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THE LATEST IN THE DISPUTE BETWEEN THE STURGIS SALOON AND EASYRIDERS

MEMORANDUM OF POINTS AND AUTHORITIES

From Joe Teresi
7/21/2012


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I. INTRODUCTION
The parties’ License Agreement had two crucial components: (1) it required KSLB&D to name its bar and restaurant enterprise in Sturgis the “Easyriders Saloon;” and (2) it barred KSLB&D from using any other name. KSLB&D has now (1) stopped using the name “Easyriders Saloon” and (2) is instead using another name. Unless KSLB&D can establish that its violation of these two crucial components should be excused, KSLB&D is in breach.
 
KSLB&D induced Paisano to enter into the License Agreement based on the promise that the Easyriders name would be viewed by the 500,000 Sturgis Rally visitors, at the biggest, newest establishment in town. (Declaration of Joseph Teresi i/s/o Paisano Motion (“Teresi Decl.”), Ex. A). The value of that exposure is enormous. Indeed, KSLB&D does not even address, let alone dispute, that Paisano agreed to enter into the License Agreement based on KSLB&D’s extremely accurate representation that Paisano would greatly benefit from the exposure provided by having the Easyriders name emblazoned atop the only three-story saloon in Sturgis. The only way to stop the damage caused by KSLB&D’s conduct is for the Court to order that conduct to stop now, before the 2012 Sturgis Events begins.

II. ARGUMENT
A. PAISANO NEVER AGREED TO WAIVE THE VENDOR AGREEMENT’S EXCLUSIVITY PROVISION, AND THUS IT IS KSLB&D, NOT PAISANO, THAT IS IN BREACH OF THE VENDOR AGREEMENT
 
KSLB&D admits that the License Agreement requires it to operate as “Easyriders Saloon” and not to use any other name. KSLB&D also admits it is violating both requirements. KSLB&D's only defense to its indisputable breach of the License Agreement is based on an attempt to bootstrap its obligations under that agreement to an alleged breach by Paisano of the parties’ separate Vendor Agreement. However, the indisputable facts establish that Paisano has performed all obligations under the express terms of the Vendor Agreement as well, and that it is actually KSLB&D who is in breach of the Vendor Agreement’s exclusivity provisions. KSLB&D admits that it violated this exclusivity by contacting and selling spaces to vendors. (Opposition (“Opp.”), at 9:9-19). KSLB&D’s entire theory of the case is thus either that: (1) the Vendor Agreement was amended by a January conversation between the parties principals; or (2) Paisano waived the exclusivity provision. Both contentions are wrong.
 
KSLB&D’s defense largely rests on an alleged conversation between Paisano’s C.E.O., Joseph Teresi, and KSLB&D agents, Lee Swanson and Kerry Fernholz, that took place in January 2012. KSLB&D contends that Joseph Teresi told them that if Paisano could not sell a majority of the spaces at an upcoming motorcycle event in Cincinnati, Ohio, KSLB&D could begin marketing and selling the vendor spaces itself. (Opp. at 8:1-23). In essence, KSLB&D asserts that Mr. Teresi gave it permission to breach the Vendor Agreement’s exclusivity provision, giving Paisano the right to “serve as [KSLB&D’s] exclusive agent for the sale of vendor space for the Sturgis Event.” (Teresi Decl., Ex. C, section 2.2).
 
Other than unsupported declarations of two KSLB&D principals, no other evidence supports this contention -- because none exists. KSLB&D does not provide any confirming emails or letters which one would expect if such a major shift in contractual responsibilities actually occurred. Moreover, Joseph Teresi expressly refutes these contentions. (Supplemental Declaration of Joseph Teresi (“Teresi Supp. Decl.”), ¶ 4).
 
The reason for the total absence of any documentation supporting Mr. Teresi’s alleged oral waiver of the Vendor Agreement’s exclusivity provision is obvious -- KSLB&D’s story about what happened during the January 2012 meeting is false. (Teresi Supp. Decl.”), ¶ 4). Mr. Teresi would never have agreed to allow the inexperienced personnel from KSLB&D to handle the vendor sales for the Sturgis Rally. Id. Paisano was to earn a contractual 30% commission on these sales, and Paisano has 40 years of experience selling these types of spaces to ensure that commission would be worth its efforts. Id. (See also, Declaration of Jim Betlach (“Betlach Decl.”), ¶ 2). KSLB&D has little to no experience in the vendor business. There is simply no reason Paisano would agree to allow KSLB&D to take over the vendor sales operation.
 
