in the united states district court for the...

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA

ATLANTA DIVISION

PRIVATE LABEL ) NUTRACEUTICALS, LLC, ) )

Plaintiff/ ) Counterclaim-Defendant, )

) CIVIL ACTION NO: v. ) 1:14-cv-00683-ODE ) HANGOVER JOE’S HOLDING ) DEMAND FOR JURY TRIAL CORPORATION and ) HANGOVER JOE’S, INC., ) ) Defendants/ )

Counterclaim-Plaintiffs/ ) Third-Party Plaintiffs, )

) v. ) ) BJARTE RENE and ) KEVIN HARDEN, ) ) Third-Party Defendants. ) ______________________________ )

DEFENDANTS’ FIRST AMENDED ANSWER, COUNTERCLAIMS AND THIRD-PARTY COMPLAINT

Defendants Hangover Joe’s Holding Corporation and Hangover Joe’s, Inc.

(“Hangover Joe’s,” “Defendants,” or “Counter-Plaintiffs”) file this amended

response (“Answer” under Fed. R. Civ. P. 15(a)(1)(B) to the pleading titled

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 of 48

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“Verified Complaint on Account” (“Complaint”), filed on February 7, 2014 in the

State Court of Gwinnett County, Georgia, Civil Action No. 14-C-00658-6, and

brought by Plaintiff Private Label Nutraceuticals, LLC (“Plaintiff” or “PLN”).

Defendants also amend their ten claims against PLN and third-party claims against

Bjarte Rene (“Rene”) and Kevin Harden (“Harden”; collectively with Rene and

PLN, “Counter-Defendants”) as set forth below.

DEFENDANTS’ RESPONSES TO ALLEGATIONS IN THE COMPLAINT

1.

Defendants are without knowledge or information sufficient to admit or

deny the allegations in paragraph 1 of the Complaint, and therefore deny those

allegations.

2.

In response to paragraph 2 of the Complaint, Defendants admit only that

both entities are incorporated in Colorado and their principle places of business are

located in Colorado. Defendants further aver that their flagship product, The

Hangover Recovery Shot, is an all-natural two-ounce liquid supplement that

effectively restores essential antioxidants to the body and promotes relief of

symptoms associated with the effects of drinking alcohol. Defendants deny the

remaining allegations in paragraph 2 of the Complaint.


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3.

Defendants admit that, before removal of the case to this Court, Plaintiff

sought to invoke the jurisdiction of the State Court of Gwinnett County.

Defendants deny the remaining allegations in paragraph 3 of the Complaint.

4.

Defendants admit that, before removal of the case to this Court, Plaintiff

sought to invoke venue in Gwinnett County. Defendants deny the remaining

allegations in paragraph 4 of the Complaint.

5.

Defendants admit Theresa M. Mehringer, who is located at 6400 S. Fiddlers

Green Circle, Suite 1000, Greenwood Village, Colorado 80111 is the registered

agent of record for Defendants. Defendants deny the remaining allegations in

paragraph 5 of the Complaint.

6.

Defendants admit they engaged Plaintiff to provide goods and services.

Defendants specifically deny any liability for the amounts referenced and deny the


7.

Defendants deny the allegations in paragraph 7 of the Complaint.


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8.

Defendants aver that the content of the referenced correspondence speaks for

itself. Defendants specifically deny any liability to Plaintiff and deny the


9.

Defendants deny the allegations in paragraph 9 of the Complaint.

10.

Defendants deny that Plaintiff is entitled to the relief set forth in his

unnumbered prayer for relief on page 3 of the Complaint.

11.

Any allegations in the Complaint not specifically answered, qualified or

denied are hereby denied.

AFFIRMATIVE AND OTHER DEFENSES

Defendants specifically deny any and all allegations of liability in the

Complaint. In asserting the following defenses, Hangover Joe’s does not admit

that the burden of proving the allegations or denials contained in them is upon

Defendants. Rather, the burden of proving the facts relevant to and/or the inverse

of the allegations contained in the following defenses and other matters is on


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Plaintiff. Moreover, Defendants do not admit any liability in asserting the

following affirmative and other defenses.

FIRST DEFENSE

Plaintiff’s Complaint and each specific cause of action fail to state a claim

upon which relief can be granted.

SECOND DEFENSE

Some or all of Plaintiff’s claims are barred by the applicable statutes of

limitations.

THIRD DEFENSE

Plaintiff has failed to timely perfect service and/or service of process on

Defendants.

FOURTH DEFENSE

Any duties or obligations, contractual or otherwise, that Plaintiff claims are

owed to it have been fully performed, satisfied, and/or discharged.

FIFTH DEFENSE

Plaintiff’s claims may be barred, in whole or in part, by Plaintiff’s own

wrongful acts or omissions, including acts of fraud.


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SIXTH DEFENSE

Some or all of Plaintiff’s claims are barred by the doctrines of waiver,

consent, ratification, release, estoppel, fraud, illegality, injury by fellow servant,

laches, license, payment and/or accord and satisfaction.

SEVENTH DEFENSE

Plaintiff’s Complaint fails to provide sufficient basis to state a claim for

punitive, actual, special, exemplary, liquidated, and/or compensatory damages.

EIGHTH DEFENSE

To the extent Plaintiff seeks equitable relief, Plaintiff has unclean hands due

to its own wrongful conduct.

