Derma Pen, LLC v. 4everyoung Ltd.

• Decision Date: 26 February 2015
• Docket Number: Case No.: 2:13-CV-00729-DN-EJF
• Parties: DERMA PEN, LLC, Plaintiff, v. 4EVERYOUNG LIMITED d/b/a DERMAPENWORLD, BIOSOFT (AUST) PTY LTD d/b/a DERMAPENWORLD, EQUIPMED INTERNATIONAL PTY LTD d/b/a DERMAPENWORLD, and STENE MARSHALL d/b/a DERMAPENWORLD, Defendants. 4EVERYOUNG LTD. and EQUIPMED INTERNATIONAL PTY. LTD., Counterclaim Plaintiffs, v. DERMA PEN, LLC, MICHAEL E. ANDERER, JEREMY JONES, MICHAEL J. MORGAN, CHAD MILTON, MEDMETICS, LLC, a Delaware limited liability company, and JOHN DOES 1-25, Counterclaim Defendants.
• Court: U.S. District Court — District of Utah

DERMA PEN, LLC, Plaintiff, v. 4EVERYOUNG LIMITED d/b/a DERMAPENWORLD,

BIOSOFT (AUST) PTY LTD d/b/a DERMAPENWORLD,

EQUIPMED INTERNATIONAL PTY LTD d/b/a DERMAPENWORLD,

and STENE

MARSHALL d/b/a DERMAPENWORLD, Defendants.

4EVERYOUNG LTD. and EQUIPMED

INTERNATIONAL PTY. LTD., Counterclaim Plaintiffs, v. DERMA PEN, LLC, MICHAEL E. ANDERER, JEREMY JONES,MICHAEL J. MORGAN, CHAD MILTON, MEDMETICS, LLC,a Delaware limited liability company, and JOHN DOES 1-25, Counterclaim Defendants.

Case No.: 2:13-CV-00729-DN-EJF

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF UTAH, CENTRAL DIVISION

February 26, 2015

CORRECTED^*

MEMORANDUM DECISION AND ORDER GRANTING IN PART 4EVERYOUNG'S MOTION FOR PRELIMINARY INJUNCTION AGAINST MICHAEL E. ANDERER; DENYING MICHAEL ANDERER'S MOTION TO VACATE

District Judge David Nuffer

Magistrate Judge Evelyn J. Furse This order resolves issues in 4EverYoung Limited's ("4EverYoung") Motion for Temporary Restraining Order and Preliminary Injunction against Michael E. Anderer¹ ("Motion for Preliminary Injunction") and Michael E. Anderer's Motion to Vacate TRO and Memorandum in Opposition to Motion for Preliminary Injunction Against Michael E. Anderer ("Motion to Vacate")². Counsel have been extraordinarily diligent and cooperative in working through an arduous schedule, often on short notice. Hearings related to these motions were held on the following dates:

January 29, 2015³

February 4, 2015⁴

February 9, 2015⁵

February 11, 2015⁶

February 12, 2015⁷

February 18, 2015⁸

February 19, 2015⁹

February 23, 2015¹⁰

Testimony was received from John Udy, Stene Marshall, Michael Morgan, Jeremy Jones, Casey Isom, Katie Allen, and Michael Anderer. Deposition testimony was admitted for Michael Anderer¹¹ and Elliott Milstein.¹² Over 100 exhibits were received.

Orders relating to this motion were previously entered.¹³ In preparation for final argument on the motion, the parties submitted proposed findings of fact and conclusions of law¹⁴ which have been very valuable in focusing issues.

This motion deals with the emerging stages of the latest battle related to 4EverYoung's contractual right to purchase a trademark and domain name from Derma Pen. This order determines that 4EverYoung is entitled to a preliminary injunction to restrain Michael Anderer, a former board member, current member, person of major influence, and sole contributor of funds in Derma Pen from taking extra-judicial and state judicial action to defeat a principal object of this litigation.

The litigation scenario is complex. This case has been pending about 18 months. But it has been to the Tenth Circuit twice¹⁵ and was suspended from August to December 2014 because Derma Pen filed bankruptcy in Delaware.¹⁶ That bankruptcy was dismissed as not being filed in good faith but as a litigation tactic.¹⁷ Most recently, the Trademark and Domain Name are subject of a public UCC sale by Anderer and part of Anderer's pending execution levy on all of Derma Pen's assets in Utah State Court.

FINDINGS OF FACT.....................................................................................................................5

The Parties ..................................................................................................................... 5

4EverYoung ..................................................................................................................... 5

Marshall ..................................................................................................................... 5

Anderer ..................................................................................................................... 5

Saunders .................................................................................................................. 6

MedMetics ..................................................................................................................... 6

S2 Partners V .......................................................................................................... 6

Derma Gen ..................................................................................................................... 6

Jones ..................................................................................................................... 6

Morgan....................................................................................................................7

The Sales Distribution Agreement......................................................................................7

Anderer's 2011 and 2012 Loans.......................................................................................12

Derma Pen's Termination of the Sales Distribution Agreement......................................17

Derma Pen and Anderer's Strategy to Avoid the Transfer Provisions in the Sales Distribution Agreement ..................................................................................................................... 18

Derma Pen Files this Lawsuit...........................................................................................20

Anderer's Knowledge of and Participation in this Action and Related Proceedings.......21

Anderer's Threats of Prolonged Litigation.......................................................................22

Derma Pen's Claims Against 4EverYoung.......................................................................23

Bifurcation and Stay.........................................................................................................24

Anderer's 2014 Advances.................................................................................................24

Derma Pen's Bankruptcy Petition..................................................................................................................... 27

Debtor In Possession (DIP) Financing..................................................................................................................... 28

Dismissal of Derma Pen's Bankruptcy Petition................................................................30

The Confession of Judgment............................................................................................31

The Trademark Assignment ..................................................................................................................... 33

Revival of this Litigation..................................................................................................34

The December 23, 2014 TRO...........................................................................................35

Withdrawal of Counsel for Derma Pen.............................................................................36

The Specific Performance Defenses Order.......................................................................37

The Specific Performance Order......................................................................................37

The January 6, 2015 Preliminary Injunction.....................................................................................................................40

The January 9, 2015 UCC Filing......................................................................................41

The Notice of UCC Sale...................................................................................................41

The Writ of Execution ..................................................................................................................... 41

Adding Anderer as a Party ..................................................................................................................... 42

The January 21, 2015 TRO...............................................................................................43

DISCUSSION ................................................................ 45

Standard Applicable to Motion for Preliminary Injunction..............................................45

Irreparable Harm...............................................................................................................45

Balance of Harms..............................................................................................................46

Public Interest ..................................................................................................................... 46

Likelihood of Success on UFTA Claims..........................................................................46

2012 Documents ..................................................................................................................... 49

2014 Documents ..................................................................................................................... 49Confession of Judgment and the Trademark Assignment....................................53

Debtor-In-Possession Financing Lien...................................................................57

Summary...............................................................................................................57

Other Issues Related to Likelihood of Success.................................................................57

Party Status and Service........................................................................................57

Narrow Issues under the UFTA............................................................................58

4EverYoung's Claims Were Not Concluded in Derma Pen's Bankruptcy..........59

The Sales Distribution Agreement Does Not Call for a Transfer in Gross..........59

Amount of Bond...............................................................................................................61

ORDER.........................................................................................................................................63

FINDINGS OF FACT¹⁸

The Parties

4EverYoung

4EverYoung LTD ("4EverYoung") is a private limited liability company organized under United Kingdom law, with its principal place of business in London.¹⁹

Marshall

Stene Marshall ("Marshall")...