KSLB&D’s story also directly contradicts the express provisions of the Vendor Agreement, which state at section 8.6 that the agreement “may be modified only by a contract in writing executed by the party(ies) to this Agreement against whom enforcement of such modifications is sought,” and at section 8.13, that “[a]ny waiver of a default under this Agreement must be in writing and shall not be a waiver of any other default concerning the same or any other provision of this Agreement.” (Teresi Decl., Ex. C (emphasis added)).
 
The fact that no amendment to the Vendor Agreement occurred is also supported by KSLB&D’s own May 31, 2012 Notice of Termination to Paisano, attached as Exhibit 6 to the Kernholz Declaration (“Kerholz Decl.”). At the top of page 2, the Notice confirms that “Mr. Teresi got on the phone and directed Kerry Fernholz of Saloon Co. not to have anyone attend the Expo because Paisano had it covered.” (Kernholz Decl., Ex. 6).
The reason for KSLB&D’s decision to prematurely attempt to terminate the Vendor Agreement, and to bootstrap that termination into a name change for the Saloon, has become clear. KSLB&D has now paid its first royalty check for 2012 under the License Agreement. However, it has paid royalties only from June 1, 2012 through June 11, 2012 -- the false “termination date.” (Supp. Teresi Decl., ¶ 11, Ex. B). KSLB&D’s conduct was designed to try to avoid paying royalties to Paisano under the License Agreement-- even though neither agreement provides that the 5% royalty payment under the License Agreement stops if a party terminates the Vendor Agreement. Payment under the Vendor Agreement is a 30% commission on vendor sales, which would theoretically stop if that Agreement were properly terminated with proper notice and opportunity to cure, neither of which happened here. All of KSLB&D’s conduct is a transparent pretext to avoid its royalty obligations under the remaining years of the License Agreement.

B. PAISANO DID NOT BREACH THE VENDOR AGREEMENT -- AND EVEN IF IT HAD, THE “CURE” PERIOD HAS NOT YET RUN
KSLB&D attempts to justify its conduct by asserting that Paisano breached its obligation to timely obtain vendors under the Vendor Agreement. However, KSLB&D purported to terminate the Vendor Agreement with a Notice of Termination dated May 31, 2012 -- well over two months prior to the Sturgis Rally. (Kernholz Decl., Ex. 6).
 
As set forth in the attached declarations of Jim Betlach and third-party witness Terry Rymer, sales of vendor space such as that covered by the Vendor Agreement generally does not begin in earnest until about two months before an event. (Betlach Decl., ¶ 3; Declaration of Terry Rymer (“Rymer” Decl.”), ¶ 2). In this case, two months before the August 5, 2012 start of the Sturgis Rally is June 5, 2012 -- after KSLB&D had already given its premature May 31, 2012 notice purporting to terminate the Agreement.
KSLB&D’s Notice also violated the notice and cure provision of the Vendor Agreement. Paragraph 3.3 provides, in relevant part:
Either party shall have the right, upon ten (10) days advance notice, to terminate this Agreement prior to expiration of the Term in the event that the other party materially breaches its obligations under this Agreement, provided that if such breach is capable of being cured, fails to cure the same by the commencement of the next applicable Sturgis Event, after receipt of notice from the non-breaching party which specifies the nature of the breach.
(Teresi Decl., Ex. C).
 
The commencement of “the next applicable Sturgis Event” is August 5, 2012 -- a date that has not yet occurred. As a result, even if Paisano had theoretically breached some obligation (it did not), the notice and cure provision directly applicable to this type of breach allowed Paisano until August 5, 2012 to cure. If, and only if, Paisano failed to cure by that date (the start of the Rally) could KSLB&D arguably terminate and then cease using the Easyriders name under its reading of paragraph 3.4 of the Vendor Agreement: ten days after the start of the Rally.
 
KSLB&D fails to address this well-designed provision until the end of its Opposition -- and its explanation fails. KSLB&D attempts to excuse its failure to allow Paisano an opportunity to cure by arguing that Paisano could not possibly have “cured” in time. (Opp. at 17:10-18:9). KSLB&D is wrong again. As confirmed by Jim Betlach and Terry Rymer, based on their combined 60 years of experience selling vendor spaces at these types of events, absent KSLB&D’s interference with Mr. Betlach’s efforts and its premature and improper termination of the Vendor Agreement, Paisano could easily have “cured” prior to commencement of the Rally. (Betlach Decl., ¶ 3; Rymer” Decl.”), ¶ 2).
 
KSLB&D’s assertion that Paisano could not have cured is unsupported by any competent evidence. Paisano’s time to cure has still not run, and thus its termination was patently improper. Since the Vendor Agreement has not been terminated, KSLB&D remains obligated to operate as “Easyriders Saloon” and under no other name.

