Derma Pen v. 4EverYoung Limited et al

Filing 630

MEMORANDUM DECISION AND ORDER granting in part and denying in part 504 Motion for Preliminary Injunction; denying 529 Motion to Vacate. Signed by Judge David Nuffer on 2/25/15 (alt)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH, CENTRAL DIVISION
DERMA PEN, LLC,
Plaintiff,
v.
4EVERYOUNG LIMITED d/b/a
DERMAPENWORLD, BIOSOFT (AUST)
PTY LTD d/b/a DERMAPENWORLD,
EQUIPMED INTERNATIONAL PTY LTD
d/b/a DERMAPENWORLD, and STENE
MARSHALL d/b/a DERMAPENWORLD,

MEMORANDUM DECISION AND
ORDER GRANTING IN PART
4EVERYOUNG’S MOTION FOR
PRELIMINARY INJUNCTION AGAINST
MICHAEL E. ANDERER; DENYING
MICHAEL ANDERER’S MOTION TO
VACATE

Defendants.

Case No.: 2:13-CV-00729-DN-EJF
District Judge David Nuffer
Magistrate Judge Evelyn J. Furse
4EVERYOUNG LTD. and EQUIPMED
INTERNATIONAL PTY. LTD.,
Counterclaim Plaintiffs,
v.
DERMA PEN, LLC, MICHAEL E.
ANDERER, JEREMY JONES, MICHAEL J.
MORGAN, CHAD MILTON, MEDMETICS,
LLC, a Delaware limited liability company,
and JOHN DOES 1-25,
Counterclaim Defendants.

This order resolves issues in 4EverYoung Limited’s (“4EverYoung”) Motion for
Temporary Restraining Order and Preliminary Injunction against Michael E. Anderer 1 (“Motion
for Preliminary Injunction”) and Michael E. Anderer’s Motion to Vacate TRO and Memorandum
in Opposition to Motion for Preliminary Injunction Against Michael E. Anderer (“Motion to
Vacate”) 2. Counsel have been extraordinarily diligent and cooperative in working through an
arduous schedule, often on short notice. Hearings related to these motions were held on the
following dates:
January 29, 2015 3
February 4, 2015 4
February 9, 2015 5
February 11, 2015 6
February 12, 2015 7
February 18, 2015 8
February 19, 2015 9
February 23, 2015 10
Testimony was received from John Udy, Stene Marshall, Michael Morgan, Jeremy Jones,
Casey Isom, Katie Allen, and Michael Anderer. Deposition testimony was admitted for Michael
Anderer 11 and Elliott Milstein. 12 Over 100 exhibits were received.
1

Docket no. 504, filed January 21, 2015.

2

Docket no. 529, filed January 28, 2015.

3

January 29, 2015 Preliminary Injunction Hearing Transcript, docket no. 600, filed February 19, 2015; Minute
Order, docket no. 533, filed January 29, 2015.
4

February 4, 2015 Preliminary Injunction Hearing Transcript, docket no. 604 , filed February 20, 2015; Minute
Order, docket no. 563, filed February 4, 2015.
5

February 9, 2015 Preliminary Injunction Hearing Transcript, docket no. 596, filed February 19, 2015; Minute
Order, docket no. 573, filed February 9, 2015.
6

February 11, 2015 Preliminary Injunction Hearing Transcript, docket no. 607, filed February 20, 2015; Minute
Order, docket no. 579, filed February 11, 2015.
7

February 12, 2015 Preliminary Injunction Hearing Transcript, docket no. 597, filed February 19, 2015; Minute
Order, docket no. 583, filed February 12, 2015.
8

February 18, 2015 Preliminary Injunction Hearing Transcript, docket no. 605, filed February 20, 2015; Minute
Order, docket no. 593, filed February 18, 2015.
9

February 19, 2015 Preliminary Injunction Hearing Transcript, docket no. 602, filed February 20, 2015; Minute
Order, docket no. 595, filed February 19, 2015.
10

Minute Order, docket no. 617, filed February 23, 2015.

2

Orders relating to this motion were previously entered. 13 In preparation for final
argument on the motion, the parties submitted proposed findings of fact and conclusions of law 14
which have been very valuable in focusing issues.
This motion deals with the emerging stages of the latest battle related to 4EverYoung’s
contractual right to purchase a trademark and domain name from Derma Pen. This order
determines that 4EverYoung is entitled to a preliminary injunction to restrain Michael Anderer, a
former board member, current member, person of major influence, and sole contributor of funds
in Derma Pen from taking extra-judicial and state judicial action to defeat a principal object of
this litigation.
The litigation scenario is complex. This case has been pending about 18 months. But it
has been to the Tenth Circuit twice 15 and was suspended from August to December 2014
because Derma Pen filed bankruptcy in Delaware. 16 That bankruptcy was dismissed as not being
filed in good faith but as a litigation tactic. 17 Most recently, the Trademark and Domain Name
are subject of a public UCC sale by Anderer and part of Anderer’s pending execution levy on all
of Derma Pen’s assets in Utah State Court.
11

Ex. 56.

12

Ex. 57.

13

Order Granting 4EverYoung’s Motion for Temporary Restraining Order Against Michael E. Anderer and Taking
Under Advisement Motion for Preliminary Injunction, docket no. 505, filed January 21, 2015; Docket Text Order
Directing Parties to Exchange Documents, docket no. 506, filed January 22, 2015; Docket Text Order Directing
Parties to Exchange Exhibits, docket no. 516, filed January 26, 2015; Docket Text Order Extending TRO, docket no.
556, filed February 4, 2015; Memorandum Decision and Order Denying [581] Oral Motion for Summary Relief,
docket no. 589, filed February 16, 2015.
14

[Anderer’s Proposed] Findings of Fact, Conclusions of Law and Order . . . , docket no. 611, filed February 21,
2015; [4EverYoung’s Proposed] Findings of Fact, Conclusions of Law, and Order . . . , docket no. 612, filed
February 21, 2015.
15

Derma Pen LLC v. 4EverYoung Limited, No. 13-4176 (10th Cir. May 8, 2014), docket no. 150, filed May 8, 2014;
Derma Pen LLC v. 4EverYoung Limited, 773 F.3d 1117 (10th Cir. 2014), docket no. 466, filed December 31, 2014.
16

Petition, docket no. 1, In Re Derma Pen, LLC, case no. 14-11894 (KJC), 2014 WL 7269762 (Bankr. D. Del. Dec.
19, 2014); Ex. 21.
17

Memorandum at 17, docket number 273, In Re Derma Pen, LLC, case no. 14-11894 (KJC), 2014 WL 7269762
(Bankr. D. Del. Dec. 19, 2014), Ex. 125.

3

FINDINGS OF FACT..................................................................................................................... 5
The Parties .......................................................................................................................... 5
4EverYoung ............................................................................................................ 5
Marshall .................................................................................................................. 5
Anderer ................................................................................................................... 5
Saunders .................................................................................................................. 6
MedMetics .............................................................................................................. 6
S2 Partners V .......................................................................................................... 7
Derma Gen .............................................................................................................. 7
Jones........................................................................................................................ 7
Morgan .................................................................................................................... 8
The Sales Distribution Agreement ...................................................................................... 8
Anderer’s 2011 and 2012 Loans ....................................................................................... 12
Derma Pen’s Termination of the Sales Distribution Agreement ...................................... 17
Derma Pen and Anderer’s Strategy to Avoid the Transfer Provisions in the Sales
Distribution Agreement ........................................................................................ 18
Derma Pen Files this Lawsuit ........................................................................................... 20
Anderer’s Knowledge of and Participation in this Action and Related Proceedings ....... 21
Anderer’s Threats of Prolonged Litigation ....................................................................... 22
Derma Pen’s Claims Against 4EverYoung....................................................................... 23
Bifurcation and Stay ......................................................................................................... 24
Anderer’s 2014 Advances ................................................................................................. 24
Derma Pen’s Bankruptcy Petition..................................................................................... 27
Debtor In Possession (DIP) Financing.............................................................................. 28
Dismissal of Derma Pen’s Bankruptcy Petition................................................................ 30
The Confession of Judgment ............................................................................................ 31
The Trademark Assignment .............................................................................................. 33
Revival of this Litigation .................................................................................................. 34
The December 23, 2014 TRO ........................................................................................... 35
Withdrawal of Counsel for Derma Pen ............................................................................. 37
The Specific Performance Defenses Order ....................................................................... 38
The Specific Performance Order ...................................................................................... 38
The January 6, 2015 Preliminary Injunction..................................................................... 40
The January 9, 2015 UCC Filing ...................................................................................... 41
The Notice of UCC Sale ................................................................................................... 41
The Writ of Execution ...................................................................................................... 41
Adding Anderer as a Party ................................................................................................ 42
The January 21, 2015 TRO ............................................................................................... 43
DISCUSSION ............................................................................................................................... 45
Standard Applicable to Motion for Preliminary Injunction .............................................. 45
Irreparable Harm ............................................................................................................... 45
Balance of Harms .............................................................................................................. 47
Public Interest ................................................................................................................... 47
Likelihood of Success on UFTA Claims .......................................................................... 47
2012 Documents ................................................................................................... 49
2014 Documents ................................................................................................... 49
4

Confession of Judgment and the Trademark Assignment .................................... 53
Debtor-In-Possession Financing Lien ................................................................... 57
Summary ............................................................................................................... 57
Other Issues Related to Likelihood of Success ................................................................. 57
Party Status and Service........................................................................................ 57
Narrow Issues under the UFTA ............................................................................ 58
4EverYoung’s Claims Were Not Concluded in Derma Pen’s Bankruptcy .......... 59
The Sales Distribution Agreement Does Not Call for a Transfer in Gross .......... 59
Amount of Bond ............................................................................................................... 61
ORDER ......................................................................................................................................... 63

FINDINGS OF FACT 18
The Parties
4EverYoung
4EverYoung LTD (“4EverYoung”) is a private limited liability company organized under
United Kingdom law, with its principal place of business in London. 19
Marshall
Stene Marshall (“Marshall”) is a resident of Australia who has interests in various
companies doing business in the United States 20 and is a principal in 4EverYoung.
Anderer
“Anderer is a member and owner of approximately 26% of Derma Pen, LLC (“Derma
Pen”) and, up until approximately August 1, 2014, he was the chairman of the Derma Pen’s
board.” 21 Anderer described himself as an “investor” in Derma Pen. 22 Anderer typically works

18

In the event fact statements are contained in other sections of this order they are also findings of fact. Findings of
fact and conclusions of law in a preliminary injunction ruling are not binding at the trial on the merits. See Univ. of
Tex. v. Camenisch, 451 U.S. 390, 395 (1981).
19

First Amended Counterclaim ¶ 1, docket no. 215, filed June 26, 2014; Plaintiff’s Answer to Defendants’ First
Amended Counterclaim ¶ 1, docket no. 233, filed July 3, 2014.
20

February 9, 2015 Preliminary Injunction Hearing Transcript at 16:3-8, docket no. 596.

21

See Anderer Dep. at 42-43, Ex.56; January 21, 2015 TRO at 4 ¶ 8, docket no. 505.

22

See Anderer Dep. at 18, 19, 20, Ex. 56.

5

through entities some of which he calls “incubators.” 23 His entities include, among others, S2,
Derma Gen, and Tensor Cloud Solutions. 24
Saunders
Samuel Saunders (“Saunders”) is Anderer’s attorney-in-fact, proxy, and counsel across
Anderer’s various entities, including MedMetics, LLC (“MedMetics”). 25 Saunders makes the
decisions with respect to Anderer’s business transactions. 26
MedMetics
Anderer is the sole owner of MedMetics, 27 which was set up by Saunders, Erik Felsted
(“Felsted”), or Baker Donelson. 28
MedMetics products include or will include micro-needling devices. 29 Anderer formed
MedMetics because he wanted to develop products that would not be tied up by this litigation. 30
Anderer described MedMetics as “a construct on paper” and “an accounting piece” with no
employees. 31 While Anderer denied any license agreement between Derma Pen and
MedMetics, 32 Derma Pen’s counsel of record in this case, Samuel F. Miller (“Miller”), claimed
that there was such a license. 33

23

See id.

24

See id. at 11-12.

25

See id. at 12, 144-45; see also Milstein Dep. at 68:12-69:18, Ex. 57.

26

See Anderer Dep. at 70-71, 145, 149, 151.

27

See AMS Board Meeting Minutes at 52:11-15, dated December 2, 2014, Ex. 66; see also February 11, 2015
Preliminary Injunction Hearing Transcript at 20:4-5, docket no. 607.

28

See Anderer Dep. at 172, 173, 197.

29

See id. at 175.

30

See id. at 173-74.

31

See id. at 183-84.

32

See id. at 198.

33

Ex. 56.

6

MedMetics partnered with Biopelle, Inc. (“Biopelle”), a Canadian company, to form
Advanced Microneedling Systems (“AMS”) to sell the MDerma micro-needling device. 34
S2 Partners V
S2 Partners V, LLC (“S2 Partners V”) is another single-member entity owned 100% by
Anderer. 35 Anderer describes S2 Partners V as “just a container” without any operations or
obligations. 36
Derma Gen
Derma Gen, LLC (“Derma Gen”) is another single-member entity owned 100% by
Anderer. 37 Derma Gen has no operating agreement, no employees, and was set up by Baker
Donelson. 38 Derma Gen loaned Derma Pen employees money during Derma Pen’s
bankruptcy. 39 Those loan documents were drafted by Saunders. 40 Derma Gen’s subsidiary
companies were set up during Derma Pen’s bankruptcy proceeding. 41
Derma Gen has a website with Dermapen-branded products identified. 42
Jones
Jeremy Jones (“Jones”) is the former COO and CEO of Derma Pen. 43 Jones performs
tasks for MedMetics and has a MedMetics e-mail account. 44
34

See Press Release, dated July 22, 2014, Ex.20; see also February 11, 2015 Preliminary Injunction Hearing
Transcript at 6:13-14, docket no. 607.

35

See Anderer Dep. at 117-18.

36

See id. at 118-20.

37

See id. at 152.

38

See id. at 154-55, 188.

39

See February 12, 2015 Preliminary Injunction Hearing Transcript at 156:10-20, docket no. 597; see also Anderer
Dep. at 168.
40

See Anderer Dep. at 168.

41

See id. at 160-61.

42

See Derma Gen Website, Ex. 88; see also February 11, 2015 Preliminary Injunction Hearing Transcript at 16:1517:4, docket no. 607.

43

See February 12, 2015 Preliminary Injunction Hearing Transcript at 155:7-156:3, docket no. 597.

7

Morgan
Michael Morgan (“Morgan”) claims to be the former CEO of Derma Pen, 45 although in a
December 2, 2014 AMS board meeting he claimed not to have resigned. 46 Morgan also has a
MedMetics e-mail account (as does Chad Milton (“Milton”), Derma Pen’s President). 47
The Sales Distribution Agreement
During the Summer of 2011, business discussions were held between Morgan and
Marshall about a distribution agreement for the sale of micro-needling devices, then known as
Epens (the “Device”), 48 and the related disposable micro-needled tips (“Tips”) for the Device,
throughout the United States of America (“USA”). 49
Marshall was the owner, either directly or indirectly, of 4EverYoung, an Australian
company, which purportedly had the ability to grant Morgan’s company, Derma Pen, LLC
(“Derma Pen”), the exclusive right to sell the Device and related Tips in the USA and
elsewhere. 50
At the time, Morgan knew Anderer who was then, and had been, a successful inventor
and investor in a variety of technology based start-up ventures, and with whom Morgan had had
a prior business and personal relationship. 51
Anderer’s business model was to lend money to entrepreneurs with promising ideas or
products. He favored businesses that had reliable or recurring revenue streams. This model

44

See id. at 156:22-157:6; see also E-Mail Jones to Milstein, dated August 19, 2014, Ex. 48.

45

See February 11, 2015 Preliminary Injunction Hearing Transcript at 5:13-6:1, docket no. 607.

46

See AMS Board Meeting Minutes at 26:4-7, dated December 2, 2014, Ex. 66.

47

See February 12, 2015 Preliminary Injunction Hearing Transcript at 158:20-25, docket no. 597.

48

February 9, 2015 Preliminary Injunction Hearing Transcript at 71:13-25, 78:1.

49

February 12, 2015 Preliminary Injunction Hearing Transcript a 104-105.

50

January 6, 2015 Preliminary Injunction Hearing Transcript at 83:19-21; see also Ex. 1.

