Free Response - District Court of Arizona - Arizona

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Thomas A. Maraz (Bar No. 010993) Maureen A. Welsh (Bar No. 020954) GALLAGHER & KENNEDY, P.A. 2575 East Camelback Road Phoenix, Arizona 85016-9225 (602) 530-8000 Attorneys for Defendants UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Physical Excellence, Inc., an Arizona corporation; Body-Of-Change, Inc., an Arizona corporation; Body Of Change International, L.L.C., a Delaware limited liability company, Plaintiffs, vs. Stephen Dow and Linda Dow, husband and wife; Dan Fahey and Jane Doe Fahey, husband and wife; Stephen Dow d/b/a Achieve Fitness; Beyond Fitness, L.L.C., a North Carolina limited liability company; John Does 1-V; Jane Does 1-V; Black And White Corporations 1-V, Defendants. Defendants, by and through its undersigned counsel, and in accord with Local Rule 56.1 of the F. R. Civ. P., hereby responds to Plaintiffs' Statement of Facts in Support of Its Response to Defendants' First Motion for Partial Summary Judgment ("PSOF"), as well as provides its own Statement of Facts in Support of its Reply ("DRSOF"). No. CIV 03-0150-PHX-EHC DEFENDANTS' RESPONSE TO PLAINTIFFS' SEPARATE STATEMENT OF FACTS AND SEPARATE STATEMENT OF FACTS IN SUPPORT OF DEFENDANTS' REPLY

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PLAINTIFFS' STATEMENT OF FACTS INTRODUCTORY STATEMENT Some of Plaintiffs' "facts" are no more than legal conclusions. As such, they are inappropriate under Rule 56 motion practice. Defendants reserve the right to address those legal conclusions in the appropriate forum, if necessary. In addition, the "facts" and legal conclusions regarding Body of Change, International's ("BOC, Int'l") successorship was never disclosed by Plaintiffs before filing their Response to Defendants' First Motion for Partial Summary Judgment ("First Motion"). Defendants, therefore, dispute outright any such facts, allegations or legal conclusions contained in Plaintiffs' Responsive Statement of Facts or their own Statement of Facts. Defendants also reserve the right to address the admissibility of these facts, legal conclusions and defenses in a separate pleading [see Motion to Strike Ben Gregg's Declaration incorporated herein by reference] and at an appropriate time in the future. Also, some of the facts presented in Plaintiffs' Statement of Facts are not relevant or dispositive as to the issues pending before this Court on Defendants' First Motion. While not relevant, Defendants respond so as not to concede or waive its positions or defenses available to it at trial. Finally, most of Plaintiffs' Statement of Facts is supported only by Ben Gregg's Declaration. When responding to the Statement of Facts, Defendants intend that any qualified admissions or objections also apply to those portions of Gregg's Declaration cited in support of that Statement of Fact. DEFENDANTS' RESPONSE PSOF ¶¶ 1-2. Admit only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on this issue. 2. PSOF ¶¶ 3-8. Admit only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of
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proof on this issue. The Defendants, however, dispute that this fact is dispositive on the issue of whether BOC, Inc. is a successor to Physical Excellence under the Non-Compete Agreement between Physical Excellence and Defendants Dow and Fahey. 3. PSOF ¶ 4. Admit only for purposes of this motion for summary judgment and not intended to be binding otherwise, that BOC, Inc. entered into a Master License Agreement with L.A. Fitness International, L.L.C. ("L.A. Fitness"). Deny that the Master License Agreement between BOC, Inc. and L.A. Fitness provided that BOC, Inc. would perform as Physical Excellence did before the termination. This is a legal conclusion. In addition, Plaintiffs have not disclosed or produced the alleged "Master License Agreement" entered into between BOC, Inc. and L.A. Fitness. Therefore, the best evidence would be the Master License Agreement not Mr. Gregg's or Plaintiffs' counsel's interpretation of what that Agreement provided. The Defendants also dispute that this fact is dispositive on the issue of whether BOC, Inc. is a successor to Physical Excellence under the Non-Compete Agreement between Physical Excellence and Defendants Dow and Fahey. 4. PSOF ¶¶ 5-8. Admit only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on this issue. The Defendants, however, dispute that these facts are dispositive on the issue of whether BOC, Inc. is a successor to Physical Excellence under the NonCompete Agreement between Physical Excellence and Defendants Dow and Fahey. 5. this issue. 6. PSOF ¶¶ 10-11. Dispute as being irrelevant. Admit, however, only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on these issues. PSOF ¶ 9. Admit only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on

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7. this issue. 8.