NINTH DEFENSE

The claims raised by Plaintiff are barred by the statute of frauds.

TENTH DEFENSE

Plaintiff’s Complaint is barred in whole or in part because of Plaintiff’s

breaches of contract.

ELEVENTH DEFENSE

Some or all of Plaintiff’s claims are barred by its willful breach of duty,

habitual neglect of duty or continued incapacity to perform its duty.


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TWELFTH DEFENSE

Some or all of Plaintiff’s claims are barred by its failure to perform the

requirements of its contract.

THIRTEENTH DEFENSE

Plaintiff filed his Complaint in an improper forum.

FOURTEENTH DEFENSE

One or both Defendants are not proper parties to this action.

FIFTHTEENTH DEFENSE

As additional information is disclosed in the discovery process, Defendants

reserve the right to assert any additional or affirmative defenses as permitted by

Rule 8 of the Federal Rules of Civil Procedure and applicable Local Rules.

DEFENDANTS’ FIRST AMENDED COUNTERCLAIMS AND THIRD-PARTY COMPLAINT

1.

Hangover Joe’s files the following counterclaims against Plaintiff and Third-

Party Complaint against Bjarte Rene and Kevin Harden and respectfully shows the

Court the following:


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PARTIES

2.

Counter-Plaintiffs are both corporations organized under the laws of the

state of Colorado. To date, Hangover Joe’s flagship product has been The

Hangover Recovery Shot, an all-natural two-ounce liquid supplement that

effectively restores essential antioxidants to the body and promotes relief of

symptoms associated with the effects of drinking alcohol. Due to the quality of the

product and the strength of its branding, The Hangover Recovery Shot is an

officially licensed product of the successful “The Hangover” movie franchise

owned by Warner Brothers.

3.

PLN is a corporation organized under the laws of the State of Georgia with

its principal place of business located at 1900 Beaver Ridge Circle, Norcross,

Georgia 30071. PLN is a vitamin and supplement manufacturer that holds itself

out as having sufficient resources to prepare and manufacture customized

supplement formulas pursuant to a client’s specifications.

4.

Rene is the CEO and owner of PLN and, upon information and belief, at all

relevant times to this action, has been a resident of San Diego, California.


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5.

Harden is the Vice President of Sales and partial owner of PLN and, upon

information and belief, at all relevant times to the claims in this lawsuit, has been a

resident of the Northern District of Georgia, Atlanta Division.

JURISDICTION AND VENUE

6.

Counter-Plaintiffs contend that jurisdiction of this case is proper in the

Northern District of Georgia. The Northern District of Georgia has subject matter

jurisdiction, pursuant to 28 U.S.C. § 1332(a), as Counter-Plaintiffs and Counter-

Defendants are citizens of different states and the amount in controversy, exclusive

of interest and costs, exceeds $75,000.

7.

Counter-Plaintiffs further contend that, pursuant to 28 U.S.C. § 1391 and

Rule 19 of the Federal Rules of Civil Procedure, venue is proper in the Northern

District of Georgia, and the Northern District of Georgia may properly exercise

personal jurisdiction over all Counter-Defendants.


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BACKGROUND INFORMATION

8.

In late 2011, Hangover Joe’s reached agreement with PLN to manufacture,

bottle, and label The Hangover Recovery Shot.

9.

PLN signed a document entitled “Agreement to Manufacture” with

Hangover Joe’s, contracting to “engage in the production and bottling of” the “Get

Up and Go Blend” known as “The Hangover Recovery Shot” in accordance with

“common industry standards of workmanship” and in compliance with “all laws

and regulations.”

10.

Harden signed the Agreement to Manufacture and was the primary PLN

point of contact for Hangover Joe’s. Rene also communicated with Hangover

Joe’s representatives, including Shawn Adamson, Hangover Joe’s Co-Founder and

Vice President of Sales and Marketing (“Adamson”).

11.

The product is sold in a two-ounce bottle sealed with a plastic sleeve label

and with perforations at the top of the bottle so that the sealed product can be

opened by twisting the top of the bottle.


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12.

PLN represented that it did not manufacture perforated plastic sleeve labels.

PLN introduced Hangover Joe’s to representatives of a company named KDM

Pop Solutions Group (“KDM”) and recommended Plaintiff engage KDM to

manufacture the perforated plastic sleeve label that PLN would use to seal the two-

ounce bottles that contained the product’s liquid formulation.

13.

In or around May 2012, KDM informed PLN and Hangover Joe’s that they

would no longer be manufacturing perforated plastic sleeve labels.

14.

Perforation of the plastic sleeve labels is necessary for the consumer to be

able to open the product. Without perforations, the product is not in a condition to

be sold. Harden told Adamson via telephone in or around May 2012 that PLN

would be responsible for the perforations and that PLN would add a machine to

their manufacturing process for that purpose.

15.

Harden introduced Hangover Joe’s to their “partner,” Metaugus, Inc., which

Harden explained performed the manufacturing side of PLN’s business.


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16.

Harden told Adamson that Metaugus was part of PLN and that PLN had a

significant financial interest in Metaugus. PLN held Metaugus out as its business

partner.

17.

