Luvsy v. Elliot - Complaint

Case 2:18-cv-01589-ER Document 15 Filed 06/21/18 Page 1 of 42
UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA
LUVSY, INC., HINDLEY INVESTMENTS

LLC, REBECCA RESCATE, and M.R., Civil Action No. 2:18-cv-01589-ER
M.R. and L.R. Minors, by REBECCA
RESCATE, Guardian,
AMENDED COMPLAINT
Plaintiffs, JURY TRIAL DEMANDED
v.
HADLEY GRACE ELLIOT and BLANKIE

TAILS INC.,
Defendants.
Plaintiffs Luvsy, Inc., (“Luvsy”), Hindley Investments LLC (“Hindley Investments”),
Rebecca Rescate (“Ms. Rescate”), and M.R., M.R. and L.R. minors, by Rebecca Rescate,
Guardian (collectively, “Plaintiffs”), by and through their undersigned attorneys, upon
knowledge as to themselves and upon information and belief as to all other matters, allege for
their Amended Complaint against defendants Hadley Grace Elliot and Blankie Tails Inc.
(“Blankie Tails” or “the Company”) (collectively, “Defendants”) as follows:
BACKGROUND
1. The instant action arises out of Defendants’ unauthorized and improper use of
images of Plaintiff Rebecca Rescate and her children in violation of an express contractual
provision – use that falsely advertises a current association between Ms. Rescate, her children
and Ms. Rescate’s business partner, Christopher Hindley (“Mr. Hindley”), with Defendant
Blankie Tails. Defendants’ objective is to create confusion amongst customers to the benefit of
Blankie Tails and the detriment of Ms. Rescate’s and Mr. Hindley’s new 2018 business, Luvsy,
whether it be through use of these images or through false and misleading statements made by
Defendant Elliot regarding the history and formation of Blankie Tails.
2. Ms. Rescate and Hindley Investments also bring claims related to Defendant
Elliot’s unauthorized disclosure of confidential and proprietary business information during the
due diligence period immediately preceding the parties’ execution of the 2017 Redemption
Agreement and Ms. Rescate and Hindley Investments’ sale of their interests in Blankie Tails.
Upon information and belief, Defendant Elliot disclosed sensitive and confidential information to
one or more third parties in breach of the express provisions of a Non-Disclosure and
Confidentiality Agreement as part of Defendant Elliot’s efforts to secure a licensing agreement
on behalf of Blankie Tails without Ms. Rescate’s and Hindley Investments’ knowledge.
Plaintiffs have been damaged by these actions because, had they known of Defendant Elliot’s
breach and disclosure of confidential and sensitive business information at the time the parties
were negotiating the terms of the final Redemption Agreement, Ms. Rescate and Hindley
Investments would not have agreed to sell their interests on the terms eventually agreed-upon.
3. In addition, Ms. Rescate and Hindley Investments bring claims in this action
related to Defendants’ unauthorized filing of incorrect 2017 federal tax returns without the
consent of Plaintiffs Rescate and Hindley Investments as required by their 2017 Share
Redemption Agreement. Defendants made the improper filing notwithstanding Ms. Rescate’s
and Hindley Investments’ pending objections to the tax returns, which misstated and understated
their and Defendant Elliot’s taxable income to the IRS– again, in clear violation of an express
contractual provision between the parties –and have caused Plaintiffs to suffer damages related
thereto.
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4. In early 2015 Rebecca Rescate – a successful entrepreneur and businesswoman,
along with her longtime business partner, Christopher Hindley – decided to launch a new
business venture with Defendant Hadley Grace Elliot to manufacture, market and sell blankets in
the shapes of mermaid tails and sharks.
5. The three formed a new company, Blankie Tails. While Mr. Hindley did not
assume a financial interest in Blankie Tails, Marcia Hindley (Mr. Hindley’s mother and the
creator of the first physical Blankie Tails product samples) did so through Hindley Investments
LLC. Given Mr. Hindley’s experience in textile manufacturing and logistics, he agreed to
oversee Hindley Investments’ interests in the business, an arrangement to which Ms. Rescate and
Defendant Elliot both agreed.
