Preview
INDEX NO. 651885/2010
FILED: NEW YORK COUNTY CLERK 1271372010
NYSCEF DOC. NO. 20 RECEIVED NYSCEF: 12/13/2010
SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
JMB APPAREL DESIGNER GROUP, INC.,
Plaintiff, Index No. 651885/10
Vv. DEFENDANTS’ ANSWER,
COUNTERCLAIMS, AND
ROBERT S. AROCHAS, D-NACH, LTD., and THIRD PARTY CLAIMS
FAB MILL, INC.,
Defendants.
Defendants Robert S. Arochas (“Arochas”), D-Nach, Ltd. (“D-Nach”), and Fab Mill, Inc.
(“Fab”), by their attorneys Feder Kaszovitz, LLP, allege the following as and for their answer and
counterclaims, and claims against third parties Ben Choy (“Choy”) and Marcella Law (“Law”):
PARTIES, VENUE AND JURISDICTION
1 Deny knowledge or information sufficient to form a belief as to the truth of the
allegations contained in paragraph 1.
2 Deny the allegations contained in paragraph 2 except admits that Arochas is a
resident of the State of New York.
3 Deny the allegations contained in paragraph 4 except admits that Fab is a New
York corporation.
4 Deny the allegations contained in paragraph 5, except admits that Arochas is a
partial owner of D-Nach.
5 Deny the allegations contained in paragraph 6, except admit that D-Nach and Fab
maintain places of business in New York County. Whether venue is proper is not a factual
allegation but a legal conclusion, and requires no response.
FACTS COMMON TO THE CAUSES OF ACTION IN THE COMPLAINT
6 Denies knowledge or information sufficient to form a belief as to the truth of the
allegations contained in paragraphs 9, 11, 14, 21, 22, 26, 42, and 44 through 46.
7
Deny the allegations contained in paragraph 10, except admits that the descriptive
word “Atelier” has not been registered in New York or with the U.S. Patent and Trademark
Office.
8 Deny the allegations contained in paragraphs 13, 15, 17, 24, 27, 30 through 32,
36, 39 through 41, and 43.
9 Denies the allegations in paragraphs 16 and 18 except admit to responsibility.
10. Deny knowledge or information sufficient to form a belief as to the truth of the
allegations contained in paragraph 19 except admit that, on plaintiff's behalf as its employee,
Arochas sought to assist it in estimating its upcoming sales volume and to assist it in selecting
styles and quantities of garments to order for the fall season.
ll. Deny the allegations contained in paragraph 23, except admit that Arochas had
discussions with buyers who had previously placed orders with JMB and, based on such
discussions, sought to estimate what they might order for the fall season.
12. Deny the allegations contained in paragraph 25, except admit that on May 25,
2010, Arochas informed people in plaintiff's New York office that he would be leaving the
company and would immediately begin working for another company that was involved in the
garment industry in New York.
13. Deny the allegations contained in paragraph 34, except admit that the inventory
numbering system utilized by the defendants, which was first utilized by Arochas many years
before he was employed by the plaintiff, is similar to that utilized by the plaintiff and most
apparel companies.
14. Deny the allegations contained in paragraph 35, except deny knowledge or
information sufficient to form a belief as to the truth of the allegation that, prior to leaving JMB’s
employ, Arochas ever held himself out to a buyer as an owner of JMB.
15. Deny the allegations contained in paragraph 37 except admit that, after May,
2010, Arochas solicited and received orders for defendants’ apparel from customers who had
also placed orders with JMB.
16. Deny the allegations contained in paragraph 38, except admit that defendants sold
garments under the registered trademark “Atelier Luxe”.
PLAINTIFF’S FIRST CAUSE OF ACTION
17. Defendants repeat, reiterate, and reallege their responses to the allegations
contained in paragraphs | through 46 above as if fully set forth herein.
18. Deny the allegations contained in paragraph 48 except admit that the descriptive
term “Atelier” is not a registered mark.
19. Deny the allegations contained in paragraphs 49 through 51, and 53 through 56.
20. Deny the allegations contained in paragraph 52, except admit that Arochas has
marketed defendants’ garments to buyers who have also purchased goods from the plaintiff.
PLAINTIFF’S SECOND CAUSE OF ACTION
21. Defendants repeat, reiterate, and reallege their responses to the allegations
contained in paragraphs 1 through 46 and 48 through 56 above as if fully set forth herein.
22. Deny knowledge or information sufficient to form a belief as to the truth of the
allegations contained in paragraphs 58, 61, and 63.
23. Deny the allegations contained in paragraphs 59, 60, 62, and 64 through 67.
PLAINTIFF’S THIRD CAUSE OF ACTION
24. Defendants repeat, reiterate, and reallege their responses to the allegations
contained in paragraphs | through 46, 48 through 56, and 58 through 67 above as if fully set forth
herein.