Harden explained that the Metaugus side of PLN would bottle and label the

product. Harden also stated that Jay Connaughton (“Connaughton”) managed the

Metaugus side of PLN’s operations. Connaughton had a PLN e-mail address,

indicating that he worked directly with PLN, and he used this address to

communicate with Hangover Joe’s, Rene, Harden, and others involved in the

relationship.

18.

Harden and Connaughton confirmed to Adamson via telephone in or around

May 2012 that Metaugus had a machine that could manufacture perforated plastic

sleeve labels for the product.

19.

Based on these representations, Hangover Joe’s did not move its business

and continued to use PLN to manufacture, bottle and label the product.


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20.

Near this time, in or around May 2012, Hangover Joe’s was presented with

a significant opportunity to begin to sell the product in the Australian market. On

or about May 30, 2012, A2 Trade Partners, an Australian distribution company,

ordered 5,700 cases of the product to test the market, with the initial order

amounting to over $116,280.00.

21.

Adamson disclosed this confidential new opportunity to Harden and PLN

and stated that he would be relying on them to the fill the substantial new orders.

Harden indicated that Hangover Joe’s could count on PLN to fulfill the orders and

that they would be Hangover Joe’s trusted business partner in manufacturing

product for the Australian job. As a result, Hangover Joe’s did not seek other

manufacturing and/or bottling companies, remained with PLN, Rene, and Harden,

and continued to provide them trade secrets regarding product and customer orders

due to PLN’s and Harden’s representations that they were Hangover Joe’s trusted

business partner.

22.

By about June 2012, Hangover Joe’s had ordered 7,200 bottles labeled for

Australia that Harden said would be ready for shipment by July 1, 2012. However,


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the product was not ready for shipment to Australia as promised, and on or about

July 25, 2012, Hangover Joe’s had to ship three pallets of their United States

product by airfreight at Hangover Joe’s expense so that A2 Trade Partners would

not be empty-handed for a previously scheduled tradeshow.

23.

By about August 9, 2012, the initial Australian order was still not complete,

so Hangover Joe’s asked PLN to airfreight five of the 20 pallets A2 Trade Partners

was expecting because they were so behind in supplying customers and could not

wait on completion of the entire order.

24.

PLN commenced shipment of the 20-pallet order on or about September 4,

2012.

25.

On or about September 5, 2012, the first five pallets of product from PLN

arrived in Australia. A2 Trade Partners informed Hangover Joe’s that none of the

144,000 bottles that were shipped had perforated labels and that they were all

virtually impossible to open – they were all defective.


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26.

When it became apparent that the labels for the bottles on the remaining

pallets of the 20-pallet order that were set for shipment on September 4, 2012 were

not perforated, the pallets were pulled off the freighter before shipment at

Hangover Joe’s expense. Harden committed to relabeling the bottles with

perforations.

27.

Harden then told Hangover Joe’s by e-mail in or around the second week of

September 2012 that he could send three perforated pallets to Australia. These

three pallets were shipped on or about September 17, 2012. However, when they

arrived on or about November 17, 2012, the Australian distributor also found that

there were not sufficient perforations on the labels for the bottles, preventing the

consumer from breaking the seal.

28.

Unperforated bottles were shipped from PLN/Metaugus throughout the

United States and Canada, affecting shipments to multiple customers of Hangover

Joe’s.


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29.

After each nonconforming shipment, Hangover Joe’s immediately contacted

Connaughton and Harden about the defective product, rejecting it as unacceptable

and not in conformance with the specifications provided by Hangover Joe’s.

30.

Each time, Connaughton and Harden responded by saying that they did

indeed have a unit that could perforate but that it was an additional step in the

process that had been missed. PLN/Metaugus agreed to correct and reship the

product and assured Adamson and Hangover Joe’s that the bottles would be

perforated in the future.

31.

In reliance on the representations of PLN and Harden, Hangover Joe’s

purchased almost half a million dollars worth of product from PLN through

January 2013.

32.

Despite Harden’s assurances, the replacement product was not ready or

shipped within the timeline provided by Hangover Joe’s. Hangover Joe’s had to

pay significant expedited shipping costs to minimize the delays.


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33.

In late November 2012, five additional pallets arrived in Australia. The

bottles again were not properly perforated. The bottles were still virtually

impossible to open, and it appeared as if someone had attempted to create

perforations in the label with a hand-tool. Further, the shipment was still about 22

cases short.

34.

Adamson rejected the product and demanded assurances that PLN/Metaugus

would make things right.

35.

Further, Michael Jaynes, Hangover Joe’s Co-Founder, Chairman, and

Director of Operations (“Jaynes”), e-mailed Harden and demanded that

PLN/Metaugus rectify the situation immediately. Jaynes explained that Hangover

Joe’s relationships with Warner Bros. and their Australian distributor were in

jeopardy because of the failure to ship product in a merchantable condition. Jaynes

reminded them that millions of dollars were at stake in getting the shipments right.


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36.

In early December 2012, Harden assured Hangover Joe’s by e-mail that PLN

would get it right and that PLN/Metaugus were doing a rush reprint of the entire

label for all bottles.

37.

By early January 2013, PLN/Metaugus was failing to meet deadlines for

shipments to numerous United States and Canadian customers of Hangover Joe’s.