51

February 11, 2015 Preliminary Injunction Hearing Transcript at 33:11-25, 34:1-10, 35:19-25, 36:1-5.

8

involved making loans to the businesses, secured with all of the assets, providing favorable
lending rates and terms, taking a minority interest in the company’s equity and providing
mentoring and access to professional services to the entrepreneurs, with the owners to retain
control of the managerial and operational aspects of the business. 52
Morgan approached Anderer to inquire about whether Anderer was interested in
providing funds to Derma Pen so that Derma Pen could enter into a distribution agreement with
4EverYoung and begin purchasing Devices from 4EverYoung for resale. 53
Anderer initially met with Morgan and Morgan’s business partner, Milton, to discuss the
proposed venture. 54
Anderer was interested in providing funding and mentoring for the project so long as (i)
the financial projections were based on a renewable revenue model, sometimes referred to as a
“razor and blades” program, where the company would receive ongoing recurring revenues from
sales of the Tips to the owners of the Devices, (ii) 4EverYoung had worldwide patents on the
Device and Tips and (iii) 4EverYoung had the ability to grant protectable exclusivity to Derma
Pen within the USA with regard to the Device and Tips. 55
Anderer contacted a renowned local physician and an experienced esthetician, who
confirmed, to Anderer’s satisfaction, that the Device and Tips actually performed as represented
when used by an experienced physician or technician. 56
Morgan then arranged for a meeting between Anderer and Marshall which occurred
during the summer of 2011. 57 During this meeting, Morgan presented Anderer to Marshall as

52

February 19, 2015 Preliminary Injunction Hearing Transcript at 6:5-7:9.

53

Id. 12:24-13:23, 14-15.

54

Id. 12:24-13:23.

55

Id. 14:15-15:12, 46:15-25, 65:22-66:4.

56

February 19, 2015 Preliminary Injunction Hearing Transcript at 15:17-16:1

9

Derma Pen’s potential investor who would provide Derma Pen with funding for the business. 58
During this meeting, Marshall “pitched” the program to Anderer and represented to him that
4EverYoung had worldwide patents on the Device and Tips and could grant and protect Derma
Pen’s exclusive right to sell the same in the USA. Marshall knew that Anderer was interested in
the patents and the exclusivity as a condition of supporting the project. 59
In anticipation of entering into an agreement with Marshall, Morgan caused Derma Pen
to create and register the trademark DERMAPEN® (the “Trademark”) in the USA. He also
created a URL named www.dermapen.com (the “Domain Name”). 60
Simultaneously, Morgan and Marshall were working on a form of a distribution
agreement (“Sales Distribution Agreement”) that Marshall drafted and had presented to Morgan
for review. On behalf of 4EverYoung, Marshall was the negotiator and drafter of the contract. 61
Anderer was involved in the negotiations regarding the Sales Distribution Agreement,
and was well aware of the key provisions, including the post-termination transfer obligations in
that agreement. 62
Internal discussion between Anderer, Morgan and Milton included the post-termination
transfer obligations and asked the question “WE NEED TO ASK OURSELVES . . . IF THE
TRADEMARK CLAUSE IS A DEAL KILLER.” 63

57

February 12, 2015 Preliminary Injunction Hearing Transcript at 44-45.

58

Id.

59

February 12, 2015 Preliminary Injunction Hearing Transcript 44:18-45:3, 101-105; February 19, 2015 Preliminary
Injunction Hearing Transcript 16:2-17:24.

60

February 9, 2015 Preliminary Injunction Hearing Transcript at 72:11-24; February 12, 2015 Preliminary
Injunction Hearing Transcript at 53-54.
61

February 9, 2015 Preliminary Injunction Hearing Transcript at 116:11-17, 126:2-8.

62

See Email Chad Milton to Mike Morgan and Mike Anderer, July 18, 2011, Ex. 67; Instant Messages, dated July 5,
2011, Ex. 77; Order Granting 4EverYoung’s Motion for Temporary Restraining Order Against Michael E. Anderer
(“January 21, 2015 TRO”) at 4 ¶ 9, docket no. 505, entered January 21, 2015.

10

Derma Pen and 4EverYoung are parties to the Sales Distribution Agreement, which was
signed on or about August 1, 2011 64 and had a term of two years. 65
Under Sections 12.2 and 14.6 of the Sales Distribution Agreement (collectively, the
“Transfer Provisions”), upon termination, Derma Pen must offer the Trademark and Domain
Name to 4EverYoung for purchase and each party was required to appoint an independent
auditor. 66 “If no agreement on price is reached, valuation must occur.” 67
Jones testified that if the Sales Distribution Agreement was valid, Derma Pen understands
that 4EverYoung is entitled to a valuation and opportunity to buy the U.S. Trademark and the
Domain Name. 68
The Sales Distribution Agreement acknowledged that Derma Pen was the owner of the
Trademark and Domain Name and had the exclusive right to use the Trademark and Domain
Name and to distribute the Devices and Tips in the USA. 69 The Sales Distribution Agreement
provided that 4EverYoung had the right to sell the Device and Tips worldwide, except in the
USA, 70 but it did not grant 4EverYoung a license to use the Trademark and Domain Name. The
agreement also did not prohibit 4EverYoung from registering the Trademark in countries other

63

Email from Chad Milton to Mike Morgan and Mike Anderer, July 18, 2011, Ex. 67. The “Trademark Clause”
referred to here is Sections 12.2 and 14.6 of the Sales Distribution Agreement, which required Derma Pen to offer
for sale the Trademark and Domain Name to 4EverYoung upon termination of the Sales Distribution Agreement.

64

See Sales Distribution Agreement at 18, Ex. 1; see also January 21, 2015 TRO at 2 ¶ (“4EverYoung and Derma
Pen are parties to the Sales Distribution Agreement.” (footnote omitted)), docket no. 505.

65

See Sales Distribution Agreement § 11.1 (Term), Ex. 1; January 21, 2015 TRO at 2-3 ¶ 2, docket no. 505.

66

See Sales Distribution Agreement §§ 12.2, 14.6, Ex. 1; see also Memorandum Decision and Order Granting
4EverYoung’s 241 Motion for Partial Summary Judgment on Specific Performance and Granting in Part
Defendants’ 141 Motion for Preliminary Injunction (“Specific Performance Order”) at 8, docket no. 476.

67

Specific Performance Order at 10, docket no. 476; see also Sales Distribution Agreement §§ 12.2, 14.6, Ex. 1.

68

See February 12, 2015 Preliminary Injunction Hearing Transcript at 158:15-19, docket no. 597.

69

Ex. 1 at §§ 12.1, 14.6.

70

Ex. 1 at §§ 2.1, 2.2.

11

than the USA. 71 Finally, the Sales Distribution Agreement did not contain any negative
covenants limiting or restricting, in any way, or at any time, Derma Pen’s right to borrow money
and pledge the Trademark and Domain Name to secure those loans. 72
The Sales Distribution Agreement also did not allow 4EverYoung to purchase any
property of Derma Pen except the Trademark and Domain Name, and Marshall acknowledged
that 4EverYoung had no right to purchase any other assets of Derma Pen, including Derma Pen’s
goodwill. 73
Anderer’s 2011 and 2012 Loans
On June 27, 2011, Anderer gave a personal check of $10,000 to Derma Pen. 74
Subsequently, on July 22, 2011, Anderer gave a second personal check to Derma Pen of $60,000.
This sum enabled Derma Pen to begin purchasing the Devices and Tips from 4EverYoung. The
memo sections of both checks designated the money as “loan.” 75
Initially, Anderer’s funds given to Derma Pen were booked on Derma Pen’s QuickBooks
debt ledgers as “capital contributions.” This designation was selected by Derma Pen’s
bookkeeper as a “placeholder” to record the loan transactions until the loans could be
documented. 76

71

Ex. 1.

72

Ex. 1; February 9, 2015 Preliminary Injunction Hearing Transcript at 118:11-18.

73

February 9, 2015 Preliminary Injunction Hearing Transcript at 120:24-121:20, 229:1-24.

74

February 12, 2015 Preliminary Injunction Hearing Transcript at 164:1-10, 165:6-167:13; February 19, 2015
Preliminary Injunction Hearing Transcript at 13:19-14:22.
75

Exs. 147, 158; February 11, 2015 Preliminary Injunction Hearing Transcript at 71:1-10; February 12, 2015
Preliminary Injunction Hearing Transcript at 162-63, 164:1-10, 165:6-167:13, 226-28, 231.
76

February 12, 2015 Preliminary Injunction Hearing Transcript at 229:19-230:8.

12

Between June 2011 and March 1, 2012, Anderer continued to advance money to Derma
Pen. An accounting of the credits (advances) and debits (loan repayments) of these loans is
shown by Exhibits 147 and 148. 77
On February 27, 2012, in an email regarding trademarks and marketing areas, Anderer
stated he was going to review the “deal we have with Stene [Marshall] for the DermaPen brand”
because “it will affect what we do with potential acquirers.” 78 Just days later, on March 1, 2012,
Note 1 and the 2012 SA were signed to document and secure advances previously made without
a note and without security.
On March 1, 2012, Derma Pen executed a Secured Promissory Note (“Note 1”) to
Anderer in the amount of $200,000 to memorialize the Note 1 loans. 79 In addition, on the same
day, Derma Pen signed a Security Agreement (the “2012 SA”) in favor of Anderer that granted
Anderer a security interest in the Trademark and Domain Name and Derma Pen’s other property,
including the proceeds therefrom, whether now owned or hereafter acquired” to secure Note 1. 80
Note 1 also was guaranteed personally by Morgan and Milton up to a total of $27,500 each. 81
Note 1 and the 2012 SA were signed to document and secure advances previously made without
a note and without security. 82

77

Ex. 147 referenced in February 12, 2015 Preliminary Injunction Hearing Transcript 171, 234, 226-30, 255; Ex.
151 referenced in February 12, 2015 Preliminary Injunction Hearing Transcript at 162-68, 181-84, 231.
78

Email from Mike Anderer to Mike Morgan, February 27, 2012, 10:01 p.m., Ex. 81 at 3.

79

Exs. 9 and 10.

80

Ex. 10.

81

Ex. 11.

82

Exs. 9 and 10.

13

On February 20, 2013, UCC-1 financing statements (the “2013 FS”) were filed by
Anderer in the appropriate public records offices in Utah and Delaware to perfect Anderer’s
security interests against Derma Pen’s assets. 83
Between September 20, 2012 and December 31, 2013, Anderer gave Derma Pen an
additional $100,000. Derma Pen’s books treated the advances as “Note 2.” 84
Most of the loan proceeds from Note 1 and Note 2 were used by Derma Pen to purchase
Devices and Tips from 4EverYoung. 85
Between June 25, 2011 and December 21, 2012, Anderer or his entities provided Derma
Pen with $280,000. 86 Only $255,000 of that amount was provided by Anderer directly. 87 There
was no negotiation on the terms of those loans. 88 Anderer left it to Derma Pen to keep track of
his loans. 89
Note 1 and the funds identified as Note 2 were paid off, either by payment in full
(Anderer received $299,108.09) 90 or by rolling into a subsequent note. 91
Anderer agrees that his current efforts to foreclose on the assets of Derma Pen are not in
collection of amounts owing under Note 1. 92
83

Exs. 12, 13.

84

Ex. 148

85

February 12, 2015 Preliminary Injunction Hearing Transcript at 94:5-25, 244:10-25, 333:16-25; February 19,
2015 Preliminary Injunction Hearing Transcript at 23:7-11.
86

See Derma Pen Bank Statements at 1, 3, 5, Ex. 151; see also Derma Pen Bank Statements at 2, 4, 5, Ex. 63J;
February 12, 2015 Preliminary Injunction Hearing Transcript at 164:22-175:8, docket no. 597.

87

See Derma Pen Bank Statements at 1, 3, 5, 26, Ex. 151; see also Derma Pen Bank Statements at 2, 4, 5, Ex. 63J.

88

See Anderer Dep. at 81.

89

See id. at 103-04.

90

See Derma Pen Bank Statements at 17, 38, 45, 53, 63, 66, 73, Ex. 151; see also Derma Pen Bank Statements at 1,
2, Ex. 63A; February 12, 2015 Preliminary Injunction Hearing Transcript at 179:18-187:5 docket no. 597.

91

See February 12, 2015 Preliminary Injunction Hearing Transcript at 325:11-13, 336:12-14, docket no. 597; see
also Anderer Dep. at 97.
92

February 23, 2015, Preliminary Injunction Hearing Transcript at ___:___, docket no. ____, filed ________
________, 2015.

14

In the spring of 2012, Derma Pen’s management and Anderer asked Marshall to provide
the proof of worldwide patents protecting the Device. Marshall advised Derma Pen that he had
been mistaken about the extent of 4EverYoung’s patent protection, and, in fact, the patent on the
Device was held by SunWoo, the manufacturer, and was only effective in South Korea. 93
Anderer then visited Marshall at 4EverYoung’s offices in Australia to see if there was a
way to fix the lack of sufficient patent protection. He also wanted to personally evaluate
Marshall’s operations. During this visit, he became “alarmed” by what he saw and learned, and
no resolution was reached. 94
Anderer and Derma Pen’s management claim they first became aware at about this same
time of 4EverYoung’s worldwide rights under the Sales Distribution Agreement and of
4EverYoung’s use of the Trademark outside the USA, also permitted under the Sales
Distribution Agreement. 95
They also learned that 4EverYoung was using materials from the Domain Name on
4EverYoung’s website entitled www.dermapenworld.com. 96 This use concerned Derma Pen’s
management because of the brand confusion and possible devaluing of the Trademark and
Domain Name. 97
The Sales Distribution Agreement did not require Derma Pen to forward any
“international leads” to 4EverYoung that Derma Pen received from those who accessed its
Domain Name or otherwise contacted Derma Pen. 98 Marshall testified that such referrals were

93

February 12, 2015 Preliminary Injunction Hearing Transcript at 102-104; February 19, 2015 Preliminary
Injunction Hearing Transcript at 34:15-21, 35:1-6.
94

February 19, 2015 Preliminary Injunction Hearing Transcript at 35:2-12.

95

Id. 71:3-72:12.

96

February 12, 2015 Preliminary Injunction Hearing Transcript at 98:11-13.

97

Id. 98:24-100:14; February 19, 2015 Preliminary Injunction Hearing Transcript 72:14-22.

98

Ex. 1.

15

“customary in the industry,” and that he expected that Derma Pen would forward such leads to
4EverYoung because Derma Pen’s territory was limited to the USA. 99
In an internal email chain generated on or about September 23, 2012, Derma Pen’s
management discussed the problems their company was having with 4EverYoung in connection
with international leads. Anderer was copied on some of these communications, and responded
by recommending that management seek legal advice to review the Sales Distribution
Agreement and advise the company about its options. In the same email he expressed his views
of Marshall and the Sales Distribution Agreement, saying, in part,
If Stene has any threats or any other issues he wants to deal with it will end up
with the attorneys and me. It is going to be a mess to extract ourselves in one
piece from this really toxic deal. We will and we will move forward stronger than
ever and unless Stene has some sort of Epiphany in the next week, the only place
we will be hearing his name or dealing with him will be in court, unfortunately. 100
In February 2013, 4EverYoung withheld supply from Derma Pen. In an email dated
February 2, 2013, Marshall wrote to Anderer saying, in part, “we currently have them on stop
supply due to the fact that there has been no effort at all from them to resolve the international
lead referral problem.” Marshall also stated that “[t]his action however just so happens to
coincide with the expiry of the current distribution contract which at this point has expired and
will not be renewed without agreement to the following items: . . . .” The email then contained a
list of demands for modifications in the Sales Distribution Agreement. 101
On November 27, 2012, Anderer also formed Derma Gen, as a company to patent,
develop, and market a line of cosmetic and dermatological products, such as a “hydro-mask.”

99

February 9, 2015 Preliminary Injunction Hearing Transcript at 142:25-144:7, 212:5-20.

100

Ex. 82.

101

Ex. 6.