6. Blankie Tails’ playful mermaid-shaped wearable blankets were an instant hit with
consumers and the business very quickly became a success. For nearly two years Ms. Rescate
and Mr. Hindley ran the business’s core functions, from accounting and human resources to
manufacturing and logistics. Ms. Rescate and her children even served as key models for
Blankie Tails, posing in the Company’s advertising and marketing materials, including product
packaging.
7. Ms. Rescate’s and Mr. Hindley’s business know-how and credibility from a
combined 20-plus years in the industry were pivotal to the Company's early success. Ms.
Rescate and Mr. Hindley brought the experience of having successfully launched dozens of
consumer products, particularly in the children’s space, and managing several profitable
companies. The two entrepreneurs had even appeared several times on ABC’s “Shark Tank,”
which enabled Blankie Tails to benefit from their experience in how to, among other things,
handle sales, fulfillment, press inquiries and residual opportunities.
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8. The working relationship amongst the three partners was short-lived, however,
and, soon after the business formed, Ms. Rescate and Mr. Hindley began experiencing problems
with Defendant Elliot. After several acrimonious months to start 2017, filled with, among other
things, Defendant Elliot’s erratic behavior (including as described below), patently unreasonable
demands for a buy-out and a baseless lawsuit filed by Defendant Elliot in this Court in May
2017,1 Ms. Rescate and Hindley Investments reluctantly resorted to selling their shares in the
Company built by Ms. Rescate and Mr. Hindley in order for Ms. Rescate and Mr. Hindley to
separate themselves from Defendant Elliot.
9. During the negotiations and due diligence that led to the parties’ execution of the
final Redemption Agreement in August 2017, the parties entered into a non-binding term sheet
and a Nondisclosure and Confidentiality Agreement (“NDA”). The NDA prohibited Defendant
Elliot from disclosing any non-public Confidential Information belonging to Blankie Tails to any
third parties for any purpose other than the due diligence necessary to complete the transactions
contemplated by the term sheet. In direct contravention of the NDA, upon information and
belief, Defendant Elliot shared highly sensitive confidential and trade secret information,
including artwork, drawings and tech packs, with one or more third parties, including an
unauthorized manufacturing facility located in China. These actions were all done without the
knowledge of Blankie Tails’ other co-owners, Ms. Rescate and Hindley Investments, in order to,
upon information and belief, lay the groundwork for a new and undisclosed licensing agreement
Defendant Elliot entered into with Hasbro for fabric containing “My Little Pony” artwork.
10. Ms. Rescate and Hindley Investments eventually sold their shares to Defendant
Elliot at a deep discount, and Ms. Rescate and Mr. Hindley exited the Company. In exchange,
1
Elliot Peze v. Rescate, et al., No. 17-cv-02408 (E.D. Pa.) (Robreno, J.).
4
the parties entered into a carefully crafted Share Redemption Agreement and Release dated
August 23, 2017 (“Redemption Agreement”). Among other deliberately-selected restrictions,
the Redemption Agreement prohibited Blankie Tails from using images of the Rescate children
in any new Blankie Tails advertising, a provision designed to protect the rights of the minors and
protect Ms. Rescate’s and Mr. Hindley’s brands from misuse by Blankie Tails and Defendant
Elliot.
11. Blankie Tails, through its director and now sole owner Defendant Elliot,
completely ignored numerous obligations under the Agreement. On at least ten different
occasions – including following multiple notices and warnings from Plaintiffs that use of the
photos was in violation of the Agreement – Blankie Tails, via Defendant Elliot, made new online
advertising postings that included photos of Ms. Rescate and her children on Blankie Tails’
Facebook and Instagram accounts and disseminated such photos to thousands of recipients via
email as part of a new advertising campaign. Defendants’ misuse of images of the Rescate
family furthered Defendants’ intent to confuse consumers and benefit from the successful brand
recognition created by Ms. Rescate and Mr. Hindley.