Other packaging issues also emerged, and product belonging to Hangover Joe’s

was damaged. PLN failed to properly glue 2-packs together, label the bottles with

the correct codes, and ship quantities consistent with packing slips. Hangover

Joe’s had to use third party companies to pick up the products, repack, and

redeliver, at significant expense. Hangover Joe’s also missed providing inventory

for the profitable holiday sales period.

38.

Despite Harden’s repeated assurances throughout the parties’ relationship

that PLN had the capability to comply with Hangover Joe’s ordering, scheduling

and bottling needs, they apparently could not keep up with demand. As Hangover

Joe’s orders increased due to the Australian marketing initiative and other orders,

Rene and Harden knew that PLN was not, in fact, capable of performing their


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commitments because neither PLN nor Metaugus had a machine to perform

perforation or the capacity to produce the volume of product Hangover Joe’s was

ordering within a reasonable amount of time. PLN/Metaugus, Rene, and Harden

therefore lied to, defrauded, and intended to mislead Hangover Joe’s about their

manufacturing capacity and capabilities in order to continue receiving

remuneration from Hangover Joe’s.

39.

With Hangover Joe’s ability to meet their customers’ orders in jeopardy,

Adamson traveled to Georgia to meet with Harden and Connaughton to try and

salvage what was left of the product PLN was allegedly in the process of

manufacturing and bottling.

40.

Adamson traveled to Cedartown, Georgia where the PLN/Metaugus plant

was located. While inspecting the plant, he asked to see the unit that perforated

labels. PLN/Metaugus was unable to produce one, and Harden and Connaughton

ultimately admitted they did not have such a machine and had misrepresented

having one. Harden explained that they had been using manual labor to attempt to

perforate the labels by hand.


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41.

Adamson and Hangover Joe’s were shocked at the admission that

PLN/Metaugus had tried to perforate hundreds of thousands of bottles by hand, but

in an effort to mitigate Hangover Joe’s losses, Adamson agreed to have

PLN/Metaugus move forward with their offer to send the unperforated bottles to

another plant to complete perforation at PLN’s expense.

42.

However, PLN/Metaugus never did a rush reprint of the labels on the

unperforated bottles or any reprints at all at Metaugus or any other facility.

PLN/Metaugus, Rene, and Harden knew they could not and were not going to

complete the reprints and perforations when they promised to do the rush reprint

and were attempting to collect as much money as possible from Hangover Joe’s

before Hangover Joe’s discovered the full extent of PLN’s, Rene’s, and Harden’s

fraudulent conduct.

43.

When PLN failed to perform in accordance with assurances, Hangover Joe’s

sought to reduce the damages and asked for the liquid that would be put into the

bottles so that it could send it to another manufacturer to bottle and label it. PLN,

Rene, and Harden agreed to provide it by 1:00 PM on January 29, 2013.


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44.

When PLN had not provided the liquid by February 8, 2013, Jaynes sent a

letter to Harden and Connaughton canceling the 3,000 gallon purchase of the liquid

in order to move forward with another manufacturer. Jaynes requested a refund of

the down payment that had secured production of the order.

45.

As a result of PLN’s, Harden’s, and Rene’s actions, A2 Trade Partners

canceled their second order with Hangover Joe’s and have declined to do business

with Hangover Joe’s since.

46.

PLN’s, Harden’s, and Rene’s actions also caused thousands of dollars worth

of damages to product belonging to Hangover Joe’s by making it unsalable.

47.

Based on the ordering schedule A2 Trade Partners provided to Hangover

Joe’s in June 2012, Hangover Joe’s lost millions of dollars because of Counter-

Defendants’ failure to meet their commitments and obligations. Hangover Joe’s

suffered additional losses by having to cover PLN’s failure to meet its

commitments.


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48.

Hangover Joe’s has also suffered substantial reputational damages to its

brand and loss of customers and customer goodwill because of Counter-

Defendants’ acts. These losses are reflected in the significant drop in Hangover

Joe’s stock price and other indicators.

49.

Since Hangover Joe’s relationship with PLN ended, it has learned that other

customers, upon information and belief, suffered similar losses as a result of PLN’s

fraudulent actions and breaches of commitments and that Counter-Defendants’

fraudulent activities are ongoing.

50.

A company called Activlab, LLC was also defrauded by PLN, Rene, and

Harden in a similar scheme where PLN promised it had the capability to prepare

orders to customers’ specifications when it did not. A lawsuit against PLN

regarding this matter is currently pending in the Western District of Tennessee,

Case No. 2:14-cv-02271-STA-CGC. Activlab, LLC alleges, among other

wrongful acts, as follows: “By delivering products adulterated with glycine,

mislabeling the products, and failing to provide products that abided by the


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contractual requirements, PLN … caused Activlab to incur damages.” (Id., Doc. 1-

1 ¶ 20.)

51.

PLN and Bjarte Rene have both been written up in publications such as the

“ripoffreport.com,” “scambook.com,” and “complaintsboard.com” for using fake

ingredients in products, shipping discrepancies, and lack of compliance with

applicable federal regulations. (See Exhibit 1.)

52.

PLN has also admitted in public filings that it tendered deficient goods to its

customers that were provided to it by Metaugus. See Private Label Nutraceuticals,

Inc. v. Metaugus, Inc., et al., Case No. 1:13-AP-43341-PWB, U.S. Bankruptcy

Court for the N.D. Ga., Doc. 66 ¶ 24; Case No. 1:14-AP-04006-PWB, U.S.

