Free Reply to Response to Motion - District Court of Arizona - Arizona

Exhibit Index
Exhibits to Reply in Support of Defendar1ts’ Second Motion for Partial Summary Judgment
Regarding Intentional Interference with Prospective Global Fitness Contract
dated August 11, 2005
Exhibit A — Defendants’ Second Supplemental Rule 26.1 Disclosure Statement
Case 2:03-cv-OO150—EHC Document 240-2 Filed O9/O2/2005 Page 1 of 4

5 ( 1 .
1 Thomas A. Maraz (Bar No. 010993)
Maureen A. Welsh (Bar N0. 020954)
2 GALLAGHER & KENNEDY, P.A.
2575 East Camelback Road
3 Phoenix, Arizona 85016-9225
(602) 530-8000
4 Attorneys for Defendants
5
6 UNITED STATES DISTRICT COURT
7 DISTRICT OF ARIZONA
8 PHYSICAL EXCELLENCE, INC., an Arizona
<< .,, co oration; BODY-OF—CHANGE, INC., an 1 No. CIV 03-0150-PHX—EHC
0. Q N rp - 1
gg§ 9 Arizona corporation; BODY OF CHANGE 1
Q ggg INTERNATIONAL, L.L.C., a Delaware DEFENDANTS’ SECOND
E gg § 10 limited liability company, 1 SUPPLEMENTAL RULE 26.1
*2 6 @2 - DISCLOSURE STATEMENT
Â¥ IQ QQ 11 Plaintiffs,
(D Z 1
E § 1
G L 12 vs. 1
13 STEPHEN DOW and LINDA DOW, husband
and wife; DAN FAHEY and JANE DOE
14 FAHEY, husband and wife; STEPHEN DOW 1
d/b/a ACHIEVE FITNESS; BEYOND 1
15 FITNESS, L.L.C., a North Carolina limited
liability company; JOHN DOES 1-V; JANE 1
16 DOES 1-V; BLACK AND WHITE 1
CORPORATIONS 1-V,
17 1
Defendants. 1
1 8 1
19 COME NOW the Defendants, Stephen Dow, Linda Dow, Dan Fahey, Beyond
20 Fitness, North Carolina, et al. (referred to collectively as "Defendants"), and disclose as
21 follows:
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1 15. "Statements of Revenue and Expenses - Income Tax Basis", for 2003, for
Triangle clubs to which the contract with Royce Pulliamf Global Fitness
2 applies.
3 16. W-2 Forms of Steve Dow.
4 17. W-2 Forms of Steve Dow.
5 C. COMPUTATION OF DAMAGES
6 At present, the Defendants are not seeking damages, but reserve the right to seek
7 the same, if discovered. Although Defendants are not seeking any damages, they will
8 assert an array of defenses to Plaintiffs’ damages claims. Analysis of many of the
9 defenses is found in the Motions in Limine tiled in this matter on December 17, 2004.
10 In particular, Plaintiffs’ cause of action for breach of a covenant not to compete is
11 without merit. These restrictive covenants "are disfavored and are strictly construed
12 against the employer." Bryceland v. Northey, 160 Ariz. 213, 216, 772 P.2d 36, 39 (App.
13 1989); Amex Distributing C0. v. Mascari, 150 Ariz. 510, 516, 724 P.2d 596, 602 (App.
14 1986). Plaintiffs cannot claim that alleged recruitment of Body of Change employees by
15 Defendants’ co-workers creates a breach of the personal contract between Defendants
16 and Physical Excellence. The covenant prohibits the Defendants from engaging in
17 certain conduct, it does not speak to the actions of third parties not acting at the direction
18 of the Defendants. Moreover, the Agreement signed by Defendants Dow and Fahey was
19 with Physical Excellence. There can be no breach of that agreement regarding employees
20 of Body of Change International, LLC.
21 Plaintiffs’ claim for tortious interference with business expectancies is likewise
meritless. The tort of interfering with a potential contract carries a substantially higher
22 ase 2:03-cv-00150-EHC Document 240-2 Filed O9/O2/2005 Page 3 of 4
<

1 burden than interfering with an existing contract. According to the Restatement (Second)
2 of Torts, § 768, a defendant does not improperly interfere with a business expectancy or
3 prospective contract if: (1) the contract concerns a matter involved in the competition
4 between the actor and the other; (2) the actor does not employ wrongful means; (3) the
5 action does not create or continue an unlawful restraint of trade; and (4) the purpose is at
6 least in part to advance his interest in competing with the other.
7 _ If disturbance or injury to one’s business relationships comes as the result of
8 competition and without improper means, there is no cause of action. Ulan v. Vend—a-
9 Coin, Inc., 27 Ariz. App. 713, 717, 558 P.2d 741, 745 (App. 1976). If a third party has a
1() legitimate interest to protect- and in our system of free enterprise, the privilege of I
i 11 competition is as a legitimate interest- even the addition thereto of a spiteful motive is
12 insufficient to create grounds for liability. Id.
13 "Improper means," as discussed in the Restatement, generally includes physical
14 violence, fraud, threat or use of civil suits and criminal prosecutions. See Restatement
15 (Second) Torts, § 768, comment e (1979) (referencing those acts discussed in § 767,
16 comment c, as the basis for its conclusion). On the other hand, the actor may use
17 persuasion and may even exert economic pressure to interfere with the expectancy. Id.
18 The Restatement developed this rule "on the belief that competition is a necessary or
19 desirable incident of free enterprise." Id.
20 In addition, the actual party to the Global Fitness contract was Triangle
21 Corporation. Moreover, Royce Pulliam testified Body of Change "lost" the contract.
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