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COMMONWEALTH OF MASSACHUSETTS
MIDDLESEX, SS. SUPERIOR COURT
MIDDLESEX DIVISION
ELIZABETH GRADY FACE FIRST INC.
D/B/A THE ELIZABETH GRADY
COMPANY,
Plaintiff,
Vv. C. A. No.
CYNOSURE, INC. AND KEVIN
THORNAL,
12/8/2020
Defendants.
NH
a)
COMPLAINT RECEIVED
Introduction
1 This civil action seeks money damages from defendants Cynosure, Inc.
(“Cynosure”) and its former President, Kevin Thornal (“Thornal’”) (collectively, “Defendants”),
The Plaintiff, Elizabeth Grady Face First Inc., commonly known as The Elizabeth Grady
Company (“Elizabeth Grady” of “Plaintiff’), asserts claims resulting from Defendants’
intentionally deceitful and knowing misrepresentations made to Elizabeth Grady during the
parties’ negotiations surrounding a certain Product Lease Agreement, executed on January 10,
2019. In the course of negotiations, Defendants’ knowingly made materially false and
misleading statements to Elizabeth Grady to induce Elizabeth Grady to enter into the Agreement.
Elizabeth Grady is now seeking damages for common law fraud and violation of Massachusetts
General Laws, Chapter 93A, Section 11.
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Parties
2 Elizabeth Grady is a well-known and successful operator and franchisor of
skincare salons with locations throughout Massachusetts and New Hampshire. Elizabeth
Grady’s principal place of business and corporate offices are located at 222 Boston Avenue,
Medford, Massachusetts.
3 Defendant Cynosure, Inc. is a Delaware corporation with a principal place of
business in Westford, Massachusetts. Cynosure is in the business of developing, marketing and
selling various devices that utilize laser technology for cosmetic and esthetic use.
4. Defendant Kevin Thornal is the former Division President of Cynosure. On
information and belief, Thornal resided in Massachusetts during the operative time period
relevant to this Complaint, and either personally made or authorized the actionable statements
that were made in Massachusetts.
Jurisdiction
5 This Court has jurisdiction over this action and the parties pursuant to
Massachusetts General Laws, Chapter 212, §§ 3 and 4, and Chapter 214, § 1.
6 This Court is the proper venue for this action pursuant to Massachusetts General
Laws, Chapter 223, § 1.
Facts
7. Founded in 1974, Elizabeth Grady is a Boston-based esthetics, massage therapy
and makeup artistry company with twenty-four locations throughout New England, in addition to
its accredited School of Esthetics and Massage Therapy located in Medford, Massachusetts. A
number of Elizabeth Grady’s twenty-four salons operate as franchises.
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8. Since its inception, Elizabeth Grady has provided customers with innovative
cosmetic treatment options and related health and beauty services. In addition, Elizabeth Grady
annually graduates highly skilled, expertly trained professional estheticians from its School of
Esthetics, Massage Therapy and Make-up Artistry.
9 Cynosure is a Massachusetts-based company that is in the business of developing,
marketing and selling a portfolio of devices that utilize laser technology for cosmetic and esthetic
use.
10. At the time of the representations made herein, Cynosure was a wholly owned
subsidiary of Hologic, Inc.
11. Cynosure specifically describes itself as a market leader in esthetic laser and RF
technologies. According to its website, Cynosure develops and manufactures a diverse range of
leading treatment applications for hair removal, skin revitalization, scar reduction, gynecological
health, body contouring, and more. Cynosure claims its products are used worldwide by
practitioners, physicians, and aesthetic business owners to help enhance their offerings while
providing the latest treatments to patients.
12. In November of 2018, Cynosure’s Division President, defendant Kevin Thornal,
contacted Elizabeth Grady’s President, John P. Walsh, Jr., to inquire into Elizabeth Grady’s
interest in placing Cynosure equipment and devices throughout Elizabeth Grady’s salons.
13. During those initial conversations, Thornal proposed that Elizabeth Grady could
lease certain of Cynosure’s equipment and devices across its salon locations.