25. Deny the allegations contained in paragraphs 69 through 77, and 79 through 84.
26. Deny knowledge or information sufficient to form a belief as to the truth of the
allegations contained in paragraph 78.
PLAINTIFF’S FOURTH CAUSE OF ACTION
27. Defendants repeat, reiterate, and reallege their responses to the allegations
contained in paragraphs | through 46, 48 through 56, 58 through 67, and 69 through 84 above as
if fully set forth herein.
28. Deny the allegations contained in paragraphs 86 through 94.
PLAINTIFF’S FIFTH CAUSE OF ACTION
29. Defendants repeat, reiterate, and reallege their responses to the allegations
contained in paragraphs 1 through 46, 48 through 56, 58 through 67, 69 through 84, and 86
through 94 above as if fully set forth herein.
30. Deny the allegations contained in paragraph 96 except admit that Arochas was a
key employee of JMB, had principal responsibility for sales and marketing of the Atelier clothing
line, and had access to information about JMB’s business, including but not limited to
information about the designs and manufacturing specifications of garments marketed by JMB,
the purchase history of past JMB customers, and JMB’s pricing.
31. Deny the allegations contained in paragraph 97 except admit that Arochas began
considering leaving JMB’s employ at least as early as March, 2010, and continued to do so until
he terminated his employment on May 24, 2010.
32. Deny the allegations contained in paragraphs 98 through 100 and 102 through
106.
33. Paragraph 101 presents a legal conclusion, not a factual allegation, and requires
no response.
PLAINTIFF’S SIXTH CAUSE OF ACTION
34. Defendants repeat, reiterate, and reallege their responses to the allegations
contained in paragraphs 1 through 46, 48 through 56, 58 through 67, 69 through 84, 86 through
94, and 96 through 106 above as if fully set forth herein.
35. Deny the allegations contained in paragraph 108, 111 through 113, and 115
through 118.
36. Deny the allegations contained in paragraph 110, except admit that, as an
employee of JMB and on its behalf, Arochas regularly communicated with buyers who had
previously ordered goods from JMB, and attempted to ascertain from those buyers the quantities
and styles which they might be purchasing for the fall season.
37. Deny knowledge or information sufficient to form a belief as to the truth of the
allegations contained in paragraph 114.
PLAINTIFF’S SEVENTH CAUSE OF ACTION
38. Defendants repeat, reiterate, and reallege their responses to the allegations
contained in paragraphs 1 through 46, 48 through 56, 58 through 67, 69 through 84, 86 through
94, 96 through 106, and 108 through 118 above as if fully set forth herein.
39. Paragraph 120 contains a legal conclusion, not a factual allegation, and requires
no response.
40. Deny the allegations contained in paragraphs 121 through 127.
AS AND FOR A FIRST AFFIRMATIVE DEFENSE
41. Plaintiffs claims fail to state causes of action upon which relief can be granted.
AS AND FOR A SECOND AFFIRMATIVE DEFENSE
42. This Court lacks subject matter jurisdiction over plaintiffs claims insofar as they
are based on copying of plaintiff's garments, as such claims sound in copyright.
AS AND FOR A THIRD AFFIRMATIVE DEFENSE
43. To the extent that plaintiff attempts to asssert common law claims based upon
copying of plaintiff's garments, such claims are preempted by Federal copyright law.
AS AND FOR A FOURTH AFFIRMATIVE DEFENSE
44. In or around September, 2010, plaintiff applied to register the mark “Bask
Atelier” as a trademark in connection with apparel with the United States Patent and Trademark
Office (“USPTO”).
45. Upon information and belief, plaintiff subsequently disclaimed any right to the
exclusive use of the term “atelier” in connection with apparel in an attempt to gain more
favorable consideration by the examining attorney and the USPTO.
46. Upon information and belief, plaintiff did gain such favorable consideration and
will obtain registration of the “Bask Atelier” mark in connection with apparel.
47. Having benefitted from its disclaimer of the right to exclusive use of the term
“atelier”, plaintiff is estopped to contradict that disclaimer by asserting in this action that it has
the exclusive right to use the term “atelier” in connection with apparel.
AS AND FOR A FIFTH AFFIRMATIVE DEFENSE
48. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs
43 through 46 above as if fully set forth herein.
49. Upon information and belief, plaintiff began using the term “atelier” in connection
with its line of apparel in or around 2006.
50. Upon information and belief, numerous other individuals and entities have used
the term “atelier”, alone or in conjunction with other terms, in connection with their sale of
apparel.
51. Upon information and belief, plaintiff has never before attempted to assert any
rights to the exclusive use of the term “atelier” in connection with apparel.
52. By virtue of the foregoing, any right it may have had to the exclusive use of the
term “atelier” in connection with apparel has been waived and is bound by waiver and laches
from prevailing on its claim.
