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Flashcards in Deposition Notes Deck (78):
1

Recognized Brands avail to JG:

Rock Revival, Miss Me, AG, MEK, Melie Bianco, David & Young, Nubra, Big Star, Veronica M., Humanity, Anama, Elan, Trinity, Yellow Box, Laguna, Alternative Apparel, Free people, 1921 Denim

2

Identification of CVI’s exclusive lines:

Private Label Program launched on July 11, 2011: Miss Me exclusive 9/11, Whitney Eve exclusive 5/12, AL Exclusive Tees/Private label 7/11, AL Exclusive belts & handbags 7/11, Some of our Must Have’s ere also Exclusive tees:

The fabric is the same Ultra Premium cotton that James Perse uses and you will be able to retail them for more than half off what James Perse retails their tops while maintaining a 66-69% margin! James Perse suggested retail provides only a 56% margin. For example: Our short sleeve top will cost $16.50 and retail for $49 (66.33% margin) vs a similar James Perse cost of $33 that retails for $75. Our 3/4 & long sleeve will cost $18.50 and retail for $59 (68.64% margin) compared to Perse 3/4 and long sleeve at $41 & $59 with retail prices of $95 & $135 respectively.

3

Information in Ops Manual that is proprietary or confidential:

The entire manual is confidential. The entire Home/Corporate/Store Opening process, POSIM manual and exclusive reports/procedures, store design criteria, visual merchandising manual, 4th quarter guide, many forms and procedures written specifically for our stores, grass roots promotions, marketing campaigns, inventory management, markdowns, OTB, customer service, store & staff surveys, customer surveys, exclusive videos, return policy, markdown strategy, Social Media Policy, Vertical Response manual, Shoptiques procedures, Shopify procedures, conference call recaps, etc.. (All in Discovery CVI)

FA:
CVI has provided a business system in which the franchisee agrees to undertake to conduct business to sell product in accordance with methods and procedures prescribed by the Franchisor and is considered confidential information, to the Franchisee, and includes, but is not limited to: trade names, associated names, trademarks, service market, all provided materials, knowledge and know-how, computer systems, software, inventory knowledge, training and vendors, merchandising techniques, fixtures, signage, advertising, drawings, equipment, fixtures, customer information and lists, all data accrued by provided methods, any information derived from methods using trade names and associated names, any information in social media, all vendors and associated contractors.

4

Identification of coordinated product purchasing or distribution by CVI:

Miss Me, Must Have Program, Whitney Eve, Premium Tees, Ada belts and Handbags, all packaging, bag, boxes, the entire LA Buying Program

5

CVI monitoring of quality standards among franchisees:

Monitoring social media posts and photos, visits, facetime meetings, mystery shops, vendors in store, customer complaints, sales margin, inventory levels, category reports, capture rate, average sale, IPT, customer counts, POSIM reports, Stock Turn reports, Inventory and vendor reports, Howdy calls, Monthly franchisee conference calls, store visit programs which evolved thru time and technical capabilities., Monthly Statistics Records, Productivity reports, marketing and promotion purchases and reporting.

6

CVI volume discounts on merchandise:

Provided in Discovery. IMAX 12%, 10-20% on apparel, 5-10% on Jewelry, 5-10% and free shipping on décor/fixtures, receipt paper up to 37%, POSIM and Boutique Window 45%, Credit card processing 10 pts above wholesale, Mood Media 10-15%, Cambeo FREE, large format printing 15%, bags/boxes/tissue free freight, Vintage Havana 10%, Ocean Drive 10%, and others at least 10%: Surf Gypsy, Basically Me, I-Madelline, On the Road, Gypsy Heart, Jacob Davis, Dear John, Suzette Elan, Black Swan, Others Follow, White Crow, Z Supply, Golden Stella, Bijoux, Creative Co-op and our exclusive LA Buyer 0-20%.

7

CVI research and development of product lines, promotions, operating procedures and techniques:

Product Lines: Exclusives & buying team researches lines for quality, celebrity status and trends. Networking and NOW feedback, MOBS Private Facebook.
Promotions: Primary, secondary and grass roots by in-house marketing department
Operating Procedures: All throughout Ops Manuals

8

Inspections, visits to and feedback by CVI of JG stores:

Feedback: 90 day program which includes trainer and merchandiser on site for openings, Ongoing: Review and analysis of reports, operations divisions analysis of vendor and stock turn reports, phone calls to managers and owners and follow ups.
Visits: Ken & Tom & Melinda

9

National Advertising Campaign:

Black Swan in Life & Style Magazine.
Press Release: Whitney Eve exclusive In Style, Style MTV, Elle, Google News, TV, Online & Newspapers across U.S. (All in Discovery).
Mothers Day Campaign: Picked up all across the U.S.
Others: Entreprenuer Magazine, Hot Fashion Retailer of Year, Disney stores, Southwest Magazine

10

Meaning of the phrase “same or similar to the types of merchandise being sold through the specialty stores” in the FA:

All franchisees understand our brand is a specialty boutique catering to mom’s and daughters and we used to make them get pre-approval on all new vendors. Stopped doing that because everyone understood the brand and if someone is deviating from merchandise mix (plus sizes, men’s, all gift, etc) we would bring them back into the fold. The normal standard can be found at the bi-annual fashion show Magic, LA Showroom, Dallas Showroom and fashion-go, along with LA market.