14, Elizabeth Grady quickly rejected this proposal, having determined that the
proposed price and deal structure was not a good fit with its business, and that it would incur
substantial additional costs to retrofit its salons to accommodate Cynosure’s equipment (as
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Cynosure’s equipment was required to be located in discrete, private rooms dedicated solely to
the particular service being provided to the customer).
15. Although Elizabeth Grady knew of Cynosure and its non-invasive body
contouring devices, Elizabeth Grady was also researching other health and beauty opportunities
offered by other manufacturers to further implement its trademark “Where Beauty Meets
Medicine”, and continued to explore those options.
16. Despite those initial concerns, and after declining Cynosure’s first proposal,
Cynosure expressed interest in continuing the discussions and the parties began to informally
discuss a revenue sharing arrangement (rather than a fixed monthly rental fee).
17. After additional discussions, Elizabeth Grady agreed that Cynosure could make a
formal presentation and proposal to its management. This presentation took place on December 3,
2018, at Elizabeth Grady’s headquarters in Medford, Massachusetts.
18. Cynosure was represented at the December 3, 2018 sales meeting by Thornal, its
Division President, and senior management from its finance, marketing, sales, field services and
clinical departments. The attendees present on behalf of Elizabeth Grady included Walsh, its
President, along with Elizabeth Grady’s Vice President and Director of Salon Operations.
19, At the meeting, Cynosure presented a detailed proposal, including sales and
marketing plans to Elizabeth Grady management. The presentation focused on two Cynosure
products — SculpSure and Icon.
20. The SculpSure product is marketed by Cynosure as the world’s first FDA-cleared
laser device for non-invasive body contouring, designed to permanently reduce stubborn fat
without surgery or downtime.
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21. Cynosure markets its Icon system as a flexible multi-purpose platform, using
advanced technologies, to provide permanent hair reduction, wrinkle reduction, stretch mark
treatment, leg vein clearance, surgical and acne scar treatment, facial vessel clearance and
pigment reduction, and fractional skin resurfacing.
22. Elizabeth Grady business model was based on other services and accordingly
Elizabeth Grady did not offer any similar products or services as those provided by Cynosure’s
SculpSure and Icon devices.
23. Cynosure’s specific proposal included the placement of its Icon and SculpSure
machines at all twenty-four Elizabeth Grady locations (in addition to the placement of machines
at Elizabeth Grady’s School of Esthetics and Massage Therapy and any new Elizabeth Grady
locations). Under this proposed arrangement, the parties would share revenue equally on a 50/50
basis, after deducting Elizabeth Grady’s associated expenses.
24. A majority of Cynosure’s presentation focused on its national marketing prowess,
brand recognition, and its promise that its products would deliver substantial new customers and
revenues for Elizabeth Grady. This was labeled as Cynosure’s “/ Did It!” campaign.
25. As evidenced throughout its presentation, Cynosure’s marketing campaign
publishes and relies on promotional literature about its products through the use of celebrity
endorsements and promotions. Elizabeth Grady’s management was interested about the prospect
of driving new customers into its salons through this unique, targeted marketing campaign.
26. Cynosure also held itself out as an expert in marketing and generating new
business. Cynosure described its vision of working in a partnership with Elizabeth Grady to
generate sustainable, new business and long-term revenues for Elizabeth Grady.
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27. As part of that sales pitch, Cynosure representatives at the meeting, including
Thornal, made numerous representations concerning Cynosure’s commitment to a long term
relationship with Elizabeth Grady. These representations include, among others, that:
e Cynosure would be the driving force to bring in new business;
Cynosure would create custom advertisements, making use of the Elizabeth
Grady name, based off its / Did Jt Campaign, among other campaigns;
Cynosure had a talented and experienced marketing department consisting of over
thirty professionals who would work directly with Elizabeth Grady to create new
marketing campaigns, advertisements, and digital media for Elizabeth Grady;
Cynosure would use its national brand recognition and marketing experience to
drive new customer base through Elizabeth Grady’s doors and increase monthly
and annual revenues across all salon locations.