12. Defendants’ misuse of the photos of Ms. Rescate and her children has caused or is
likely to cause confusion amongst consumers by associating Ms. Rescate and her children, and
by extension her business partner Mr. Hindley, with Blankie Tails even after the Plaintiffs have
cut all ties with the Company and Defendant Elliot. This misconduct has harmed not only
consumers, but also Ms. Rescate’s and Mr. Hindley’s personal and business reputations, as well
as their new 2018 business venture, Luvsy, which manufactures and sells themed-shaped
blankets.
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13. This is not the only way in which Defendants have sought to confuse consumers
in an effort to benefit themselves. Defendant Elliot also has made public statements
misrepresenting Blankie Tails’ creation, falsely crediting herself solely with its founding, and
leaving the false impression that Ms. Rescate and Mr. Hindley were not essential to the founding
of the Company or in any way responsible for Blankie Tails’ multi-year success, thereby unfairly
discrediting Ms. Rescate and Mr. Hindley.
14. Accordingly, Plaintiffs come before this Court seeking compensatory damages for
the harm caused by Defendants’ unauthorized use of images, misleading statements,
unauthorized and concealed disclosure of highly confidential information in violation of the
NDA, and Defendants’ filing of Blankie Tails’ 2017 federal tax return in violation of the
Redemption Agreement. Further, Plaintiffs also seek injunctive relief to prevent Defendants
from continuing to misuse photos of Plaintiffs to advertise Blankie Tails’ products in violation of
the parties’ contract and federal and state law, and to prevent Defendants from making false and
misleading statements about Blankie Tails which improperly attribute credit to Defendant Elliot
and serve to discredit Ms. Rescate and Mr. Hindley, all in an effort to create market confusion
and impair consumers’ ability to make informed purchasing decisions.
15. Plaintiffs bring claims for false endorsement under the Lanham Act (15 U.S.C.
§ 1125(a)), deceptive business practices in violation of Section 349(a) of the New York General
Business Law, unauthorized use of name and likeness (42 P.A.C.S. § 8316(a)), misappropriation
of the right of publicity, invasion of privacy and breach of contract against Hadley Grace Elliot
and Blankie Tails based upon their unlawful business practices as detailed herein.
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PARTIES
16. Plaintiff Luvsy is a corporation organized under the laws of Pennsylvania, with its
principal place of business at 61 Green Lane, Bristol, Pennsylvania. Luvsy manufactures,
markets, and sells consumer products, specifically themed-shaped blankets. Rebecca Rescate
and Christopher Hindley founded Luvsy in or around January 2018. Luvsy is named as a
plaintiff in this case with respect to Counts I and II only.
17. Plaintiff Hindley Investments is a limited liability company organized under the
laws of the State of New Jersey, with its primary place of business at 11 Sweetbriar Lane,
Bordentown, New Jersey. Hindley Investments is owned and operated by Marcia Hindley,
mother of Christopher Hindley. Christopher Hindley managed Marcia Hindley’s interest on her
behalf in Blankie Tails through Hindley Investments. Hindley Investments is named as a
plaintiff in this case with respect to Counts VII and VIII only.
18. Plaintiff Rebecca Rescate is an individual residing in Morrisville, Pennsylvania.
Ms. Rescate is a citizen of the Commonwealth of Pennsylvania. She is a former co-founder
director, officer, and shareholder of Blankie Tails and is currently the co-founder, co-owner and
CEO of Luvsy. Ms. Rescate has been a serial entrepreneur for almost 15 years, bringing
successful products like CitiKitty, HoodiePillow, and the Top-Down Planner to market. She
made three successful appearances on ABC’s national program “Shark Tank,” and her products
have been featured on the Today Show, Good Morning America, and the Tonight Show with Jay
Leno, and in the New York Times, Time Magazine and Wall Street Journal, among other
national and international outlets. Ms. Rescate is named as a plaintiff in this case with respect to
all counts. Ms. Rescate is the legal guardian of her three children, M.R., M.R., and L.R, and
brings certain claims in this lawsuit on their behalf as well.