11

Identification of home accessories and “the assortment of merchandise similar to the assortment of merchandise carried in the SS”:

Home accessories are small décor items, candles, throw pillows, pictures, signs and additional items whose purpose is to decorate the home.

12

Identification of uniform types of merchandise carried across the AL brand:

Fashion and seasonal tops, bottoms, dresses, denim, outerwear, shoes, handbags, hats, jewelry and accessories.

13

CVI procedure and mechanisms for approval of the clothing zees sell:

All franchisees understand our brand is a specialty boutique catering to mom’s and daughters and we used to make them get pre-approval on all new vendors. Stopped doing that because everyone understood the brand and if someone is deviating from merchandise mix (plus sizes, men’s, all gift, etc) we would bring them back into the fold.

We start each new store with the initial recommended merchandise plan and our Open-To-Buy Program. We give them all the vendors and contact information and we place many of the orders after we review together. We make appointments for our stores at the major vendor shows and liaison between the vendors and franchisees to get line sheets, seasonal picks and best seller recommendations. We have monthly conference calls which all stores are invited to share new vendors that are doing well. We have bi-annual conventions where we get all of the participating stores involved in multi-day buying, new product introductions, training and specials. We give updated vendor lists, recommendations and negotiated discounts, but allow each store to uniquely buy for their particular demographic.

14

CVI guidelines for the clothing that franchisees sell:

We put together the merchandise plan for all new stores. This sets the standard, guidelines and approval process for merchandise carried. Zees have flexibility to carry new vendors within those categories. Again, We start each new store with the initial recommended inventory and the Open To Buy Program. We give them all the vendors and contact information and place any orders when requested. We have them meet our LA Buying team and understand the LA buying techniques and vendors. We teach how to manage inventory, purchasing, pricing, discounting, marketing, tracking and re-ordering products. We make appointments for our stores at the major vendor shows and liaison between the vendors and franchisees to get line sheets, seasonal picks and best seller recommendations. We have monthly conference calls which all stores are invited to share new vendors that are doing well. We have Bi-annual conventions where we get all of the participating stores involved in multi-day buying, new product introductions, training and specials. We give updated vendor lists, recommendations and negotiated discounts, but allow each store to uniquely buy for their particular demographic.

15

Any trade dress that CVI claims is distinctive or protectable under common law or trademark law:

Store design standards: Slat wall, chandeliers, paint colors, cash wrap, flooring, lighting, fixtures, dressing rooms, lounge areas. These designs and combinations were all developed in house and shared as needed to individual stores and their contractors. We continue to evaluate and evolved our store design to keep current with the times and needs. We set up individual conferences with the franchisees to discuss construction specifics and requirements, options where flexible, signage, wrap desk specifics, As-Builts, floor plans, and fixture orders.

16

Identification of any confidential information that relates to sources for buying:

LA exclusive buyer program headed by– Angela Myers.

17

Identification of any merchandise the public readily identifies with AL name:

Trendy fashion tops and dresses through tons of PR and media placements: TV segments, National business and fashion magazines, National Blogs, National Newspapers, Social Media.

Of course, trendy women tend to shop in boutiques and each local boutique tries to identify and carry local trends unique to that area. AL buyers constantly update and recommend fashion that meets the local needs and, most of the time, customers and their friends are repeat customers wanting that unique fashion top that is not normally carried in large quantities like the larger chains.

9/14-9/15: Print, Online, TV, Online Magazines – Total reach 287,978,571 with publicity value of $2,663,802.

2011-2012: Average 5 TV spots per month – Broadcast exposure $240,000 – Print, online and blogs $892,244 (does not include national magazine hits: People Stylewatch, Entrepreneur, In Style, etc)

CNN Documentary: Ran CNN International and Domestic

Disney Anaheim and Orlando stores: International brand awareness.

18

Consumer surveys that show the public associate the AL name with particular types of merchandise, assortment, trade dress:

Just some local store customer surveys – mostly based on service and merchandise mix. We were awarded Hottest Retail Store award which malls were surveyed and responded. We were so well received that Disney asked us to open AL boutique showcase stores in both USA Disney locations.