16

On May 21, 2013, Anderer formed MedMetics LLC as a research and development
company to develop and patent a new micro-needling. MedMetics was owned 100% by
Anderer. 102 MedMetics was in the process of developing a new form of the Device to be known
as the MDerma. 103 MedMetics was not a distribution company and did not have a sales force.
Instead, MedMetics intended to use Derma Pen as a distributor for the MDerma. 104
Both MedMetics and Derma Gen were separate companies from Derma Pen. 105
MedMetics also had an importer’s license to import goods into the USA from other countries. 106
Derma Pen’s Termination of the Sales Distribution Agreement
On May 30, 2013, Jones, on behalf of Derma Pen and with assistance of counsel, 107
notified 4EverYoung that Derma Pen was terminating the Sales Distribution Agreement effective
at the end of its initial two-year term. 108 Jones’s email to Marshall confirmed a wire transfer to
4EverYoung for additional product and indicated that:
As you are very well aware and have been pushing for some time now, we need to
renegotiate our arrangement. We absolutely agree with this need and therefore
are taking the appropriate steps in noticing you of our intent to not renew our
existing agreement so that we may begin working on a solution. 109
That same day, Marshall, on behalf of 4EverYoung, responded “[n]o problems with the
notice not to renew,” and requested that Derma Pen comply with its post-termination obligations

102

February 12, 2015 Preliminary Injunction Hearing Transcript at 134:13-14.

103

Id. 134: 2-12.

104

Id. 134:10-12.

105

February 11, 2015 Preliminary Injunction Hearing Transcript at 10:19-11:4; February 12, 2015 Preliminary
Injunction Hearing Transcript at 82:8-10.
106

February 11, 2015 Preliminary Injunction Hearing Transcript at 18:14-19:4.

107

February 19, 2015 Preliminary Injunction Hearing Transcript at 41:13-28; February 12, 2015 Preliminary
Injunction Hearing Transcript at 158:4-6.
108

See Letter Jones to Marshall, dated May 30, 2013, Ex. 2.

109

Ex. 3.

17

under the Sales Distribution Agreement. 110 “‘The Distribution Agreement has been terminated.
Derma Pen terminated it.’” 111
Several days later, Jones wrote to Marshall, stating “regarding the trademark we are
focused on performing our duties under the agreement until it expires on August 2. We can
speak at the end of the term about any post-agreement duties that each of us have.” 112
On July 25, 2013, Marshall wrote to Jones again requesting Derma Pen’s compliance
with its post-termination obligations under the Sales Distribution Agreement and requested a
response by August 1, 2013. 113
Between May 30, 2013 and August 1, 2013, Derma Pen’s management learned that
4EverYoung was using the Trademark to sell Devices and Tips in the USA. 114 The situation
became acute for Derma Pen when it was unable to register as a marketer at a medical device
trade show in the USA because 4EverYoung had previously registered at the same trade show
using the Trademark. 115
Derma Pen and Anderer’s Strategy to Avoid the Transfer Provisions in the Sales
Distribution Agreement
Almost immediately after the execution of the Sales Distribution Agreement, Anderer
and Derma Pen became increasingly dissatisfied with the terms of the agreement 116 and
displeased with Marshall. 117
110

See E-Mail Exchange between Jones and Marshall, dated May 30, 2013, Ex. 3.

111

January 21, 2015 TRO at 3 ¶ 4, docket no. 505 (quoting December 23, 2014 TRO at 4, docket no. 451); see also
Letter Jones to Marshall, dated May 30, 2013, Ex. 2.
112

E-Mail Jones to Marshall, dated June 4, 2013, Ex. 3.

113

See Letter Marshall to Jones, dated July 25, 2013, Ex. 4.

114

February 9, 2015 Preliminary Injunction Hearing Transcript at 87:24-91:12.

115

February 12, 2015 Preliminary Injunction Hearing Transcript at 99:5-20.

116

See, e.g., E-Mail Exchange, dated November 1, 2011, Ex. 78; E-Mail Exchange, dated February 13, 2013, Ex. 7.

117

See E-Mail Exchange, dated December 14, 2011, Ex. 79; see also E-Mail Anderer to Marshall, dated July 2,
2012, Ex. 80; E-Mail Exchange, dated September 23, 2012, Ex. 82.

18

In February 2012, Anderer suggested that Derma Pen simply breach the agreement and
register trademarks in the name Dermapen in the European Union. 118 Anderer made clear that he
was an architect – if not the architect – of Derma Pen’s strategy for exiting the Sales Distribution
Agreement and retaining the Trademark in a September 7, 2012 e-mail, in which he outlined the
manner in which he thought the facts should be characterized and in which another former
member of Derma Pen, Felsted, stated that “over Mike A.’s dead body is he going to just allow
Stene to take control of those assets,” i.e., the Trademark and Domain Name. 119
On March 2, 2013, in an e-mail to Derma Pen’s board, Morgan wrote that “I hate Stene
!!!” 120
In an e-mail sent by Biopelle’s President and CEO, Elliott Milstein (“Milstein”), he
reiterated what Jones told him about Derma Pen’s strategy with respect to the Trademark and
Domain Name:
Derma Pen, LLC is the owner of the trade name “DermaPen” in the
United States. Equipmed is the owner of the same trade name in a number of
other countries. Derma Pen, LLC used to be affiliated with Equipmed and when
they broke that affiliation, Equipmed formed its US subsidiary, Dermapenworld,
to challenge Derma Pen’s ownership of the trade name DermaPen. This legal
battle has been going on for over a year.
As a strategy in fighting this legal battle, the partners of Derma Pen, LLC
formed a new company, Medmetics, LLC, and have transferred most of the assets
of Derma Pen, LLC to this new entity, including the ownership of the trademark.
But it has been their intention for some time to abandon the Dermapen trademark
and develop a new, uncontested trademark. The new company and its name were
part of this strategy as well as creating a new trade name, MDerma FDS, for its
new generation device. The bankruptcy filing was just another step in this
strategy. 121
118

See E-Mail Anderer to Derma Pen, dated February 27, 2012, Ex. 81.

119

E-Mail Felsted to Morgan, et al., dated September 7, 2012, Ex. 5; see also January 21, 2015 TRO at 4 ¶ 10,
docket no. 505.
120

E-Mail M. Morgan to Derma Pen Board, dated March 2, 2013, Ex. 8.

121

E-Mail Milstein to Biopelle, dated August 12, 2014, Ex. 49; see also Memorandum at 2 (quoting Milstein email), Ex. 125.

19

During his deposition, Milstein confirmed that the information contained in his e-mail
accurately reflected what was told to him by Jones. 122 Milstein also testified that Saunders told
him that, by terminating the Sales Distribution Agreement, Derma Pen had “unwittingly
triggered some aspect of trademark ownership.” 123
During a December 2, 2014 AMS board of directors meeting, Anderer discussed the
landscape “[o]nce Dermapen is gone” 124 and strategy to shift to the MDerma micro-needling
device. 125 Derma Pen’s minutes also reflect its intent to shift away from the Dermapen name. 126
During Morgan’s and Jones’s testimony at the preliminary injunction hearing, they were
still visibly and expressly “tender” and angry about the Sales Distribution Agreement and their
relationship with 4EverYoung and Marshall. 127
Other than statements in the hearings on this preliminary injunction motion, neither
Anderer nor any representative of Derma Pen has communicated to 4EverYoung that Derma Pen
was ready to offer the Trademark and Domain Name to 4EverYoung. 128
Derma Pen Files this Lawsuit
On August 1, 2013, Derma Pen filed this lawsuit. 129 Derma Pen filed this lawsuit on the
date that Marshall had requested a response to his July 25, 2013 inquiry whether Derma Pen
would honor its post-termination transfer obligations. The Complaint sought declaratory relief
122

See Milstein Dep. at 50:16-51:5, 56:20-61:25, 67:3-69:18, 82:14-83:3, 86:20-22, Ex. 57.

123

See id. at 68:12-69:18, Ex. 57.

124

AMS Board Meeting Minutes at 15:10-14, dated December 2, 2014, Ex. 66.

125

See id. at 21:15-22.

126

See Derma Pen Minutes at 2, 9, 14, 17, Ex. 91.

127

See, e.g., February 11, 2015 Preliminary Injunction Hearing Transcript at 53:20-22, 68:9-11, 71:12, 73:3-22,
docket no. 607; see also February 12, 2015 Preliminary Injunction Hearing Transcript at 141:19-24, docket no. 597.

128

February 23, 2015, Preliminary Injunction Hearing Transcript at ___:___, docket no. ____, filed ________
________, 2015.
129

See Complaint, docket no. 2.

20

that no such obligation existed. But the Complaint did not identify the post-termination
obligations or attach the Sales Distribution Agreement. Derma Pen only provided the Court a
copy of the Sales Distribution Agreement after Derma Pen filed its motion for temporary
restraining order and preliminary injunction, after the Court requested a copy, and before
4EverYoung or the other Defendants were represented by counsel. 130
4EveryYoung counterclaimed on May 2, 2014. 131 “Part of 4EverYoung’s claim for
breach of contract seeks specific performance and damages under Sections 12.2 and 14.6 of the
Sales Distribution Agreement, which ‘provide 4EverYoung with certain rights to purchase the
Derma Pen US trademark and the dermapen.com domain name after the Sales Distribution
Agreement terminated.’” 132
Anderer’s Knowledge of and Participation in this Action and Related Proceedings
Anderer has attended numerous depositions in this case, including the October 22, 2013
Rule 30(b)(6) deposition of Derma Pen at which Milton testified as the company representative
and the June 5, 2014 deposition of Stene Marshall.
In the bankruptcy case, Anderer’s own deposition was taken in Florida, and he attended
the depositions of two former employees of Derma Pen.

130

Docket no. 25, filed October 10, 2013.

131

Answer to First Amended Complaint, Counterclaim, Third-Party Amended Complaint, and Demand for Jury
Trial ¶C, docket no. 139, filed May 2, 2014; see also Third Amended Counterclaim ¶¶ 45, 46, docket no. 547.
132

January 21, 2015 TRO at 3 ¶ 5, docket no. 505 (quoting Memorandum Decision and Order Granting in Part
Defendants’ Motion for Temporary Restraining Order (“The December 23, 2014 TRO”) at 4, docket no. 451); see
also Third Amended Counterclaim ¶¶ 45, 46, docket no. 547.

21

Anderer’s Threats of Prolonged Litigation
At the conclusion of Milton’s deposition in the Derma Pen Bankruptcy, Anderer
informed Marshall, in the presence of counsel, that he would follow Marshall all over the world
and would sue him anywhere and everywhere. 133
During the December 2, 2014 AMS board of directors meeting 134 attended by Morgan
and Milstein, among others, Anderer reiterated his “promise” to sue Defendants “for the next
twenty years.” 135 Anderer went on to state, “[Defendants] will not, and this could go on the
record, they will not wake up a day in the rest of their lives when they don't wake up to me suing
them for something, for the damage that they’ve done.” 136 Morgan vouched for Anderer’s
sincerity to the others present. 137
Anderer also explained that he had been paying for all of the litigation regarding the
Trademark and Domain Name and that the cost did not matter to him. 138
In the summer of 2014, Derma Pen began purchasing Devices and Tips from MedMetics,
which, in turn, purchased these products directly from a Philippine supplier of SunWoo.
MedMetics resold these products to Derma Pen at a markup. 139
Also during the summer of 2014, MedMetics entered into a joint venture with Biopelle,
which made a cosmetic cream to be used with the Devices. The joint venture was called

133

See February 9, 2015 Preliminary Injunction Hearing Transcript at 186:14-187:1, docket no. 596.

134

This meeting was recorded by a court reporter, with which recording Anderer expressed he was “not real
comfortable.” AMS Board Meeting Minutes at 4:23-25, dated December 2, 2014, Ex. 66. Anderer even suggested
that the minutes be “destroy[ed]” or altered. Id. at 5:23-6:2, Ex. 66.
135

See id. at 16:23-17:7, dated December 2, 2014, Ex. 66.

136

See id. at 17:3-7.

137

See id. at 17:1-2.

138

See id. at 12:24-13:3, dated December 2, 2014, Ex. 66.

139

February 11, 2015 Preliminary Injunction Hearing Transcript at 18:14-20:18.

22

AMS. 140 The purpose of AMS was to sell both the cream and the MDerma device as a package
to physicians and, thereby, take advantage of the combined marketing power of both products
and the increased renewable revenues from selling additional creams and Tips. Because of
production delays in bringing the MDerma to market, the Device was offered for free to initial
purchasers of the packages, with the promise of replacing the Device with the MDerma once it
became available. 141
Derma Pen’s Claims Against 4EverYoung
Derma Pen claims that since as least August 1, 2013, 4EverYoung has been using
Dermapenworld to market and sell Devices in the United States by using the Trademark at issue
in this case. 142 Derma Pen recently filed a summary of its motions related to this issue, the
parties will file supplemental briefs, and a hearing is set March 6, 2015 to hear Derma Pen’s
motion for a preliminary injunction. 143
Derma Pen claims that after Keli Cypriano was terminated from Derma Pen, she began
working for Dermapenworld Sales and hacked into Derma Pen’s computer systems on multiple
occasions gaining access to Derma Pen’s confidential information and trade secrets, including its
lists of current customers and potential customers 144 and that with this information

140

Id. at 6:13-14.

141

February 12, 2015 Preliminary Injunction Hearing Transcript 82:8-10, 99:5-20, 134:5-12.

142

February 9, 2015 Preliminary Injunction Hearing Transcript at 82:8-10, 99:5-20, 134:5-12.87:24-91:12; February
11, 2015 Preliminary Injunction Hearing Transcript at 82:8-10, 99:5-20, 134:5-12.30:8-10.

143

Identification of Documents Related to Derma Pen’s Motion for Temporary Restraining Order and Preliminary
Injunction, docket no. 590, filed February 16, 2015; Minute Order docket no. 595, filed February 19, 2015.
144
February 12, 2015 Preliminary Injunction Hearing Transcript at 82:8-10, 99:5-20, 134:5-12.109:2-7, 279:13 282:6; February 18, 2015 Preliminary Injunction Hearing Transcript at 82:8-10, 99:5-20, 134:5-12.20:4-21:12,
61:14-62:12.

23

Dermapenworld has actively targeted Derma Pen’s customers in an effort to lure them away
from Derma Pen and make them customers of Dermapenworld. 145
Bifurcation and Stay
On May 2, 2014, Defendants filed a motion for temporary restraining order and
preliminary injunction (“Defendants’ Injunction Motion”), 146 seeking, among other things, an
order requiring Derma Pen to specifically perform on the Transfer Provisions under the Sales
Distribution Agreement, including its obligation to offer to 4EverYoung for purchase the
Trademark and Domain Name. 147
On May 15, 2014, this court bifurcated certain threshold claims related to Derma Pen’s
claim for rescission of the Sales Distribution Agreement and 4EverYoung’s claim for specific
performance of that agreement, and stayed the remaining claims and issues in the case. 148
Prior to the January 6, 2015 hearing, the Court had expressly granted, in whole or part,
Defendants’ motion for partial summary judgment, save Defendants’ motion for partial summary
judgment regarding specific performance. 149
Anderer’s 2014 Advances
Anderer also claims a lien by virtue of money paid in 2014, just before Derma Pen filed
bankruptcy. 150 The money was disbursed by Saunders, S2 Partners V, or Tensor Cloud
145

February 18, 2015 Preliminary Injunction Hearing Transcript at 82:8-10, 99:5-20, 134:5-12.142:8-143:4;
February 12, 2015 Preliminary Injunction Hearing Transcript at 82:8-10, 99:5-20, 134:5-12.98:7-100:14
146

Docket no. 141, dated May 2, 2014.

147

See id. at v.

148

Memorandum Decision and Order Re: Expedited Schedule on Rescission Claims and Trademark Rights and
Staying All Other Issues in the Case, docket no. 155, entered May 15, 2014; see also Memorandum Decision and
Order Re: Jury Trial on Derma Pen, LLC’s 22nd and 24th Causes of Action and Part of Defendants’ 1st Counterclaim
Cause of Action, docket no. 207, entered June 26, 2014.
149

Memorandum Decision and Order Granting 4EverYoung’s 238 Motion for Partial Summary Judgment on
Rescission, docket no. 397, entered August 4, 2014; Memorandum Decision and Order Granting in Part and
Denying in Part 4EverYoung’s 244 Motion for Partial Summary Judgment on Fraudulent Inducement, docket no.
400, entered under seal August 4, 2014; Memorandum Decision and Order Granting 4EverYoung’s 240 Motion for
Partial Summary Judgment Directed Against Derma Pen LLC’s Defenses to Specific Performance (the “Specific
Performance Defenses Order”), docket no. 465, entered December 30, 2014.