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19. Plaintiffs M.R., M.R., and L.R. are the minor children of Ms. Rescate. They are
each residents and citizens of the Commonwealth of Pennsylvania and are named as plaintiffs in
this case with respect to Counts III-VI only.
20. On information and belief, Defendant Hadley Grace Elliot (formerly Hadley
Grace Elliot Peze and also known as Hattie Grace Elliot) is an individual residing in New York,
New York. Defendant Elliot is a citizen of the State of New York. Upon information and belief,
Defendant Elliot is sole owner of Blankie Tails and a director of the Company. Defendant Elliot
is named as a defendant with respect to Counts I-V, and Counts VII and VIII.
21. Defendant Blankie Tails is a corporation organized under the laws of
Pennsylvania. Its principal place of business is at 1436 Wells Drive, Suite 1, Bensalem,
Pennsylvania. Blankie Tails manufactures, markets and sells consumer products, specifically
blankets styled as mermaids, sharks and rockets. Blankie Tails sells its products throughout the
United States, including in New York and Pennsylvania. Blankie Tails is named as a defendant
with respect to Counts I-VII.
22. On information and belief, Defendant Blankie Tails is registered to do business in
the Commonwealth of Pennsylvania. Blankie Tails and Defendant Elliot regularly transact
business within this judicial district. Further, Defendants have purposefully availed themselves
of the privileges and benefits of the Commonwealth of Pennsylvania, and directed their business
activities to this forum.
JURISDICTION AND VENUE
23. This is a complaint for damages, injunction, and other appropriate relief stemming
from Defendants Elliot’s and Blankie Tails’ unlawful business practices and breach of contract.
In this action, Plaintiffs bring a Complaint alleging violations of the Lanham Act, 15 U.S.C
8
§ 1125(a), Section 349(a) of the New York General Business Law, and Pennsylvania statutory
law, 42 P.A.C.S. § 8316, and bring contract and tort claims under common law.
24. This Court has subject matter jurisdiction over this action pursuant to 28 U.S.C.
§ 1331, which provides for federal jurisdiction over civil actions arising under the laws of the
United States. This Court likewise has supplemental jurisdiction over Plaintiffs’ state law claims
pursuant to 28 U.S.C. § 1367. The state law claims derive from a common nucleus of operative
facts and are so related to the federal law claims that they form part of the same case or
controversy.
25. This Court has personal jurisdiction over Defendants because of Defendant
Elliot’s contacts within the Commonwealth of Pennsylvania, and because Blankie Tails is a
Pennsylvania corporation with its principal place of business in Bensalem, Pennsylvania. The
Defendants are subject to specific jurisdiction because they have all committed and contributed
to unlawful acts in the Eastern District of Pennsylvania, as alleged in this Complaint.
26. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b), as a substantial
part of the events or omissions giving rise to the claims pled herein occurred in the Eastern
District of Pennsylvania, and because Defendant Blankie Tails has a principal place of business
within the Eastern District of Pennsylvania.
FACTUAL ALLEGATIONS
Formation of Blankie Tails
27. Plaintiffs Rebecca Rescate and Christopher Hindley are long-time business
associates, individually and together responsible for successfully managing nine businesses and
launching over 20 consumer products and brands since 2005.
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28. Ms. Rescate and Mr. Hindley have also collectively appeared, on three separate
occasions in 2011, 2012 and 2013, on the ABC nationally televised show, “Shark Tank.”
Episodes of these shows have repeated on national television on dozens of occasions. Millions
of viewers saw Ms. Rescate and Mr. Hindley present two of their successful products – CitiKitty
and HoodiePillow – and receive praise from the show’s investors.