19

CVI systems for detecting and monitoring unauthorized disclosure of trade secrets or confidential info:

We do google searches and have identified unauthorized uses of our trademark and have followed up with those to cease and desist. It is in our FA to not share or use any of our manuals and they are all copyrighted. In addition, our relationship with vendors tell us when someone is attempting to use our systems for their own stores not under an FA. These are from our slatwall company, lease negotiators, POSIM and software, CAMBEO, some LA Vendors, designers, other vendors (when asked for the AL discounts), and other contractors.

20

Any system to monitor, detect or police any violation of CVI trademarks:

We do google searches and have identified unauthorized uses of our trademark and have followed up with those to cease and desist.

21

Any written restrictions on what merchandise zees can advertise, offer or sell:

Nothing outside of the descriptions within the FA.

22

Identification of any trade secrets or confidential info used in or associated with the operation of AL:

The entire manual and system within is confidential. The entire Home/Corporate/Store Opening process, POSIM manual and exclusive reports/procedures, store design criteria, signage criteria, training, conventions, LA buying, OTB< Vendor lists, customer service training, in store associate training, Mood Music system, Gift Card program, visual merchandising manual, 4th quarter guide, many forms and procedures written specifically for our stores, grass roots promotions, marketing campaigns, inventory management, markdowns, OTB, customer service, store & staff surveys, customer surveys, exclusive videos, return policy, markdown strategy, Social Media Policy, Vertical Response manual, Shoptiques procedures, Shopify procedures, conference call recaps, etc.. (All in Discovery)

23

Any lines of clothing that are unique, proprietary or specific to AL:

Private Label Program launched on July 11, 2011: Miss Me exclusive 9/11, Whitney Eve exclusive 5/12, AL Exclusive Tees/Private label 7/11, AL Exclusive belts and handbags 7/11, Some of our Must Have’s era also exclusive.

Exclusive tees: The fabric is the same Ultra Premium cotton that James Perse uses and you will be able to retail them for more than half off what James Perse retails their tops while maintaining a 66-69% margin! James Perse suggested retail provides only a 56% margin. For example: Our short sleeve top will cost $16.50 and retail for $49 (66.33% margin) vs a similar James Perse cost of $33 that retails for $75. Our 3/4 & long sleeve will cost $18.50 and retail for $59 (68.64% margin) compared to Perse 3/4 and long sleeve at $41 & $59 with retail prices of $95 & $135 respectively.

24

The enforcement of covenants not to compete by CVI including policies, procedures, investigations and identification of zee who have violated those provisions:

We know of nobody (can't recall anyone) who has violated this except for Dixon’s and Lancaster’s.

25

Any and all support and assistance provided to the Lancaster by CVI after they became zees:

A ton of support and resources provided to Lancaster’s. CAMBEO (free), marketing, social media, monthly conference calls, store visits, phone support, annual inventory on-call, 4th quarter planning guides, learning guides, window displays, Must Have program, OTB system, all ops manuals, in-store signage program, trends, technology updates, forms, continuing education conferences, MAGIC conventions, stat comparisons, private label program, exclusives, discounts, custom POS reporting, Boutique Window, national PR brand recognition, just to name a few!

26

Allegation that Lancasters had a “plan from the beginning” to open Blu Spero boutiques:

That is coming from them saying it in a press release announcing BS and other conversations can’t recall right now.

27

Allegation “This attempted sham separation does not match reality”.

Can’t recall specifics right now

28

Allegations Lancasters are seeking to cripple CVI financially, and that their claims that CVI has breached its contractual obligations are false.

Cripple financially: This is from a phone conversation with Craig Young in July 2016 - Made him real mad when Rod called him and asked him to join in the NB suit. Rod said that it would be Rod and Craig on the lawsuit and that Art would be in the background because he has so many stores and they each would pay 1/3 the legal costs. Rod said that Art mentioned all they needed to do was to keep funding the attorney’s until we fold.

Claims CVI breached our contractual obligations are false: Because we have not.

29

Allegation that Lancaster’s promised other franchisees that they would fund any lawsuits they file against CVI:

Ron Miller was approached by Art and his attorney to join the lawsuit and share the costs. Craig also said echoed the same type of comments coming from Rod Dixon.

30

Our knowledge of Lancasters involvement with BS including allegations in PP 4-7 and 21-34 of the Counterclaim:

4. Because they knew that this conduct breached the terms of the Apricot Lane Franchise Agreements, the Lancaster’s attempted to set up their Blu Spero boutiques so that it would appear that another entity, Love Grace, operated the Blu Spero boutiques with only Art Lancaster’s involvement. This attempted sham “separation” does not match reality. Among other things, the Lancasters have issued a press release entitled “Blu Spero Clothing Boutique to Open” which describes Stacie Lancaster as a “Founder” of Blu Spero and Stacie Lancaster has her own phone extension at Love Grace.