AS AND FOR A FIFTH AFFIRMATIVE DEFENSE
53. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs
43 through 46 and 48 through 51 above asif fully set forth herein.
54. Plaintiff knew, or should have known, that defendant Robert Arochas (““Arochas”)
had applied to register the trademark “Atelier Luxe” in connection with apparel by August 3,
2010, when such mark was published for opposition by the USPTO.
55. Plaintiff neither opposed registration, nor took any other action designed to either
assert its alleged right to the exclusive use of the term “atelier”, to prevent Arochas from utilizing
the “Atelier Luxe” trademark in connection with apparel until October 8, 2010, two months after
plaintiff knew, or should have known, of the attempted registration of the “Atelier Luxe”
trademark in connection with apparel.
56. Defendants relied on plaintiffs inaction to their detriment, in that they spent
substantial sums to manufacture and market numerous garments under the “Atelier Luxe” mark.
57. By virtue of the foregoing, plaintiff's claims based on its alleged exclusive right to
utilize the “atelier” mark in connection with apparel are barred by laches, waiver and estopped
from prevailing on its claim.
AS AND FOR A SIXTH AFFIRMATIVE DEFENSE
58. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs
43 through 46, 48 through 51, and 53 through 56 above as if fully set forth herein.
59. By virtue of the foregoing, plaintiff is estopped from denying that defendants
have the right to use the “Atelier Luxe” mark in connection with apparel, and from preventing
the defendants from utilizing the “Atelier Luxe” mark in connection with defendants’
manufacture, marketing, and sale of apparel.
AS AND FOR A SEVENTH AFFIRMATIVE DEFENSE
60. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs
43 through 46, 48 through 51, and 53 through 56 above as if fully set forth herein.
61. Plaintiff employed Arochas from in or around the spring of 2004 through May 24,
2010.
62. As part of his compensation for his employment with the plaintiff, Arochas was
entitled to receive a 20% share of plaintiff's annual profit.
63. Upon information and belief, Choy and Law are employees of the plaintiff who
started their employment at the same time that Arochas did.
64. Upon information and belief, Choy and Law were both highly placed executives
in plaintiff's employ during the term of Arochas’s employment with the plaintiff.
65. Upon information and belief, Choy was an officer of the plaintiff during the term
of Arochas’s employment with the plaintiff.
66. Upon information and belief, Choy was a director of the plaintiff during the term
of Arochas’s employment with the plaintiff.
67. Upon information and belief, Law was an officer of the plaintiff during the term
of Arochas’s employment with the plaintiff.
68. Upon information and belief, Law was a director of the plaintiff during the term of
Arochas’s employment with the plaintiff.
69. Numerous times over the course of his employment, plaintiff, through Choy and
Law, represented to Arochas that plaintiff had never realized any material amount of profit, and
therefore that he would not receive any profit sharing.
70. Upon information and belief, such representations were false when made in that
plaintiff did earn a substantial profit during the period of Arochas’s employment.
71. Upon information and belief, Choy and Law knew that such representations were
false when they made them.
72. Upon information and belief, plaintiff, through Choy and Law, intentionally
concealed this fact from Arochas.
2B. Upon information and belief, Choy wrongfully diverted monies from the plaintiff
which rightfully belonged to the plaintiff during the term of Arochas’s employment with the
plaintiff.
74. Upon information and belief, Law wrongfully diverted monies from the plaintiff
which rightfully belonged to the plaintiff during the term of Arochas’s employment with the
plaintiff.
75. Upon information and belief, plaintiff was at all times aware of Choy’s wrongful
diversion of monies.
76. Upon information and belief, plaintiff was at all times aware of Law’s wrongful
diversion of monies.
77. Upon information and belief, beginning in or around 2009, plaintiff began
recording payments to “phantom employees”, i.e. persons who were not actually employed by the
plaintiff, on its books and records.
10
78. Upon information and belief, plaintiff received compensation from the “phantom
employees” for this service.
79. Upon information and belief, Choy received compensation from the “phantom
employees” for this service.
80. Upon information and belief, Law received compensation from the “phantom
employees” for this service.
81. Upon information and belief, another purpose for reporting these “phantom
employees” on plaintiff's payroll was to aid Choy in his dealings with immigration authorities by
misrepresenting that he was a key employee of a business which employed a great number of
people.
82. By virtue of the foregoing, plaintiffs claims are barred by its unclean hands.
AS AND FOR A FIRST COUNTERCLAIM AND
THIRD PARTY CLAIM AGAINST CHOY AND LAW
83. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs
43 through 46, 48 through 51, 53 through 56, and 58 through 84 above as if fully set forth herein.
84. Upon information and belief, Choy resides in the State of New York, County of
New York.