24

Solutions,151 although the loan documents identified Anderer as the lender. 152 Saunders
negotiated and documented these loans. 153 Anderer never read the loan documents. 154
In order to maximize FDIC insurance protection for his cash assets, Anderer diversified
his cash holdings among various bank accounts in the names of entities that he solely owned and
controlled, such as S2 Partners V, LLC and Tensor Cloud, LLC. 155
Anderer also relied on his personal attorney, Sam Saunders, who had check signing and
disbursement authority on these affiliated entity bank accounts, to disburse funds from these
accounts as Anderer directed. 156
Occasionally, some of Anderer’s loan advances to Derma Pen were made from these
affiliated bank accounts, 157 but all of the funds advanced were of Anderer’s personal money. 158
In addition, on occasion Anderer authorized Saunders, and Saunders’s wife, Patricia
Saunders, to make loan advances for Derma Pen in the form of paying Derma Pen’s obligations
to lawyers through the use of personal American Express credit card accounts that were owned

150

See Bankruptcy Petition, dated August 8, 2014, Exs. 21, 22.

151

See Saunders Credit Card Statements at 2, 6, 8, 13-15, 17, Ex. 74; see also S2 Partners V Credit Card Statement
at 3, 5, 8, Ex. 75; Tensor Cloud Solutions Credit Card Statements at 3, Ex. 76. See also February 12, 2015
Preliminary Injunction Hearing Transcript at 188:18-195:7, docket no. 597; Anderer Dep. at 117, 122.
152

See Secured Promissory Note, dated July 1, 2014, Ex. 14; see also Security Agreement, dated July 1, 2014, Ex.
15; Amendment to Secured Promissory Note and Security Agreement, August 7, 2014, Ex. 16; Utah UCC Filing,
dated August 7, 2014, Ex. 17.

153

See Anderer Dep. at 109, 122-23, 137-38.

154

See id. at 135-36.

155

February 19, 2015 Preliminary Injunction Hearing Transcript at 24:3-25:4.

156

Id. at 25:5-26:20.

157

Ex. 153.

158

February 12, 2015 Preliminary Injunction Hearing Transcript at 174:19-175:2, 191:14-192:14; February 19, 2015
Preliminary Injunction Hearing Transcript at 25:25-26:23.

25

by Mr. and Ms. Saunders. 159 On these occasions, Anderer promptly reimbursed the Saunders’ for
these credit card charges from his personal funds. 160
On July 1, 2014, Derma Pen executed and delivered another Secured Promissory Note to
Anderer in the amount of $278,400 (the “2014 Note” or “Note 3”). 161 The 2014 Note was
secured with a Security Agreement of the same date (the “2014 SA”). 162 The 2014 SA granted
Anderer a security interest in the Trademark and Domain Name and Derma Pen’s other
property. 163
The loan proceeds from the 2014 Note were used to pay legal fees that Derma Pen owed
to its counsel in connection with this lawsuit.164
The 2014 Note was amended on August 7, 2014 (the “2014 Note Amendment”) to
increase the note balance by an additional $301,884.90, for a total 2014 Note balance, at that
date, of $580,284.90. 165 The loan proceeds from the 2014 Note Amendment also were used to
pay Derma Pen’s legal fees in connection with this lawsuit. 166
At the time the 2014 Note and the 2014 Note Amendment were signed, both Anderer and
Derma Pen expected that Derma Pen would be able to repay the obligations from Derma Pen’s
future revenues. 167

159

Exs. 152, 153.

160

February 19, 2015 Preliminary Injunction Hearing Transcript at 25:25-26:23.

161

Ex. 14

162

Ex. 15.

163

Id.

164

February 12, 2015 Preliminary Injunction Hearing Transcript 235:15-237:15; Exs. 146, 149, 152, 153.

165

Exs. 16, 149.

166

February 12, 2015 Preliminary Injunction Hearing Transcript at 235:15-237:15; Exs. 146, 149, 152, 153.

167

February 19, 2015 Preliminary Injunction Hearing Transcript at 46:25-47:3; February 18, 2015 Preliminary
Injunction Hearing Transcript at 78:20-79:4.

26

Derma Pen’s Bankruptcy Petition
On August 8, 2014, after 4EverYoung had filed and prevailed on multiple motions for
partial summary judgment related to its attempt to enforce the transfer provisions, and just one
business day before the jury trial on the bifurcated contract claims in this case, Derma Pen filed
chapter 11 bankruptcy in Delaware. 168 Each of the members of Derma Pen, including Anderer,
executed a resolution authorizing the filing of the bankruptcy. 169
Just prior to Derma Pen filing the Bankruptcy Case, Anderer resigned from the board of
Derma Pen, because he believed there was a conflict with his role as a creditor and his role as a
board member. 170
That bankruptcy filing halted the August 11, 2014 jury trial and prevented the Court from
entering further orders.
In the Bankruptcy Case, Derma Pen scheduled 4EverYoung with a contingent,
unliquidated and disputed unsecured claim in the amount of $56,150.05, [Schedule F]. It
scheduled Anderer with an undisputed secured claim in the amount of $580,284.90 [Schedule
D]. It also scheduled MedMetics as an undisputed, unsecured creditor with a claim of
$79,862.77 [Schedule F]. 171
Jones testified that Derma Pen still owed at least approximately $56,000 to 4EverYoung
under the Sales Distribution Agreement. 172

168

See In Re Derma Pen, LLC, case no. 14-11894 (KJC), 2014 WL 7269762 (Bankr. D. Del. Dec. 19, 2014); see
also Notice of Filing of Bankruptcy and Automatic Stay Under 11 U.S.C. § 362, docket no. 422, filed August 8,
2014; see also January 21, 2015 TRO at 5 ¶ 12, docket no. 505.
169

Bankruptcy Petition at 6, Ex. 21; see also Amended Bankruptcy Petition at 6, Ex. 22; January 21, 2015 TRO at 5
¶ 13, docket no. 505.
170

February 19, 2015 Preliminary Injunction Hearing Transcript at 48:18-24.

171

Ex. 115.

172

See February 12, 2015 Preliminary Injunction Hearing Transcript at 159:23-161:9, docket no. 597.

27

In the bankruptcy case, Derma Pen attempted to “reject” its post-termination obligations
to 4EverYoung under the Sales Distribution Agreement. 173 Anderer prepared a stalking horse
bid so the Trademark and Domain Name could be sold out of bankruptcy. 174 The price on the
stalking horse bid for the Trademark and Domain Name (i.e., $1.08 million) was calculated by
Anderer and represented an amount that “would pay off the secured creditors and it would -- it
would pay back the rest of the shareholders twice what the average collections were in Delaware
in a bankruptcy case.” 175
Debtor In Possession (DIP) Financing
During the Bankruptcy Case, Derma Pen sought authority to use Anderer’s cash
collateral, and it also sought authority to borrow up to an additional $150,000 from Anderer. 176
4EverYoung objected to Derma Pen’s efforts to obtain this authority. 177 Ultimately, after
discovery and further hearings, the Bankruptcy Court entered its Final Order authorizing Derma
Pen’s use of cash collateral, granting adequate protection to Anderer and authorizing postpetition financing. 178 Among other things, this Final Order recognized that Derma Pen and
Anderer stipulated to the validity, priority and amount of Anderer’s security interest and secured
debt, and the final order granted additional liens to Anderer in connection with his postbankruptcy loans to Derma Pen. 179

173

See Debtor’s Motion for Entry of an Order (A) Approving the Sale of the Debtor’s Assets Free and Clear of
Liens Claims and Encumbrances, (B) Authorizing the Assumption and Assignment of Certain Executory Contracts
and Unexpired Leases, and (C) Granting Certain Related Relief, Ex. 24.
174

See id.

175

See December 19, 2014 Preliminary Injunction Hearing Transcript at 49:17-50:4, docket no. 602.

176

Exs. 116, 122.

177

Exs. 117, 119, 121.

178

Ex. 123.

179

Id.

28

The DIP financing was governed by terms consistent with the 2014 Note and 2014 SA 180
but with special protection under Section 364(e) of the Bankruptcy Code. 181
In Section 3 of the Bankruptcy Court’s Final Order, the Bankruptcy Court granted
4EverYoung and Marshall a reservation of rights to challenge Anderer’s security interests and
liens, but it established a deadline for 4EverYoung and Marshall to do so. 182 The same section
also preserved Anderer’s defenses to any such challenge, if one were filed. 183 Ultimately, the
Bankruptcy Court extended 4EverYoung’s challenge deadline to December 23, 2014. 184 The
Bankruptcy was dismissed December 19, 2014 before that deadline expired.
The funds from Anderer’s post-bankruptcy loans to Derma Pen were used by Derma Pen
to retain bankruptcy counsel. 185 Anderer advanced $100,000 under the post-bankruptcy loans. 186
Derma Pen has not repaid any of the funds loaned to it by Anderer during the
bankruptcy. 187 As of January 29, 2015, the outstanding balance on the post-petition bankruptcy
loan was $102,383.80, consisting of unpaid principal in the amount of $100,000 and accrued and
unpaid interest in the amount of $2,383.80. 188
At the time Anderer made these post-bankruptcy loans to Derma Pen, he expected that
Derma Pen would be able to repay him from its operating revenues, or from a sale of the
Trademark and Domain Name. 189
180

Id. ¶¶5, 7-9 at 4-6 of Stipulation.

181

Id. ¶ D. at 2.

182

Ex. 123 at § 3.

183

Id.

184

Ex. 124.

185

February 19, 2015 Preliminary Injunction Hearing Transcript at 49:8-16.

186

Ex. 25.

187

February 12, 2015 Preliminary Injunction Hearing Transcript at 97:17-98:3; id. at 237:18-21.

188

Ex. 150; February 12, 2015 Preliminary Injunction Hearing Transcript at 243:11-18.

189

February 19, 2015 Preliminary Injunction Hearing Transcript at 49:8-51:24.

29

At all times that Anderer was a lender to Derma Pen, he believed that the value of Derma
Pen’s assets was greater than the amount of its liabilities. 190
Derma Pen’s bankruptcy sworn schedules showed that Derma Pen’s assets were
significantly greater than its liabilities at the time the Bankruptcy Case was filed. 191
In its bankruptcy schedules and even now, Derma Pen maintains that the Trademark and
Domain Name are worth in excess of $6 million.192
No one other than Anderer has advanced funds to Derma Pen, either as a lender or equity
investor.
Dismissal of Derma Pen’s Bankruptcy Petition
Following full briefing and evidentiary hearings, Derma Pen’s bankruptcy was dismissed
on Friday, December 19, 2014, after the bankruptcy court concluded that the bankruptcy was
filed “as a litigation tactic, rather than as a good faith attempt to reorganize or preserve value for
creditors.” 193 The bankruptcy court stated as follows:
I conclude that the totality of the facts and circumstances of this case support a
determination that Derma Pen's bankruptcy petition was filed as a litigation tactic,
rather than as a good faith attempt to reorganize or preserve value for creditors.
Derma Pen filed the complaint that started the Utah Litigation and the Utah
District Court was addressing the numerous claims. When the Utah District Court
entered preliminary rulings that were not in Derma Pen's favor, Derma Pen filed a
bankruptcy petition. The timing of the petition, and the lack of facts
demonstrating that Derma Pen was in financial distress at that time, indicate that
the bankruptcy petition was filed to avoid the expense of trial and the possibility
of additional rulings against it. The bankruptcy filing is an improper attempt by
the Debtor to re-start the contract and trademark battle with the Movants in a new
court. Rather than filing to assuage operational difficulties and financial stress
caused by the trademark dispute, Derma Pen’s petition is an attempt to disrupt the

190

Id. 39:13-22, 46:15-47:3.

191

Ex. 115.

192

See Bankruptcy Schedules at 13, Ex. 115; see also Draft Navigant Valuation, Ex. 40.

193

Memorandum at 17, Ex. 125; see also January 21, 2015 TRO at 5 ¶ 14, docket no. 505.

30

litigation process. The Debtor has failed to meet its burden that its chapter 11
petition was filed in good faith. 194
On December 19, 2014, after the bankruptcy dismissal, Anderer’s counsel sent a default
notice to Jones, as the CEO of Derma Pen, demanding immediate payment of $687,918.82, plus
interest, in connection with Derma Pen’s secured obligations to Anderer. 195
The Confession of Judgment
Anderer testified that, up until the bankruptcy case was dismissed, he would have
continued to extend funds to Derma Pen indefinitely, had no concern over how the monies were
used, and never had any intention of taking action against Derma Pen. 196
On Friday, December 19, 2014 (i.e., the same day that the bankruptcy case was
dismissed), Saunders, on behalf of Anderer, verbally asked Jones to confess judgment on behalf
of Derma Pen in favor of Anderer. 197
Jones testified that, on December 19, 2014, he spoke with Derma Pen’s then-counsel,
Russell S. Walker (“Walker”), for forty minutes regarding Saunders’s request. 198 Yet, during a
December 23, 2014 telephonic conference in court, Walker stated that he only became aware of
Derma Pen’s intent to surrender assets to Anderer on the evening of December 22, 2014. 199
Jones testified that he did not perceive that Derma Pen had any defense to Anderer’s
claims. 200 However, he was aware of 4EverYoung’s standing motion and draft complaint in the
bankruptcy on behalf of Derma Pen to avoid obligations to Anderer. 201
194

Memorandum at 17-18 (internal footnote omitted), Ex. 125.

195

Ex. 128.

196

See February 19, 2015 Preliminary Injunction Hearing Transcript at 28:6-10, 39:20-22, 45:4-6, 56:18-57:13,
58:21-59:5, docket no. 602; see also Anderer Dep. at 111, 124, 138-39.

197

See February 12, 2015 Preliminary Injunction Hearing Transcript at 202:3-206:19, 220:24-221:3, docket no. 597.

198

See id. at 202:21-24, 214:4-215:2.

199

See December 23, 2014 Telephonic Conference Transcript at 16:6-10, 17:10-23, docket no. 520.

200

See February 12, 2015 Preliminary Injunction Hearing Transcript at 221:6-9, docket no. 597.

31

On Monday, December 22, 2014, Anderer appeared at Derma Pen’s office with a notary,
and Derma Pen executed a Confession of Judgment in favor of Anderer without meeting or
discussion. 202 Jones, on behalf of Derma Pen, executed the Confession of Judgment,
acknowledging a liability of Derma Pen to Anderer in the amount of $791,012.18. 203
The Confession of Judgment correctly recites the principal under the post-bankruptcy
loans as $100,000 but is in error in reciting that the interest rate is 10% on those loans. The
correct rate is 5%.
Jones, Morgan, and Milton executed a written consent by which they approved the
Confession of Judgment. 204
Jones testified that he understands that, as an officer of Derma Pen, his fiduciary duties
were to the “stakeholders,” not the company itself. 205
On December 22, 2014, Anderer filed an action (the “Confession of Judgment Action”)
in the Third District Court, State of Utah, to levy on Derma Pen’s secured assets. 206
On December 24, 2014, based on the Confession of Judgment, the state court entered a
judgment against Derma Pen in favor of Anderer in the amount of $791,012.18 (the
“Judgment”). 207

201

See id. at 221:20-24; see also 4EverYoung’s Standing Motion, Court’s Exhibit 3 from February 4, 2015 Hearing.

202

See Confession of Judgment, dated December 22, 2014, Ex. 25; see also February 12, 2015 Preliminary
Injunction Hearing Transcript at 199:17-202:2, docket no. 597.
203

Exs. 25, 135.

204

See Confession of Judgment at 3, Ex. 25.

205

See February 12, 2015 Preliminary Injunction Hearing Transcript at 206:6-19, docket no. 597.

206

See Anderer v. Derma Pen, LLC, in the Third Judicial District Court, Salt Lake County, Utah, Case No.
140908635, Honorable Robert Faust.
207

Ex. 30.

32

The Trademark Assignment
On the evening of December 19, 2014, and again unbeknownst to 4EverYoung,
Saunders, Anderer’s counsel, purportedly called due Derma Pen’s debt to Anderer. 208 That same
evening, Jones expressed Derma Pen’s concession to Anderer’s position. 209
On December 22, 2014, Saunders sent an email to Jones that requested a “partial
surrender of some of the secured collateral assets in favor of Mike Anderer per Article 9 of the
Utah Commercial Code, rather than being in a situation where Mike would have to seize the
assets.” As such, Anderer’s counsel requested that Derma Pen immediately record an
assignment of the Trademark using the USPTO Electronic Transfer Assignment System in order
“to effectuate this partial surrender in as timely a manner as possible.” 210 Anderer’s counsel also
provided a form of Trademark Assignment for Jones to execute on behalf of Derma Pen. 211
In approximately the hour that followed, Jones made an electronic assignment of the
Trademark to Anderer and received a receipt from the USPTO to that effect. 212 An actual
Assignment of the Trademark also was executed on December 22, 2014, 213 and the USPTO
acknowledged that the Assignment was effected on December 22, 2014. 214

208

See E-Mail Saunders to Jones, dated December 19, 2014 (6:46 p.m.), Ex. 128; see also February 12, 2015
Preliminary Injunction Hearing Transcript at 212:7-213:12, docket no. 597.
209

See E-Mail Jones to Saunders, dated December 19, 2014 (9:00 p.m.), Ex. 129.

