Private Label Nutraceuticals, LLC v. Hangover Joe's Holding Corporation Et Al Doc 13

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 1 of 48
IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
PRIVATE LABEL
NUTRACEUTICALS, LLC,
)
)
)
Plaintiff/
)
Counterclaim-Defendant,
)
)
v.
)
)
HANGOVER JOES HOLDING )
CORPORATION and
)
HANGOVER JOES, INC.,
)
)
Defendants/
)
Counterclaim-Plaintiffs/
)
Third-Party Plaintiffs,
)
)
v.
)
)
BJARTE RENE and
)
KEVIN HARDEN,
)
)
Third-Party Defendants.
)
______________________________ )
CIVIL ACTION NO:

1:14-cv-00683-ODE
DEMAND FOR JURY TRIAL
DEFENDANTS FIRST AMENDED ANSWER,

COUNTERCLAIMS AND THIRD-PARTY COMPLAINT
Defendants Hangover Joes Holding Corporation and Hangover Joes, Inc.
(Hangover Joes, Defendants, or Counter-Plaintiffs) file this amended
response (Answer under Fed. R. Civ. P. 15(a)(1)(B) to the pleading titled
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.
2
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.
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 Joes 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
Plaintiff.
Moreover, Defendants do not admit any liability in asserting the
following affirmative and other defenses.

FIRST DEFENSE
Plaintiffs Complaint and each specific cause of action fail to state a claim
upon which relief can be granted.
SECOND DEFENSE
Some or all of Plaintiffs 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
Plaintiffs claims may be barred, in whole or in part, by Plaintiffs own
wrongful acts or omissions, including acts of fraud.
SIXTH DEFENSE
Some or all of Plaintiffs 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
Plaintiffs 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
Plaintiffs Complaint is barred in whole or in part because of Plaintiffs
breaches of contract.
ELEVENTH DEFENSE
Some or all of Plaintiffs claims are barred by its willful breach of duty,
habitual neglect of duty or continued incapacity to perform its duty.
TWELFTH DEFENSE
Some or all of Plaintiffs 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 Joes files the following counterclaims against Plaintiff and ThirdParty Complaint against Bjarte Rene and Kevin Harden and respectfully shows the
Court the following:
PARTIES
2.
Counter-Plaintiffs are both corporations organized under the laws of the
state of Colorado.
To date, Hangover Joes 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 clients 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.
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 CounterDefendants 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.
BACKGROUND INFORMATION
8.
In late 2011, Hangover Joes reached agreement with PLN to manufacture,
bottle, and label The Hangover Recovery Shot.
9.
PLN signed a document entitled Agreement to Manufacture with
Hangover Joes, 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 Joes. Rene also communicated with Hangover
Joes representatives, including Shawn Adamson, Hangover Joes 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.
10
12.
PLN represented that it did not manufacture perforated plastic sleeve labels.
PLN introduced Hangover Joes 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 twoounce bottles that contained the products liquid formulation.
13.
In or around May 2012, KDM informed PLN and Hangover Joes 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 Joes to their partner, Metaugus, Inc., which
Harden explained performed the manufacturing side of PLNs business.
11
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 PLNs operations.
Connaughton had a PLN e-mail address,
indicating that he worked directly with PLN, and he used this address to
communicate with Hangover Joes, 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 Joes did not move its business
and continued to use PLN to manufacture, bottle and label the product.
12
20.
Near this time, in or around May 2012, Hangover Joes 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 Joes could count on PLN to fulfill the orders and
that they would be Hangover Joes trusted business partner in manufacturing
product for the Australian job. As a result, Hangover Joes 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 PLNs and Hardens representations that they were Hangover Joes trusted
business partner.
22.
By about June 2012, Hangover Joes had ordered 7,200 bottles labeled for
Australia that Harden said would be ready for shipment by July 1, 2012. However,
13
the product was not ready for shipment to Australia as promised, and on or about
July 25, 2012, Hangover Joes had to ship three pallets of their United States
product by airfreight at Hangover Joes 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 Joes 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 Joes 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.
14
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 Joes expense.
Harden committed to relabeling the bottles with
perforations.
27.
Harden then told Hangover Joes 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
Joes.
15
29.
After each nonconforming shipment, Hangover Joes immediately contacted
Connaughton and Harden about the defective product, rejecting it as unacceptable
and not in conformance with the specifications provided by Hangover Joes.
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 Joes that the bottles would be
perforated in the future.
31.
In reliance on the representations of PLN and Harden, Hangover Joes
purchased almost half a million dollars worth of product from PLN through
January 2013.
32.
Despite Hardens assurances, the replacement product was not ready or
shipped within the timeline provided by Hangover Joes. Hangover Joes had to
pay significant expedited shipping costs to minimize the delays.
16
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 Joes Co-Founder, Chairman, and
Director of Operations (Jaynes), e-mailed Harden and demanded that
PLN/Metaugus rectify the situation immediately. Jaynes explained that Hangover
Joes 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.
17
36.
In early December 2012, Harden assured Hangover Joes 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 Joes.
Other packaging issues also emerged, and product belonging to Hangover Joes
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
Joes had to use third party companies to pick up the products, repack, and
redeliver, at significant expense. Hangover Joes also missed providing inventory
for the profitable holiday sales period.
38.
Despite Hardens repeated assurances throughout the parties relationship
that PLN had the capability to comply with Hangover Joes ordering, scheduling
and bottling needs, they apparently could not keep up with demand. As Hangover
Joes 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
18
commitments because neither PLN nor Metaugus had a machine to perform

