Free Trial Brief - District Court of Arizona - Arizona

GREENBERG TRAURIG, LLP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Plaintiff Awareness Corporation ("Awareness") hereby submits its bench memorandum regarding its claims for breach of contract against the Distributor Defendants. As made clear in the Court's June 1, 2005 Order on the parties' respective motions for summary judgment (the "June 1 Order"), the Distributor Defendants are each bound by the terms and conditions of Awareness' July 2003 Policies and Procedures (the "July 2003 P&P"), and all prior versions. June 1 Order at 12. The July 2003 P&P is not a contract of adhesion. June 1 Order at 15. Nor are any of the other agreements between the Distributor Defendants and Awareness. Awareness distributors are prohibited from building or attempting to build businesses that would be detrimental to Awareness. Specifically, Section X.B. of the July
phx-fs1\1506746v01\8/8/05\5:54:00PM ATTORNEYS AT LAW SUITE 700 2375 EAST CAMELBACK ROAD PHOENIX, ARIZONA 85016 (602) 445-8000

Steven M. Weinberg, SBN 016817, [email protected] Brian J. Schulman, SBN 015286, [email protected] Kimberly A. Warshawsky, SBN 022083, [email protected] Attorneys for Plaintiff Awareness Corporation and Third Party Defendants Allcock and Schmidt IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Awareness Corporation, Plaintiff, v. Group Vision International, L.L.C., et al., Defendants. And related cross claims and third party actions. No. CV03-2024-PHX-DGC PLAINTIFF AWARENESS CORPORATION'S BENCH MEMORANDUM NO. 3 RE: AWARENESS' BREACH OF CONTRACT CLAIM AGAINST THE DISTRIBUTOR DEFENDANTS

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2003 P&P provides, in pertinent part, that Team Members/Distributors shall not directly or indirectly [i] solicit any person whom the Team Member/Distributor knows or should have known is a Team Member/Distributor of the Company to sell other products of any nature, by or through another direct sales plan, or [ii] attempt to build or establish a business that would cause a detrimental effect or be at the expense of other Company Team Members/Distributors, their downline or the Awareness Corporation. July 2003 P&P, Section X.B. See also June 1 Order at 12 ("The Court reads the provision as prohibiting two activities...."). The Distributor Defendants each breached Section X.B. of the July 2003 P&P by soliciting Awareness distributors to GVI and by building their GVI businesses before terminating their respective Awareness distributorships. As a result of the Distributor Defendants' breach of this restrictive covenant, they are each liable for Awareness' actual losses and damages, which are calculated as lost profits. Arizona allows monetary damages when one party is injured by another party's breach of a restrictive covenant. Mattison v. Johnston, 730 P.2d 286, 292 (Ariz. Ct. App. 1986). Generally, under these circumstances, an award of lost profits is appropriate. Gann v. Morris, 122 P.2d 43, 45 (Ariz. Ct. App. 1979). The measure of damages for this breach are actual losses and damages, calculated as current and future lost profits. Addotionally, because parties injured by the breach of a restrictive covenant may be "constantly violated ... the ensuing loss of profits must [be] contemplated." McNutt Oil & Ref. Co. v. D'Ascoli, 281 P.2d 966, 970 (Ariz. 1955). See also Mattison, 730 P.2d at 292. Unlike many breaches of contract, the breach of a non-competitive restrictive Awareness' damages for the Distributor Defendants' breaches of contract may be calculated by evaluation of sales invoices and parties' testimony. Under Arizona law, uncertainty as to the amount of damages does not preclude recovery. Mattison, 730 P.2d
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covenant is not complete and final upon commission. McNutt Oil, 281 P.2d at 970.

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at 292. Specifically, in restrictive covenant cases where damages are difficult to ascertain, quantifications may be supported by sales evidence and testimonial evidence. Gann, 596 P.2d at 45. Thus, Awareness is entitled to damages regardless of their illiquidity and Awareness' lost profits can be calculated by evaluating evidence of sales data and testimony of the parties. Testimony of Awareness' representatives who observed the behavior and comments is admissible under Rule 803(3), Federal Rules of Evidence. Awareness may offer evidence to prove causation based on (1) its own testimony about their distributor's and customer's behavior, including the identification of such distributors and customers whom the plaintiffs lost as a result of the defendant's actions, (2) expert damage reports on the reasons for such losses, and (3) statements made by distributors and customers explaining the reasons they no longer do business with the plaintiffs. Callahan v. A.E.V., Inc., 182 F.3d 237, 260 (3d Cir. 1999). This evidence is admissible and, in the aggregate, is sufficient evidence to prove the defendants' actions caused Awareness' damages. Id. In addition to the breaches of Section X.B., the Distributor Defendants also breached the P&Ps as follows: a. b. c. The MacGregors and Bettses breached Section XIX of the July 2003 P&P The Mattices, the Remelskis, the Betts and the MacGregors each violated The Mattices breached Section Section XIX.E. by producing, "starring in," by selling Awareness products following their termination as Awareness distributors. Sections XIX.C. and XIX.M. by engaging in unauthorized advertising. distributing and marketing unauthorized radio infomercials regarding Awareness products in the United States and violated Sections XIX.E. and XIX.M by producing, "starring in," distributing and marketing unauthorized radio infomercials regarding Awareness products in Canada. Paige Mattice admitted to these breaches in two written settlement agreements between Awareness and Ms. Mattice. d. The Remelskis and MacGregors breached Section XIX.E. of the July 2003
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P&P by marketing and distributing the unauthorized (US) advertisements and Sections XIX.E. and XIX.M by marketing and distributing the improper (Canada) radio infomercials. e. products. RESPECTFULLY SUBMITTED this 8th day of August, 2005. GREENBERG TRAURIG, LLP By: /s/ Kimberly A. Warshawsky Steven M. Weinberg Brian J. Schulman Kimberly A. Warshawsky Attorneys for Awareness Corp. and Third Party Defendants Allcock and Schmidt The MacGregors and the Betts breached Section XIX.F. and XIX.M of the July 2003 P&P by publishing websites that contained false claims about Awareness

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CERTIFICATE OF SERVICE I hereby certify that on August 8, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and transmittal s of a Notice of Electronic Filing to the following CM/ECF registrants: Curtis D. Drew, Esq. 2342 North Pima Road Scottsdale, Arizona 85257-2405 [email protected] Attorney for Defendant Group Vision International, L.L.C. G. Gregory Eagleburger, Esq. The Eagleburger Law Group 2999 North 44th Street, Suite 303 Phoenix, Arizona 85018 [email protected] Attorneys for Distributor Defendants I hereby certify that on August 8, 2005, I served the attached document by facsimile and United States mail on the following, who are not registered participants of the CM/ECF System:

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/s/ J. David Smith

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