210

See E-Mail Saunders to Jones, dated December 22, 2014 (7:10 p.m.), Ex. 130; see also February 12, 2015
Preliminary Injunction Hearing Transcript at 213:13-215:2, docket no. 597.
211

Ex. 130.

212

Ex. 131-132. See Receipt of Trademark Assignment Filing, dated December 22, 2014 (8:17 p.m.), Ex. 28; see
also E-Mail Jones to Saunders, dated December 22, 2014 (10:17 p.m.), Ex. 131; see also Trademark Assignment,
dated December 22, 2014, Ex. 27.
213

Ex. 133.

214

Ex. 134.

33

Revival of this Litigation
The same day that the bankruptcy court dismissed Derma Pen’s bankruptcy (i.e.,
December 19, 2014), 215 4EverYoung filed a notice of the dismissal and requested a pretrial
conference. 216 On December 21, 2014 (i.e., before the Confession of Judgment or Trademark
Assignment were executed), a telephone conference was scheduled for Tuesday, December 23,
2014 “to discuss how the civil case should proceed going forward in light of the recent
bankruptcy ruling dismissing the bankruptcy case.” 217 Recipients of that telephone conference
notice included Baker Donelson, still counsel of record for Derma Pen and used by Derma Pen,
Anderer, and entities owned solely by Anderer; as well as Mark Gibb of Durham Jones &
Pinegar, local counsel for Derma Pen. 218
On December 23, 2014, at the beginning of the telephone conference to discuss the
impact of the bankruptcy dismissal, counsel for 4EverYoung requested “that the Court rule upon
the motion for preliminary injunction filed by 4EverYoung, which was Document 141.” 219
Further, 4EverYoung’s counsel stated the “need to lock down and preserve the trade – what the
bankruptcy court I believe referred to as the trademark asset, the trademark and the domain
name. So we have a fulsome record before the Court that will enable this Court to enter the
preliminary injunction without further proceedings[.]”220

215

See Memorandum, Ex. 125; see also Order Dismissing Bankruptcy Case, dated December 19, 2014, Ex. 126;
Bankruptcy Court Docket, Ex. 127.
216

See Notice of Dismissal of Bankruptcy Case and Request for Pretrial Conference, docket no. 448, filed December
19, 2014.
217

E-Mail Chambers to Counsel, dated December 21, 2014, lodged February 23, 2015 as docket no. 614.

218

Anderer Dep. at 188:32-37, 197:17-20; see also February 19, 2015 Preliminary Injunction Hearing Transcript at
41:12-18, docket no. 602, filed February 20, 2015.
219

December 23, 2014 Telephone Conference Transcript at 5:2-3, docket no. 520, filed January 27, 2015.

220

December 23, 2014 Telephone Conference Transcript at 10:15-21, docket no. 520, filed January 27, 2015.

34

Derma Pen’s bankruptcy counsel, Walker, then stated that he had just learned “late” on
the prior evening that a Confession of Judgment was filed in Utah State Court on December 22,
2014, which was intended to result in surrender of the Trademark and Domain Name to
Anderer. 221 Derma Pen’s counsel in this litigation stated that they were unaware of the
Confession of Judgment, Trademark Assignment, or intended surrender. 222
Mr. Von Maack was directed to submit the form of a TRO. 223 No objections were made
by counsel for Derma Pen. But counsel for Derma Pen did request a TRO be set on Derma Pen’s
motion that had been recently remanded from the 10th Circuit. 224
Following that scheduling conference, the Court set the jury trial on the remaining
threshold issues for February 2-13, 2015, 225 and, as discussed below, entered the first of several
injunctions to prevent further transfer of the Trademark or Domain Name.
The December 23, 2014 TRO
On December 23, 2014, the Court entered a temporary restraining order (the “December
23, 2014 TRO”), 226 granting in part Defendant’s Motion for Temporary Restraining Order and
Preliminary Injunction filed May 2, 2014. 227 That motion contained 76 paragraphs of facts from
the record. The Court ordered that “Derma Pen, its officers, agents, servants, employees, and

221

See December 23, 2014 Telephone Conference Transcript at 16:6-18:2, docket no. 520, filed January 27, 2015;
see also December 23, 2014 TRO at 2-3, docket no. 451; January 6, 2015 Preliminary Injunction Order at 4, docket
no. 476; January 21, 2015 TRO at 7 ¶ 21, docket no. 505.
222

See December 23, 2014 Telephone Conference Transcript at 16:6-18:22, docket no. 520, filed January 27, 2015;
see also December 23, 2014 TRO at 3, docket no. 451; January 6, 2015 Preliminary Injunction Order at 4, docket
no. 476.
223

December 23, 2014 Telephone Conference Transcript at 22:12-13, docket no. 520, filed January 27, 2015.

224

Id. 23:20-23.

225

Notice of Pretrial Status Conference and Trial, docket no. 452, entered December 23, 2014.

226

See December 23, 2014 TRO, docket no. 451; see also January 21, 2015 TRO at 7 ¶ 22, docket no. 505.

227

Docket no. 141.

35

attorneys, and those acting in concert, with them (collectively, the ‘Enjoined Parties’) shall not
transfer the trademark and domain name.” 228
The December 23, 2014 TRO made extensive preliminary findings and recited that the
“bankruptcy dismissal declares that the bankruptcy filing was a bad faith attempt to prevent
adjudication in this case” and that the “Confession of Judgment is also an attempt to evade this
adjudication process by placing the trademark beyond the reach of the court.” 229
The December 23, 2014 TRO includes language similar to that under Rule 65(d)(2)(c) of
the Federal Rules of Civil Procedure, reciting that the temporary restraining order binds “persons
who are in active concert or in participation with” Derma Pen, which includes Anderer. 230
On or before December 24, 2014, Anderer, through his counsel, received notice of the
December 23, 2014 TRO. 231 Anderer also likely learned of the December 23, 2014 TRO during
his holiday party in early January 2015, which was attended by “Derma Pen people, Derma Gen
people,” Jones, Morgan, and at least one of Anderer’s attorneys, among others. 232
The Court required 4EverYoung to post security of $10,000 related to the issuance of the
December 23, 2014 TRO. 233 4EverYoung timely posted that security. 234
The December 23, 2014 TRO also set a preliminary injunction hearing for January 6,
2015. 235

228

December 23, 2014 TRO at 6 ¶ 2, docket no. 451; see also January 21, 2015 TRO at 7 ¶ 22, docket no. 505.

229

December 24, 2014 TRO at 5, docket no. 451; see also January 21, 2015 TRO at 7 ¶ 22, docket no. 505.

230

See Fed. R. Civ. P. 65(d)(2).

231

See E-Mail Von Maack to Scofield, dated December 24, 2014, docket no. 481 at 28; see also E-Mail Von Maack
to Hon. Faust and Counsel, dated December 24, 2014, Docket no. 481 at 30; Letter D. Scofield to Hon. Faust, dated
January 8, 2015, Docket no. 481 at 16.
232

See February 12, 2015 Preliminary Injunction Hearing Transcript at 198:5-199:4, Docket no. 597.

233

January 6, 2015 Preliminary Injunction Order at 5, docket no. 476.

234
See Notice of Security Bond, docket no. 462, entered December 29, 2014; see also Notice of Posting of Security
for Temporary Restraining Order, docket no. 463, filed December 29, 2014; January 6, 2015 Preliminary Injunction
Order at 5, docket no. 476; January 21, 2015 TRO at 7 ¶ 23, docket no. 505.

36

Withdrawal of Counsel for Derma Pen
On December 23, 2014, after entry of the TRO, the Court granted the pending motions to
withdraw filed by Derma Pen’s counsel. 236 In granting those motions to withdraw, the Court
required Derma Pen to appear through counsel “[o]n or before January 5, 2015, at 3:00 p.m.” and
warned that Derma Pen’s failure “to file a Notice of Substitution of Counsel or Notice of
Appearance as set forth above, may . . . subject [it] to sanction pursuant to Federal Rule of Civil
Procedure 16(f)(1), including but not limited to dismissal or default judgment.” 237
On January 5, 2015, at 4:38 p.m. Walker and Reid W. Lambert of Woodbury & Kesler
filed a Notice of Limited Appearance. 238 According to that notice, “[t]he scope of Woodbury &
Kesler’s appearance is limited to [the January 6, 2015] hearing. Derma Pen, LLC remains
responsible for all matters not specifically described in this notice.” 239 No general appearance
followed.
On January 7, 2015, the Court entered the Order to Show Cause and Warning, which
warned Derma Pen that “it has failed to comply with the Orders and with the local rules of this
court. Derma Pen’s default and an order striking claims may be entered if this failure is not
immediately cured.” 240

235

See December 23, 2014 TRO at 6 ¶ 3, docket no. 451; see also January 6, 2015 Preliminary Injunction Order at 5,
docket no. 476; January 21, 2015 TRO at 7 ¶ 23, docket no. 505.
236

Order on Motion for Withdrawal of Counsel (Nicholas L. Vescovo), docket no. 453, entered December 23, 2014;
Order on Motion for Withdrawal of Counsel (Maia T. Woodhouse), docket no. 454, entered December 23, 2014;
Order on Motion for Withdrawal of Counsel (Samuel F. Miller), docket no. 455, entered December 23, 2014; Order
Granting Motion to Withdraw as Counsel (Peter Donaldson), docket no. 456, entered December 23, 2014; Order
Granting Motion to Withdraw as Counsel (Ryan Pahnke), docket no. 457, entered December 23, 2014; Order
Granting Motion to Withdraw as Counsel (Mark Gibb), docket no. 458, entered December 23, 2014 (collectively,
the “Withdrawal Orders”).
237

See id.

238

Docket no. 467, filed January 5, 2015.

239

See id. at 1-2.

240

Docket no. 470 at 3, entered January 7, 2015.

37

The Specific Performance Defenses Order
On December 30, 2014, the Court granted Defendants’ Motion for Partial Summary
Judgment on Plaintiff’s Defenses to Specific Performance 241 through the Court’s Specific
Performance Defenses Order. 242 In the Specific Performance Defenses Order, the Court rejected
all of Derma Pen’s defenses to specific performance, including unclean hands, laches, waiver,
equitable estoppel, failure to meet a necessary precondition, lack of standing, fraud or fraudulent
inducement, lack of mutuality, nonrenewal of Sales Distribution Agreement, survival clause, and
first material breach. 243
The Specific Performance Order
On January 6, 2015, the Court granted 4EverYoung’s Motion for Partial Summary
Judgment on Specific Performance. 244 That ruling was memorialized on January 12, 2015 in the
Court’s Memorandum Decision and Order Granting 4EverYoung’s 241 Motion for Partial
Summary Judgment on Specific Performance and Granting in Part Defendants’ 141 Motion for
Preliminary Injunction (the “Specific Performance Order” or “January 6, 2015 Preliminary
Injunction Order”). 245
In the Specific Performance Order, the Court ruled as follows:
Summary judgment is granted on 4EverYoung’s specific performance claim as
there remain no genuine issues as to any material fact regarding Derma Pen’s
obligation, pursuant to Sections 12.2 and 14.5 of the Sales Distribution
Agreement, to offer the Trademark and Domain Name. As discussed in the
Specific Performance Defenses Order, it is clear from the undisputed facts that
Derma Pen terminated the Sales Distribution Agreement. The language of
Sections 12.2 and 14.6 of that Sale Distribution Agreement makes it clear that
241

Docket no. 240, filed July 3, 2014.

242

Docket no. 465, entered December 30, 2014.

243

See generally Specific Performance Defenses Order, docket no. 465.

244

Defendants’ Motion for Partial Summary Judgment on Specific Performance and Memorandum in Support,
docket no. 241, dated July 3, 2014; see also Specific Performance Order, docket no. 476, entered January 12, 2015.
245

Specific Performance Order, docket no. 476.

38

Derma Pen had the obligation to offer the Trademark and Domain Name to
4EverYoung for purchase and each party was required to appoint an independent
auditor. The record is clear that Derma Pen did not make an offer and did not
timely appoint an auditor to value the Trademark and Domain Name. Sections
12.2 and 14.6 also contain the implied obligation that Derma Pen cooperate with
the auditor appointed by 4EverYoung. That, on the undisputed facts, was not
done. In fact, Derma Pen repudiated the process by filing this suit and including a
claim for a declaration that it had no obligations under Sections 12.2 and 14.6.
....
Specific performance of Sections 12.2 and 14.6 is not a single event, but a
process, due to the stages of activity outlined in each section. The Specific
Performance Defenses Order outlined, in construing the sections, the process to
follow. The specific performance process in its various phases will be supervised
by this Court. . . .
....
. . . The Sales Distribution Agreement states “that the value will be determined by
the courts of the land that is governing this contract.” Section 17.7 (Governing
Law) of the Sales Distribution Agreement contemplates the United Kingdom as
the land governing that contract. These provisions have been at issue many times
in the case.
As trial on important issues approached in August 2014 an order declaring choice
of law for the proceeding stated that Utah law will govern the breach of contract
claims and fraudulent inducement claims. Thus, Utah is “the land that is
governing [the Sales Distribution Agreement],” and this Court is the “court[] of
the land that is governing this contract.” For that reason, valuation is proper here
under Section 17.7.
....
There are other reasons that the valuation should occur in this court. Derma Pen
filed bankruptcy to stop this case. The bankruptcy court dismissed Derma Pen’s
filings with a declaration that Derma Pen was not acting in good faith:
The bankruptcy filing is an improper attempt by the Debtor to re-start the contract
and trademark battle with the Movants in a new court. Rather than filing to
assuage operational difficulties and financial stress caused by the trademark
dispute, Derma Pen's petition is an attempt to disrupt the litigation process. The
Debtor has failed to meet its burden that its chapter 11 petition was filed in good
faith.
Derma Pen’s change of heart on venue—from filing in this court, to repudiating
this court—and bankruptcy filing, followed by transfer of the assets at issue
evidences Derma Pen’s determination to frustrate 4EverYoung’s rights of
purchase. Requiring valuation to occur in the United Kingdom, which has been
shown to be so difficult and expensive that the parties decided to return to this
venue, would aid Derma Pen’s strategy. Derma Pen raised a textbook litany of
defenses to the specific performance claim as well as unreasonable construction
of the provisions of Sections 12.2 and 14.6. These were all rejected by the

39

Specific Performance Defenses Order. Derma Pen’s insistence on valuation in the
United Kingdom, when it has repudiated the entire offer process and taken no
steps toward that valuation, is merely obstructive. 246
The January 6, 2015 Preliminary Injunction
In the hearing on January 6, 2015, Derma Pen consented to continuation of the December
23, 2014 TRO as a preliminary injunction (the “January 6, 2015 Preliminary Injunction”), and
the Court issued a written preliminary injunction order on January 12, 2015 (the “January 6,
2015 Preliminary Injunction Order”). 247
In the January 6, 2015 Preliminary Injunction Order, the Court explained that the
December 23, 2014 TRO included language similar to Rule 65(d)(2)(C), “reciting that the
temporary restraining order binds ‘persons who are in active concert or participation with’
Derma Pen, which includes Anderer.” 248
On or before January 8, 2014, Anderer, through his counsel, received notice of the
January 6, 2015 Preliminary Injunction. 249 Anderer also likely learned of the January 6, 2015
Preliminary Injunction during his holiday party in early January 2015, which was attended by
“Derma Pen people, Derma Gen people,” Jones, Morgan, and at least one of Anderer’s attorneys,
among others. 250

246

Specific Performance Order at 7-10, 12-13 (footnotes omitted), docket no. 476.