Bankruptcy Court for the N.D. Ga., Doc. 24 at 3 (“Metaugus fraudulently

represented to PLN that certain goods it manufactured for PLN were made in

accordance with the specifications provided by PLN’s customers to PLN and

subsequently to Metaugus when, in reality and unbeknownst to PLN, goods

manufactured by Metaugus for PLN apparently contained inferior, substituted

and/or missing ingredients, and otherwise failed to meet the required contractual

specifications.”).


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53.

As PLN, Rene, and Harden held Metaugus out as the manufacturing side of

PLN’s business and even permitted Metaugus representatives to use PLN e-mail

addresses, all acts of Metaugus and Connaughton are indistinguishable from the

acts of PLN, Rene, and Harden, and PLN, Rene, and/or Harden are liable for any

acts of Metaugus to the extent Metaugus is somehow distinguishable.

54.

Further, upon information and belief, PLN/Metaugus is currently under

investigation by the United States Food and Drug Administration for misbranding

products.

COUNT I: BREACH OF CONTRACT (Against PLN)

55.

Counter-Plaintiffs incorporate by reference and re-allege each and every

allegation in the above paragraphs as if fully set forth in this paragraph.

56.

PLN had an agreement with Hangover Joe’s to manufacture and bottle the

product within a reasonable time period and pursuant to Hangover Joe’s

specifications in exchange for Hangover Joe’s payments, amounting to at least

$443,418.17 over less than a one-year period.


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57.

Counter-Plaintiffs fully performed all terms and conditions of the agreement

and have been ready and willing to receive the goods and services purchased from

PLN pursuant to the specifications provided.

58.

PLN breached its agreement with Counter-Plaintiffs by failing to manufacture

or bottle the product pursuant to Hangover Joe’s specifications or in a state fit for the

ordinary purposes for which the product is used.

59.

PLN further breached its agreement with Counter-Plaintiffs by failing to

manufacture or bottle the product ordered within the time specified by Counter-

Plaintiffs and/or within a reasonable time.

60.

Hangover Joe’s notified PLN on numerous occasions of its breaches, which

PLN failed to remedy at any reasonable time thereafter or to date.

61.

As a direct result of PLN’s breach of the parties’ agreement to manufacture

and bottle the product within a reasonable time period, pursuant to Hangover Joe’s


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specifications, and/or in a merchantable condition, Hangover Joe’s has been damaged

in an amount to be determined by a jury at trial.

COUNT II: EQUITABLE RESCISSION

62.



63.

Under Georgia law, Hangover Joe’s is entitled to plead alternative theories of

recovery and seek alternative remedies.

64.

PLN’s actions and omissions amount to fraud, deceit, fraudulent

inducement, fraudulent misrepresentation, and/or negligent misrepresentation,

entitling Hangover Joe’s to equitable rescission of the agreement with PLN to

manufacture and bottle the product within a reasonable time period and pursuant to

Hangover Joe’s specifications.

65.

Hangover Joe’s justifiably relied on PLN’s representations constituting

PLN’s agreement to manufacture and bottle the product within a reasonable time

period and pursuant to Hangover Joe’s specifications.


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66.

PLN’s actions and omissions have actually and proximately caused injury

and damage to Hangover Joe’s.

67.

Hangover Joe’s is entitled to a full refund of all payments made pursuant to

the parties’ agreement and all damages allowed by law to place Hangover Joe’s in

the position it was in prior to entering into the agreement, including general,

nominal, special, actual, consequential, compensatory and punitive damages for

PLN’s specific intent to harm Hangover Joe’s.

COUNT III: UNJUST ENRICHMENT (Against All Counter-Defendants)

68.



69.

Under Georgia law, Hangover Joe’s is entitled to plead alternative theories of

recovery and seek alternative remedies and pleads this Count III under the theory

that any contract or agreement referenced in these Amended Counterclaims was not

valid or enforceable. Specifically, Hangover Joe’s had invalid and/or unenforceable

agreements with PLN, Rene, and Harden to manufacture and bottle the product


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within a reasonable time period and pursuant to Hangover Joe’s specifications in

exchange for Hangover Joe’s payments.

70.

PLN, Rene, and/or Harden have retained possession of payments made by

Hangover Joe’s for the manufacturing and bottling of the product purchased by

Hangover Joe’s but which was never delivered and/or not delivered in a form fit for

the ordinary purposes for which the product was intended to be used. These monies

were not earned, nor were they contractually due.

71.

PLN, Rene, and/or Harden have been unjustly enriched by their retention of

the monies paid by Hangover Joe’s.

72.

Hangover Joe’s has been damaged by the retention of such monies in an

amount to be determined by a jury at trial.

COUNT IV: NEGLIGENT MISREPRESENTATION (Against PLN and Harden)

73.




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74.

PLN and Harden, themselves and through their authorized representatives,

negligently made false representations to Hangover Joe’s, even if they believed

them to be true, in order to induce Hangover Joe’s to continue paying PLN to

manufacture and bottle the product.

75.

