According to Richard Feldstein, who provides business and accounting services to MGHCandy and Ciccone, MGHCandy was formed for the following purposes: (1) allowing Ciccone and Oseary to hold ownership interests in MGHCandy; (2) fulfilling obligations and receiving benefits pursuant to the HCF Operating Agreement; (3) facilitating the transfer of intellectual property rights to HCF; and (4) engaging in other necessary and incidental activities.

The limited purposes for which MGHCandy was formed reflect the limited role MGHCandy plays in HCF. Ciccone provided input regarding: “(1) the individual names used for the DVDs in the set; (2) the DVD descriptions included on the back of the DVD covers; (3) the wording of the quote attributed to Ciccone on the cover of the DVDs; and (4) the title that should be given to the dancer in the DVD, Nicole Winhoffer.” Ciccone also selected the final DVD cover artwork as well as the final color scheme and layout (including images) for the rest of the DVD artwork. Ciccone also viewed a “sizzle reel” highlighting portions of the DVD’s content, but she never viewed the entire DVD. Ciccone was “only concerned with [her own] image on the cover of the DVD,” and she did not otherwise take part in any approval process regarding how the DVD was advertised, presented, or sold.

When they do discuss HCF-related matters, the issues are “more aesthetic, approving a color of some- thing in a gym, approving flooring.” Indeed, Ciccone approved certain HCF merchandise, including shirts, sunglasses, water bottles, a gym bag, and a pen.

In 2012 and 2013, Live Nation and one of Ciccone’s business entities collaborated to produce a worldwide concert tour. As part of the arrangement, Live Nation— not Ciccone—scheduled and produced the concerts and manufactured and sold merchandise with the “Hard Candy” mark. In late November 2012, Ciccone per- formed two of those concerts in Miami, Florida, but she did not promote HCF or HCF-related goods or services at her concerts, nor did she attend a special event held in Miami around the time of her concerts to promote the ATS DVD. Ciccone has not directly sold concert tickets or merchandise in connection with the concerts she has performed with Live Nation over the past five years.

Strictly construing the Florida long-arm statute and making all reasonable inferences in favor of Hard Candy, the Court finds the Defendants’ Florida contacts relating to the asserted causes of action are too tenuous to support specific jurisdiction over the Defendants.

The reach of general jurisdiction under the Florida long-arm statute “extends to the limits on personal juris- diction imposed by the Due Process Clause of the Fourteenth Amendment. . .. Corporations are considered “at home” in their place of incorporation and principal place of business. Corporations may be subject to the exercise of general jurisdiction in other places as well, but the Due Process Clause imposes a high standard: “the inquiry . . . is not whether a foreign corporation’s in-forum contacts can be said to be in some sense ‘continuous and systematic,’ it is whether that corporation’s ‘affiliations with the State are so ‘continuous and systematic’ as to render [it] essentially at home in the forum State.’” Defendants, MGHCandy, LLC, Guy Oseary, and Madonna Louise Ciccone are dismissed from this action. The request to transfer this case to a different venue is granted.

Case Questions:

1. Develop a chart showing the various companies involved along with the people and locations for doing business.

2. Explain when Madonna was in Florida and why her presence was not enough to allow jurisdiction.

3. What kinds of activities would have subjected Madonna and her companies and agents to Florida jurisdiction?

4. Why do you think it is so important for Hard Candy to have Madonna and one of her companies as defendants?

Case 2: Pulte Home Corporation v Simerly

In January 2004, Pulte purchased property to develop single-family residences for what would become the Notting Hill and Fieldstone subdivisions. The Pulte Development discharged water into Harris Creek and was located upstream of the properties owned by Tim and Adele Simerly and Richard and Susan Trent (Plaintiffs). Pulte had purchased the property from Macauley Properties, which previously hired Lowe Engineering to complete a hydrology and storm-water management study. The Lowe Study was completed in January 2004, and Pulte relied upon the study to design and construct its development. The Lowe Study recommended that storm water discharges from future developments could be controlled with the construction of a weir on Harris Creek, which consisted of a partial wall across the creek, above Drew Campground Road located within Fieldstone.

Pulte began mass grading and other land-disturbing activities at Fieldstone in March 2004. Shortly thereafter, excessive amounts of storm water, dirt, sediment, and development debris were discharged into Harris Creek and ultimately into the ponds located on the Simerly and Trent properties. Investigations revealed that the discharged sediment and pollutants were caused by

Pulte’s activities upstream and its failure to install and maintain erosion control devices required by law. The Pulte Development also caused a dramatic increase in the rate and flow of storm-water discharge into Harris Creek that caused flooding to the Simerly and Trent properties. During a subsequent study, it was discovered that the weir was inadequate to control the storm-water discharge from the Pulte Development because the Lowe Study, upon which Pulte had relied for storm-water management, was based upon flawed assumptions and analysis.

The Simerlys and Trents sued Pulte Home Corporation for trespass, nuisance, negligence, negligence per se, riparian rights, unjust enrichment, and ejectment based on the company’s actions in causing excess storm water and sediment to enter the Simerlys’ and Trents’ properties.

The jury found in favor of the Simerlys, Trents, and Lawsons (collectively, the “Plaintiffs”) and awarded them $2.49 million in damages and attorney fees. The court had found evidence of spoliation by Pulte and excluded certain exculpatory evidence from the trial because of a finding of Pulte’s counsel’s misconduct. The trial court also allowed evidence of Pulte’s conduct during discovery in its determination of attorney fees. Pulte appealed.