247

January 6, 2015 Preliminary Injunction Order, docket no. 476, entered January 12, 2015; see also January 21,
2015 TRO at 7 ¶ 24, docket no. 505.
248

January 6, 2015 Preliminary Injunction Order at 4-5, docket no. 476; see also January 21, 2015 TRO at 8 ¶ 25,
docket no. 505.
249

See E-Mail C. Von Maack to Hon. Faust and Counsel, dated January 8, 2015, docket no. 481 at 32; see also
Letter D. Scofield to Hon. Faust, dated January 8, 2015, docket no. 481 at 17-18; E-Mail C. Von Maack to Hon.
Faust and Counsel, dated January 12, 2015, docket no. 481 at 35; E-Mail C. Von Maack to Counsel, dated January
12, 2015, docket no. 481 at 38; E-Mail D. Scofield to C. Von Maack, dated January 12, 2015, docket no. 481 at 40;
E-Mail T. Dance to C. Von Maack, dated January 12, 2015, docket no. 481 at 44.
250

See February 12, 2015 Preliminary Injunction Hearing Transcript at 198:5-199:4, docket no. 597.

40

The January 9, 2015 UCC Filing
On January 9, 2015, Anderer (through counsel, Snell & Wilmer) filed a UCC Financing
Statement in Delaware. 251 That UCC filing expressly covered the Trademark and Domain
Name. 252
The Notice of UCC Sale
On January 9, 2015, Anderer (through counsel, Snell & Wilmer) issued a notice of public
sale of Derma Pen and its assets, including the Trademark. 253 According to the Notice of Sale,
the sale was to take place on January 22, 2015, at 8:00 a.m., at the Salt Lake City office of Snell
& Wilmer. 254
The Writ of Execution
On January 12, 2015, Anderer (through counsel, David Scofield) filed an Application for
Writ of Execution.255 The Application for Writ of Execution sought to execute upon the
Trademark and Domain Name. 256
On January 13, 2015, the State Court issued Anderer’s proposed Writ of Execution in the
Confession of Judgment Action. 257 That same day, Anderer (through counsel, David Scofield)
executed a Praecipe directing the Sheriff or any constable “to levy upon, attach and hold” Derma
Pen’s assets, including the Trademark and Domain Name. 258

251

See Delaware UCC Financing Statement, dated January 9, 2015, Ex. 18.

252

See id.

253

See Notice of Public Disposition of Collateral (the “Notice of Sale”), dated January 9, 2015, Ex. 31.

254

See Notice of Sale at 1, Ex. 31.

255

See Application for Writ of Execution, Ex. 32.

256

See id. at 19.

257

See Writ of Execution, Ex. 33.

258

See Praecipe, dated January 13, 2015, Ex. 139.

41

On January 14, 2015, Anderer (through the Salt Lake County Constable) served upon
Derma Pen the Writ of Execution and Praecipe. 259 That same date, Derma Pen executed a
Keeper’s Receipt. 260
On or about January 16, 2015, Anderer (through the Salt Lake County Constable) issued
a Notice of Constable Sale. 261 According to that notice, the Trademark and Domain Name were
to be sold on January 30, 2015 at 2:00 p.m. at the Derma Pen offices at 3216 South Highland
Drive, Suite 200, Salt Lake City, Utah 84106. 262
4EverYoung filed a reply (Reply) to the Writ of Execution 263 and according to counsel
for Derma Pen, a hearing has been set on the subject on March 4, 2015. 264 The Reply does not
mention the Utah Fraudulent Transfer Act.
Adding Anderer as a Party
4EverYoung’s Motion to add Anderer as a party in this case was filed January 12,
2015, 265 and taken under advisement the next day. 266 Any response was required by January 20,
2015. 267
On January 21, 2015, 4EverYoung filed a third-party complaint against Anderer and
others.

268

259

See Proof of Service, dated January 14, 2015, Ex. 142.

260

See Keeper’s Receipt, dated January 14, 2015, Ex. 140.

261

See Notice of Constable Sale, dated January 16, 2015, Ex. 141.

262

See id.

263

Reply to Writ and Request for Hearing, dated January 26, 2015, in Confession of Judgment Action, docket no.
576, Exhibit 2.
264

Notice of Hearing, docket no. 615, filed February 23, 2015; February ___, 2015 Preliminary Injunction Hearing
Transcript ___;___, docket no. ___, filed ________________________
265

Docket no. 475, filed January 19, 2015.

266

Docket Text Order, docket no. 477, filed on January 20, 2015.

267

Id.

42

A few hours later, 4EverYoung also filed an ex parte motion to effect service on Anderer
by serving Anderer’s counsel, who previously had only entered a special, limited appearance in
the case in connection with the OSC hearing, and who appeared on the form which had given
notice of public sale, as well as Anderer’s counsel in the Confession of Judgment Action. 269 An
order granting the motion for alternative service was promptly filed. 270
The January 21, 2015 TRO
4EverYoung’s Motion for Temporary Restraining Order Against Michael E. Anderer 271
was filed and granted in part on the evening of January 21, 2015. 272 The TRO was intended to
stop the January 22, 2015, 9:00 a. m. public sale for which notice was given January 9, 2015.
The January 21, 2015 TRO contained preliminary findings:
27.
4EverYoung is likely to suffer irreparable injury in the absence of
preliminary injunctive relief by reason of transfer of the Trademark and Domain
Name, and defeat of its contractual rights, and the harm it faces outweighs the
harm faced by Anderer from the issuance of an injunction which is measurable by
monetary damages. The facts are established by an uncontested record that the
sale is set to occur less than 12 hours from now, without any intervening business
hours.
28.
The public interest favors this restraining order to uphold contractual
rights, prevent transfer of assets outside the control of parties subject to orders of
the court, and ensure orderly resolution of disputes.
29.
4EverYoung is at this stage shown to be likely to prevail on the merits of
its claim for fraudulent transfer.
30.

Under Utah Code Ann. § 25-6-5(1)(a), a transfer is fraudulent if

268

Second Amended Counterclai, Third-Party Complaint, and Demand for Jury Trial, docket no. 492, filed January
21, 2015.
269

Docket no. 501, filed January 21, 2015.

270

Docket no. 503, filed January 21, 2015.

271

Docket no. 504, filed January 21, 2015.

272

Order Granting 4EverYoung’s Motion for Temporary Restraining Order Against Michael E. Anderer, docket no.
505, filed January 21, 2015.

43

(1) the creditor has a claim that arose either before or after the transfer was made
or the obligation was incurred; and
(2) the transfer was made with actual intent to hinder, delay, or defraud any
creditor of the debtor.
31.
The facts recited show the actual intentions of the control group including
Anderer to hinder, delay and obstruct 4EverYoung’s claims.
32. Under Utah Code Ann. 25-6-6(2), a transfer is fraudulent where:
(1) the creditor has a claim that arose before the transfer was made or the
obligation was incurred;
(2) the transfer was made to an insider for an antecedent debt;
(3) the debtor was insolvent at the time;
(4) the insider had reasonable cause to believe that the debtor was insolvent.
33.
4EverYoung’s claim arose before Derma Pen transferred the trademark
and domain name to Anderer.
34.

Anderer is an insider.

35.
The antecedent debts are the 2012 and 2014 Notes and Security
Agreements.
36.
Anderer had reasonable cause to believe that Derma Pen was insolvent.
The statements in a paper filed by Derma Pen and by Derma Pen’s counsel in
court that Derma Pen has a verbal license from Anderer to use the Trademark
show the transfer is likely illusory.
38.
Derma Pen and Anderer stated in court that the Public Sale will convey
title to the Trademark, Domain Name and other property subject of the sale and
that there is no effect on that sale by reason of the levy of execution in the
Confession of Judgment Action.
39.
This Temporary Restraining Order is issued without notice because there
are no working hours before the time set for the public sale and for the reasons
stated in 4EverYoung’s Emergency Ex Parte Motion for Alternative Service and
the Declaration of Christine T. Greenwood in support of that motion. 273

273

January 21, 2015 TRO at 8-10 ¶¶ 27-39 (footnotes omitted), docket no. 505.

44

The Anderer TRO did not prohibit Anderer from selling the Trademark and Domain
Name to 4EverYoung. Accordingly, though Anderer’s counsel appeared at the sale on January
22, 2015 4EverYoung did not attend, did not post a deposit as required in the Notice of Sale, did
not demonstrate its ability to pay, and did not bid.
DISCUSSION
Standard Applicable to Motion for Preliminary Injunction
In order to obtain a preliminary injunction, movant must show: (1) a substantial
likelihood of success on the merits; (2) irreparable harm to the movant if the injunction is denied;
(3) the threatened injury outweighs the harm that the preliminary injunction may cause the
opposing party; and (4) the injunction, if issued, will not adversely affect the public interest . 274
“[W]here the moving party has established that the three ‘harm’ factors tip decidedly in its favor,
the ‘probability of success’ requirement is relaxed.’ In such cases, ‘[t]he movant need only show
questions going to the merits so serious, substantial, difficult and doubtful, as to make them a fair
ground for litigation.’” 275
Irreparable Harm
“To constitute irreparable harm, an injury must be certain, great, actual ‘and not
theoretical.’” 276 “[T]he party seeking injunctive relief must show that the injury complained of is
of such imminence that there is a clear and present need for equitable relief to prevent irreparable
harm.” 277 “It is also well settled that simple economic loss usually does not, in and of itself,
constitute irreparable harm; such losses are compensable by monetary damages.” 278
274

General Motors Corp. v. Urban Gorilla, LLC, 500 F.3d 1222, 1226 (10th Cir. 2007).

275

Star Fuel Marts, LLC v. Sam's E., Inc., 362 F.3d 639, 653 (10th Cir. 2004) (quoting Heideman v. S. Salt Lake
City, 348 F.3d 1182, 1188 (10th Cir. 2003)) (internal citations omitted).

276

Heideman, 348 F.3d at 1189 (quoting Wisconsin Gas Co. v. GERC, 758 F.2d 669, 675 (D.C. Cir. 1985)).

277

Id.

278

Id.

45

4EverYoung has presented clear and convincing evidence that it faces an irreparable loss
if sale under the 2014 SA and DIP Lienn occurs. 4EverYoung has shown that Anderer would
likely proceed with the sale if not enjoined. Anderer would be able to credit bid the entire
balance he is owed, which his attorneys claim is approaching $2 million. 4EverYoung’s ability
to receive its contracted right to purchase the Trademark and Domain Name would be frustrated.
Separate valuation proceedings are underway in this case to determine the price
4EverYoung must pay Derma Pen for the Trademark and Domain Name. This is not inconsistent
with 4EverYoung’s assertion that they are unique assets, the loss of which would be irreparable.
The Sales Distribution Agreement gave 4EverYoung the right to purchase these valuable assets,
and gave Derma Pen the right to receive their value. The Sales Distribution Agreement provided
specific property for money.
The circumstances of these parties need stabilization. After the bankruptcy dismissal,
Derma Pen was first approached about a Confession of Judgment. 279 Then, almost immediately,
a Trademark Assignment 280 was presented. Early on Derma Pen asserted that Derma Pen still
had use of the Trademark by a verbal license in spite of the Trademark Assignment. 281 Derma
Pen and Anderer then claimed this Trademark Assignment was not what it appears to be on its
face, but was only a possessory transfer. Then a Notice of Public Sale 282 was given, and an
Application for a Writ of Execution 283 was filed, both seeking sales of the same property by
different methods. The last two months have been a fast paced scramble as the means of
279

See February 12, 2015 Preliminary Injunction Hearing Transcript at 202:3-206:19, 220:24-221:3, docket no. 597.

280

Ex. 27.

281

Response to Sua Sponte Order to Show Cause and Warning, docket no. 488, filed January 20, 2015; Transcript
January 21, 2015, at 23:10-12. This is consistent with a statement made in Bankruptcy Court by Mr. Morgan about
“‘oral understandings’ between Derma Pen and Medmetics that grant Medmetics a ‘right to use’ the U.S.
Trademark.” Ex. 125 at 10.
282

Ex. 31

283

Ex. 32.

46

effecting a transfer evolve. Stability can be achieved by stanching the evolution of innovative
transfer means, and avoiding a loss of control of the Trademark and Domain Name.
Balance of Harms
Anderer claims to be a secured creditor with a set amount owing on Notes. He bargained
for recovery of a specific sum of money, with interest, and legal fees. By contrast, 4EverYoung
contracted for purchase of the specific Trademark and Domain Name. Despite arguments that
4EverYoung has a damages remedy if specific performance is frustrated, the contractual object
was the Trademark and Domain Name, not a compensating sum of money. The difference
between Anderer and 4EverYoung shows that the balance of harm from the loss of the
Trademark and Domain Name would fall more heavily on 4EverYoung.
Public Interest
The public has an interest in soundness of secured transactions and also has an interest in
having parties comply with agreements that were freely negotiated, such as 4EverYoung’s right
to purchase. Public interest favors avoidance of transfers that hinder, delay or defraud creditors.
There is no issue of deception to the public since the Trademark and Domain Name are used by
both parties with respect to the same product. The public interest slightly favors 4EverYoung.
Likelihood of Success on UFTA Claims
4EverYoung contends that certain transfers made by Derma Pen to Anderer were
fraudulent pursuant to either Utah Code Ann. §§ 25-6-5(1)(a) or 25-6-6(2) of the Utah Uniform
Fraudulent Transfer Act (“UFTA”). 284 4EverYoung’s likelihood of success depends on these
claims.

284

The Memorandum Decision of February 16, 2015 [Dkt. 589] concluded that 4EverYoung had standing to assert a
claim under the UFTA.

47

To establish a fraudulent transfer claim under Utah Code Ann. § 25-6-5(1)(a), referred to
as the “actual fraud” section, 4EverYoung must establish: (i) that it has a claim that arose either
before or after the transfer was made or the obligation was incurred, and that (ii) the transfer was
made with actual intent to hinder, delay, or defraud any creditor of the debtor. 285 Section 25-6-5
enumerates factors which may be considered, among others, to determine if “actual intent”
existed. These include whether:
(a) the transfer or obligation was to an insider; (b) the debtor retained possession
or control of the property transferred after the transfer; (c) the transfer or
obligation was disclosed or concealed; (d) before the transfer was made or
obligation was incurred, the debtor had been sued or threatened with suit; (e) the
transfer was of substantially all the debtor’s assets; (f) the debtor absconded; (g)
the debtor removed or concealed assets; (h) the value of the consideration
received by the debtor was reasonably equivalent to the value of the asset
transferred or the amount of the obligation incurred; (i) the debtor was insolvent
or became insolvent shortly after the transfer was made or the obligation was
incurred; and (k) the debtor transferred the essential assets of the business to a
lienor who transferred the assets to an insider of the debtor.” 286
These factors are termed “badges of fraud.” 287 “The badges’ value as evidence, however,
is relative not absolute, and they are considered facts which throw suspicion on a transaction and
which call for an explanation.” 288 “In other words, ‘[t]hey are not usually conclusive proof; they
are open to explanation.’” 289 And they are not exclusive, as the statute states.
To establish a fraudulent transfer claim under Utah Code Ann. § 25-6-6(2), referred to as
the “constructive fraud” section, 4EverYoung must establish that: (i) it claim arose before the
transfer; (ii) the transfer was made to an insider, (iii) for an antecedent debt; (iii) the debtor was

285

Utah Code Ann. § 25-6-5(1)(a).

286

Utah Code Ann. § 25-6-5(2).

287

Tolle v. Fenley, 2006 UT App 78, ¶ 27, 132 P.3d 63 (quoting Dahnken, Inc. v. Wilmarth, 726 P.2d 420, 423
(Utah 1986)).

288

Wasatch Oil & Gas, L.L.C. v. Reott, 2007 UT App 223, ¶ 33, 163 P.3d 713 (internal quotation marks and citation
omitted).

289

Id. (quoting Territorial Sav. & Loan Ass'n v. Baird, 781 P.2d 452, 462 (Utah Ct. App. 1989)).

48

insolvent at the time; and (iv) the insider had reasonable cause to believe that the debtor was
insolvent. 290
4EverYoung alleges that the following transfers were fraudulent under §§ -5(1)(a) or 6(2): (i) the 2012 Security Agreement and the 2013 UCC-1 financing statement (“2012
Documents”); 291 (ii) the 2014 Security Agreement and the 2015 UCC-1 financing statement
(“2014 Documents”) ; 292 (iii) the Confession of Judgment and the Trademark Assignment. 293
Each of these alleged transfers will be discussed below.
2012 Documents
There is no need to analyze the 2012 Documents because “obligations under the 2012
Note . . . were rolled into the amount of the 2014 Note.” 294 Anderer agreed at argument that his
current efforts to foreclose on the assets of Derma Pen are not in collection of amounts owing
under Note 1. 295
2014 Documents
(1)

Utah Code Ann. § 25-6-5(1)(a)

The granting of a security interest by Derma Pen to Anderer was a transfer. The UFTA
defines transfer as “every mode, direct or indirect, absolute or condition, or voluntary or
involuntary, of disposing of or parting with an Asset, or an interest in an Asset, and includes . . .
creation of lien or other encumbrance.” 296 At the time of the transfer, 4EverYoung was a

290

Utah Code Ann. § 25-6-6(2).