85. Upon information and belief, Law resides in the State of New York, County of
New York.
86. Arochas has been damaged by the above breaches of contract and frauds, in an
amount to be determined, in that he has been deprived of the share of plaintiffs profits to which
he was entitled during the term of his employment with the plaintiff.
11
AS AND FOR A SECOND COUNTERCLAIM AND
THIRD PARTY CLAIM AGAINST CHOY AND LAW
87. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs
43 through 46, 48 through 51, 53 through 56, 58 through 84, and 86 through 88 above as if fully
set forth herein.
88. By virtue of the foregoing, plaintiff has been unjustly enriched.
89. By virtue of the foregoing, Choy has been unjustly enriched.
90. By virtue of the foregoing, Law has been unjustly enriched.
AS AND FOR A THIRD COUNTERCLAIM AND
THIRD PARTY CLAIM AGAINST CHOY AND LAW
91. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs
43 through 46, 48 through 51, 53 through 56, 58 through 84, 86 through 88, and 90 through 92
above as if fully set forth herein.
92. Upon information and belief, in or around December, 2010, plaintiff began to
contact customers and potential customers of defendants.
93. Upon information and belief, in order to induce these customers not to do
business with the defendants, plaintiff made false and disparaging statements about the
defendants to them, including but not limited to statements to the effect that defendants had no
right to do utilize Arochas’s trademark for “Atelier Luxe”, that such use infringed upon
plaintiff's rights in the term “atelier”, that Arochas had breached his fiduciary duties to the
plaintiff, and other disparaging statements about defendants’ integrity and character.
94, Upon information and belief, such disparaging statements were made by and/or
upon the instructions of Choy.
12
95. Upon information and belief, Choy knew or should have known, at the time that
such disparaging statements were made, that they were not true.
96. Upon information and belief, such disparaging statements were made by and/or
upon the instructions of Law.
97. Upon information and belief, Law knew or should have known, at the time that
such disparaging statements were made, that they were not true.
98. Upon information and belief, the above disparagement and trade libel by plaintiff,
Choy, and Law has damaged defendants in that customers who would otherwise have purchased
goods from the defendants have failed to do so.
99. Upon information and belief, the actions of plaintiff, Choy, and Law in making or
causing such disparaging statements to be made were motivated by malice.
WHEREFORE, defendants demand judgment as follows:
a) dismissing plaintiffs’ claims;
b) on behalf of Arochas on defendants’ first and second counterclaims and first and
second third party claims against plaintiff, Choy, and Law, jointly and severally, for an
accounting of all of plaintiff's transactions up until May 24, 2010 and for damages in the amount
of 20% of the profits plaintiff earned during that time period;
c) on behalf of Arochas on defendants’ first and second counterclaims and first and
second third party claims against plaintiff, Choy, and Law, jointly and severally, for punitive
damages in an amount equal to 40% of the profits plaintiff earned up until May 24, 2010;
d) on behalf of Arochas on defendants’ first and second counterclaims and first and
second third party claims against plaintiff, Choy, and Law, jointly and severally, for the
13
imposition of a constructive trust over the proceeds of 20% of all monies which were wrongfully
diverted from plaintiff from its inception up until May 24, 2010;
e) on behalf of Arochas on defendants’ first and second counterclaims and first and
second third party claims against plaintiff, Choy, and Law, jointly and severally, for interest at
the rate of 9% per year from May 1, 2004;
e) on behalf of defendants Fab and D-Nach on defendants third counterclaim and third
party claim against Choy and Law, against plaintiff, Choy, and Law, jointly and severally, for
damages in an amount to be determined at trial;
f) on behalf of defendants Fab and D-Nach on defendants third counterclaim and third
party claim against Choy and Law, against plaintiff, Choy, and Law, jointly and severally, for
punitive damages in the amount of $2.5 million;
8) on behalf of defendants Fab and D-Nach on defendants third counterclaim and third
party claim against Choy and Law, against plaintiff, Choy, and Law, jointly and severally, for
interest at the rate of 9% per year from December 1, 2010;
h) for the costs and disbursements of this action; and
i) for such other and further relief as this Court deems just and necessary.
Dated: New York, New York
December 10, 2010
FEDER KASZOVITZ LLP
Attorneys for the Defengants~
By:_J) fe] ALA <1
BRUC E ROBINS, ESQ.