28. During the presentation, Cynosure also provided detailed, annualized financial
information and anticipated revenues, Cynosure stated that its financial analysis was based upon
Cynosure’s national sales data for its SculpSure and Icon machines and were readily achievable
in Elizabeth Grady’s markets.
29. Cynosure specifically stated that through the services provided by the Icon
machine, Elizabeth Grady could reasonably expect to realize $228,960 per month in revenue
combined for all twenty-four Elizabeth Grady salons. Under the 50/50 revenue split proposed at
the time, Cynosure therefore stated Elizabeth Grady’s monthly revenue for the Icon machine to
be $114,480, or $1.373 million annualized.
30. Cynosure also provided a “year one” projection for Elizabeth Grady’s integration
of the SculpSure machines into its twenty-four salons. Cynosure’s analysis showed monthly
sales revenue generated by SculpSure services to be between $24,000 and $36,000, and when
incorporating a 50/50 revenue split, Cynosure showed Elizabeth Grady’s annual first-year
revenues to be in the range of $3.456 million to $5,184 million.
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31. Cynosure also represented that SculpSure revenues would likely increase year
over year, based on continued marketing efforts, demand, and the anticipated success of the
product.
32. Cynosure’s financial projections relied heavily upon a marketing campaign,
spearheaded and managed by Cynosure’s marketing team. Cynosure assured Elizabeth Grady
that because of the proposed 50/50 split such a campaign would be implemented to bring this
proposed joint business within Cynosure’s national sales data and market trends.
33. Elizabeth Grady was concerned about the logistical disruptions that would be
caused at its salons through the placement of new equipment, the lost business from having a
dedicated room for the new equipment, and the costs it would incur to retrofit its salons, to train
personal, and to manage this new business. Those concerns, however, were outweighed by
Cynosure’s assurances of the new business and customers that would be attracted through
Cynosure’s marketing and that would easily account for substantial new revenues for Elizabeth
Grady.
34. During the parties’ negotiations, Cynosure made additional representations to
Elizabeth Grady concerning the anticipated business relationship of the parties. This included,
for example, Cynosure’s promise that:
° It would promote, market and distribute Elizabeth Grady beauty products to
Cynosure’s existing clients;
Elizabeth Grady was to become Cynosure’s vendor of choice for the ancillary
accompanying products used with Cynosure’s laser services;
Elizabeth Grady and Cynosure would pursue the joint opening of a school or
training center at headquarters to be located in either in Marlborough or Westford,
Massachusetts; and
It would promote Elizabeth Grady’s expansion.
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35. On January 10, 2019, the parties executed a Product Lease Agreement (the
“Agreement”) addressing the Icon and the SulpSure machines to be placed in Elizabeth Grady
locations.
36. On or about January 28, 2019, Elizabeth Grady introduced Cynosure management
and its technologies at a corporate event. At this presentation, Thornal addressed the meeting
attendees and reinforced Cynosure’s commitment to its marketing program for Elizabeth Grady.
37. On or about February 5, 2019, Elizabeth Grady presented the Cynosure devices to
its Elizabeth Grady franchisees on the basis of Cynosure’s representations to Elizabeth Grady.
38. On or around February 19, 2019, Cynosure issued a press release announcing a
“partnership” with Elizabeth Grady to offer Cynosure’s SculpSure and Icon technologies at
Elizabeth Grady’s salons and esthetic school.
39, By the Spring of 2019, Elizabeth Grady personnel and employees were being
trained on the SculpSure and Icon devices. Despite Cynosure’s pre-agreement representations
that training could be completed relatively seamlessly in only a few days, the training process
was significantly more labored and difficult. Ultimately, training was completed in phases over a
period of months, rather than days.
40. During this time, Cynosure also promised to create and publish a digital
marketing campaign on Elizabeth Grady’s behalf, to be rolled out over a period of months and to
help drive new customers to Elizabeth Grady.