291

Third Amended Counterclaim at 46, ¶ 165.

292

Id. at 46, ¶ 166.

293

Id. at 47, ¶ 167.

294

Exs. 147 and 149. Anderer’s FFCC at 51, ¶75.

295

February 23, 2015, Preliminary Injunction Hearing Transcript at ___:___, docket no. ____, filed ________
________, 2015.
296

Utah Code Ann. § 25-6-2(12).

49

creditor 297 and Derma Pen was a debtor. 298 The timing of the transfer is of no importance in this
UFTA section. The remaining issue is whether Derma Pen made the transfer with actual intent to
hinder, delay, or defraud any creditor of the debtor. Derma Pen’s intent is established through
the presence of several badges of fraud. In addition to the badges of fraud, the statute authorizes
the court to consider other facts that may guide the court’s conclusion. It is undisputed that
Anderer is an insider. 299 Derma Pen has maintained control of the Domain Name and Trademark
at all times, even after the Trademark Assignment and Confession of Judgment. 300 The transfer
was not made known by concurrent filing of UCC-1 financing statement and 4EverYoung was
not aware of the transfer until Derma Pen filed for Bankruptcy. 301 This litigation was pending at
the time of the transfer. 302 The 2014 Security Agreement was of substantially all of Derma Pen’s
assets. 303 Derma Pen became insolvent shortly after the transfer was made. 304 First, Derma Pen
declared itself insolvent by its bankruptcy filing, and second, Derma Pen was presumed insolvent
because it was unable to pay its attorneys’ fees as they became due and had to borrow money to
make payments. 305
The 2014 Documents were executed in contemplation of impending trial in this case.
They were also executed in very close proximity to Derma Pen’s bankruptcy filing which was
297

4EverYoung’s status as a creditor with a claim was established in the Memorandum Decision and Order Denying
[581] Oral Motion for Summary Relief, docket no. 589, filed February 16, 2015.
298

Id.

299

Utah Code Ann. § 25-6-5(2)(a).

300

Id. § 25-6-5(2)(b).

301

Id. § 25-6-5(2)(c).

302

Id. § 25-6-5(2)(d).

303

Ex. 106, exhibit A (Collateral: Those certain items of personal property and intellectual property rights owned by
the Grantor including any and all inventory, together with all accessions, replacements, additions, or proceeds
therefrom, whether now owned or hereafter acquired, and all of the Grantor’s trademarks, tradenames, patent rights,
and domain names, including but not limited to “DERMAPEN,” the “Dermapen ‘D’ logo,” and “dermapen.com”.).
304

Id. § 25-6-5(2)(i).

305

Id. § 25-6-3(2).

50

dismissed as not filed in good faith, but as a strategic move to avoid consequences in this
court. 306 In viewing all of the circumstances and badges of fraud surrounding the 2014
Documents, 4EverYoung is likely to establish by clear and convincing evidence Derma Pen’s
intent to defraud 4EverYoung.
Defenses
After 4EverYoung shows likelihood of success, the burden shifts to Anderer, the
transferee, to come forward with rebuttable evidence that he took in good faith and for a
reasonably equivalent value. 307 Section 25-6-9(1) of the UFTA states the defense of a good faith
purchase for value: “A transfer or obligation is not voidable under Subsection 25-6-5(1)(a)
against a person who took in good faith and for a reasonably equivalent value or against any
subsequent transferee or obligee.” 308 Anderer has failed to show a good faith purchase to rebut
the presumption of fraud.
“Good faith embodies the concept that one is free ‘from knowledge of circumstances
which ought to put the holder on inquiry.’” 309 It is an objective standard. 310 Anderer is not
simply a third-party lender to Derma Pen. He is an insider and part owner of Derma Pen, and was
aware of the present litigation, which involved, among other things, Derma Pen’s posttermination obligation to offer for sale the Trademark and Domain Name to 4EverYoung, the
306

Memorandum at 17–18, Ex. 125.

307

See Utah Code Ann. § 25-6-9(1). See also Territorial Sav. & Loan Ass'n v. Baird, 781 P.2d 452, 462 n. 18 (Utah
Ct.App.1989); see e.g., In re M & L Bus. Mach. Co., Inc., 84 F.3d 1330, 1338 (10th Cir.1996) (stating that transferee
has the burden of establishing good faith under § 548(c) of the Bankruptcy Code, a section similar to that of the
UFTA); Aptix Corp. v. Quickturn Design Systems Inc., 148 Fed. Appx. 925, 930 (Fed. Cir.2005) (stating that statute
requires the transferee present evidence of transferee’s good faith).
308

Utah Code Ann. § 25-6-9.

309

S.E.C. v. Madison Real Estate Group, LLC, 657 F.Supp.2d 1271 (D. Utah. 2009) (quoting Jobin v. McKay (In re
M & L Bus. Mach. Co., Inc.), 84 F.3d 1330, 1335 (10th Cir.1996)).
310

In re Lockwood Auto Group, Inc., 428 B.R. 629, 636 (Bankr. W.D. Pa. 2010) (“First, good faith is determined
according to an objective or ‘reasonable person’ standard, and not based on subjective knowledge or belief of the
transferee. Courts thus look to what the transferee objectively knew or should have known concerning the nature of
the underlying circumstances involved with the transfer.”).

51

same two assets that were secured as collateral in the 2014 Security Agreement. Many of the
same facts that tend to establish 4EverYoung’s claim rebut the assertion of good faith. The
borrowed funds for 2014 did not go toward operating funds for the business, but to pay legal fees
for this litigation. The borrowed funds were very close in time to a jury trial setting in the present
litigation and to the bankruptcy filing. Although the value of the Trademark and Domain Name
is yet to be determined, Derma Pen has consistently claimed that the value of the Trademark
alone is worth over $5 million dollars. Therefore, viewed from Derma Pen’s point of view, there
is a large disparity between the total secured debt and the value of the collateral. The 2014
Documents can be seen as an effort to take those assets out of reach of 4EverYoung by the
imposition of a sizeable encumbrance.
Good faith must pertain specifically to the taking of a security interest. In Aptix Corp. v.
Quickturn Design Systems, Inc., 311 the Federal Circuit carefully distinguished between business
needs of the debtor, Aptix; the lending and borrowing motivations of both parties; and the good
faith of the creditor, Mohsen, in taking a security interest:
Here, Mohsen attempts to rebut the presumption of fraudulent intent by focusing
on the reason that Aptix needed to borrow money from Mohsen, i.e. it could not
obtain funding elsewhere, and its ultimate use of the money, i.e. to pay employees
and other creditors. Although Mohsen's argument may explain why Aptix entered
into the loan arrangement with Mohsen, it does not explain why it was necessary
for Aptix to grant Mohsen a security interest in substantially all of its assets when
Mohsen had never required such an interest for his past loans. 312
Similarly here, Anderer advanced all the funds under Note 1 in 2011 well before there was any
documentation of the loan or security interest on that loan. Filing of a financing statement was
delayed a year. Then, on Note 2, there was no documentation at all. Note 3 was documented
while advances made in the heat of this litigation, to lawyers in this litigation, who would have
311

148 Fed. Appx. at 929.

312

Id.

52

had unsecured claims in the bankruptcy, on the eve of bankruptcy filing. Anderer never testified
as to needing security, but said he left documentation to his lawyers, and said that he always
expected to be paid out of the business operations. He said he never thought he would need to
foreclose.
(2)

Utah Code Ann. § 25-6-6(2)

The 2014 Documents were not transferred to Anderer, an insider, for an antecedent debt.
The 2014 security interest was granted to Anderer for “contemporaneous new value” that
Anderer provided to Derma Pen by payment of Derma Pen’s legal fees. Because the antecedent
debt element of § 25-6-6(2) is not satisfied, 4EverYoung’s fraudulent transfer claim on the 2014
Documents pursuant to § 25-6-6(2) cannot succeed.
Confession of Judgment and the Trademark Assignment
(3)

Utah Code Ann. § 25-6-5(1)(a)

The Confession of Judgment and Trademark Assignment fall under the broad definition
of transfer. 313 At the time of the transfers, 4EverYoung was a creditor and Derma Pen was a
debtor. 314 The timing of the transfers is of no importance in this UFTA section. Derma Pen’s
actual intent to hinder, delay, or defraud 4EverYoung is likely to be established through the
presence of the following badges of fraud: Anderer was still an insider due to his part ownership
interest of Derma Pen. 315 After the transfer, Derma Pen originally argued that it no longer owns

313

See e.g., Posner v. S. Paul Posner 1976 Irrevocable Family Trust, 2004 WL 2473984 (N.Y.A.D. 1 Dept.) (A
family trust's confession of judgment in a purported lender's favor was not given and taken in good faith, and thus
was invalid and had to be set aside as a fraudulent transfer, even if the confession of judgment was a fair equivalent
for the purported lender's alleged outstanding loans to the trust); In re XYZ Options, Inc., 154 F3d 1262 (11th Cir.
1998) (court could examine a consent judgment to determine whether or not it constituted a fraudulent transfer);
Generic Farms v. Stensland, 518 N.W.2d 800, 802 (Iowa Ct. App. 1994) (“The trial court determined the assignment
of the Land O’Lakes seed corn contracts by Stensland to Knecht as a result of the trademark assignment was a
fraudulent conveyance.”).
314

Memorandum Decision and Order Denying [581] oral Motion for Summary Relief, docket no. 589, filed
February 16, 2015.
315

Utah Code Ann. § 25-6-5(2)(a).

53

the assets, only a license to use the assets. Derma Pen now maintains that it owns and controls all
of its assets, and that Anderer simply has possession. 316 The transfers were not made known to
4EverYoung until after the transfers. 317 Derma Pen’s own attorneys were not aware of the
transfers. The Bankruptcy stay in this litigation had lifted only a few days before the transfers
occurred, and notice of a status conference in this litigation had issued at the time of the
transfers. 318 The bankruptcy court concluded that Derma Pen had filed bankruptcy as a litigation
avoidance tactic and the bankruptcy was not filed in good faith. 319 The transfers included Derma
Pen’s most valuable assets. 320 Derma Pen was insolvent at the time the transfers were made. 321
First, Derma Pen declared itself insolvent by its bankruptcy filing, and second, Derma Pen was
presumed insolvent because it was unable to pay its attorneys’ fees as they became due and had
to borrow money to make payments. 322 And the Confession of Judgment was executed because
Derma Pen’s management felt it had no defense to Anderer’s claims. 323 The above badges of
fraud show 4EverYoung is likely to establish, by clear and convincing evidence, Derma Pen’s
intent to hinder, delay and defraud 4EverYoung.

316

Id. § 25-6-5(2)(b).

317

Id. § 25-6-5(2)(c).

318

Id. § 25-6-5(2)(d).

319

Memorandum at 17–18, Ex. 125.

320

Ex. 106, Exhibit A (Collateral: Those certain items of personal property and intellectual property rights owned by
the Grantor including any and all inventory, together with all accessions, replacements, additions, or proceeds
therefrom, whether now owned or hereafter acquired, and all of the Grantor’s trademarks, tradenames, patent rights,
and domain names, including but not limited to “DERMAPEN,” the “Dermapen ‘D’ logo,” and “dermapen.com”.).
321

Id. § 25-6-5(2)(i).

322

Id. § 25-6-3(2).

323

See February 12, 2015 Preliminary Injunction Hearing Transcript at 221:6-9, docket no. 597.

54

Defenses
Anderer has failed to meet his burden of proving his good faith in these transfers for the
same reasons outlined above. 324 Additional factors strongly suggest the lack of Anderer’s good
faith. Saunders, on behalf of Anderer (both with the full knowledge of this pending litigation)
asked Jones to confess judgment on behalf of Derma Pen the very day that the bankruptcy case
was dismissed. 325 Similarly, the following day, Saunders asked Jones to execute the Trademark
Assignment—the trademark that has been at issue in this case for over one year. 326 Neither
Anderer nor Derma Pen notified 4EverYoung of Anderer’s demand, nor gave 4EverYoung an
opportunity to pay off Anderer’s debt.
(4)

Utah Code Ann. § 25-6-6(2)

Both of these transfers fall under the broad transfer definition. 327 4EverYoung’s claim
had arisen before the transfers were made—during this pending litigation. Anderer, was at the
time of the transfers, an insider. The transfers were made pursuant to Derma Pen’s antecedent
debt from the 2014 Documents and the DIP lien. Derma Pen was insolvent at the time the
transfers were made. 328 First, Derma Pen declared itself insolvent by its bankruptcy filing, also
Derma Pen was presumed insolvent because, by that time, it was not paying its attorneys’ fees as
they became due. 329 As an insider and part owner of Derma Pen, Anderer had at the time of the
transfers reason to know of Derma Pen’s finances as he was the one funding Derma Pen’s
present litigation and was aware of the substantial amount of legal fees that Derma Pen owed its

324

Utah Code Ann. § 25-6-9(1).

325

See February 12, 2015 Preliminary Injunction Hearing Transcript at 202:3-206:19, 220:24-221:3, docket no. 597.

326

See E-Mail Saunders to Jones, dated December 19, 2014 (6:46 p.m.), Ex. 128; see also February 12, 2015
Preliminary Injunction Hearing Transcript at 212:7-213:12, docket no. 597.
327

Utah Code Ann. § 25-6-2(12).

328

Id. § 25-6-5(2)(i).

329

Id. § 25-6-3(2).

55

attorneys. 4EverYoung is likely to prevail in establishing constructive fraud under § 25-6-6(2) by
clear and convincing evidence.
Defenses
Anderer argues that even if there is a finding of constructive fraud, “[a] transfer is not
voidable under Subsection 25-6-6(2): . . . (c) if made pursuant to a good-faith effort to
rehabilitate the debtor and the transfer secured present value given for that purpose as well as an
antecedent debt of the debtor. 330 This defense is not applicable to the Confession of Judgment
and Trademark Assignment transfers because neither transfer was to rehabilitate the debtor. They
occurred after the bankruptcy dismissal.
Anderer also argues as a defense that the “transfer is not voidable under . . . Section 25-66 if the transfer results from: . . . (b) enforcement of a security interest in compliance with Title
70A, Chapter 9a, Uniform Commercial Code – Secured Transactions.” 331 As previously ruled,
Anderer is not absolutely insulated from a fraudulent transfer attack simply because he holds a
security interest. 332 If Anderer’s rationale were true, then any fraudulent transfer of a security
interest would be insulated. 333 4EverYoung has the right to attempt to show that Anderer’s
security interests and other documents may be part of the alleged fraudulent transfer of assets. If
4EverYoung ultimately prevails at trial on the merits of its UFTA claim(s), then Anderer’s
security interest, and therefore his valid liens, would be voidable just as any other transfer under
330

This section “reflects a policy judgment that an insider who has previously extended credit to a debtor should not
be deterred from extending further credit to the debtor in a good faith effort to save the debtor from a forced
liquidation in bankruptcy or otherwise.” Uniform Fraudulent Transfer Act § 8, cmt. 6. Relevant considerations in
determining whether the transfer was in good faith under this section include (i) the amount of the present value
given, (ii) the size of the antecedent debt secured, and (iii) the likelihood of success for the rehabilitative effort. Id.;
Prairie Lakes Health Care Sys., Inc. v. Wookey, 1998 S.D. 99, ¶ 26, 583 N.W.2d 405, 417 (determining that
rehabilitation defense was inapplicable because transfer was “obviously not made to rehabilitate” but instead to
“dispose of [defendants’] entire real estate holdings and thus end their ownership of the farming business”).
331

Utah Code Ann. § 25-6-9(5).

332

See Memorandum Decision and Order Denying [581] Oral Motion for Summary Relief at 9, docket no. 589, filed
February 16, 2015.

333

Id.