perforation or the capacity to produce the volume of product Hangover Joes was
ordering within a reasonable amount of time. PLN/Metaugus, Rene, and Harden
therefore lied to, defrauded, and intended to mislead Hangover Joes about their
manufacturing capacity and capabilities in order to continue receiving
remuneration from Hangover Joes.
39.
With Hangover Joes 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.
19
41.
Adamson and Hangover Joes 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 Joes losses, Adamson agreed to have
PLN/Metaugus move forward with their offer to send the unperforated bottles to
another plant to complete perforation at PLNs 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 Joes
before Hangover Joes discovered the full extent of PLNs, Renes, and Hardens
fraudulent conduct.
43.
When PLN failed to perform in accordance with assurances, Hangover Joes
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.
20
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 PLNs, Hardens, and Renes actions, A2 Trade Partners
canceled their second order with Hangover Joes and have declined to do business
with Hangover Joes since.
46.
PLNs, Hardens, and Renes actions also caused thousands of dollars worth
of damages to product belonging to Hangover Joes by making it unsalable.
47.
Based on the ordering schedule A2 Trade Partners provided to Hangover
Joes in June 2012, Hangover Joes lost millions of dollars because of CounterDefendants failure to meet their commitments and obligations. Hangover Joes
suffered additional losses by having to cover PLNs failure to meet its
commitments.
21
48.
Hangover Joes has also suffered substantial reputational damages to its
brand and loss of customers and customer goodwill because of CounterDefendants acts. These losses are reflected in the significant drop in Hangover
Joes stock price and other indicators.
49.
Since Hangover Joes relationship with PLN ended, it has learned that other
customers, upon information and belief, suffered similar losses as a result of PLNs
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
22
contractual requirements, PLN caused Activlab to incur damages. (Id., Doc. 11 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 PLNs 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.).
23
53.
As PLN, Rene, and Harden held Metaugus out as the manufacturing side of
PLNs 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 Joes to manufacture and bottle the
product within a reasonable time period and pursuant to Hangover Joes
specifications in exchange for Hangover Joes payments, amounting to at least
$443,418.17 over less than a one-year period.
24
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 Joes 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 CounterPlaintiffs and/or within a reasonable time.
60.
Hangover Joes 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 PLNs breach of the parties agreement to manufacture
and bottle the product within a reasonable time period, pursuant to Hangover Joes
25
specifications, and/or in a merchantable condition, Hangover Joes has been damaged

in an amount to be determined by a jury at trial.
COUNT II: EQUITABLE RESCISSION
62.
63.
Under Georgia law, Hangover Joes is entitled to plead alternative theories of
recovery and seek alternative remedies.
64.
PLNs actions and omissions amount to fraud, deceit, fraudulent
inducement, fraudulent misrepresentation, and/or negligent misrepresentation,
entitling Hangover Joes to equitable rescission of the agreement with PLN to
manufacture and bottle the product within a reasonable time period and pursuant to
Hangover Joes specifications.
65.
Hangover Joes justifiably relied on PLNs representations constituting
PLNs agreement to manufacture and bottle the product within a reasonable time
period and pursuant to Hangover Joes specifications.
26
66.
PLNs actions and omissions have actually and proximately caused injury
and damage to Hangover Joes.
67.
Hangover Joes is entitled to a full refund of all payments made pursuant to
the parties agreement and all damages allowed by law to place Hangover Joes in
the position it was in prior to entering into the agreement, including general,
nominal, special, actual, consequential, compensatory and punitive damages for
PLNs specific intent to harm Hangover Joes.
COUNT III: UNJUST ENRICHMENT
(Against All Counter-Defendants)
68.
69.
Under Georgia law, Hangover Joes 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 Joes had invalid and/or unenforceable
agreements with PLN, Rene, and Harden to manufacture and bottle the product
27
within a reasonable time period and pursuant to Hangover Joes specifications in