Joe Teresi, standing, with longtime partner Mil Blair, with their Covair powered drag bike.
Joe Teresi, standing, with longtime partner Mil Blair, with their Covair powered drag bike.

 
DECLARATION OF JOSEPH TERESI

I, Joseph Teresi, declare:

1. I am the C.E.O. of plaintiff Paisano Publications, LLC (“Paisano”). I have personal knowledge of the facts set forth in this declaration. If called as a witness, I would and could competently testify to these facts under oath.
 
2. Paisano is the publisher of numerous magazines, including its flagship, Easyriders magazine, which it has published since 1971. Paisano is owned 99% by Paisano Enterprises, LLC (“Paisano Enterprises”) and 1% by Teresi Publications, Inc. (“Teresi Publications”). ER Assets, LP (“ER Assets”) owns various trademarks and other intellectual property assets associated with Paisano’s Easyriders magazine and the Easyriders brand. ER Assets, similarly to plaintiff Paisano, is owned 99% by Paisano Enterprises and 1% by Teresi Publications. Paisano Enterprises is owned 99% by me and 1% by my wife, Ellen Teresi. Teresi Publications is similarly owned 99% by me and 1% by my wife, Ellen.
3. Under an inter-company license agreement dated as of November 7, 2007 between Paisano and ER Assets, ER Assets licensed to Paisano the right to use all of its Easyriders trademarks and intellectual property. A true and correct copy of the November 7, 2007 license agreement is attached hereto as Exhibit “A.” This license agreement provided Paisano the authority to license the Easyriders marks to KSLB&D under the March 22, 2011 license agreement at issue in this case (the “License Agreement”) attached as Exhibit A to my declaration filed in support of Paisano’s moving papers.
 
4. I have reviewed Lee Swanson’s declaration submitted in support of KSLB&D’s Opposition to Paisano’s Motion for Preliminary Injunction. Although I did meet with Mr. Swanson in January 2012, many of his claims regarding that meeting are either misleading or untrue. First, the topic of vendor sales was only one of many topics discussed at that meeting. It was not the main topic of discussion, and we discussed it only briefly.
5. In connection with that topic, I told Mr. Swanson he did not need to send anyone to the Cincinnati Event (which is a trade show, not a rally) because Mr. Beltach would act as the vendor representative. I did not say Mr. Betlach would sell all spaces for the 2012 Sturgis Event at the Cincinnati V-Twin Expo. I did say we had sold 200+ vendors for 500+ 10x10 booths existing in Cincinnati, much more than the 60 10x10 booths KSLB&D had in Sturgis (of those sixty, twelve were being used by KSLB&D and Paisano had committed to four). I told him we absolutely would have no trouble selling the much fewer number of spaces necessary to sell out KSLB&D’s minimal space in Sturgis -- and that Paisano/Easyriders would fill in any spaces not sold. In short, KSLB&D had nothing to worry about as our experience and contacts would easily, with these same vendors, satisfy their needs. Furthermore, Mr. Swanson never told me that if Mr. Betlach could not sell a majority of the vendor spaces at the Cincinnati V-Twin Expo, he would be forced to start having his own people sell vendor spaces to ensure all the spaces were sold for the 2012 Sturgis Rally, or anything of the kind. I would have never agreed to such a proposal.
 
Paisano has 40 years of experience selling vendor spaces, had sold 500+ vendor spaces to 200+ vendors in Cincinnati, many of whom would likely also go to Sturgis, and had sold 500+ vendor spaces at the Daytona Beach Rally in March. KSLB&D’s people have virtually no such experience. Mr. Swanson also never told me that if KSLB&D personnel did all of the work to sell the vendor spaces, that he would only be able to pay me a 5% royalty on the vendor revenues as opposed to our agreed upon 30%. I certainly did not agree to any such proposal, as it was never raised with me. I would not have agreed to such a drastic change in our agreement. Mr. Swanson often communicated with me via email to confirm various business discussions during the course of our relationship, I have reviewed my file related to this matter and no such confirmatory email, or any other similar writing, exists. The parties also did not execute a written amendment to that effect.
 
6. The 30% revenue share to Paisano in the Vendor Agreement is not solely related to Paisano’s and its agents’ sales efforts. That amount is also meant to compensate Paisano for services performed in connection with setting up the vendor booths prior to the Sturgis Rally and assisting the vendors during the event.
 
