International Beauty Products, LLC v. Beveridge

Decision Date02 December 2005
Docket NumberNo. 05CV00179 EWN/MJW.,05CV00179 EWN/MJW.
Citation402 F.Supp.2d 1261
PartiesINTERNATIONAL BEAUTY PRODUCTS, LLC, a Colorado limited liability company, Plaintiff, v. Garth BEVERIDGE, an individual, Dinah Beveridge, an individual, and Mustang Enterprises, Inc., an administratively dissolved Nevada corporation, Defendants.
CourtU.S. District Court — District of Colorado

Leah E. Capritta, Scott Ari Hyman, Hale Friesen, LLP, Denver, CO, for Plaintiff.

Jonathan Charles Oster, Oster & Martin, LLC, Denver, CO, for Defendants.

ORDER AND MEMORANDUM OF DECISION

NOTTINGHAM, District Judge.

This is a fraud and conversion case. Plaintiff alleges that Defendant Garth Beveridge made material misrepresentations while in Plaintiff's employment, and all Defendants misappropriated Plaintiff's funds and assets. This matter is before the court on: (1) "Defendant Garth Beveridge's Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue Including Brief of Support," filed March 14, 2005; (2) "Defendant Mustang Enterprise's Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue Including Brief of Support," filed March 29, 2005; and (3) "Defendant Dinah Beveridge's Motion to Dismiss for Lack of Personal Jurisdiction and Improper Venue Including Brief of Support," filed May 5, 2005. Jurisdiction is based on 28 U.S.C. § 1332 (2005).

FACTS
1. Factual Background

The following facts are taken largely from Plaintiff's amended complaint. Plaintiff is a Colorado limited liability company with its principal place of business and headquarters in Colorado. (First Am. Verified Compl. ¶ 1 [filed Mar. 3, 2005] [hereinafter "Am. Compl."].) Plaintiff's primary warehouse facility and bank accounts are located in Colorado. (Id. ¶ 15.) Plaintiff is in the business of manufacturing, marketing and selling cosmetic products under various trademarks, including "Jerome Russell," "Hayashi," and "Tecnica." (Id. ¶ 14.) Plaintiff generates sales of its beauty products through sales representatives paid by commission and through in-house employees paid by salary. (Id. ¶¶ 16-17.)

During the period of time relevant to the instant case, Defendant Garth Beveridge has been a resident of California or Texas. (Def. Garth Beveridge's Mot. to Dismiss for Lack of Pers. Jurisdiction and Improper Venue Including Br. of Supp., Ex. A [Aff. of Garth Beveridge] [filed Mar. 14, 2005] [hereinafter "Def. Garth Beveridge's Br."].) Prior to August 21, 2002, Defendant Garth Beveridge was employed by two California corporations — Hay-Tec Acquisition Corporation ("Hay-Tec") and Jerome Russell Cosmetics USA ("Jerome Russell"). (Am.Compl. ¶ 22.)

On August 21, 2002, Plaintiff acquired the assets of Hay-Tec and Jerome Russell. (Id. ¶ 13.) On the same date, Defendant Garth Beveridge terminated his employment with Hay-Tec and Jerome Russell, and subsequently took employment with Plaintiff as president of Plaintiff's Hay-Tec and Jerome Russell divisions. (Id. ¶ 23; Def. Garth Beveridge's Br., Ex. A [Aff. of Garth Beveridge].) Plaintiff and Defendant Garth Beveridge agreed that Plaintiff would pay Defendant Garth Beveridge the same salary that he earned as an employee of Hay-Tec and Jerome Russell. (Am.Compl. ¶ 24.) Plaintiff asserts that: (1) Defendant Garth Beveridge's actual previous remuneration was a salary of $9,166.67 per month; but (2) during employment negotiations, Defendant Garth Beveridge represented to Plaintiff that he received a total $20,833.67 per month, comprising $9,166.67 in salary and $11,667.00 in consulting fees. (Id. ¶¶ 25-26.) Plaintiff asserts that it relied on Defendant Garth Beveridge's misrepresentation, and agreed to pay $20,833.67 per month, divided as $9,1667.00 in salary to Defendant Garth Beveridge, and $11,667.00 in consulting fees to Lucknow Worldwide ("Lucknow"), a Hong Kong corporation allegedly controlled by Defendant Garth Beveridge. (Id. ¶ 27-29, 31.) Between August 2002 and January 2005, Plaintiff paid a total of $338,343.00 in consulting fees to Lucknow. (Id. ¶¶ 30-31.)

As president of Plaintiff's Hay-Tec and Jerome Russell divisions, Defendant Garth Beveridge's employment duties included: (1) oversight of the operational aspects of Plaintiff's business, including accounting, product manufacture, sales, and marketing; and (2) approval and payment by check of Plaintiff's authorized sales commissions and other authorized fees and expenses owed to sales representatives and third-party vendors. (Id. ¶¶ 43, 44.) Between September 2002 and January 2005, Defendant Garth Beveridge caused Plaintiff to make at least twenty-eight monthly sales commission payments to Defendant Mustang Enterprises Inc. ("Defendant Mustang") by check (the "Mustang Checks"), totaling $200,043.10. (Id. ¶¶ 45-46.) The Mustang Checks were drawn on Plaintiff's Colorado bank account. (Id. ¶ 48.)