exchange for Hangover Joes payments.
70.
PLN, Rene, and/or Harden have retained possession of payments made by
Hangover Joes for the manufacturing and bottling of the product purchased by
Hangover Joes 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 Joes.
72.
Hangover Joes 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.
28
74.
PLN and Harden, themselves and through their authorized representatives,
negligently made false representations to Hangover Joes, even if they believed
them to be true, in order to induce Hangover Joes 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 Joes 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;
29
(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 Joes via e-mail and
telephone that PLN/Metaugus was doing a rush reprint of the entire label
for all bottles; and
(i) Hardens repeated assurances via e-mail, telephone, and in-person
throughout the parties relationship that PLN had the capability to
comply with Hangover Joes order schedule and bottling needs.
76.
PLN and Harden negligently made the above statements and intended
Hangover Joes to rely on such statements to induce Hangover Joes to act or fail
to act.
77.
Hangover Joes justifiably relied upon these false statements to its detriment.
78.
As a proximate result of these negligent representations, Hangover Joes has
been damaged in an amount to be determined at trial.
30
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:
bottling line;
expecting;
31
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
32
capacity and capability to sufficiently and timely manufacture and bottle the product
pursuant to Hangover Joes 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
85.
86.
A confidential relationship and duty to disclose existed between Hangover
Joes and PLN, Rene, and Harden as a result of the trade secrets Hangover Joes
provided to Counter-Defendants as a trusted business partner, as well as CounterDefendants acceptance of that confidential information with the understanding that
Hangover Joes was relying on and trusting Counter-Defendants as their business
33
partner to perform as promised.

87.
The confidential relationship between Hangover Joes, PLN, Rene, and/or
Harden obligated PLN, Rene, and/or Harden to disclose to Hangover Joes complete
and accurate information about the companys capacity, capability, and intentions
with respect to the manufacturing and bottling ordered by Hangover Joes and the
previous federal investigations and customer complaints against PLN and Metaugus
to Hangover Joes.
88.
PLN, Rene, and/or Harden violated their confidential relationship with
Hangover Joes by failing to inform Hangover Joes that:
(a) they did not have the capacity or capability to perform the manufacturing
and bottling ordered by Hangover Joes 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 Joes 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 Joes reasonably relied on the completeness and accuracy of the
34
information provided to it by PLN, Rene, and/or Harden in placing orders.

90.
By taking advantage of their confidential relationship with Hangover Joes,
PLN, Rene, and/or Harden induced Hangover Joes to reasonably rely, and Hangover
Joes did reasonably rely, on the failure to communicate the facts set forth in sections
(a) through (d) of paragraph 88. Hangover Joes therefore continued to pay CounterDefendants and failed to seek an alternative manufacturer based on CounterDefendants failure to disclose. All the while, Counter-Defendants knew they could
not provide the products and services Hangover Joes paid for and that CounterDefendants agreed to provide.
91.
As a proximate result of PLNs, Renes, and/or Hardens constructive fraud,
Hangover Joes 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.
35
COUNT VII: BREACH OF THE IMPLIED

COVENANTS OF GOOD FAITH AND FAIR DEALING
(Against PLN)
92.
93.
PLN had an agreement with Hangover Joes to manufacture and bottle the
product within a reasonable time period and pursuant to Hangover Joes
specifications in exchange for Hangover Joes payments, amounting to at least
$443,418.17 over less than a one year period.
94.
Hangover Joes 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 Joes 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 others right
36
to receive the benefits under the agreement.