845 Third Avenue
New York, New York 10022-6601
(212) 888-8200
Email address brobins@fedkas.com
\\federserver\wpdoc\BR\Arochas\arojmbans.
wpd
14
VERIFICATION
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
ROBERT S. AROCHAS, being duly sworn, deposes and says:
I am the defendant in the within action; I have read the foregoing Defendants’
Answer, Counterclaims, and Third Party Claims and know the contents thereof; and the same
is true to my own knowledge, except as to matters therein stated to be alleged upon
information and belief, and as to those matters I my it to be t
w)
/
y
ROBERT S. AROCHAS
Swoyn to before me this
} day of December, 2010
~;
dz ‘pe5 By
f0 ON
1 Axe,ON,
HOA
(3 Bp sieis AG yOI0
GLORIA L. M
Notary Public, State of New York
ace SE af
No. 01MC4668688
Preview
INDEX NO. 651885/2010 FILED: NEW YORK COUNTY CLERK 1271372010 NYSCEF DOC. NO. 20 RECEIVED NYSCEF: 12/13/2010 SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK JMB APPAREL DESIGNER GROUP, INC., Plaintiff, Index No. 651885/10 Vv. DEFENDANTS’ ANSWER, COUNTERCLAIMS, AND ROBERT S. AROCHAS, D-NACH, LTD., and THIRD PARTY CLAIMS FAB MILL, INC., Defendants. Defendants Robert S. Arochas (“Arochas”), D-Nach, Ltd. (“D-Nach”), and Fab Mill, Inc. (“Fab”), by their attorneys Feder Kaszovitz, LLP, allege the following as and for their answer and counterclaims, and claims against third parties Ben Choy (“Choy”) and Marcella Law (“Law”): PARTIES, VENUE AND JURISDICTION 1 Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 1. 2 Deny the allegations contained in paragraph 2 except admits that Arochas is a resident of the State of New York. 3 Deny the allegations contained in paragraph 4 except admits that Fab is a New York corporation. 4 Deny the allegations contained in paragraph 5, except admits that Arochas is a partial owner of D-Nach. 5 Deny the allegations contained in paragraph 6, except admit that D-Nach and Fab maintain places of business in New York County. Whether venue is proper is not a factual allegation but a legal conclusion, and requires no response. FACTS COMMON TO THE CAUSES OF ACTION IN THE COMPLAINT 6 Denies knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraphs 9, 11, 14, 21, 22, 26, 42, and 44 through 46. 7 Deny the allegations contained in paragraph 10, except admits that the descriptive word “Atelier” has not been registered in New York or with the U.S. Patent and Trademark Office. 8 Deny the allegations contained in paragraphs 13, 15, 17, 24, 27, 30 through 32, 36, 39 through 41, and 43. 9 Denies the allegations in paragraphs 16 and 18 except admit to responsibility. 10. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 19 except admit that, on plaintiff's behalf as its employee, Arochas sought to assist it in estimating its upcoming sales volume and to assist it in selecting styles and quantities of garments to order for the fall season. ll. Deny the allegations contained in paragraph 23, except admit that Arochas had discussions with buyers who had previously placed orders with JMB and, based on such discussions, sought to estimate what they might order for the fall season. 12. Deny the allegations contained in paragraph 25, except admit that on May 25, 2010, Arochas informed people in plaintiff's New York office that he would be leaving the company and would immediately begin working for another company that was involved in the garment industry in New York. 13. Deny the allegations contained in paragraph 34, except admit that the inventory numbering system utilized by the defendants, which was first utilized by Arochas many years before he was employed by the plaintiff, is similar to that utilized by the plaintiff and most apparel companies. 14. Deny the allegations contained in paragraph 35, except deny knowledge or information sufficient to form a belief as to the truth of the allegation that, prior to leaving JMB’s employ, Arochas ever held himself out to a buyer as an owner of JMB. 15. Deny the allegations contained in paragraph 37 except admit that, after May, 2010, Arochas solicited and received orders for defendants’ apparel from customers who had also placed orders with JMB. 16. Deny the allegations contained in paragraph 38, except admit that defendants sold garments under the registered trademark “Atelier Luxe”. PLAINTIFF’S FIRST CAUSE OF ACTION 17. Defendants repeat, reiterate, and reallege their responses to the allegations contained in paragraphs | through 46 above as if fully set forth herein. 18. Deny the allegations contained in paragraph 48 except admit that the descriptive term “Atelier” is not a registered mark. 19. Deny the allegations contained in paragraphs 49 through 51, and 53 through 56. 20. Deny the allegations contained in paragraph 52, except admit that Arochas has marketed defendants’ garments to buyers who have also purchased goods from the plaintiff. PLAINTIFF’S SECOND CAUSE OF ACTION 21. Defendants repeat, reiterate, and reallege their responses to the allegations contained in paragraphs 1 through 46 and 48 through 56 above as if fully set forth herein. 22. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraphs 58, 61, and 63. 23. Deny the allegations contained in paragraphs 59, 60, 62, and 64 through 67. PLAINTIFF’S THIRD CAUSE OF ACTION 24. Defendants repeat, reiterate, and reallege their responses to the allegations contained in paragraphs | through 46, 48 through 56, and 58 through 67 above as if fully set forth herein. 