7. I have also reviewed Kerry Fernholz’s declaration submitted in support of KSLB&D’s Opposition to Paisano’s Motion for Preliminary Injunction. Although Mr. Fernholz did participate briefly in a call with me and Mr. Swanson during our January 2012 meeting, that call was primarily to discuss the sale of T-shirts and other merchandise. I have no recollection of discussing anything related to vendor sales or a modification of the Vendor Agreement with Mr. Fernholz.
 
8. In addition to Mr. Betlach, John Green -- president of Teresi Enterprises -- also acts as a vendor sales agent for consumer motorcycle events. Mr. Green has an entire sales team dedicated to assisting him sell vendor spaces at these bike shows and motorcycle rodeos. In 2011 alone, he sold 1158 10x10 booths to over 100 different vendors. Had KSLB&D not breached the Vendor Agreement by selling spaces on its own and prematurely attempting to terminate the Agreement, if Mr. Betlach was unable to sell sufficient spaces, Mr. Green could have stepped up and sold the remaining spaces in advance of the start of the 2012 Sturgis Rally.
 
9. In addition to losing the benefit of Paisano’s bargain under the License Agreement, KSLB&D’s unlawful actions of removing all references to the Easyriders brand from the Saloon will irreparably harm Paisano if not corrected before the start of the 2012 Sturgis Rally. For example, Paisano expects it will lose goodwill amongst customers familiar with its magazines who are expecting to see the Easyriders brand displayed prominently at the Sturgis Rally and in connection with the Saloon. Paisano could lose these customers as a result. Paisano also expects to lose goodwill, advertising and incur harm to its reputation amongst other businesses and clients in the motorcycle industry. For example, at the 2011 Sturgis Rally Paisano hosted an industry-related advertiser event at the Saloon, which will have to be cancelled this year if KSLB&D does not restore the Easyriders marks. Paisano will also lose the opportunity to have the Easyriders name prominently displayed before 500,000 motorcycle enthusiasts at the largest and only three story eating and drinking establishment in Sturgis.
 
10. Any drop in Easyriders magazine circulation from 2011 to 2012 is due to a downward turn in the magazine and newspaper industry as a whole, and is unrelated to a lack of exposure or success at the 2011 Sturgis Event. KSLB&D’s refusal to use our Easyriders marks in compliance with the License Agreement can only further harm the Easyriders brand, the magazine’s circulation and advertising sales, and Easyriders merchandise sales.
 
11. I am familiar with the merchandising agent who supplied the Easyriders Saloon merchandise to KSLB&D for the 2011 and 2012 Sturgis Rally. This supplier informed me that KSLB&D returned approximately $50,000 to $60,000 worth of Easyriders Saloon merchandise to her once this dispute began. This supplier is willing and able to return that merchandise to KSLB&D to be sold at the Saloon during the 2012 Sturgis Rally in the event KSLB&D agrees, or is ordered, to once again operate as the Easyriders Saloon.
12. Attached hereto as Exhibit “B” is a true and correct copy of a royalty check Paisano received from KSLB&D dated as of July 12, 2012. The check reflects royalties only for the period from June 1st to June 11th, 2012 -- the date KSLB&D began covering the signs bearing the Easyriders marks. KSLB&D did not pay royalties for the rest of June. The check also shows that KSLB&D was formerly operating as the “Easyriders Saloon,” but they have crossed-out the reference to Easyriders on the check.
13. Paragraph 3.4 in the Vendor Agreement was inserted primarily for Paisano’s benefit, in that Paisano did not want KSLB&D to be able to use the Easyriders name in contracts related to selling vendor spaces if the Agreement had been terminated.

I declare under penalty of perjury under the laws of the United States of America the foregoing is true and correct.

Executed this 19th day of July, 2012 at Ft. Lauderdale, FL.

____________________________
--Joseph Teresi
 

 

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Reader Comments


http://www.youtube.com/watch?v=XMiXMSXGxfU

a Corvair engined Harley street bike

Anson
Houma, LA
Sunday, July 29, 2012
Bandiit, it's a 215 Buick, and yes, I built a Covair bike also. Get your facts straight, goddammit.

Mil Blair
LA, CA
Tuesday, July 24, 2012
Editor Response Yes sir.
--Bandit
Ha ha ha......that ain't no Corvair motor!!!!!

Big Bill
St. Augustine, FL
Monday, July 23, 2012
Editor Response Oops.
--Bandit
I think your right about the Covair bike being built.
I remember it from a old ER mag.

But a Corvair motor was/is a flat six opposed and air cooled .

tom kellerstrass
ogden, UT
Monday, July 23, 2012
Editor Response Thanks. Maybe I'm not completely out of my mind. I should call Mil Blair, goddammit.
--Bandit
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