Beauty Store Business

MAR 2015

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46 March 2015 | beautystorebusiness.com Beauty & The Law Finally, either party can appeal to a higher court if it can point to an error at trial. Several recent lawsuits illustrate the factors that potential plaintiffs should weigh before starting a case. HATCHING A PLAN TO SUE In 2012, Restorsea brought out a new antiaging product line. The unlikely active ingredient in its products is a salmon- hatching fluid that Restorsea says enables newly hatched fish to emerge from salmon eggs without injury. The fluid exfoliates dead cells without affecting living cells and makes skin look young, according to Restorsea. Restorsea had entered into an agreement with a Norwegian company, Aqua Bio Technology ASA, to supply the hatching fluid to it and only one other company, Amway. Restorsea claimed ABT sold the hatching fluid to its competitors and so it sued in February 2014. Restorsea asked the New York federal court to issue an injunction prohibiting ABT from selling certain types of hatching fluid to anyone other than Restorsea and Amway. Restor- sea also asked the court for at least $5.9 million, which is the amount Restorsea paid for ABT's promise not to sell hatching fluid to anyone else. Just five months later the case was over when Restorsea dismissed its claims and agreed not to file them again. ABT hadn't even answered the complaint. What could have prompted Restorsea to settle so quickly? Two pub- lic documents offer clues into that ques- tion. The parties had a conference with the judge in May 2014, and Restorsea's lawyer told the judge that Restorsea had to make a quarterly payment to ABT of $800,000 at the end of June. Restorsea said that it thought ABT already owed it $6 million, but ABT only had $4 or $4.5 million in cash. Restorsea's lawyer said, "And what our concern would be is that we could win the battle here and lose the war, [because] we could get a nice big monetary judgment at the end of the day … and yet the defendant may not be good for it." The judge pointed out that the parties wanted to continue doing business together and stated: "I think that this litigation strategy may not be the best way of resolving it in this particular case." The second source of clues into why this case may have settled so quickly is ABT's financial presentation, available on its website. ABT reported that its operating costs in the first half of 2014 were "significantly affected by Restorsea dispute." Its costs were up over $250,000 more than the same period in 2013; although that wasn't necessarily all due to litigation expenses. ABT announced that it had entered into a new agreement with Restorsea on the same financial terms but covering more products. This case illustrates how important it is to make sure that the defendant can actu- ally pay any damages that may be awarded by a court. Also, if your long-term objective is to ensure a supply of product from a critical vendor, it's not a good idea to put the vendor out of business. NOT THE RIGHT STUFF Beauty Manufacturing Solutions Corp. made a crème-to-powder product for Mary Kay. Consumer complaints prompted an investigation that revealed that the product was made with an incorrect ingredient. When Beauty Manufacturing learned that its supplier, Ashland, had been sending it the wrong ingredient for a year and a half, it sued Ashland. Beauty Manufacturing won a $231,016.43 judgment after a three-day non-jury trial. The damages included money that Beauty Manufacturing had credited Mary Kay, Beauty Manufacturing's costs for destroying defective crème-to-powder products and the value of two drums of raw materials it returned to Ashland. On the surface, it looks as if Beauty Manufacturing was made whole by the court's award of damages, but its legal fees were $422,096.00. Luckily for Beauty Man- ufacturing, it had sued in Texas, where there is a law allowing recovery of attorneys' fees for contract claims. The court awarded Beauty Manufacturing $325,069.71, still leaving it almost $100,000 out of pocket if it paid the full amount of its attorneys' fees. WHAT'S IN A NAME? Princess Marcella Borghese sold the right to her name, family crest and family history to Revlon in 1976, and Borghese Inc. now owns those rights. In 1993, the princess and her sons, Livio and Silver & zinc alloy and rhinestones. Rhodium-plated. Lead- and cadmium-compliant. Small Scissor Necklace Small Scissor Wire Earring Large Scissor Necklace I DO HAIR Pin Adjustable Scissor Ring Small Scissor Post Earring STYLIST Pin Scissor/Blow Dryer Necklace * FREE DISPLAY with pre pack purchase (8 different items • 24 count display) *Call for distributor pricing and details 800.634.8500 or email slenzkes@creativeage.com $ 12 00 Each Item Salon Cost ONLY

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