These negligent representations include, but may not be limited to, the

following statements:

(a) Harden told Adamson in or around May 2012 via telephone that PLN was adding a machine to their bottling line that could perforate labels;

(b) Harden told Adamson in or around May 2012 via telephone and e-mail

that Metaugus was part of the same operation as PLN and that PLN had a significant financial interest in Metaugus;

(c) Harden confirmed to Adamson in or around May 2012 via telephone that

Metaugus had a machine that could perforate labels for the product on the bottling line;

(d) Harden stated in or around May 2012 and on multiple occasions

thereafter via telephone and in person that PLN could handle the increased orders and production volume that Hangover Joe’s was expecting;

(e) Harden stated in or around September 2012 via e-mail and telephone that

he was shipping perforated pallets of product to Australia, when in fact the product was unperforated;


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(f) Both Connaughton and Harden stated on multiple occasions during the

period June-December 2012 via e-mail and in person that PLN/Metaugus had a unit that could perforate;

(g) As one specific example out of many instances, Connaughton e-mailed

Adamson on September 6, 2012 stating, “As I mentioned, we have a unit that can perf [sic]”;

(h) In December 2012, Harden assured Hangover Joe’s via e-mail and

telephone that PLN/Metaugus was doing a rush reprint of the entire label for all bottles; and

(i) Harden’s repeated assurances via e-mail, telephone, and in-person

throughout the parties’ relationship that PLN had the capability to comply with Hangover Joe’s order schedule and bottling needs.

76.

PLN and Harden negligently made the above statements and intended

Hangover Joe’s to rely on such statements to induce Hangover Joe’s to act or fail

to act.

77.

Hangover Joe’s justifiably relied upon these false statements to its detriment.

78.

As a proximate result of these negligent representations, Hangover Joe’s has

been damaged in an amount to be determined at trial.


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COUNT V: FRAUD (Against PLN and Harden)

79.



80.

Counter-Defendants made false representations to Counter-Plaintiffs in order

to induce them to pay and/or continue paying for manufacturing and bottling which

Counter-Defendants did not have the capability or capacity to adequately perform

including, but not limited to, the following statements:









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(e) Harden stated in or around September 2012 via e-mail and telephone that he was shipping perforated pallets of product to Australia, when in fact the product was unperforated;









81.

Counter-Defendants’ knew the above statements were false and made them

with the intent to defraud Counter-Plaintiffs.

82.

Counter-Plaintiffs justifiably relied upon Counter-Defendants’ false statements

to their detriment and made payments on the invoices sent by Counter-Defendants

based on the false statements indicating generally that Counter-Defendants had the


33

capacity and capability to sufficiently and timely manufacture and bottle the product

pursuant to Hangover Joe’s specifications.

83.

As a proximate result of Counter-Defendants’ materially false representations,

Counter-Plaintiffs have been damaged in an amount to be determined at trial.

84.

Counter-Defendants’ fraudulent representations were committed willfully or

with malice, fraud, wantonness, or oppression, and, therefore, Counter-Plaintiffs

additionally are entitled to punitive damages against Counter-Defendants.

COUNT VI: CONSTRUCTIVE FRAUD (Against All Counter-Defendants)

85.



86.

A confidential relationship and duty to disclose existed between Hangover

Joe’s and PLN, Rene, and Harden as a result of the trade secrets Hangover Joe’s

provided to Counter-Defendants as a trusted business partner, as well as Counter-

Defendants’ acceptance of that confidential information with the understanding that

Hangover Joe’s was relying on and trusting Counter-Defendants as their business


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partner to perform as promised.

87.

The confidential relationship between Hangover Joe’s, PLN, Rene, and/or

Harden obligated PLN, Rene, and/or Harden to disclose to Hangover Joe’s complete

and accurate information about the company’s capacity, capability, and intentions

with respect to the manufacturing and bottling ordered by Hangover Joe’s and the

previous federal investigations and customer complaints against PLN and Metaugus

to Hangover Joe’s.

88.

PLN, Rene, and/or Harden violated their confidential relationship with

Hangover Joe’s by failing to inform Hangover Joe’s that:

(a) they did not have the capacity or capability to perform the manufacturing and bottling ordered by Hangover Joe’s sufficiently and/or in a timely manner;

(b) they did not have a machine that could perforate labels; (c) they did not intend to provide the product ordered to Hangover Joe’s as

specified and/or in a timely manner; and (d) PLN and/or Metaugus had been or were being investigated by federal

agencies and were embroiled in disputes with other customers as a result of their failure to manufacture and bottle supplements ordered and paid for.

89.

Hangover Joe’s reasonably relied on the completeness and accuracy of the


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information provided to it by PLN, Rene, and/or Harden in placing orders.

90.

By taking advantage of their confidential relationship with Hangover Joe’s,

PLN, Rene, and/or Harden induced Hangover Joe’s to reasonably rely, and Hangover

Joe’s did reasonably rely, on the failure to communicate the facts set forth in sections

(a) through (d) of paragraph 88. Hangover Joe’s therefore continued to pay Counter-

Defendants and failed to seek an alternative manufacturer based on Counter-

Defendants’ failure to disclose. All the while, Counter-Defendants knew they could

not provide the products and services Hangover Joe’s paid for and that Counter-

Defendants agreed to provide.

91.

As a proximate result of PLN’s, Rene’s, and/or Harden’s constructive fraud,

Hangover Joe’s has been damaged, and continues to be damaged, in an amount to be

determined at trial, with all available legal and/or equitable relief awarded.