56

the UFTA, 334 and his security interest defense would not support the Confession of Judgment
and Trademark Assignment transfers.
Debtor-In-Possession Financing Lien
4EverYoung’s Third-Amended Counterclaim does not identify nor specifically seek to
avoid the DIP Lien. 335 At the time 4EverYoung filed the Third Amended Counterclaim, it was
aware of the DIP Lien, as it had objected to the lien on several occasions during the Bankruptcy
Case. 336 But the Third Amended Counterclaim states no claim against the DIP Lien. Similarly,
the draft findings and conclusions submitted by 4EverYoung make no reference to invalidation
of the DIP Lien. Whether the DIP Lien is analyzed under § 25-6-5(1)(a) or § 25-6-6(2), the
supervision of that financing by the bankruptcy court suggest that evidence could not be clear
and convincing that the DIP lien was a fraudulent transfer.
Summary
4EverYoung is likely to succeed on its claim that the 2014 Documents, Confession of
Judgment and Trademark Assignment were made with the intent to hinder, delay or defraud, and
are fraudulent transfers. Anderer is not likely to succeed in proving any defense.
Other Issues Related to Likelihood of Success
Party Status and Service
Anderer raises other issues, such as his party status, which was discussed in an order
previously. 337 And contrary to his claims, service on him by alternative means was properly

334

Id. at 12.

335

Third Amended Counterclaim and Demand for Jury trial, docket no. 547, filed February 3, 2015.

336

Exs. 117, 119, 121.

337

See Memorandum Decision and Order Granting [569] Nunc Pro Tunc Motion, docket no. 588, filed February 16,
2015.

57

authorized because service was “impracticable under the circumstances.” 338 Further, he
generally appeared through counsel on January 26, 2015. 339
Narrow Issues under the UFTA
Another prior order dealt with arguments under the Uniform Fraudulent Transfer Act. 340
Anderer argued that as holder of a facially valid security interest, he had a “valid lien” and was
immune from UFTA claims, and that 4EverYoung was not a creditor with a claim. This
argument was resolved in a prior order. 341
Derma Pen and Anderer also argued that the UFTA does not permit voiding of a
transfer. 342 This argument is unavailing. Utah Courts have held that “transfers of property
designed to place a debtor’s assets beyond the reach of the debtor’s creditors are void as to the
creditors.” 343 In Tolle, the trial court found that the transfer of the property at issue was
fraudulent and therefore void. 344 The Utah Court of Appeal held that the “trial court properly
voided the transfers.” 345 Moreover, § 25-6-8(1)(c)(iii) of the UFTA stated that “a creditor . . .
may obtain . . . (iii) any other relief the circumstances may require.” 346 Voiding a fraudulent
transfer is a relief that is contemplated in the broad language of § 25-6-8(1)(c)(iii).

338

Utah R. Civ. P. 4(d)(4)(A).

339

Notice of Appearance of Counsel (David E. Leta) docket no. 517, filed January 26, 2015; Notice of Appearance
of Counsel (Michael A. Gehret) docket no. 518, filed January 26, 2015; Notice of Appearance of Counsel (Douglas
P. Farr) docket no. 519, filed January 26, 2015.
340

See Memorandum Decision and Order Denying [581] Oral Motion for Summary Relief, docket no. 589, filed
February 16, 2015.
341

Id.

342

January 29, 2015 Preliminary Injunction Hearing Transcript at 68.

343

Tolle v. Fenley, 2006 UT App 78, ¶ 13, 132 P.3d 63 (quoting National Loan Investors, L.P. v. Givens, 952 P.2d
1067, 1069 (Utah 1998)).

344

Id. ¶ 9.

345

Id. ¶ 30.

346

Utah Code Ann. § 25-6-8(1)(c)(iii).

58

4EverYoung’s Claims Were Not Concluded in Derma Pen’s Bankruptcy
Anderer has also argued that 4EverYoung’s claims were concluded in the Derma Pen
Bankruptcy. Anderer argues that the Final Order . . . (I) Authorizing the Debtor to Use Cash
Collateral, (II) Granting Adequate Protection, and (III) Authorizing Post-Petition Financing 347
finally and completely adjudicates the validity of his 2014 security interest and loan and the
Debtor in Possession financing. On the record in the February 4, 2015 hearing, the court ruled on
these assertions. 348 Anderer cites language about validity of the 2014 SA and Note 3 from a
stipulation to which 4EverYoung was not a party. 4EverYoung never had an opportunity to
present its current claims in Bankruptcy Court and never missed a deadline for such presentation.
The deadline was extended until a date that turned out to be after the bankruptcy dismissal, and
Anderer presented no authority that that date continued to have meaning. The deadline was
related only to the bankruptcy proceedings and was not a statute of limitation. The bankruptcy
judge was repeatedly careful to note 4EverYoung’s claim was specifically reserved. Anderer has
not pointed to an express waiver 4EverYoung made in the Bankruptcy Court.
The Sales Distribution Agreement Does Not Call for a Transfer in Gross
Anderer argues that the Sales Distribution provides for an ineffective transfer in gross of
the Trademark. That is, he contends that the bare transfer of the Trademark is ineffective
because it is not accompanied by a transfer of the associated goodwill. The Sales Distribution
Agreement neither requires Derma Pen to sell any of its goodwill, business assets or customer
lists to 4EverYoung, nor does it allow 4EverYoung to exercise any form of option or right of
first refusal to acquire those items, upon termination of the Sales Distribution Agreement.
“Courts have consistently held that a valid assignment of a trademark or service mark requires

347

Ex. 123.

348

Minute Order, docket no. 563, filed February 4, 2015.

59

the transfer of the goodwill associated with the mark.” 349 “A trademark identifies the source and
quality of the goods and services offered.” 350 “For a company to purchase the rights to a wellknown trademark to use it in a manner which is wholly unrelated to the business or products
which made the trademark famous would confuse or deceive the consumer.” 351 “The purpose for
requiring transfer of goodwill along with the transfer of the . . . [trademark] is to ensure that
consumers receive accurate information about the product or service associated with the
mark.” 352
“Consonant with this purpose, courts have recognized exceptions to the general rule that
trademarks cannot be assigned without the goodwill of the accompanying business.” 353 Such
assignments are upheld “if . . . the assignee is producing a product or performing a service
substantially similar to that of the assignor and that the consumers would not be deceived or
harmed.” 354

349

Vittoria N. Am., L.L.C. v. Euro-Asia Imports Inc., 278 F.3d 1076, 1082 (10th Cir. 2001); see also Sands, Taylor
& Wood Co. v. Quaker Oats Co., 978 F.2d 947, 956 (7th Cir.1992) (“[T]he transfer of a trademark apart from the
goodwill of the business which it represents is an invalid ‘naked’ or ‘in gross' assignment, which passes no rights to
the assignee.” (citation and quotations omitted)); Berni v. Int'l Gourmet Rests. of Am., Inc., 838 F.2d 642, 646 (2d
Cir.1988) (same).
350

J. Atkins Holding Ltd. v. English Discounts, Inc., 729 F.Supp. 945 (1990).

351

Id.

352

See e.g., Vittoria N. Am., L.L.C., 278 F.3d at 1083; Sugar Busters LLC v. Brennan, 177 F.3d 258, 265 (5th
Cir.1999) (“The purpose of the rule prohibiting the sale or assignment of a trademark in gross is to prevent a
consumer from being misled or confused as to the source and nature of the goods or service that he or she
acquires.”); E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1289 (9th Cir.1992) (same); Patterson Labs.,
Inc. v. Roman Cleanser Co. (In re Roman Cleanser Co.), 802 F.2d 207, 208–09 (6th Cir.1986) (same); Marshak v.
Green, 746 F.2d 927, 929–930 (2d Cir.1984) ) (same).
353

Id.

354

Marshak, 746 F.2d at 930 (citations omitted); see also Sugar Busters, 177 F.3d at 266; Defiance Button Mach.
Co. v. C & C Metal Prods. Corp., 759 F.2d 1053, 1059 (2d Cir.1985) (“[A] trademark may be validly transferred
without the simultaneous transfer of any tangible assets, as long as the recipient continues to produce goods of the
same quality and nature previously associated with the mark.” (citation omitted)); Visa, U.S.A., Inc. v. Birmingham
Trust Nat'l Bank, 696 F.2d 1371, 1376 (Fed.Cir.1982) ( “[T]ransfer of goodwill requires only that the services be
sufficiently similar to prevent consumers of the service offered under the mark from being misled from established
associations with the mark.” (quotations omitted)).

60

4EverYoung’s purchase of the Trademark falls within the exception to the general rule.
Under the Sales Distribution Agreement, 4EverYoung granted Derma Pen the exclusive right to
sell the Device and the related Tips in the USA and 4EverYoung also provided Derma Pen the
Device and the Tips to market and sell. 355 While Derma Pen sold the Device in the USA,
4EverYoung sold the same Device outside of the USA. Under the circumstances of this case,
4EverYoung’s purchase of the Trademark, without its associated goodwill, will not separate the
trademark from the goods upon which its reputation is based. 356 The Device that 4EverYoung is
selling is not so different from what Derma Pen has been selling, since the inception of the Sales
Distribution Agreement, to work a deception upon the public. Variations in type or quality of the
product will not invalidate the purchase. 357 No evidence has been presented that 4EverYoung
seeks to apply the trademark to an entirely different type of product. Accordingly, the Derma Pen
Trademark may be validly purchased without being accompanied by the goodwill.
Amount of Bond
As with every other issue in this case, views on an appropriate bond are disparate.
Anderer claims his $791,012.18 judgment will swell to $2,000,000 by the time this dispute is

355

Ex. 1, § 2.1.

356

See e.g., J. Atkins Holding Ltd. at 729 F.Supp. 945, 950 (1990) (“If, on the other hand, one looks at the overall
facts, this is not an assignment that separates the trademark from the goods or services upon which its reputation is
based. To the contrary, this was an assignment . . . which is designed to continue the employment of the trademarks
in connection with the same goods on which their reputation is based. . . .”). See also Visa U.S.A., Inc., 696 F.2d at
1376 (mark signifying a promise to guarantee a check can be assigned from a supermarket chain to a credit card
organization).
357

Bambu Sales, Inc. v. Sultana Crackers, Inc., 683 F.Supp. 899, 907 (E.D. NY 1988); see also citing Hy–Cross
Hatchery, Inc. v. Osborne, 303 F.2d 947 (1962) (upholding assignment of mark where the mark was transferred to a
producer who raised a different variety of chickens); E.I. DuPont de Nemours & Co. v. G.C. Murphy Co., 199
U.S.P.Q. 807, 813 (T.T. & A. Bd.1978) (holding that a change in the quality of a paint from premium priced to
budget-type would not interrupt the continuity of the mark, so long as “[t]he inherent and identifiable character of
the goods remains the same.”); Glamorene Products Corp. v. Procter & Gamble Co., 538 F.2d 894 (upholding
assignment of mark used on different dry cleaning detergent); Beech–Nut Packing Co. v. P. Lorillard Co., 299 F.
834, 849 (D.C.N.J.1924) (upholding assignment of mark upon predecessor's liquidation, although assignee applied
the mark to tobacco of a different blend and formula); and White Satin Mills Corporation v. Woodward, 34 F.2d 158
(D.C.Minn.), aff'd., 42 F.2d 987 (8th Cir.1929) (change in type of sugar sold under the mark did not invalidate
assignment).

61

resolved, and seeks a bond in that amount. 358 His estimate includes legal fees in this case which
he asserts Derma Pen is required to pay in collection of the notes, even though the fees are
incurred in a separate fraudulent transfer action, defending against a separate party. His theory
ignores the security of the Trademark and Domain Name which Derma Pen has consistently
valued at millions of dollars. He does acknowledge that 4EverYoung values the Trademark and
Domain Name at $353,000. 359
Another theory advanced by Anderer is that the bond should be set at the entire value of
the Trademark and Domain Name on the assumption that they might be valueless as a result of
this litigation. However, eighteen months of litigation and combative competition have not
dampened the parties’ enthusiasm for the Trademark and Domain Name.
4EverYoung provides no rationale for its argument 360 that the $20,000 it already posted
in the form of a $10,000 bond on this temporary restraining order 361 and the $10,000 bond it
posted on the December 23, 2014 TRO 362 is sufficient security.
These polar positions do little to assist the establishment of a bond amount. The Anderer
obligation is on its face fully secured. Interest accrues under the judgment at 5% per annum. 363
The judgment says it bears interest “at the judgment rate.” Assuming that rate to be 5%, the
358

[Anderer’s Proposed] Findings of Fact, Conclusions of Law and Order . . . , ¶196 at 76, docket no. 611, filed
February 21, 2015.
359

Id. ¶197 at 76. This value estimate is highly questionable. Separate proceedings in this case about the value of the
Trademark and Domain Name as of August 31, 2013 have yielded evidence showing the estimate is undoubtedly far
too low by reason of assumptions 4EverYoung’s expert has made about royalty rates and discount rates, among
other factors.
360

[4EverYoung’s Proposed] Findings of Fact, Conclusions of Law, and Order . . . , ¶35 at 53-54, docket no. 612,
filed February 21, 2015.
361

Docket no. 508, filed January 22, 2015.

362

Docket no. 462, filed December 29, 2014.

363

Judgment in the Confession of Judgment Action, docket no. 496 in this case, filed January 21, 2015 and Ex. 30.
See also Confession of Judgment, docket no. 460-1 in this action, filed December 24, 2014, and Ex 25. At the
hearing February 23, 2015, counsel for Anderer clarified that the Confession of Judgment is in error in reciting a
10% interest rate for the $100,000 advanced in bankruptcy. February 23, 2015 Preliminary Injunction Hearing
Transcript ___;___, docket no. ___, filed ________________________.

62

judgment may increase by $40,000 each year. This litigation may extend three years which
yields a total of $120,000. The accrual of interest is a direct cost of delay of Anderer’s
foreclosure. Anderer also incurs costs which may be recoverable under Fed. R. Civ. P. 54 which
should be secured by a bond. Those costs are not likely to exceed $10,000. Thus, the total bond
supporting this preliminary injunction will be $130,000 to which the $10,000 bond filed
already 364 for restraint of Anderer may be credited.
The new additional bond of $120,000 must be posted by Monday March 2, 2015. If it is
not posted, this preliminary injunction shall dissolve.
ORDER
Based upon the pending motions, 365 the evidentiary hearing and argument, the pleadings
and papers on file with the Court, and for good cause shown,
IT IS HEREBY ORDERED:
4EverYoung’s Motion for Temporary Restraining Order and Preliminary Injunction
Against Michael E. Anderer 366 is GRANTED IN PART and DENIED IN PART. A preliminary
injunction is entered as follows:
(a)

Anderer, his agents, servants, employees, and attorneys, and those acting

in concert, with them (collectively, the “Enjoined Parties”) shall not transfer the
Trademark or Domain Name or any interest therein of any kind or any obligation secured
thereby except in connection with a foreclosure based on the Debtor In Possession (DIP)
Financing;

364

Docket no. 508, filed January 22, 2015.

365

Docket nos. 504 and 529.

366

Docket no. 504.

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(b)

Anderer may not credit bid any amounts (specifically including but not

limited to amounts claimed under Note 3 also known as the 2014 Note and under the
2014 SA) other than the principal and interest owing under the Debtor In Possession
(DIP) Financing (see the Findings of Fact at p. 28–29) at any foreclosure based on the
lien of or amounts owing under the Debtor In Possession (DIP) Financing without further
order of this court; 367
(c)

Any foreclosure based on amounts owing under the Debtor In Possession

(DIP) Financing shall be subject to the lien interest, if any, represented by the 2014 SA,
and any debt or obligation secured thereby, as shall later be adjudicated by this court and
all documents issued in connection with such a foreclosure shall recite that fact and refer
to this order by court, case number and title, and docket number and date;
(d)

This preliminary injunction will remain in effect until otherwise ordered

by the Court; and
(e)

4EverYoung must post $120,000 additional security for the issuance of

this preliminary injunction on or before March 2, 2015.
IT IS FURTHER ORDERED that Anderer’s Motion to Vacate TRO 368 is DENIED.

Dated February 25, 2015.
BY THE COURT:
____________________________
David Nuffer
United States District Judge

367

Anderer’s counsel agreed at the hearing February 23, 2015, that if the DIP financing proceeded to foreclosure,
and foreclosure of Note 3, the 2014 Note, was restrained, that amounts secured by that latter obligation could not be
credit bid. February 23, 2015, Preliminary Injunction Hearing Transcript at ___:___, docket no. ____, filed
________ ________, 2015.
368

Docket no. 529.

64