29. Ms. Rescate and Mr. Hindley have since appeared together publicly to promote
their shared business interests and common brands since 2012.
30. Ms. Rescate first met Defendant Elliot in 2006 when Defendant Elliot was, on
information and belief, running her first, now defunct, business, SOCOCO, Inc. The two
reconnected in 2015, after Ms. Rescate had established a decade of notoriety as a successful
entrepreneur. During this meeting in February 2015, Ms. Rescate educated Defendant Elliot on
how to spot consumer trends and new product ideas. Meanwhile, on information and belief,
Defendant Elliot was running an ultimately unsuccessful second business, the now-defunct social
networking service, The Grace List.
31. On information and belief, in March 2015, Defendant Elliot – taking the advice
Ms. Rescate provided related to spotting trends – saw a photo on Facebook of a mermaid tail
made by a freelance designer. She then contacted Ms. Rescate and Mr. Hindley in the hopes of
teaming up with them and benefiting from their business acumen, know-how and financial
support. In her own words, Defendant Elliot “reach[ed] out to two fellow entrepreneurs who had
experience in manufacturing and distribution (consumer goods).”
32. Within days after Defendant Elliot contacted Ms. Rescate and Mr. Hindley, the
three agreed to form a business and on March 29, 2015, Ms. Rescate, Mr. Hindley and Defendant
Elliot formed Blankie Tails.
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33. While Mr. Hindley did not assume a financial interest in Blankie Tails, Marcia
Hindley did so through Hindley Investments LLC. Given Mr. Hindley’s experience in textile
manufacturing and logistics, he agreed to oversee Hindley Investments’ interests in the business,
an arrangement to which Ms. Rescate and Defendant Elliot both agreed.
34. In March 2015, Mr. Hindley drew the initial design mock-up of a wearable
mermaid blanket and made all subsequent revisions, Mr. Hindley’s mother, Marcia Hindley,
used Mr. Hindley’s illustration concepts and hand-sewed the first two product prototypes, and
Ms. Rescate prepared an initial business plan for the Company and circulated it among the
parties. Christian Rescate, husband to Rebecca Rescate, coined the Company and brand name
“Blankie Tails.”
35. Defendant Elliot did not contribute any personal funds to Blankie Tails during the
time the three partners owned the business. To the contrary, Ms. Rescate and Mr. Hindley were
responsible for providing and/or securing the seed funding for Blankie Tails.
Blankie Tails is a Successful Business Associated with Ms. Rescate and Mr. Hindley
36. From the beginning, Ms. Rescate and Mr. Hindley ran the day-to-day operations
of the business. Ms. Rescate and Mr. Hindley managed Blankie Tails’ accounting,
manufacturing process, distribution, warehousing, human resources, website development,
customer services, order processing, and graphic design among other responsibilities.
37. Mr. Hindley sourced fabric and manufacturing domestically to launch the product,
then facilitated and managed all overseas manufacturing, created the logo, acquired relevant web
domain names, built the website, and photographed initial product and lifestyle images.
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38. Ms. Rescate prepared the initial business plan, launched products on
Amazon.com, filed for intellectual property protection, initially managed all employees, and
handled warehousing, order fulfillment and other important tasks.
39. Defendant Elliot was in charge of marketing and sales. Beyond that, as
Defendant Elliot has herself acknowledged, she “knew nothing about the consumer products
industry.”
40. Blankie Tails primarily manufactured and sold blankets in the shapes of mermaids
and sharks, and later, orcas and rockets. During the early life of the Company, Blankie Tails
considered several other concepts and designs, many of which were already on the market,
including princess dresses, ice cream sundaes, monsters, dragons, alligators, race cars, and
penguins, but chose not to add these other designs to the Company’s line-up.