5. Realizing the danger they now face with CVI discovering the true nature of their wrongful and fraudulent enterprise, the Lancasters have gone on the offensive, seeking to cripple CVI financially so that this matter will never go to trial and CVI will let them out of their commitments just to survive. The Lancasters have attempted to do this by, among other things, withholding royalties that are due under the parties’ Franchise Agreements, starting multiple lawsuits in multiple jurisdictions based on false claims that CVI has breached its contractual obligations, encouraging other franchisees to do the same, and ceasing use of CVI’s Point of Sale System so that CVI cannot track Joli Grace’s merchandise sales. On information and belief, the Lancasters have even promised other franchisees that they would fund any lawsuits that they filed against CVI. 
6. On August 18, 2016, after Joli Grace failed to cure a material default of the Hattiesburg Franchise Agreement, CVI terminated the franchise agreement for the Hattiesburg franchise location. The Franchise Agreement between the parties requires the turnover of the lease in the event of termination of the Franchise Agreement. Despite the termination of the agreement, Joli Grace, by and through its officers, agents, members and/or employees, has improperly refused to the turn over the lease and continued for a period of time to operate the store under the trademark “Apricot Lane”. Moreover, Joli Grace improperly assigned the lease to Love Grace, who has begun operating the store as a Blu Spero while still selling Apricot Lane tagged items. 
7. CVI brings these counterclaims against Joli Grace and Stacie Lancaster for the various breaches of the Franchise Agreements, for Counter-Defendants’ fraud and deceit; to end the sham and require Counter-Defendants to honor the non-compete obligations; for the harm they have caused CVI in converting their Apricot Lane boutiques to Blu Spero boutiques and diverting customers, business, and leases to Blu Spero; and failing to pay overdue royalties. CVI also brings this counterclaim to recover damages from Counter-Defendant’s wrongful continued use of the trademark “Apricot Lane” after termination of the franchise agreement for the Hattiesburg location; an injunction to prevent any further improper use of the trademark; and an injunction requiring the turn-over of the Hattiesburg lease as required by the Franchise Agreement, lease, and Collateral Assignment of Lease. 

31

The “support, knowledge and services provided to JG by AL systems as alleged in PP 16:

A ton of support and services and resources provided to Lancasters. CAMBEO (free), marketing, social media, monthly conference calls, store visits, phone support, annual inventory on-call, 4th quarter planning guides, learning guides, window displays, Must Have program, OTB system, all ops manuals, in-store signage program, trends, technology updates, forms, continuing education conferences, MAGIC conventions, stat comparisons, private label program, exclusives, discounts, custom POS reporting, Boutique Window, national PR brand recognition, just to name a few!

A ton of knowledge from years of history and experience operating retail businesses along with lessons learned and applied into our program.

We start each new store with the initial recommended inventory and the Open To Buy Program. We give them all the vendors and contact information and place any orders when requested. We make appointments for our stores at the major vendor shows and liaison between the vendors and franchisees to get line sheets, seasonal picks and best seller recommendations. We have monthly conference calls which all stores are invited to share new vendors that are doing well. We have Bi-annual conventions where we get all of the participating stores involved in multi-day buying, new product introductions, training and specials. We give updated vendor lists, recommendations and negotiated discounts

We are available to assist them with everything from site selection, store design, custom cash wrap, signage, lighting recommendations, contactor, architect, lease negotiator recommendations, applying for licenses, vendors, insurances, bookkeeping, supplies, floor plans, merchandise plans, in store marketing, display and fixtures ordering, all the way down to stockroom supplies, bags and even labor law posters.

PP16: The Lancasters thrived within the Apricot Lane system, and benefited from the support, knowledge and services provided by the Apricot Lane system. The Lancasters learned from CVI how to be successful boutique operators. The Lancasters achieved so much success that, over the next five years, the Lancasters (through their entity Joli Grace) entered into additional franchise agreements for Apricot Lane stores in: (Lists all stores)

32

Allegation of PP 22 that Lancasters “secretly” opened their first BS store in April 2015

From the anonymous letter received from Lancaster employee. Never notified by Lancasters.

PP22: By no later than approximately April 2015, the Lancasters secretly opened their first Blu Spero store. 

33

The anonymous note referred to in PP 23 and investigation undertaken by CVI in PP 24:

We knew that Stacie would claim that she had nothing to do with BS, so we began an investigation before they could begin to cover tracks.

PP24: In light of these allegations, CVI began to investigate Stacie Lancaster’s involvement in Love Grace and Blu Spero, as well as the relationship between Stacie Lancaster, Love Grace, Joli Grace, Art Lancaster, and Blu Spero. Unfortunately, the investigation to date has proven that the statements in the anonymous note are true – the Lancasters have started a competing brand, Blu Spero, using a sham corporate structure. 

34

Any claim that you have that the brands identified in PP 25 are either exclusive to AL or can’t be purchased by LG or other buyers:

No. The point of PP 25 was to show that BS copied much of what Art learned from AL and as we begin to subpoena vendor invoices, we will show that BS and AL purchased the same items on the same buying trips to L.A.