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COUNT VII: BREACH OF THE IMPLIED COVENANTS OF GOOD FAITH AND FAIR DEALING

(Against PLN)

92.



93.

PLN had an agreement with Hangover Joe’s to manufacture and bottle the

product within a reasonable time period and pursuant to Hangover Joe’s

specifications in exchange for Hangover Joe’s payments, amounting to at least

$443,418.17 over less than a one year period.

94.

Hangover Joe’s has fully performed all terms and conditions of the agreement

and has been ready and willing to receive the correct goods and services purchased

from PLN or, alternatively, accept a refund and damages for having to cover its

losses plus consequential damages.

95.

The agreement between Hangover Joe’s and PLN contained an implied

warranty of good faith and fair dealing under which each party agreed to satisfy their

respective obligations under the agreement and not to interfere with each other’s right


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to receive the benefits under the agreement.

96.

PLN unfairly interfered with Hangover Joe’s right to receive the benefits of the

agreement and failed to satisfy their obligations by failing to manufacture and bottle

the product in a form fit for the ordinary purpose for which the product was intended

to be used and in a reasonably timely manner as promised and still have not done so

to date.

97.

As a result of PLN’s conduct, Hangover Joe’s has been damaged in an amount

to be determined by a jury at trial.

COUNT VIII: VIOLATION OF RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT – MAIL AND WIRE FRAUD

(Against All Counter-Defendants)

98.



99.

This cause of action arises under the Racketeer Influenced and Corrupt

Organizations Act, 18 U.S.C. §§ 1961, et seq. (“RICO”).


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100.

Counter-Defendants’ actions, including but not limited to the following,

constitute violations of RICO:

(a) Counter-Defendants violated 18 U.S.C. § 1962(a) by receiving income

from racketeering activities, which include but are not limited to the

practice of purporting to sell and receiving payment for supplement

manufacturing and bottling services through the United States mail,

electronic mail, and online websites, that they neither have the capacity

nor capability to perform, nor intend to perform, and by reinvesting the

income received from these fraudulent sales in an organization that

pursues racketeering activities.

(b) Counter-Defendants violated 18 U.S.C. § 1962(b) by maintaining

control of an entity that affects interstate commerce through a pattern of

racketeering activity, which includes but is not limited to the practice of

purporting to sell and receiving payment for supplement manufacturing

and bottling services through the United States mail, electronic mail,

and online websites, that they neither have the capacity nor capability to

perform, nor intend to perform.


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(c) Counter-Defendants violated 18 U.S.C. § 1962(c) through Counter-

Defendants, Counter-Defendants’ agents, associates, and representatives

conspiring to conduct the affairs of Counter-Defendants through a

pattern of racketeering activity. Specifically, Counter-Defendants and

their agents have made fraudulent representations to Counter-Plaintiffs,

other customers, and the general public through their public

advertisements, web-based communications and sales forums, print

media, and e-mail and mail communications in violation of 18 U.S.C.

§§ 1341 and 1343 regarding the capabilities, qualities, and existence of

the equipment and manufacturing services Counter-Defendants purport

to offer.

101.

The fraudulent statements made to elicit payments from Hangover Joe’s, which

constitute mail and/or wire fraud, include, but may not be limited to, the following:





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(c) Harden confirmed to Adamson in or around May 2012 via telephone that Metaugus had a machine that could perforate labels for the product on the bottling line;











Harden’s repeated assurances via e-mail, telephone, and in-person throughout the

parties’ relationship that PLN had the capability to comply with Hangover Joe’s

order schedule and bottling needs.

102.

Upon information and belief, Rene is the founder, CEO, and owner of PLN


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and orchestrated and/or authorized all of the fraudulent statements referenced above.

Harden is an owner and Vice President of Sales at PLN and either made,

orchestrated, and/or authorized all of the fraudulent statement referenced above.

Together they controlled and control all aspects of PLN’s practices, activities, and

operations.

103.

Counter-Defendants voluntarily and intentionally devised the scheme to make

misrepresentations constituting mail and wire fraud to Hangover Joe’s about their

ability and capacity to perform as agreed in order to receive payments from

Hangover Joe’s, with full knowledge that they could not perform as they promised.

Counter-Defendants intended to defraud Hangover Joe’s.

104.

Counter-Defendants’ criminal scheme to defraud customers is ongoing, as the

Activlab, LLC lawsuit and federal investigation of PLN make clear.

105.

It was reasonably foreseeable that interstate wire and mail communications

would be used to perpetuate Counter-Defendants’ fraudulent communications, and

interstate wire and mail communications were, in fact, used to relay fraudulent

misrepresentations.


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106.

Rene and Harden are individuals who have profited from the scheme to accept

payment for supplement manufacturing and bottling services through the United

States mail, electronic mail, and online websites, that they neither have the capacity

nor capability to perform, nor intend to perform, and therefore are persons who have

received income, from a “pattern of racketeering” as defined in 18 U.S.C. § 1961(3).

107.

As a result of the foregoing violations of RICO, Counter-Defendants

proximately caused injury to Hangover Joe’s and are liable to Hangover Joe’s

pursuant to 18 U.S.C. § 1964 for declaratory judgment that Counter-Defendants’

conduct violated RICO, treble compensatory and punitive damages, and costs of

attorneys’ fees.