41. Blankie Tails’ products were marketed primarily to children. As a result, Ms.
Rescate allowed her children to serve as models for the Company’s signature mermaid and shark
blankets seen by millions. Ms. Rescate’s children, specifically, M.R., M.R and L.R., became
faces of the Company, as they were featured prominently on the products’ packaging, on Blankie
Tail’s website, in its product catalogues and marketing materials, and in photos displayed at trade
shows and on national television. Indeed, images of Ms. Rescate’s children have been used on
tens of thousands of Blankie Tails product packages in circulation throughout the United States
over the last three years.
42. Blankie Tails also promoted its products by publishing several photos of Ms.
Rescate alongside her children between 2015 and 2017. Advertisements like these created the
association between the Rescate children and Ms. Rescate, and also with her personal brand of
successful entrepreneurism.
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43. Furthermore, Blankie Tails’ products received hundreds of mentions from online
reviewers in the 2015-2017 time frame. M.R., M.R., and L.R. served as predominant models in
those product reviews. The Rescate children’s prominence in these advertisements caused
customers to associate the Blankie Tails brand with their likeness, and by extension the
successful business brand of Ms. Rescate.
44. Blankie Tails also manufactured adult-sized mermaid and shark blankets. Ms.
Rescate served as a model for Blankie Tails’ adult products and posed in photos used in Blankie
Tails’ marketing and advertising materials and on its product packaging.
45. Consumers associated Ms. Rescate’s and Mr. Hindley’s identities as successful
entrepreneurs, and Ms. Rescate’s children’s images, with the Blankie Tails brand.
46. The Company had a successful first year, grossing more than $4.5 million in sales
in 2015. Indeed, Blankie Tails’ mermaid blanket was called the “most desired gift item of
2015.”
Ms. Rescate and Hindley Investments Sell Their Interests in Blankie Tails, and Ms. Rescate
and Mr. Hindley Leave the Company
47. Despite the Company’s early success, Defendant Elliot soon created friction with
her fellow co-founders, Ms. Rescate and Mr. Hindley. For example, after Blankie Tails’
successful year in 2015, Defendant Elliot faded to the background, showing up to the corporate
headquarters less than 10 times in 2016. Defendant Elliot announced she was leaving the
business on several occasions in 2016 and 2017, only to change her mind on each occasion after
causing significant business disruption. Defendant Elliot also began arriving late and leaving
early from meetings so she could prevent decisions from being made, or refused to attend
meetings altogether.
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48. This tension worsened in early 2017 when Defendant Elliot began demanding via
legal counsel that Ms. Rescate and Hindley Investments pay her over-market value for her shares
and/or that Ms. Rescate and Hindley Investments sell their shares to her for a below-market
price. Unable to get her way, Defendant Elliot filed a baseless lawsuit against her own company
Blankie Tails and Ms. Rescate, Mr. Hindley and Hindley Investments on May 26, 2017 in this
Court, see Elliot Peze v. Rescate, et al., No. 17-cv-02408 (E.D. Pa.) (Robreno, J.), in connection
with which the Company and Ms. Rescate and Hindley Investments were forced to expend
significant funds to resolve.2
49. In an effort to distance themselves from Defendant Elliot’s erratic behavior, poor
business acumen and anticipated costly litigation, Ms. Rescate and Hindley Investments entered
into negotiations with Defendant Elliot to sell their shares and depart the Company in August
2017. In connection with those negotiations, the parties entered into a non-binding term sheet
and NDA (effective August 10, 2017) in order to allow Defendant Elliot access to certain
confidential business information belonging to the Company for the limited purpose of
conducting the necessary due diligence. See NDA, attached hereto as Exhibit A. The NDA
strictly prohibited the disclosure of any confidential information for any purpose other than the
due diligence purpose. See id., Background & ¶ 2.
50. Ultimately, Ms. Rescate and Hindley Investments sold their shares to Defendant
Elliot and departed the Company on or about August 28, 2017. As part of that resolution,
Blankie Tails and Defendant Elliot agreed to specific terms set forth by Ms. Rescate, Mr.