PP25: Like Apricot Lane boutiques, the Lancasters’ Blu Spero boutiques sell women’s clothing and accessories. Like Apricot Lane boutiques, Blu Spero sells merchandise online. The Blu Spero and Apricot Lane boutiques carry directly competing merchandise. Indeed, the Lancasters have carried the same brands, such as Qupid, LA Coalition, En Crème, Everly, Naked Zebra, Olivaceous, and Lane California, at their Apricot Lane and Blu Spero boutiques. Other brands carried at Blu Spero and Apricot Lane boutiques include Love Stitch, Blu Pepper, Ginger G, Umgee, TCEC, Everly, Esley, Ya, Renee C, Timing, Honey Punch, Collective Concept, Ark&Co, MonoB, and CLuce, and others. In some cases, the Lancasters’ Apricot Lane and Blu Spero boutiques have even sold the same items. A true and correct copy of sample images of items sold by the Lancasters’ Blu Spero and Apricot Lane boutiques is attached to this Counterclaim as Exhibit K and fully incorporated by reference. 

35

Any claim that you have that it’s unlawful for BS to carry brands identified in 25:

No. Just ironic that BS copied an alleged failed system so closely.

36

The clothing items tagged with the BS label in AL stores as alleged in SAC-PP 26:

PP26: Additionally, CVI discovered that clothing items tagged with the “Blu Spero” label were being sold in at least three of the Apricot Lane stores operated by Counter-Defendants in violation of the Franchise Agreements. Thus, not only are the Blu Spero stores competing with the Apricot Lane stores, Counter-Defendants are using the Apricot Lane stores to sell merchandise with Blu Spero tags. True and correct copies of pictures taken at Apricot Lane stores, with clothing bearing the Blu Spero label, are attached hereto as Exhibit L and fully incorporated herein. 

37

The slat walls, earring fixtures, linen jewelry fixtures and cashwrap referred to in PP 27 and the manufacturers or suppliers thereof:

PP27: The Lancasters’ Blu Spero stores look visually similar to Apricot Lane stores. For example, they use similar slat walls, earring fixtures, linen jewelry fixtures, and cashwrap. Upon information and belief, the Lancasters have used vendors that service the Apricot Lane system to obtain similar items for their Blu Spero stores, including distinctive, hard-to-find items like the textured slat walls. In “developing” the Blu Spero stores, the Lancasters copied the Apricot Lane system, which they are ironically now claiming is a failed franchise system. 

38

Any claim by you that is is unlawful for BS to use items in 37 above:

No

39

Allegation in PP 28 that staff at the Destin BS tell customers that BS is an AL “sister store”:

This is in Discovery. Our franchisee in Destin advised that customers are coming into AL saying they were told by BS staff that BS is a sister store of AL. She was upset that BS staff was saying this and she quickly corrected the customers.

40

Any basis we contend that JG is liable for royalties to us for revenues derives through BS stores:

It is not separate, but an extension of the AL stores and Stacie was involved. The franchise agreement specifically addresses this and the non-competition or sharing knowledge issue.

41

Allegation of PP 40(a) that JG diverted business and customers to BS:

In Discovery and Declarations: AL customers getting BS communications when they have never been in a BS store before. BS receipts when it was still an AL store. BS sign in Hattiesburg with all AL tagged merchandise. Social media examples also.

Other Breaches of the Franchise Agreements :
40. The Franchise Agreements obligate Joli Grace to follow CVI’s requirements for operating an Apricot Lane store. Joli Grace has breached these obligations. For example (40 a-n):

a. Joli Grace has directly and indirectly diverted business and customers of Apricot Lane to Blu Spero and has performed other acts injurious and prejudicial to the goodwill associated with Apricot Lane and its Marks. 

42

PP 40(b) including identification of all leases that JG did not submit for approval:

Baton Rouge relocation (removed our required language), assignments to BS. And in discovery, all the leases, which most were signed prior to sending a copy to CVI. We have subpoenaed Jann Sheehy’s records which will show lined out lease language that was not submitted to us prior to approval.

b. Joli Grace has failed to submit one or more leases for approval by CVI prior to execution of the lease, as required by the Franchise Agreements, including but not limited to section 4.C. of the Franchise Agreements; 

43

Allegation of PP 40(c) of Counterclaim:

c. Joli Grace has not submitted to CVI for prior approval all promotional materials and advertising to be used by Joli Grace, as required by the Franchise Agreements, including but not limited to Section 11.D. of the Franchise Agreements; This is true, we have no records, we believe, to discount this statement.

44

Allegations of PP 40(d) and our knowledge of the amounts that Joli Grace spent on local advertising.