PSOF ¶ 12. Admit only for purposes of this motion for summary judgment

and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on PSOF ¶ 13. Admit only for purposes of this motion for summary judgment

and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on this issue. The Defendants, however, dispute that this fact is dispositive on the issue of whether BOC, Inc. and BOC, Int'l are successors to Physical Excellence under the NonCompete Agreement between Physical Excellence and Defendants Dow and Fahey. 9. PSOF ¶ 14. Defendants dispute these facts because they are arguments of counsel and contain legal conclusions concerning the transfer of "proprietary information". Dispute also as being overly broad in the use of the term "targeted health clubs". The Defendants also dispute that even taking these facts as true, they are not dispositive on the issue of whether BOC, Inc. and BOC, Int'l are successors to Physical Excellence under the Non-Compete Agreement between Physical Excellence and Defendants Dow and Fahey. 10. PSOF ¶ 15. Admit only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on this issue. The Defendants, however, dispute that this fact is dispositive on the issue of whether BOC, Inc. and BOC, Int'l are successors to Physical Excellence under the NonCompete Agreement between Physical Excellence and Defendants Dow and Fahey. In addition, Defendants dispute these facts to the extent they contain legal conclusions and arguments concerning the transfer of "good will", "valuable information", "contractual obligations". 11. PSOF ¶ 16. Defendants dispute these facts because they are arguments of counsel and contain legal conclusions that BOC, Inc. and BOC, Int'l "received value" from Physical Excellence and that BOC, Inc. and BOC, Int'l were successors to the present and future business operations of Physical Excellence. The Defendants also dispute that even taking these facts as true, they are not dispositive on the issue of
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whether BOC, Inc. and BOC, Int'l are successors to Physical Excellence under the NonCompete Agreement between Physical Excellence and Defendants Dow and Fahey. 12. PSOF ¶ 17. Defendants dispute these facts because they are arguments of counsel and contain legal conclusions regarding the alleged verbal transfer of assets. Defendants also dispute, as a legal conclusion, that any verbal contract exists between BOC, Inc. and BOC, Int'l. The Defendants also dispute that even taking these facts as true, they are not dispositive on the issue of whether BOC, Inc. and BOC, Int'l are successors to Physical Excellence under the Non-Compete Agreement between Physical Excellence and Defendants Dow and Fahey. 13. PSOF ¶ 18. Admit only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on this issue. Defendants, however, dispute these facts to the extent they contain legal conclusions and arguments that BOC, Inc. became the employer of former Physical Excellence employees and that the benefit of the [Physical Excellence] contracts of employment was transferred from Physical Excellence to BOC, Inc. The Defendants, also dispute that these facts are dispositive on the issue of whether BOC, Inc. and BOC, Int'l are successors to Physical Excellence under the Non-Compete Agreement between Physical Excellence and Defendants Dow and Fahey. 14. PSOF ¶ 19. Admit the Non-Compete Agreement entered into between Physical Excellence and Defendants Dow and Fahey contains the quoted "term for succession." Deny that this provision applies to or is dispositive on the issue of whether BOC, Inc. and BOC, Int'l are successors to Physical Excellence under the Non-Compete Agreement. In addition, deny as the statement of fact concerning the successorship of BOC, Inc. and BOC, Int'l is a legal conclusion, not appropriate for motions for summary judgment. 15. PSOF ¶ 20. Deny that any alleged additional discovery as to the list of employees allegedly recruited by Defendants is due to Defendants' actions. Plaintiffs are the ones who should be in possession of the list of their own personnel who terminated
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their employment with Physical Excellence, BOC, Inc. and BOC, Int'l. Defendants incorporate by reference its Reply to Defendants' First Motion, p. 12, ll. 11-22. In addition, if Plaintiffs needed additional time to conduct discovery on this issue and present facts in support, it should have moved for additional time under Rule 56(f). They did not. Plaintiffs should, therefore, be bound, for purposes of the First Motion, by the discovery disclosed and produced to date. 16. PSOF ¶ 21. Dispute as being irrelevant. Defendants' First Motion addresses reasonableness of Non-Compete Agreement as to the geographical scope concerning Arizona. It does not address whether the one-year time limitation or 10-mile geographical restriction is reasonable. Admit, however, only for purposes of this motion for summary judgment and not intended to be binding otherwise. Plaintiffs are put to their burden of proof on this issue. 17. PSOF ¶ 22. Dispute as being irrelevant. Defendants' First Motion addresses reasonableness of the Non-Compete Agreement based on the geographical scope concerning Arizona. It does not address whether the one-year time limitation or 10-mile geographical restriction is reasonable. In addition, Defendants dispute these facts to the extent they contain legal conclusions and arguments concerning the reasonableness of the Non-Compete Agreement, as well as whether Defendants Dow and Fahey stipulated to the facts in the Non-Compete Agreement. Finally, Defendants dispute ¶¶ 23-27 of Ben Gregg's Declaration cited in support of this statement of fact. These paragraphs contain nothing but arguments of counsel and legal conclusions that are not appropriate for motions for summary judgment. In addition, Defendants dispute that many of the statements contained in those paragraphs are actually based on Ben Gregg's "first hand [sic] knowledge." 18. PSOF ¶ 23. Dispute. This is not a statement of fact. It is an argument of counsel and a conclusion of law. This statement is also irrelevant.

