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Pierre & Carlo, Inc. v. Premier Salons

May 24, 2010

PIERRE & CARLO, INC., ET AL., PLAINTIFFS
v.
PREMIER SALONS, INC., ET AL., DEFENDANTS



The opinion of the court was delivered by: Anita B. Brody, J.

MEMORANDUM*fn1

I. FACTS*fn2

For more than 30 years, Plaintiff Pierre & Carlo operated one of the top salons and spas in Philadelphia in leased premises at The Bellevue, 200 S. Broad Street, Philadelphia (the "Premises").During that time, Plaintiff Joseph Cutrufello, the owner, president, and manager of Pierre & Carlo,*fn3 worked tirelessly to develop Pierre & Carlo's reputation and expand its clientele.

Pierre & Carlo spent more than a million dollars advertising its name (TR20 at 99-101) and devoted considerable resources to train its employees. It took "many years" and "a lot of time, energy, and investment" to educate Pierre & Carlo employees and build customer loyalty. (TR20 at 124.)

On October 23, 2009, Pierre & Carlo's long history at The Bellevue came to a sudden halt. By cooperating with Defendant Premier Salons, The Bellevue ousted Pierre & Carlo from the Premises and allowed Premier to change the locks, in violation of a lease agreement that allowed Pierre & Carlo to occupy the Premises through June 30, 2015. (TR20 at 102, 142-43.) On that same day, Premier seized Pierre & Carlo's business; Premier immediately put Pierre & Carlo employees to work servicing Pierre & Carlo customers.

Unbeknownst to Pierre & Carlo, The Bellevue and Premier had been scheming about the takeover for months. Jocelyne Horst, Premier's Senior Vice President, assisted because she apparently had prior experience with similar takeovers; even she thought it was "[s]ad that I have this down to science." (Ex. L.) To secure Cutrufello's cooperation, Horst instructed Premier employees to "dangle the potential of a position" in front of him. Id. Premier employees followed through on that request.

On October 21, 2009, Premier instructed The Bellevue's management to tell Cutrufello that Premier was "interested in speaking to him about employment options." (TR19 at 153-56.) Later that day, Premier offered Cutrufello a job at the salon working for Premier. (TR20 at 131-32.) Premier also asked Cutrufello to "let the staff know that . . . he was going to be staying" in order "to give the staff comfort." (TR20 at 56-57.) Relying on Premier's representations, Cutrufello complied with its requests.

On October 23, 2009, Cutrufello went into the salon under the impression that he had employment with Premier. (TR20 at 135.) Instead, Premier rescinded its job offer and ordered Cutrufello to leave the Premises. (TR20 at 76-78, 139-40.) Cutrufello left, believing that he would be ejected by security if he failed to comply with Premier's demand. (TR20 at 145.)

From October 23, 2009 onward, Premier operated the salon for its own profit. Premier immediately began servicing Pierre & Carlo customers, many of whom booked their appointments with Pierre & Carlo prior to the takeover (TR19 at 78-79), by using Pierre & Carlo's name, license, equipment and furniture, employees, and customer lists, as follows:*fn4

* Name: Through November 1, 2009, Premier displayed Pierre & Carlo signage, offered Pierre & Carlo branded products for sale, wore aprons with the Pierre & Carlo logo, issued customer receipts bearing the Pierre & Carlo logo, and distributed business cards with the Pierre & Carlo phone number. (Ex. CC.) Premier personnel who called customers said that they were calling from Pierre & Carlo. Id. Additionally, Premier accepted Pierre & Carlo gift certificates through December 31, 2009. (TR20 at 38-39.)

* License: Premier currently operates in the Premises pursuant to a license issued by the State Board of Cosmetology (the "State Board"). To get this license, Premier supplied Pierre & Carlo's telephone and license numbers and represented that there had been a "change in ownership" in the salon at The Bellevue. (Ex. R.) By misrepresenting the takeover as a change in ownership rather than identifying the opening of a "new salon," Premier was able to take advantage of a 90 day grace period that allowed it to open for business on October 23, 2009 without an inspection. (See Exs. T, U.) Premier's statement that there had been a "change of ownership" also prevented Pierre & Carlo from benefitting from a 90 day grace period that would allow it to transfer its existing license to a different location. (See Pl.'s Feb. 19, 2010 Findings of Fact, Doc. # 34, Ex. 8.)