They did not provide an accounting, so we don’t know the actual amounts.

d. Upon information and belief, Joli Grace has not spent on local advertising and promotion a minimum of two percent (2%) of Gross Revenues annually, as required by the Franchise Agreements including but not limited to Section 11.C. of the Franchise Agreements; Joli Grace has not furnished CVI with an accounting of its expenditures on local advertising and promotion, as required by the Franchise Agreements including but not limited to Section 11.E. of the Franchise Agreements; 

45

Allegations of PP 40(e) that JG has not maintained books, records and accounts as required by FA: Same as 44

e. Upon information and belief, Joli Grace has not maintained and preserved books, records, and accounts as required by the Franchise Agreements including but not limited to Section 13.A. of the Franchise Agreements; 

46

Allegations of PP 40(f) not supplied PandL:

Same as 44
f. Joli Grace has not supplied CVI with profit and loss statements and balance sheets, as required by the Franchise Agreements including but not limited to Section 13.B. of the Franchise Agreements; 

47

Allegations of PP 40(g) not submitted other reports, forms, records:

Same as 44
g. Joli Grace has not submitted to CVI other reports, forms and records, as required by the Franchise Agreements including but not limited to Section 13.C. of the Franchise Agreements; 

48

Allegations PP 40(h) failed to timely pay vendors for products or supplies:

POSIM

h. Joli Grace has failed to timely pay CVI vendors for products and/or supplies as required by the Franchise Agreements including but not limited to Section 14.O. of the Franchise Agreements; 

49

PP 40(i) failed to provide a copy of database:

i. Joli Grace has failed to supply a copy of the database of current and historical sales, merchandise and inventory and customers, as required by the Franchise Agreements including but not limited to Section 14.L. of the Franchise Agreements; 

50

1. PP 40(J) JG failed to provide 45 days written notice and right of first refusal to CVI of proposes transfer of the FA, business or asset:

j. Joli Grace has failed to provide 45-days written notice and right of first refusal to CVI of any “proposed transfer: (i) of th[e] Agreement or the franchise [there]under; or (ii) of the Franchised Business; or (iii) of a substantial part of the assets used therein; or (iv) which would effect a change in the controlling interest of FRANCHISEE or the Franchised Business,” as required by the Franchise Agreements, including but not limited to section 20.F./21.F.1 of the Franchise Agreements; 

51

1. PP 40(k) ceased use of CVI required POS in order to hide evidence:

Melinda Liming witnessed the additional POS system in September of 2016 during visit of FL store. Notification from POSIM that they had discontinued using our required software.

k. Joli Grace has ceased use of CVI’s required “point of sale” (“POS”) system in order to hide evidence of its sales from CVI; 

52

PP 40(l) JG has allowed the conversion of AL customers, stores and leases to BS:

l. Joli Grace has allowed and participated in the conversion of Apricot Lane customers, stores, and leases to Blu Spero; 

53

PP 40(m) JG has displayed and sold BS merchandise in AL stores:

Melinda Liming witnessed BS hang tags in AL stores located in Hattiesburg, Spanish Fort and Mobile in September 2016.

m. Joli Grace has displayed and sold Blu Spero merchandise in Apricot Lane stores; and 

54

PP 40(n) JG merged social media with competitor BS:

In Discovery showing screen shots.

n. Joli Grace has merged some or all of its social media with a competitor, namely Blu Spero. 

55

PP 41 that JG or Stacie have attempted to transfer FA or ownership of JG without prior written approval of CVI:

41. In addition, Joli Grace and/or Stacie Lancaster have attempted to transfer the Franchise Agreements, the franchise (or any interest therein), or any part of ownership of Joli Grace or the franchised business (or any interest therein) without the prior written approval of CVI, in breach of the Franchise Agreements, including but not limited to sections 20.B./21.B. and 20.G./21.G. of the Franchise Agreements. In particular, the Lancasters have informed CVI that membership interest in Joli Grace LLC has been transferred from Stacie Lancaster to the Stacie Lancaster Children’s Trust; CVI never consented to such a transfer. CVI is informed and believes that the transfer was done with the intent to defraud CVI. In addition, upon information and belief, Joli Grace has obtained loans without CVI’s consent. 

56

PP 42 that JG has not complied with CVI design specifications:

June 19, 2015 email to Stacie & Art: Re-Opening of Mall of Louisiana article in the “InRegister” that showed a photo of the interior of the store violating our design specifications/trade dress. We included our design criteria and photos of current stores. Art responded back acknowledging the email and would note for future remodels.

42. In addition, Joli Grace has not complied with CVI’s design specifications. 

57

PP 47 that JG were obligated to vacate the premises in Hattiesburg:

The letter of termination and our collateral assignment of lease.