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DEFENDANTS' STATEMENT OF FACTS IN SUPPORT OF ITS REPLY BOC, Int'l had no relationship with any health clubs, e.g., L.A. Fitness clubs, with which Physical Excellence had prior contractual relationships. See Ben Gregg Deposition, p. 38, ll. 10-15; p. 52, ll. 20-24, attached hereto as Exhibit A. 2. 3. 4. There was no purchase by BOC, Int'l of Physical Excellence or its assets. There was no contract of merger between BOC, Int'l and Physical The only relationship between Physical Excellence and BOC, Int'l is that See Ben Gregg Deposition (Exhibit A), p. 38, ll. 10-15; p. 66, ll. 15-18. Excellence. See Exhibit A, p. 66, ll. 22-25. after BOC, Int'l was formed, Physical Excellence provided temporary management services to BOC, Int'l until a new management company took over those services. See Exhibit A, p. 46, ll. 12-18. 5. 6. The managerial relationship between Physical Excellence and BOC, Int'l Mr. Fahey executed a Non-Compete Agreement with Physical Excellence was never memorialized in writing. See Exhibit A, p. 67, ll. 9-12. on July 28, 1999. SOF ¶ 52. On September 20, 1999, Mr. Dow executed a NonCompete Agreement with Physical Excellence, Inc. SOF ¶ 24. By September of 1999 Physical Excellence had only three clubs--two in Arizona and one in Florida. See Exhibit A, p. 26, ll. 8-25; p. 27, ll. 1-9. RESPECTFULLY SUBMITTED this 29th day of August, 2005. GALLAGHER & KENNEDY, P.A. By: /s/ Maureen A. Welsh Thomas A. Maraz Maureen A. Welsh 2575 East Camelback Road Phoenix, Arizona 85016-9225 Attorneys for Defendants

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ORIGINAL of the foregoing electronically filed via the CM/ECF system this 29th day of August, 2005, with: Clerk of Court United States District Court Sandra Day O'Connor U.S. Courthouse 401 West Washington Street Phoenix, Arizona 85003 COPY of the foregoing hand-delivered this 29th day of August, 2005, to: The Honorable Earl H. Carroll United States District Court Sandra Day O'Connor U.S. Courthouse 401 West Washington Street Phoenix, Arizona 85003 COPY of the foregoing electronically mailed via the CM/ECF system this 29th day of August, 2005, to: Russell A. Kolsrud, Esq. Ryan J. Lorenz, Esq. Norling, Kolsrud, Sifferman & Davis, P.L.C. 16427 N. Scottsdale Road, Suite 210 Scottsdale, Arizona 85254 Attorneys for Plaintiffs /s/ Jenifer L. Mills

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