2
In a further effort to attack Ms. Rescate and Mr. Hindley and in an attempt to interfere with their new legitimate
business, Defendant Elliot has filed another baseless lawsuit in this Court against Ms. Rescate, Mr. Hindley, Hindley
Investments, and Luvsy. See Blankie Tails Inc. v. Rebecca Rescate, et al., No. 2:18-cv-01027-ER (E.D. Pa.) (filed
March 9, 2018).
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Hindley and Hindley Investments and entered into the Redemption Agreement, attached hereto
as Exhibit B (previously filed under seal).3
51. Since Ms. Rescate’s children were a central part of Blankie Tails’ brand and
advertising, and Defendant Elliot could not be relied upon to protect their image and likeness
from misuse, the Redemption Agreement specifically prohibited Blankie Tails from using the
Rescate children’s photos in any newly-posted Blankie Tails materials, website or social media
content, effective August 23, 2017, the date the Agreement was signed. See Section IV.9, Use of
Photos (“The Company will not include any images containing children related to Hindley
and/or Rescate . . . in any new materials in print or any other media (including online), and
will replace photos on all material previously printed so that such images are completely out of
circulation no later than December 31, 2018”) (emphasis added).
52. Additionally, because of Ms. Rescate’s and Hindley Investments’ involvement
with Blankie Tails during eight months of calendar year 2017, the Company’s tax returns for
2017 impact Ms. Rescate and Hindley Investments and their own respective tax filings.
Accordingly, Ms. Rescate and Hindley Investments specifically secured the right to review and
object to those tax returns under the Redemption Agreement in order to protect themselves from
possible inaccurate or fraudulent tax returns.
53. Section IV.13 of the Agreement, Tax Matters, therefore provides, in pertinent
part, that “[Defendant Elliot] shall provide a draft of [2017 tax] returns to the Selling
Shareholders [defined in the Redemption Agreement as Ms. Rescate and Hindley Investments]
for review and comment.” Any objections by Ms. Rescate and Hindley Investments were to be
made in writing and the parties agreed to “cooperate to resolve any such objections.” The
3
This Court previously granted Plaintiffs’ motion to file the Redemption Agreement under seal with Plaintiffs’
original complaint (Dkt. No. 11).
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Company was permitted to “extend the deadline for filing the income tax returns only to the
extent necessary to provide time to resolve the objections.” If the parties were unable to resolve
the objections, the Redemption Agreement provided that the parties would jointly engage “an
independent accountant to resolve any remaining objections,” and Defendant Elliot would then
“cause to be filed the Company’s tax returns consistent with the decision of the independent
accountant….”
54. Blankie Tails and Defendant Elliot further agreed to “jointly and severally
indemnify each of the Selling Shareholders and Hindley from and against all losses incurred or
sustained by or imposed upon a Seller or Hindley based upon, arising out of or with respect to
any liabilities of the Company or any activities of [Defendant Elliot] or the Company from and
after the Closing.” See Section II.V, Indemnity.
Defendant Elliot Shared Confidential and Proprietary Blankie Tails Information in

Violation of the Parties’ Non-Disclosure Agreement
55. Pursuant to the NDA executed by the parties and as part of the due diligence
associated with negotiating Ms. Rescate and Hindley Investments’ sale of their interests in the
Company, Defendant Elliot was allowed access to certain confidential information — hundreds
of documents including designs and “tech-packs” that are confidential and trade secret
information forming the core of the Company’s intellectual property. Tech packs, for example,
make up the “blueprint” that Blankie Tails sent to its manufacturing facilities in order to
physically produce the product.
56. The NDA clearly prohibited Defendant Elliot from using or disclosing that
confidential information to any third party for any purpose other than the due diligence set forth
in the NDA and the contemporaneously executed term sheet.