COUNT IX: VIOLATION OF GEORGIA RICO ACT (Against All Counter-Defendants)

108.



109.

Counter-Defendants violated Georgia’s Racketeer Influenced and Corrupt

Organizations Act (“State RICO”). Specifically, Counter-Defendants violated


43

O.C.G.A. § 16-14-4(a) - (c) by acquiring money through the scheme of accepting

payment for supplement manufacturing and bottling services that they neither have

the capacity nor capability to perform, nor intend to perform. Counter-Defendants

accomplish and have accomplished this through fraudulent representations to

Hangover Joe’s, other customers, and the general public in their public

advertisements, web-based communications and sales forums, print media, and e-

mail and United States mail communications.

110.

The fraudulent statements made to elicit payments from Hangover Joe’s,

which constitute mail and/or wire fraud, include, but may not be limited to, the

following:







thereafter via telephone and in person that PLN could handle the


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increased orders and production volume that Hangover Joe’s was expecting;







(h) In December 2012, Harden assured Hangover Joe’s via e-mail and telephone that PLN/Metaugus was doing a rush reprint of the entire label for all bottles; and



111.

Upon information and belief, Rene is the founder, CEO, and owner of PLN

and orchestrated and/or authorized all of the fraudulent statements referenced above.

Harden is an owner and Vice President of Sales at PLN and either made,

orchestrated, and/or authorized all of the fraudulent statement referenced above.

Together they controlled and control all aspects of PLN’s practices, activities, and


45

operations.

112.

Counter-Defendants voluntarily and intentionally devised the scheme to make

misrepresentations constituting mail and wire fraud to Hangover Joe’s about their

ability and capacity to perform as agreed in order to receive payments from

Hangover Joe’s, with full knowledge that they could not perform as they promised.

Counter-Defendants intended to defraud Hangover Joe’s.

113.

Counter-Defendants’ criminal scheme to defraud customers is ongoing, as the

Activlab, LLC lawsuit and federal investigation of PLN make clear.

114.

It was reasonably foreseeable that interstate wire and mail communications

would be used to perpetuate Counter-Defendants’ fraudulent communications, and

interstate wire and mail communications were, in fact, use to relay fraudulent

misrepresentations.

115.

As a result of the foregoing violations of State RICO, Counter-Defendants

proximately caused injury to Hangover Joe’s and are liable to Hangover Joe’s under

O.C.G.A. § 16-14-6 for declaratory judgment that Counter-Defendants’ conduct


46

violated State RICO, treble compensatory and punitive damages, and costs of

attorneys’ fees.

COUNT X: ATTORNEYS’ FEES (Against All Counter-Defendants)

116.



117.

Counter-Defendants have acted in bad faith, have been stubbornly litigious,

and/or have caused Hangover Joe’s unnecessary trouble and expense.

118.

As a result of Counter-Defendants’ conduct, Hangover Joe’s is entitled to

recover expenses of litigation, including reasonable attorneys’ fees, from Counter-

Defendants, pursuant to O.C.G.A. § 13-6-11.

ACCORDINGLY, Counter-Plaintiffs respectfully request that the Court:

A. enter judgment in favor of Counter-Plaintiffs against PLN, Rene and

Harden on all causes of action as well as for punitive damages and attorneys’ fees for

their wrongdoing;

B. grant to Counter-Plaintiffs actual, treble compensatory, and

consequential damages;


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C. order PLN, Rene and Harden to pay Plaintiff’s attorneys’ fees and

expenses incurred in pursuing this lawsuit; and

D. award any and all other relief that this Court may deem necessary and

proper.

DEMAND FOR TRIAL BY JURY

Counter-Plaintiffs respectfully submit a demand for a trial by jury as to all

counterclaims and third-party claims.

/s/ Theresia M. Moser Theresia M. Moser

Georgia Bar No. 526514 Elizabeth Bulat Turner

Georgia Bar No. 558428 Meyer Moser Lang LLP Southern Dairies Building 621 North Avenue, N.E. Suite C-150 Atlanta, Georgia 30308 (404) 537-5330 phone (404) 537-5340 facsimile [email protected] [email protected]

Attorneys for Hangover Joe’s Holding Corporation and Hangover Joe’s, Inc.


CERTIFICATE OF SERVICE

I certify that I used the CM/ECF system to serve a copy of DEFENDANTS’

FIRST AMENDED ANSWER, COUNTERCLAIMS AND THIRD-PARTY

COMPLAINT on the Clerk of Court for the Northern District of Georgia and the

following CM/ECF participants:

David Allen Roberts Jonathan D. Letzring Hall, Arbery, Gilligan, Roberts & Shanlever LLP 3340 Peachtree Road, Suite 2570 Atlanta, Georgia 30326

This 6th day of June, 2014.

/s/ Theresia M. Moser Theresia M. Moser

Georgia Bar No. 526514 Elizabeth Bulat Turner

Georgia Bar No. 558428 Meyer Moser Lang LLP Southern Dairies Building 621 North Avenue, N.E. Suite C-150 Atlanta, Georgia 30308 (404) 537-5330 phone (404) 537-5340 facsimile [email protected] [email protected]

Attorneys for Hangover Joe’s Holding Corporation and Hangover Joe’s, Inc.


in the united states district court for the...

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