25. Deny the allegations contained in paragraphs 69 through 77, and 79 through 84. 26. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 78. PLAINTIFF’S FOURTH CAUSE OF ACTION 27. Defendants repeat, reiterate, and reallege their responses to the allegations contained in paragraphs | through 46, 48 through 56, 58 through 67, and 69 through 84 above as if fully set forth herein. 28. Deny the allegations contained in paragraphs 86 through 94. PLAINTIFF’S FIFTH CAUSE OF ACTION 29. Defendants repeat, reiterate, and reallege their responses to the allegations contained in paragraphs 1 through 46, 48 through 56, 58 through 67, 69 through 84, and 86 through 94 above as if fully set forth herein. 30. Deny the allegations contained in paragraph 96 except admit that Arochas was a key employee of JMB, had principal responsibility for sales and marketing of the Atelier clothing line, and had access to information about JMB’s business, including but not limited to information about the designs and manufacturing specifications of garments marketed by JMB, the purchase history of past JMB customers, and JMB’s pricing. 31. Deny the allegations contained in paragraph 97 except admit that Arochas began considering leaving JMB’s employ at least as early as March, 2010, and continued to do so until he terminated his employment on May 24, 2010. 32. Deny the allegations contained in paragraphs 98 through 100 and 102 through 106. 33. Paragraph 101 presents a legal conclusion, not a factual allegation, and requires no response. PLAINTIFF’S SIXTH CAUSE OF ACTION 34. Defendants repeat, reiterate, and reallege their responses to the allegations contained in paragraphs 1 through 46, 48 through 56, 58 through 67, 69 through 84, 86 through 94, and 96 through 106 above as if fully set forth herein. 35. Deny the allegations contained in paragraph 108, 111 through 113, and 115 through 118. 36. Deny the allegations contained in paragraph 110, except admit that, as an employee of JMB and on its behalf, Arochas regularly communicated with buyers who had previously ordered goods from JMB, and attempted to ascertain from those buyers the quantities and styles which they might be purchasing for the fall season. 37. Deny knowledge or information sufficient to form a belief as to the truth of the allegations contained in paragraph 114. PLAINTIFF’S SEVENTH CAUSE OF ACTION 38. Defendants repeat, reiterate, and reallege their responses to the allegations contained in paragraphs 1 through 46, 48 through 56, 58 through 67, 69 through 84, 86 through 94, 96 through 106, and 108 through 118 above as if fully set forth herein. 39. Paragraph 120 contains a legal conclusion, not a factual allegation, and requires no response. 40. Deny the allegations contained in paragraphs 121 through 127. AS AND FOR A FIRST AFFIRMATIVE DEFENSE 41. Plaintiffs claims fail to state causes of action upon which relief can be granted. AS AND FOR A SECOND AFFIRMATIVE DEFENSE 42. This Court lacks subject matter jurisdiction over plaintiffs claims insofar as they are based on copying of plaintiff's garments, as such claims sound in copyright. AS AND FOR A THIRD AFFIRMATIVE DEFENSE 43. To the extent that plaintiff attempts to asssert common law claims based upon copying of plaintiff's garments, such claims are preempted by Federal copyright law. AS AND FOR A FOURTH AFFIRMATIVE DEFENSE 44. In or around September, 2010, plaintiff applied to register the mark “Bask Atelier” as a trademark in connection with apparel with the United States Patent and Trademark Office (“USPTO”). 45. Upon information and belief, plaintiff subsequently disclaimed any right to the exclusive use of the term “atelier” in connection with apparel in an attempt to gain more favorable consideration by the examining attorney and the USPTO. 46. Upon information and belief, plaintiff did gain such favorable consideration and will obtain registration of the “Bask Atelier” mark in connection with apparel. 47. Having benefitted from its disclaimer of the right to exclusive use of the term “atelier”, plaintiff is estopped to contradict that disclaimer by asserting in this action that it has the exclusive right to use the term “atelier” in connection with apparel. AS AND FOR A FIFTH AFFIRMATIVE DEFENSE 48. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs 43 through 46 above as if fully set forth herein. 49. Upon information and belief, plaintiff began using the term “atelier” in connection with its line of apparel in or around 2006. 50. Upon information and belief, numerous other individuals and entities have used the term “atelier”, alone or in conjunction with other terms, in connection with their sale of apparel. 51. Upon information and belief, plaintiff has never before attempted to assert any rights to the exclusive use of the term “atelier” in connection with apparel. 52. By virtue of the foregoing, any right it may have had to the exclusive use of the term “atelier” in connection with apparel has been waived and is bound by waiver and laches from prevailing on its claim. AS AND FOR A FIFTH AFFIRMATIVE DEFENSE 53. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs 43 through 46 and 48 through 51 above asif fully set forth herein. 