96.
PLN unfairly interfered with Hangover Joes 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 PLNs conduct, Hangover Joes 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
98.
99.
This cause of action arises under the Racketeer Influenced and Corrupt
Organizations Act, 18 U.S.C. 1961, et seq. (RICO).
37
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.
38
(c)
Counter-Defendants violated 18 U.S.C. 1962(c) through CounterDefendants, 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 Joes, which
constitute mail and/or wire fraud, include, but may not be limited to, the following:
39
bottling line;
expecting;
Hardens repeated assurances via e-mail, telephone, and in-person throughout the
parties relationship that PLN had the capability to comply with Hangover Joes
order schedule and bottling needs.
102.
Upon information and belief, Rene is the founder, CEO, and owner of PLN
40
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 PLNs practices, activities, and
operations.
103.
Counter-Defendants voluntarily and intentionally devised the scheme to make
misrepresentations constituting mail and wire fraud to Hangover Joes about their
ability and capacity to perform as agreed in order to receive payments from
Hangover Joes, with full knowledge that they could not perform as they promised.
Counter-Defendants intended to defraud Hangover Joes.
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.
41
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 Joes and are liable to Hangover Joes
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
108.
109.
Counter-Defendants violated Georgias Racketeer Influenced and Corrupt
Organizations Act (State RICO).
Specifically, Counter-Defendants violated

42
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 Joes, other customers, and the general public in their public
advertisements, web-based communications and sales forums, print media, and email and United States mail communications.
110.
The fraudulent statements made to elicit payments from Hangover Joes,
which constitute mail and/or wire fraud, include, but may not be limited to, the
following:
bottling line;
43

expecting;
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 PLNs practices, activities, and
44
operations.
112.
Counter-Defendants voluntarily and intentionally devised the scheme to make
misrepresentations constituting mail and wire fraud to Hangover Joes about their
ability and capacity to perform as agreed in order to receive payments from
Hangover Joes, with full knowledge that they could not perform as they promised.
Counter-Defendants intended to defraud Hangover Joes.
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 Joes and are liable to Hangover Joes under
O.C.G.A. 16-14-6 for declaratory judgment that Counter-Defendants conduct
45
violated State RICO, treble compensatory and punitive damages, and costs of
attorneys fees.
COUNT X: ATTORNEYS FEES
116.
117.
Counter-Defendants have acted in bad faith, have been stubbornly litigious,
and/or have caused Hangover Joes unnecessary trouble and expense.
118.
As a result of Counter-Defendants conduct, Hangover Joes is entitled to
recover expenses of litigation, including reasonable attorneys fees, from CounterDefendants, 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
consequential damages;
46
actual,
treble
compensatory,
and
C.
order PLN, Rene and Harden to pay Plaintiffs 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
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
tmoser@mmlfirm.com
bbulatturner@mmlfirm.com
Attorneys for Hangover Joes Holding
Corporation and Hangover Joes, Inc.
47
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
This 6th day of June, 2014.
/s/ Theresia M. Moser
Theresia M. Moser
Elizabeth Bulat Turner
Meyer Moser Lang LLP
Southern Dairies Building
621 North Avenue, N.E. Suite C-150
(404) 537-5330 phone
(404) 537-5340 facsimile
tmoser@mmlfirm.com
bbulatturner@mmlfirm.com
Attorneys for Hangover Joes Holding
Corporation and Hangover Joes, Inc.

Private Label Nutraceuticals, LLC v. Hangover Joe&#39;s Holding Corporation Et Al Doc 13

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

IN THE UNITED STATES DISTRICT COURT

CIVIL ACTION NO:

DEFENDANTS FIRST AMENDED ANSWER,

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 2 of 48

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

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 3 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 4 of 48

Defendants specifically deny any liability to Plaintiff and deny the

remaining allegations in paragraph 8 of the Complaint.

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 5 of 48

Moreover, Defendants do not admit any liability in asserting the

following affirmative and other defenses.

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 6 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 7 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 8 of 48

To date, Hangover Joes flagship product has been The

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

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 9 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 10 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 11 of 48

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Connaughton had a PLN e-mail address,

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

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Harden committed to relabeling the bottles with

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 16 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 17 of 48

The bottles were still virtually

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

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 18 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 19 of 48

commitments because neither PLN nor Metaugus had a machine to perform

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 20 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 21 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 22 of 48

A lawsuit against PLN

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

Activlab, LLC alleges, among other

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

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 23 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 24 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 25 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 26 of 48

specifications, and/or in a merchantable condition, Hangover Joes has been damaged

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 27 of 48

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 28 of 48

within a reasonable time period and pursuant to Hangover Joes specifications in

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Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 30 of 48

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Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 33 of 48

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partner to perform as promised.

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 35 of 48

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

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 36 of 48

COUNT VII: BREACH OF THE IMPLIED

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 37 of 48

to receive the benefits under the agreement.

Case 1:14-cv-00683-ODE Document 13 Filed 06/06/14 Page 38 of 48

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

Private Label Nutraceuticals, LLC v. Hangover Joe's Holding Corporation Et Al Doc 13

Private Label Nutraceuticals, LLC v. Hangover Joe's Holding Corporation Et Al Doc 13