47. Just as they failed to comply with their financial obligations under the Hattiesburg Franchise Agreement, Joli Grace and Stacie Lancaster have also failed to comply with the post-termination obligations of the Hattiesburg Franchise Agreement. Despite having received the Notice of Default and Notice of Termination, and despite CVI’s demand that Joli Grace and Stacie Lancaster peaceably vacate the premises, Joli Grace and Stacie Lancaster have refused to surrender possession of the Hattiesburg Store and in fact continue to operate the Hattiesburg Store in identical fashion, but now under the “Blu Spero” mark. One shopper who recently entered the Hattiesburg Store commented on the change in name to Blu Spero and was told by a store employee that “yes, the name changed, but everything else is the same.” The sales personnel went on to clarify that the clothing brands, jewelry, and other items were the same as they have always been. 

58

PP 47 that a shopper was told by a store employee that “yes, the name changed, but everything else is the same”:

Documented in Declaration provided.

59

Your knowledge of retail stores where the brands in PP 25 are sold:

]Like Apricot Lane boutiques, the Lancasters’ Blu Spero boutiques sell women’s clothing and accessories. Like Apricot Lane boutiques, Blu Spero sells merchandise online. The Blu Spero and Apricot Lane boutiques carry directly competing merchandise. Indeed, the Lancasters have carried the same brands, such as Qupid, LA Coalition, En Crème, Everly, Naked Zebra, Olivaceous, and Lane California, at their Apricot Lane and Blu Spero boutiques. Other brands carried at Blu Spero and Apricot Lane boutiques include Love Stitch, Blu Pepper, Ginger G, Umgee, TCEC, Everly, Esley, Ya, Renee C, Timing, Honey Punch, Collective Concept, Ark&Co, MonoB, and CLuce, and others. In some cases, the Lancasters’ Apricot Lane and Blu Spero boutiques have even sold the same items. A true and correct copy of sample images of items sold by the Lancasters’ Blu Spero and Apricot Lane boutiques is attached to this Counterclaim as Exhibit K and fully incorporated by reference. 

60

PP 48 that JG “continue to use the proprietary AL mare in connection with the Hattiesburg store”:

Old news.

61

Mystery Shopper reports regarding AL and BS stores:

Reports and pictures in discovery

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PP 57 & 64 any harms suffered by CVI including profits from BS stores, royalties, liquidated damages, late fees and interest and other damages:

57. CVI has been harmed by such breaches in an amount to be proven at trial, but which includes, without limitation, any profits earned from the operation of the Blu Spero stores, any royalty amounts due and owing, and any amounts owed to the fund which have not been paid, as well as liquidated damages, late fees, and interest thereon at the highest legal rate. Monetary damages, however, are an inadequate remedy, and CVI therefore is entitled to injunctive relief, in addition to damages. 

64. CVI has been harmed by such breaches in an amount to be proven at trial, but which includes, without limitation, any profits earned from the operation of the Blu Spero stores, any royalty amounts due and owing, and any amounts owed to the fund which have not been paid, as well as liquidated damages, late fees, and interest thereon. Monetary damages, however, are an inadequate remedy, and CVI therefore is entitled to injunctive relief, in addition to damages. 

63

PP 87 that JG have misrepresented the nature, characteristics or qualities of the Hattiesburg stores goods, services or commercial activities

Claim VI (Violation of the Lanham Act – Trademark Infringement) 
(Against Joli Grace and Stacie Lancaster) – PP 84-94

87. Further, Counter-Defendants, in commercial advertising or promotion, have misrepresented the nature, characteristics, or qualities of the Hattiesburg store’s goods, services, or commercial activities by claiming a connection to “Apricot Lane” after the franchise agreement for the Hattiesburg store location was terminated. 

64

Any facts that support PP 88 “such use is likely to cause confusion or to cause mistake, or to deceive as to the affiliation, connection or association of the Hattiesburg store..”

88. Such use is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of the Hattiesburg store, or as to the origin, sponsorship, or approval of the Hattiesburg store’s goods, services, or commercial activities by Apricot Lane or CVI, in violation of Section 32 of the Lanham Act, 15 U.S.C. § 1114. 

65

PP 90 that CVI likely to be substantially injured in its business as a result of Defendant’s infringement:

90. As a direct and proximate result of Counter-Defendants’ infringement, CVI has been and is likely to be substantially injured in its business, including its goodwill and reputation, resulting in lost customers, revenues, and profits and diminished goodwill. CVI is entitled to recover its damages in an amount to be proven at trial. 

66

Basis for 92 & 103 that counter defendants will continue to use and infringe the AL Mark” unless enjoined and future “threat of future injury to CV business identity, goodwill and reputation”:

.

67

PP 113 that Stacie intended from execution of the first AL to defraud CVI by opening her own competing boutiques:

Subpoenas of Fuse Sense, bookkeepers, banks, loan applications, vendors will show this. Also, depositions of family members, investors and employees we believe, will bear this out.