54. Plaintiff knew, or should have known, that defendant Robert Arochas (““Arochas”) had applied to register the trademark “Atelier Luxe” in connection with apparel by August 3, 2010, when such mark was published for opposition by the USPTO. 55. Plaintiff neither opposed registration, nor took any other action designed to either assert its alleged right to the exclusive use of the term “atelier”, to prevent Arochas from utilizing the “Atelier Luxe” trademark in connection with apparel until October 8, 2010, two months after plaintiff knew, or should have known, of the attempted registration of the “Atelier Luxe” trademark in connection with apparel. 56. Defendants relied on plaintiffs inaction to their detriment, in that they spent substantial sums to manufacture and market numerous garments under the “Atelier Luxe” mark. 57. By virtue of the foregoing, plaintiff's claims based on its alleged exclusive right to utilize the “atelier” mark in connection with apparel are barred by laches, waiver and estopped from prevailing on its claim. AS AND FOR A SIXTH AFFIRMATIVE DEFENSE 58. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs 43 through 46, 48 through 51, and 53 through 56 above as if fully set forth herein. 59. By virtue of the foregoing, plaintiff is estopped from denying that defendants have the right to use the “Atelier Luxe” mark in connection with apparel, and from preventing the defendants from utilizing the “Atelier Luxe” mark in connection with defendants’ manufacture, marketing, and sale of apparel. AS AND FOR A SEVENTH AFFIRMATIVE DEFENSE 60. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs 43 through 46, 48 through 51, and 53 through 56 above as if fully set forth herein. 61. Plaintiff employed Arochas from in or around the spring of 2004 through May 24, 2010. 62. As part of his compensation for his employment with the plaintiff, Arochas was entitled to receive a 20% share of plaintiff's annual profit. 63. Upon information and belief, Choy and Law are employees of the plaintiff who started their employment at the same time that Arochas did. 64. Upon information and belief, Choy and Law were both highly placed executives in plaintiff's employ during the term of Arochas’s employment with the plaintiff. 65. Upon information and belief, Choy was an officer of the plaintiff during the term of Arochas’s employment with the plaintiff. 66. Upon information and belief, Choy was a director of the plaintiff during the term of Arochas’s employment with the plaintiff. 67. Upon information and belief, Law was an officer of the plaintiff during the term of Arochas’s employment with the plaintiff. 68. Upon information and belief, Law was a director of the plaintiff during the term of Arochas’s employment with the plaintiff. 69. Numerous times over the course of his employment, plaintiff, through Choy and Law, represented to Arochas that plaintiff had never realized any material amount of profit, and therefore that he would not receive any profit sharing. 70. Upon information and belief, such representations were false when made in that plaintiff did earn a substantial profit during the period of Arochas’s employment. 71. Upon information and belief, Choy and Law knew that such representations were false when they made them. 72. Upon information and belief, plaintiff, through Choy and Law, intentionally concealed this fact from Arochas. 2B. Upon information and belief, Choy wrongfully diverted monies from the plaintiff which rightfully belonged to the plaintiff during the term of Arochas’s employment with the plaintiff. 74. Upon information and belief, Law wrongfully diverted monies from the plaintiff which rightfully belonged to the plaintiff during the term of Arochas’s employment with the plaintiff. 75. Upon information and belief, plaintiff was at all times aware of Choy’s wrongful diversion of monies. 76. Upon information and belief, plaintiff was at all times aware of Law’s wrongful diversion of monies. 77. Upon information and belief, beginning in or around 2009, plaintiff began recording payments to “phantom employees”, i.e. persons who were not actually employed by the plaintiff, on its books and records. 10 78. Upon information and belief, plaintiff received compensation from the “phantom employees” for this service. 79. Upon information and belief, Choy received compensation from the “phantom employees” for this service. 80. Upon information and belief, Law received compensation from the “phantom employees” for this service. 81. Upon information and belief, another purpose for reporting these “phantom employees” on plaintiff's payroll was to aid Choy in his dealings with immigration authorities by misrepresenting that he was a key employee of a business which employed a great number of people. 82. By virtue of the foregoing, plaintiffs claims are barred by its unclean hands. AS AND FOR A FIRST COUNTERCLAIM AND THIRD PARTY CLAIM AGAINST CHOY AND LAW 83. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs 43 through 46, 48 through 51, 53 through 56, and 58 through 84 above as if fully set forth herein. 84. Upon information and belief, Choy resides in the State of New York, County of New York. 85. Upon information and belief, Law resides in the State of New York, County of New York. 86. Arochas has been damaged by the above breaches of contract and frauds, in an amount to be determined, in that he has been deprived of the share of plaintiffs profits to which he was entitled during the term of his employment with the plaintiff. 