* Equipment and Furniture: Pierre & Carlo retains title to virtually all of the equipment that Premier uses to service customers.*fn5 (TR19 at 128-29.) In contrast, Premier has never paid Pierre & Carlo, or anyone else, for its continued use of the equipment. (TR19 at 160-65.)*fn6

* Employees: Premier hired the former Pierre & Carlo employees*fn7 and required that they sign non-compete, non-solicitation of customers, and confidentiality agreements. (TR19 at 57-59; Ex. Y.)*fn8 Premier also offered signing bonuses to employees who had previously worked for Pierre & Carlo, but required that employees agree to return the bonus if they leave Premier's employ within one year. (TR19 at 57-59, 120-121.)

* Customer lists: The newly-minted Premier employees used customer contact information from client lists that they developed and maintained when they worked for Pierre & Carlo. (TR19 at 123.) Pierre & Carlo's Policies & Procedures Manual prohibited such use, treating customer information as confidential salon property:

Salon records such as perm cards, color cards, names, addresses and phone numbers of clients are the property of Pierre and Carlo, Inc. Any such records are for Salon use and for performance of such services. These records are not to be removed from the Salon.

(TR20 at 270-71.) Pierre & Carlo also prohibited its employees from selling client information to third parties. (TR20 at 124-25.)

Premier's takeover of Pierre & Carlo's business prevented Pierre & Carlo from continuing operations at The Bellevue and interfered with its ability to open a new salon in a different location. Although Pierre & Carlo was in debt on October 23, it was taking steps to improve its profitability by increasing sales and reducing overhead. (TR20 at 120-22.) Pierre & Carlo was also engaged in discussions with a potential business partner who was confident that he could run a profitable salon at The Bellevue. (TR20 at 121-22.)

Absent Premier's intrusion, Pierre & Carlo could have opened a new salon and spa in a different location or brought its name and clientele to another high-end salon in the Philadelphia area. (TR20 at 123-24, 153-54.) Premier's actions, however, destroyed Pierre & Carlo's ability to relocate: Cutrufello clearly testified that Pierre & Carlo is unable to open a new salon without its equipment and that if it were able to reacquire the furniture and inventory, it would help re-establish the business. (TR20 at 110-11, 277-81.)*fn9 I find Cutrufello's testimony that, if granted appropriate relief, he will attempt to open a new Pierre & Carlo salon entirely credible. I also find that because of the name recognition and branding associated with the Pierre & Carlo name, Cutrufello's efforts to open a salon, either alone or with a business partner, are likely to succeed.(See TR20 at 120-22.)*fn10

On October 30, 2009, Plaintiffs filed this action in an attempt to prevent Premier from further sabotaging its business. On November 4, 2009, Pierre & Carlo filed a motion for a preliminary injunction, asking that I enjoin Premier from (i) directly or indirectly operating a beauty salon and/or day spa at The Bellevue, (ii) using the name Pierre & Carlo or any derivation thereof, or (iii) otherwise using in any form or fashion the good will or other assets of Plaintiffs. On November 10, 2009, I held a telephone conference with the parties. At this conference, Premier assured the Court that it would refrain from using the name Pierre & Carlo. On November 12, 2009, consistent with that representation, I issued an order preliminarily enjoining and restraining Premier from using the Pierre & Carlo name.

Premier, however, failed to inform its employees about the Court order. (TR19 at 89-90, 115; TR20 at 44.)*fn11 As a result, in November 2009, Premier employees mailed letters prepared by Premier's marketing division to Pierre & Carlo customers that clearly use the Pierre & Carlo name. (See TR20 at 43.)*fn12

Not content to simply use Pierre & Carlo's license, equipment, employees, and customer lists, Premier also attempted to usurp Pierre & Carlo's hard earned reputation. The first letter, sent in early November, emphasized Pierre & Carlo's tradition of providing high quality salon and spa services:

Halcyon Days Salon & Spa opened for business on October 23 in the space previously known as Pierre & Carlo Salon and Spa, to carry on the legacy of one of Philadelphia's top beauty destinations. Guests can expect the same great service and staff, while experiencing a renewed commitment to quality and luxury with support from the location's new operator.