41, Despite its promise, Cynosure slashed the agreed upon advertising budget and
duration of the proposed digital campaign. While a digital campaign was eventually launched, it
lasted for approximately only one month and failed to generate any noticeable business for
Elizabeth Grady.
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42. Over the following months, Elizabeth Grady also attempted to work with
Cynosure on other marketing and advertising initiatives, but Cynosure was mostly non-
responsive. When Cynosure finally responded with proposed advertising, the proposed ads were
inadequately tailored to Elizabeth Grady’s business. When Elizabeth Grady communicated those
concerns to Cynosure and requested modifications to the advertisements, Cynosure was again
generally non-responsive and failed to provide the represented level of support.
43. Despite Elizabeth Grady making commercially reasonable efforts to market and
advertise the Cynosure products, Cynosure provided little to no marketing support, and failed
and refused to create any specific / Did It advertising for Elizabeth Grady. Cynosure generally
failed to make available its marketing department to Elizabeth Grady and failed to work
cooperatively with Elizabeth Grady to create advertising and digital media campaigns.
44, Due to logistic issues with Cynosure’s training, the final roll-out of Cynosure’s
equipment into Elizabeth Grady’s salons was not completed until the Fall of 2019.
45, In connection with that effort, each Elizabeth Grady salon had to remove existing
services and equipment and provide a dedicated room to accommodate the new Cynosure
devices,
46. On or about November 20, 2019, Hologic announced that it was selling its
Cynosure business to an investment banking firm Clayton, Dubilier & Rice and that despite
purchasing Cynosure in 2017 for $1.65 billion, Hologic was selling the business just two years
later for a little over $200,000 million.
47. Cynosure provided no advance notice to Elizabeth Grady of the sale, nor did it
inform Elizabeth Grady once the closing was complete. Despite the alleged “partnership”
between the parties, Elizabeth Grady only learned of the sale through a press release.
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Management of Elizabeth Grady believed that they had been betrayed. On information and
belief, Cynosure and its senior management, including Thornal, only wanted to use the
relationship and Agreement with Elizabeth Grady to inflate Cynosure’s distribution and potential
revenues for purposes of selling the company. Moreover, on information and belief, Cynosure’s
management knew, but did not disclose, that Cynosure was internally and financially in disarray,
that Cynosure would be unable to fulfill its representations because of the impending sale and
restrictions within Cynosure on the use of cash and Hologic’s view of the failure of its
relationship with Cynosure.
48. Without Cynosure’s represented level of involvement, Elizabeth Grady was not
positioned to generate the required customer volume to reach Cynosure’s stated revenue levels.
49. As a result of Cynosure’s and Thornal’s actionable deceitful conduct, Elizabeth
Grady suffered a substantial loss of revenue. Not only did Elizabeth Grady fail to reach any of
the stated revenues forecast by Cynosure, Elizabeth Grady lost substantial revenues and its
working capital, inter alia, from reductions in pre-existing services, from changes in its physical
space to accommodate Cynosure equipment and services, from franchisee discontent and from
lost management time caused by all of the above. These losses are continuing. As a result,
Elizabeth Grady had a year-end financial loss for the first time under Walsh’s management and
has had destroyed its market value as an on-going business.
50. Elizabeth Grady reasonably relied upon representations made by Cynosure and
Thornal as alleged above. Had Elizabeth Grady known the truth of the matter, including that
Cynosure had no intention of fulfilling its marketing and advertising representations, Elizabeth
Grady would never have entered into the Agreement.
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COUNT I - FRAUD/MISREPRESENTATION
51. Elizabeth Grady incorporates by reference the preceding allegations and
paragraphs as if set forth in full herein.
52. Cynosure and Thornal made misrepresentations of material fact, through
affirmative statements directly to Elizabeth Grady, concerning the business that Cynosure would
generate for and with Elizabeth Grady and Cynosure’s purported commitment to create
advertising and joint market programs with Elizabeth Grady as hereinbefore alleged. Cynosure
and Thornal made these statements in order to induce Elizabeth Grady to enter into the
Agreement.