Judicial Opinion

MILLER, Judge

During litigation, the trial court found that Pulte had engaged in spoliation by deleting emails relevant to the litigation, and enjoined Pulte from engaging in further destruction of evidence. The trial court had appointed a Special Discovery Master to oversee compliance with the court’s injunction and to resolve other discovery issues, including the attempted recovery of spoliated evidence through a computer forensic investigation. The Special Discovery Master issued a report outlining that the computer forensic investigation revealed that Pulte had engaged in further spoliation of electronic evidence after the trial court’s order and recommended that Pulte be sanctioned for its violations. The trial court adopted the Special Discovery Master’s report and recommendation.

The Special Discovery Master also informed the trial court that the Simerlys’ counsel and Pulte’s counsel had provided conflicting statements relating to Pulte’s removal of discovery documents during a May 2009 document review at Pulte’s offices. At a subsequent hearing before the trial court, Simerlys’ counsel, Michael Carvalho, testified that he and an associate attorney, Christine Westberg, had a scheduled document review at Pulte’s offices in May 2009. Carvalho testified that during the document review, he had stacked a number of documents in a pile that were deemed relevant in order to copy them. Before taking a break for lunch, Carvalho informed Pulte’s counsel that they planned to copy the documents in the stack. When Carvalho returned from lunch, he noticed that the stack of documents was smaller. Carvalho testified that he asked Pulte’s counsel about the missing documents, and she told him that she took the documents because they were privileged. Following the hearing, the trial court found that Pulte’s counsel had taken documents during the document review.

The trial court allowed Carvalho to testify about spoliation during the May 2009 document review and would [not] allow Pulte to benefit from its discovery violations.

Plaintiffs were forced to undergo unnecessary trouble and expense to prosecute their claims in this case, and the evidence [of the spoliation] was properly admit- ted as it related to the issue of attorney fees.

Affirmed.

Case Questions:

1. Explain what the Special Master found about Pulte’s behavior in the case.

2. What are the consequences when one side attempts to withhold or destroy evidence?

3. What management lessons should be learned and applied from this case?

Case 3: Rowe v New Hampshire Motor Transport Ass’n

Maine passed a law that prohibited anyone other than a Maine-licensed tobacco retailer from accepting an order for delivery of tobacco. The law required the retailer to arrange for delivery with a special receipt showing that someone over the age of 18 had received and signed for the tobacco products delivered. Out-of- state shippers and tobacco sellers challenged the law as one that favored Maine tobacco retailers.

The state of Maine argued that its law was passed to prevent the public health hazard of minors becoming addicted to tobacco. The federal district court granted summary judgment for the shippers, and the court of appeals affirmed. The state of Maine appealed.

Judicial Opinion

BREYER, Justice The provision requires the carrier to check each shipment for certain markings and to compare it against the Maine attorney general’s list of proscribed shippers. And it thereby directly regulates a significant aspect of the motor carrier’s package pickup and delivery ser- vice. In this way it creates the kind of state-mandated regulation that the federal Act pre-empts.

Maine replies that the regulation will impose no significant additional costs upon carriers. But even were that so (and the carriers deny it), Maine’s reply is off the mark. As with the recipient-verification provision, the “deemed to know” provision would freeze in place and immunize from competition a service-related

system that carriers do not (or in the future might not) wish to provide. To allow Maine to insist that the carriers provide a special checking system would allow other States to do the same. And to interpret the federal law to permit these, and similar, state requirements could easily lead to a patchwork of state service-deter- mining laws, rules, and regulations.

That state regulatory patchwork is inconsistent with Congress’ major legislative effort to leave such decisions, where federally unregulated, to the competitive marketplace. And to allow Maine directly to regulate carrier services would permit other States to do the same. Given the number of States through which carriers travel, the number of products, the variety of potential adverse public health effects, the many different kinds of regulatory rules potentially available, and the difficulty of finding a legal criterion for separating permissible from impermissible public health- oriented regulations.

In this case, the state law is not general, it does not affect truckers solely in their capacity as members of the general public, the impact is significant, and the connection with trucking is not tenuous, remote, or peripheral. The state statutes aim directly at the carriage of goods, a commercial field where carriage by commercial motor vehicles plays a major role. The state statutes require motor carrier operators to perform certain services, thereby limiting their ability to provide incompatible alternative services; and they do so sim- ply because the State seeks to enlist the motor carrier operators as allies in its enforcement efforts.

Maine adds that it possesses legal authority to prevent any tobacco shipments from entering into or moving within the State, and that the broader authority must encompass the narrower authority to regulate the manner of tobacco shipments.

But even assuming purely for argument’s sake that Maine possesses the broader authority, its conclusion does not follow. To accept that conclusion would permit Maine to regulate carrier routes, carrier rates, and carrier services, all on the ground that such regulation would not restrict carriage of the goods as seriously as would a total ban on shipments.

And it consequently would severely undermine the effectiveness of Congress’ pre-emptive provision. Indeed, it would create the very exception that we have just rejected, extending that exception to all other products a State might ban. We have explained why we do not believe Congress intended that result.

Finally, Maine says that to set aside its regulations will seriously harm its efforts to prevent cigarettes from falling into the hands of minors. The Solicitor General denies that this is so. He suggests that Maine, like other States, can prohibit all persons from providing tobacco products to minors; that it can ban all non-face-to-face sales of tobacco; that it might pass other laws of general applicability; and that it can, if necessary, seek appropriate federal regulation.

For these reasons, the judgment of the Court of Appeals is affirmed.

Case Questions

1. What is the effect of the Maine law, if allowed to stand, on interstate carriers?

2. If this law is constitutional, what would happen to interstate carriers and their activities within particular states?