With Pierre and Carlo's 30-year history at The Bellevue, and a clientele that includes government and business dignitaries, high-society brides and celebrities, becoming a part of the Halcyon Days network will take this formerly family-run business to the next level. (Ex. AA.) On November 29, 2009, Premier employees mailed a similar letter, again stating that Premier intended to "carry on the legacy" of Pierre & Carlo. (Ex. FF.) In addition to interfering with Pierre & Carlo's ability to open a new salon, Premier's attempts to capitalize on Pierre & Carlo's reputation and good will inhibit Pierre & Carlo's ability to collect licensing fees for the use of its name. Pierre & Carlo currently collects such licensing fees from a salon and spa located in Wyncote, Pennsylvania. (TR20 at 218-19.)

II.DISCUSSION

Pierre & Carlo requests the following injunctive relief:

1. Defendant is directed to immediately withdraw the Salon Licensure Application filed with the State Board of Cosmetology at Application Number 2744490.

2. Defendant is directed to immediately cease and desist from operating under Salon License No. CB122284 and to surrender said License to The State Board of Cosmetology.

3. Defendant is direct to immediately notify the State Board in writing of the following fraudulent misrepresentations made in its application and cover letter:

a. Salon Telephone Number 215-790-9910 is not and has never been a number legitimately associated with or owned by Defendant.

b. Defendant never held or possessed a Salon License No. CB088972L.

c. There was no "Change of ownership" associated with Salon License No. CB088972L.

d. Defendant does not lawfully possess or own the minimum equipment required for licensure at the location of the applicant.

e. The following statement was a misrepresentation: "The business has changed ownership, unfortunately the previous owner has refused to cooperate with Trade Secret Beauty Stores, Inc. in this change over period."*fn13

4. Defendant shall immediately cease and desist from operating within The Bellevue.

5. Defendant shall immediately surrender the original and all copies of customer information relating to any and all customers who patronized Pierre & Carlo on and prior to October 23, 2009.

6. Defendant shall immediately notify all former employees of Pierre & Carlo now employed by Defendant that they are excused from any obligations or burdens imposed under the Personnel Status forms, the Employment Agreements and the Sign On Bonus Agreements.

7. Defendant shall immediately cease and desist from using any and all furniture, fixture, and equipment present in the salon on October 23, 2009.

8. Defendant shall immediately cease and desist from providing any service to customers who patronized Pierre & Carlo on and prior to October 23, 2009.

9. Defendant shall immediately notify in writing all customers of Pierre & Carlo prior to October 23, 2009, that the statements made in the letters mailed on or about November 20, 2009 are false and fraudulent and that there has never been any legitimate association between Pierre & Carlo and Halcyon Days Salon & Spa.

10. Defense counsel shall certify to the Court within 10 days of the entry of the Court's Order that Defendant has fully complied with each and every term stated therein, and that a copy of the Court's Order has been provided to each and every person employed by Defendant at The Bellevue and to each management level employee with responsibility for the operation of the salon at The Bellevue including Briar Van Metter, Snow Proudlove, Megan Stern, Jocelyn Horst, Blair Hodgson, Brian Luborsky, Paul Bernards and Michael Kirkpatrick.

A. Preliminary Injunction Standard

"The test for preliminary relief is a familiar one. A party seeking a preliminary injunction must show: (1) a likelihood of success on the merits; (2) that it will suffer irreparable harm if the injunction is denied; (3) that granting preliminary relief will not result in even greater harm to the nonmoving party; and (4) that the public interest favors such relief." Kos Pharm., Inc. v. Andrx Corp., 369 F.3d 700, 708 (3d Cir. 2004).

Preliminary injunctions are extraordinary relief that should be granted only in limited circumstances. Am. Tel. & Tel. Co. v. Winback & Conserve Program, Inc., 42 F.3d 1421, 1426-27 (3d Cir. 1994). "A primary purpose of a preliminary injunction is maintenance of the status quo until a decision on the merits of a case is rendered." Acierno v. New Castle County, 40 F.3d 645, 647 (3d Cir. 1994). "Status quo" refers to "the last, peaceable, noncontested status of the parties." Kos Pharm., 369 F.3d at 708.

B. Claims for Relief

Plaintiff requests preliminary injunctive relief based on its claims for (1) conversion, (2) violations of the Lanham Act, and (3) intentional interference with present and prospective business and contractual relations. I apply the traditional ...


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