Defendant Mustang is a dissolved Nevada corporation. (Am. Compl. ¶ 8; Def. Mustang Enters. Inc.'s Mot. to Dismiss for Lack of Pers. Jurisdiction and Improper Venue Including Br. of Supp. at 2 [filed Mar. 29, 2005] [hereinafter "Def. Mustang's Br."].) Defendants Garth Beveridge and Dinah Beveridge each own and control half of Defendant Mustang's remaining interests. (Am. Compl. ¶ 9; Notice of Filing of the Notarized Aff. of Def. Garth Beveridge in Supp. of Def. Mustang Enters. Inc.'s Mot. to Dismiss for Lack of Pers. Jurisdiction and Improper Venue Including Br. in Supp. at 2 [filed Apr. 12, 2005] [hereinafter "Def. Garth Beveridge's Mustang Aff."]; Def. Dinah Beveridge's Mot. to Dismiss for Lack of Pers. Jurisdiction and Improper Venue Including Br. of Supp., Ex. A [Aff. of Dinah Beveridge] [filed May 5, 2005] [hereinafter "Def. Dinah Beveridge's Br."].) Plaintiff asserts that during the period of time relevant to this matter, Defendant Mustang has never been an authorized sales representative of Plaintiff, and Defendant Mustang thus never properly earned the Mustang Checks. (Am.Compl. ¶¶ 49-52.) Plaintiff further asserts that: (1) Defendant Garth Beveridge is the sole signatory to Defendant Mustang's bank account, the same account into which the Mustang Checks were deposited; (2) Defendants Garth Beveridge and Dinah Beveridge endorsed and deposited the Mustang Checks into Defendant Mustang's bank account; and (3) Defendant Garth Beveridge distributed the Mustang Check funds to himself and/or Defendant Dinah Beveridge. (Id. ¶¶ 59-63.)

Plaintiff alleges that from August 2002 through March 2005, Defendant Garth Beveridge caused twenty-six checks, drawing funds from Plaintiff's Jerome Russell operating account located in Colorado amounting to $22,672.44, to be issued to Bay View Bank in California without Plaintiff's authorization. (Id. ¶¶ 67, 71.) Plaintiff alleges that Defendant Garth Beveridge caused the checks to be issued in order to pay his personal car payments. (Id. ¶ 67-69.) Plaintiff further alleges that Defendant Garth Beveridge caused two unauthorized payments totaling $27,836.90 to be made from Plaintiff's Jerome Russell operating account to Lucknow. (Id. ¶¶ 75-82.) Plaintiff alleges that Defendant Garth Beveridge channeled Plaintiff's funds paid to Lucknow through an account in the British Virgin Islands, and ultimately used Plaintiff's funds to purchase a residence in Texas in August 2004. (Id. ¶¶ 83-100.)

Plaintiff alleges that from August 2002 through March 2005, Defendant Garth Beveridge changed identifying tags on Plaintiff's product inventory stored in Plaintiff's warehouses and wrote-off the inventory in Plaintiff's record books, although the inventory remained in Plaintiff's warehouse storage. (Id. ¶¶ 103, 104.) Specifically, Plaintiff asserts that in December 2004, Defendant Garth Beveridge traveled to Plaintiff's warehouse in Colorado and wrote-off approximately $750,000.00 of inventory stored in the warehouse, although the inventory remained in storage available for sale. (Id. ¶ 103, 106.) Plaintiff alleges that: (1) Defendant Garth Beveridge has, without Plaintiff's authorization, transferred or sold large amounts of Plaintiff's product inventory to third parties; and (2) Defendant Garth Beveridge and/or Defendant Dinah Beveridge have personally retained the proceeds from the write-off and sale of Plaintiff's inventory. (Id. ¶¶ 107, 110.)

During the period of time relevant to the instant case, Defendant Dinah Beveridge was a resident of California or Texas, and was employed by Plaintiff's Jerome Russell division. (Def. Dinah Beveridge's Br. at 3.) Defendant Dinah Beveridge was a salaried employee and was not eligible to receive commissions. (Pl.'s Resp. to Def. Dinah Beveridge's Mot. to Dismiss for Lack of Pers. Jurisdiction and Improper Venue, Ex. 2 [Aff. of Kenneth Bernstein] [filed May 25, 2005] [hereinafter "Pl.'s Resp. to Def. Dinah Beveridge"]; cf. Def. Garth Beveridge's Mustang Aff. ¶ 5.) Defendant Dinah Beveridge's work-related duties included managing Plaintiff's "house" customer accounts. (Pl.'s Resp. to Def. Dinah Beveridge at 3.) "House" customer accounts do not generate sales commissions on Plaintiff's products sold to the customer. (Id.) Plaintiff alleges that Defendant Dinah Beveridge traveled to Colorado in July 2004 for a trade show, at which Defendant Dinah Beveridge sold Plaintiff's products. (Pl.'s Resp to Def. Dinah Beveridge's Br. at 6.) Plaintiff alleges that Dinah Beveridge caused Defendant Mustang to be paid sales commissions for work performed by Defendant Dinah Beveridge, including sales she made at the July 2004 Colorado trade show. (Id., Ex. 1 [Aff. of James Perry, Addendum]; Def. Garth Beveridge's Mustang Aff. ¶¶ 5-6.)

2. Procedural History

On February 1, 2005, Plaintiff filed a verified complaint in this court. (Compl. [filed Feb. 1, 2005].) On March 3, 2005, Plaintiff filed an amended verified complaint. (Am.Compl.) Plaintiff asserted the following claims against Defendants: (1)...

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