11 AS AND FOR A SECOND COUNTERCLAIM AND THIRD PARTY CLAIM AGAINST CHOY AND LAW 87. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs 43 through 46, 48 through 51, 53 through 56, 58 through 84, and 86 through 88 above as if fully set forth herein. 88. By virtue of the foregoing, plaintiff has been unjustly enriched. 89. By virtue of the foregoing, Choy has been unjustly enriched. 90. By virtue of the foregoing, Law has been unjustly enriched. AS AND FOR A THIRD COUNTERCLAIM AND THIRD PARTY CLAIM AGAINST CHOY AND LAW 91. Defendants repeat, reiterate, and reallege the allegations contained in paragraphs 43 through 46, 48 through 51, 53 through 56, 58 through 84, 86 through 88, and 90 through 92 above as if fully set forth herein. 92. Upon information and belief, in or around December, 2010, plaintiff began to contact customers and potential customers of defendants. 93. Upon information and belief, in order to induce these customers not to do business with the defendants, plaintiff made false and disparaging statements about the defendants to them, including but not limited to statements to the effect that defendants had no right to do utilize Arochas’s trademark for “Atelier Luxe”, that such use infringed upon plaintiff's rights in the term “atelier”, that Arochas had breached his fiduciary duties to the plaintiff, and other disparaging statements about defendants’ integrity and character. 94, Upon information and belief, such disparaging statements were made by and/or upon the instructions of Choy. 12 95. Upon information and belief, Choy knew or should have known, at the time that such disparaging statements were made, that they were not true. 96. Upon information and belief, such disparaging statements were made by and/or upon the instructions of Law. 97. Upon information and belief, Law knew or should have known, at the time that such disparaging statements were made, that they were not true. 98. Upon information and belief, the above disparagement and trade libel by plaintiff, Choy, and Law has damaged defendants in that customers who would otherwise have purchased goods from the defendants have failed to do so. 99. Upon information and belief, the actions of plaintiff, Choy, and Law in making or causing such disparaging statements to be made were motivated by malice. WHEREFORE, defendants demand judgment as follows: a) dismissing plaintiffs’ claims; b) on behalf of Arochas on defendants’ first and second counterclaims and first and second third party claims against plaintiff, Choy, and Law, jointly and severally, for an accounting of all of plaintiff's transactions up until May 24, 2010 and for damages in the amount of 20% of the profits plaintiff earned during that time period; c) on behalf of Arochas on defendants’ first and second counterclaims and first and second third party claims against plaintiff, Choy, and Law, jointly and severally, for punitive damages in an amount equal to 40% of the profits plaintiff earned up until May 24, 2010; d) on behalf of Arochas on defendants’ first and second counterclaims and first and second third party claims against plaintiff, Choy, and Law, jointly and severally, for the 13 imposition of a constructive trust over the proceeds of 20% of all monies which were wrongfully diverted from plaintiff from its inception up until May 24, 2010; e) on behalf of Arochas on defendants’ first and second counterclaims and first and second third party claims against plaintiff, Choy, and Law, jointly and severally, for interest at the rate of 9% per year from May 1, 2004; e) on behalf of defendants Fab and D-Nach on defendants third counterclaim and third party claim against Choy and Law, against plaintiff, Choy, and Law, jointly and severally, for damages in an amount to be determined at trial; f) on behalf of defendants Fab and D-Nach on defendants third counterclaim and third party claim against Choy and Law, against plaintiff, Choy, and Law, jointly and severally, for punitive damages in the amount of $2.5 million; 8) on behalf of defendants Fab and D-Nach on defendants third counterclaim and third party claim against Choy and Law, against plaintiff, Choy, and Law, jointly and severally, for interest at the rate of 9% per year from December 1, 2010; h) for the costs and disbursements of this action; and i) for such other and further relief as this Court deems just and necessary. Dated: New York, New York December 10, 2010 FEDER KASZOVITZ LLP Attorneys for the Defengants~ By:_J) fe] ALA <1 BRUC E ROBINS, ESQ. 845 Third Avenue New York, New York 10022-6601 (212) 888-8200 Email address brobins@fedkas.com \\federserver\wpdoc\BR\Arochas\arojmbans. wpd 14 VERIFICATION STATE OF NEW YORK ) ) SS. COUNTY OF NEW YORK ) ROBERT S. AROCHAS, being duly sworn, deposes and says: I am the defendant in the within action; I have read the foregoing Defendants’ Answer, Counterclaims, and Third Party Claims and know the contents thereof; and the same is true to my own knowledge, except as to matters therein stated to be alleged upon information and belief, and as to those matters I my it to be t w) / y ROBERT S. AROCHAS Swoyn to before me this } day of December, 2010 ~; dz ‘pe5 By f0 ON 1 Axe,ON, HOA (3 Bp sieis AG yOI0 GLORIA L. M Notary Public, State of New York ace SE af No. 01MC4668688