53. Cynosure and Thornal knew that those statements to Elizabeth Grady were false
or were made with reckless disregard for the truth, and that Cynosure would not fulfill any of its
representation, including the implementation of its marketing and advertising program necessary
to achieve the stated revenue numbers.
34, Elizabeth Grady reasonably relied on Cynosure’s and Thornal’s representations,
and based on that reliance, Elizabeth Grady entered into the Agreement and agreed to lease
certain Cynosure equipment for placement in its salons.
55. As a result thereof, Elizabeth Grady has been substantially damaged, and
continues to suffer damages.
COUNT II - VIOLATION OF M.G.L. C. 93A § 11
56. Elizabeth Grady incorporates by reference the preceding allegations and
paragraphs as if set forth in full herein.
37. Cynosure and Thornal, in his capacity as an officer of Cynosure, was at all
material times engaged in trade and/or commerce within the meaning of § 1 of Chapter 93A.
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58. Elizabeth Grady was at all material times engaged in trade and/or commerce
within the meaning of Chapter 93A, § 1, and suffered a loss of money as a result of Cynosure’s
and Thornal’s use of unfair methods of competition and/or unfair and/or deceptive acts and/or
practices in commerce, as previously described in this Complaint, and in violation of §§ 2 and 11
59. Cynosure’s and Thornal’s unfair and deceptive acts and practices were knowing
and/or willful.
60. Cynosure’s and Thornal’s unfair and deceptive acts and practices occurred
primarily and substantially in the Commonwealth of Massachusetts.
61. Cynosure’s and Thornal’s unfair and deceptive acts and practices have caused
Elizabeth Grady to suffer substantial damages and to incur substantial attorneys’ fees, which it
continues to incur.
COUNT III —- PROMISSORY ESTOPPEL
62. Elizabeth Grady incorporates by reference the preceding allegations and
paragraphs as if set forth in full herein.
63. During the course of the parties’ negotiations, Elizabeth Grady relied on
Cynosure’s and Thornal’s statements and promises concerning Cynosure’s marketing —rogram if
Elizabeth Grady were to enter into the Agreement.
64, Wishing to close the deal, and to secure the Agreement, without disclosing the
active efforts to sell the company, Cynosure and Thornal convinced Elizabeth Grady that
Cynosure would use its available and abundant marketing resources to help Elizabeth Grady
drive new business to its salons.
65. Cynosure and Thornal made these representations and promises to Elizabeth
Grady expecting and desiring for Elizabeth Grady to rely on those promises.
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66. Elizabeth Grady reasonably and detrimentally relied on Cynosure’s and Thornal’s
representations and promises, and entered into the Agreement. The promised marketing never
materialized and Elizabeth Grady suffered a substantial losses as hereinbefore alleged.
67. As a result, Cynosure and Thornal should be estopped from denying their
promises to provide the marketing and advertising support that Elizabeth Grady reasonably
expected to receive, and Cynosure and Thornal should be held accountable for any and all
damages suffered by Elizabeth Grady in connection with its reasonable reliance.
WHEREFORE, Elizabeth Grady respectfully requests that this Court:
A enter judgment for Plaintiff and against Defendants on each of Plaintiff's claims,
in an amount to be determined at trial;
award Plaintiff damages for Defendants’ violations of Chapter 93A and attorney’s
fees and costs;
double or treble such damages based upon Defendants’ knowing or willful
conduct; and
D. award such other and further relief as this Court deems just and equitable.
Plaintiff further demands a jury trial on all issues deemed triable to a jury.
ELIZABETH GRADY FACE FIRST, INC.
D/B/A THE ELIZABETH GRADY
COMPANY,
By its attorneys,
A
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(Ak Ui iv Ame yt
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William A. Zucker, Esq., BBO No. 541240
Nicholas W. Allen, Esq., BBO No. 663409
McCarter & English, LLP
265 Franklin Street
Boston, MA 02110-3113
617.449.6500
wzucker@mecarter.com
December 8, 2020 nallen@mccarter.com
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