113. CVI is informed and believes and thereon alleges that Stacie Lancaster intended from the very beginning – from the execution of the first Apricot Lane franchise agreement – to defraud CVI by opening her own competing boutiques in contravention of her promise to CVI that she would not compete. 

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PP 113 that Stacie intended from execution of the first AL to defraud CVI by opening her own competing boutiques:

Subpoenas of Fuse Sense, bookkeepers, banks, loan applications, vendors will show this. Also, depositions of family members, investors and employees we believe, will bear this out.

113. CVI is informed and believes and thereon alleges that Stacie Lancaster intended from the very beginning – from the execution of the first Apricot Lane franchise agreement – to defraud CVI by opening her own competing boutiques in contravention of her promise to CVI that she would not compete. 

69

The conduct that is referred in PP 114:

114. By and through Counter-Defendants’ conduct, Counter-Defendants have engaged in activities that constitute unlawful, unfair, and fraudulent business practices prohibited by the California Business and Professions Code § 17200 et seq. 

70

The “misrepresentations and practices” referred in PP 116:

116. Counter-Defendants’ misrepresentations and practices as alleged herein also constitute “unfair” business acts and practices within the meaning of Business and Professions Code section 17200, et seq., in that their conduct is substantially injurious to consumers, offends public policy, and is immoral, unethical, oppressive, and unscrupulous as the gravity of the conduct and the harm to CVI outweighs the utility to Stacie Lancaster and Joli Grace. 

71

PP 117 actions likely to deceive and mislead the general public:

117. Counter-Defendants’ actions, as alleged herein, are “fraudulent” within the meaning of Business and Professions Code section 17200, et seq., in that Counter-Defendants’ actions, including the continued and unauthorized use of the Apricot Lane Mark, the conversion of Apricot Lane boutiques to Blu Spero boutiques, the operation of the Blu Spero boutiques in otherwise identical fashion and in the same manner and location, and the misrepresentations to customers as to the relationship between Apricot Lane and Blu Spero stores are likely to deceive and mislead the general public into believing that Blu Spero is a sister store of Apricot Lane, or otherwise affiliated with, sponsored, or approved by Apricot Lane or CVI.

72

That CD allegedly unlawful, unfair and fraudulent business practices present a continuing threat:

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73

The unfair methods of competition and the unfair or deceptive acts or practices referred in in PP 124:

Claim IX (Violation of Louisiana Unfair Trade Practices and Consumer Protection Law, LSA-R.S. 51:1401 et seq) 
(Against Joli Grace and Stacie Lancaster) PP 122-132

124. Counter-Defendants have engaged in unfair methods of competition or unfair or deceptive acts or practices in the conduct of any trade or commerce, within the meaning of the Louisiana Trade Practices Act. 

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1. CD have used a sham corporate structure to attempt to evade the non-compete provisions of the FA as alleged in PP 125:

125. Counter-Defendants participated in secret in the organization and establishment of a competing business, Blu Spero, and have utilized a sham corporate structure to attempt to evade the non-compete provisions of their Franchise Agreements with CVI. Counter-Defendants’ Blu Spero stores are designed to appear similar to Apricot Lane stores, and employees at the Blu Spero stores have told customers that Blu Spero is an Apricot Lane “sister store.” Counter-Defendants are using their Apricot Lane stores to sell merchandise with Blu Spero tag

75

Fact of allegation PP 145 that JG did not intent to perform the promises identified therein when made:

Claim X (Fraud) 
(Against Joli Grace and Stacie Lancaster) PP 140-153

145. Joli Grace and Stacie Lancaster did not intend to perform the promise when they made it.

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Basis for PP 147 that Art was referring to BS when he spoke of “development opportunities”:

147. Further, in or about July of 2013 Art Lancaster told Ken Petersen that he would “no longer be involved in the day to day operations of the stores” because he was “moving toward more development opportunities”. A true and correct copy of the July email is attached hereto as Exhibit Q. Although CVI did not know it at the time, CVI is informed and believes that, in light of the recently discovered evidence of the Lancaster’s unlawful activities in establishing a competing enterprise, the “development opportunities” to which Art Lancaster referred was actually Blu Spero. 

77

Allegations of PP 148.

148. Still further, the Lancasters have stated that the “idea” to open the Blu Spero chain was conceived in 2014. By no later than approximately April 2015, the Lancasters secretly opened their first Blu Spero store. In 2014, the Lancasters entered into another Franchise Agreement with CVI – specifically, the Franchise Agreement for Premier Center in Mandeville, LA (agreement dated October 13, 2014). Thus, by the Lancasters’ own admission they were involved in the scheme to open a competing chain of boutiques at the time they entered the 2014 Franchise Agreement which specifically prohibited such activity; and as alleged herein many years earlier. 

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Basis for allegations of PP 149.

149. Joli Grace and Stacie Lancaster intended that CVI rely on this promise.