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57. Nonetheless, upon information and belief, Defendant Elliot improperly and
without authorization disclosed some of this confidential information, including potentially
designs and tech packs, with third parties in direct violation of the terms of the NDA. Upon
information and belief, this disclosure occurred during the due diligence period after August 10,
2017, in the course of Defendant Elliot negotiating and/or entering into two engagements – one
with Hasbro to license the use of their “My Little Pony” designs and another with a new
manufacturing plant in China to create Blankie Tails’ products using the Hasbro design.
58. On or about August 21, 2017, Ms. Rescate and Mr. Hindley learned that a new
manufacturer in China – one with whom Blankie Tails had never conducted prior business – had
begun the process of manufacturing Blankie Tails’ products with the My Little Pony design. It
would be highly unlikely for a manufacturing facility to be able to produce Blankie Tails’
products without access to tech packs and other confidential information, the type of which was
shared with Defendant Elliot in August 2017 pursuant to the NDA.
59. Nonetheless, when questioned about this incident at the time, Defendant Elliot
denied any involvement.
60. Additionally, Plaintiffs learned on or about September 10, 2017, which was only
10 business days after Ms. Rescate and Hindley Investments’ sale of their interests in Blankie
Tails, that Blankie Tails (then under the sole control of Defendant Elliot) had Blankie Tails’
products with My Little Pony print already on the production line.
61. Upon information and belief, Defendant Elliot did not have Blankie Tails finalize
a new contract with Hasbro, source a new factory for manufacturing, share plans, have fabric
printed, and begin production of new products in the 10 business day period. Instead, Defendant
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Elliot, upon information and belief, improperly shared confidential information prior to the
finalized sale of Plaintiffs’ shares and in direct violation of the terms of the NDA.
Defendants Misuse the Rescate Children’s Images in Direct Violation of the Agreement
62. As discussed above, the Redemption Agreement specifically prohibited Blankie
Tails from using the Rescate children’s photos in any newly-posted Blankie Tails materials,
website or social media content. Not only did Ms. Rescate and Mr. Hindley specifically bargain
for inclusion of the “Use of Photos” restrictions in the Redemption Agreement in order to protect
their children’s images and likeness from misuse, but also to disassociate themselves from
Blankie Tails and Defendant Elliot.
63. This decision was, in addition to the other reasons noted herein, because Ms.
Rescate and Mr. Hindley wished to protect any new business ventures that they might have in the
future. Indeed, the two eventually created a new business venture together when they founded
Luvsy in or around January 2018. Luvsy markets and sells themed-shaped blankets.
64. Neither Ms. Rescate nor Mr. Hindley (or their children) wished to be associated
with any new Blankie Tails material or Defendant Elliot following Ms. Rescate and Mr.
Hindley’s separation from the Company.
65. Nevertheless, Blankie Tails and Defendant Elliot repeatedly violated the express
terms of the Redemption Agreement, making new uses of photos of Ms. Rescate and her children
without their consent and, upon information and belief, for purposes of misleading the public to
believe that Ms. Rescate and her children were still associated with or endorsing Blankie Tails.
66. Defendant Elliot is a director and the sole owner of Blankie Tails. Defendant
Elliot has had full operational control of Blankie Tails, including oversight of Blankie Tails’
advertising and marketing campaigns, since August 28, 2017. Defendant Elliot has exercised
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control over the content of Blankie Tails’ public image during that time. Furthermore,
Defendant Elliot had personal knowledge of the use of photos of Rebecca Rescate and the
Rescate children in Blankie Tails’ new online and print materials since the parties executed the
Redemption Agreement.
67. On August 28, 2017, just days after the Redemption Agreement was signed,
Defendants made a new online posting that included an image of Ms. Rescate’s son, M.R., on
Blankie Tails’ Facebook page. Defendants made this post to advertise Blankie Tails’ products,
including a shark tail shaped blanket. The advertisement contained a single image of a
prominently featured model, M.R. See Posting attached hereto as Exhibit C. It was new online
material posted to Blankie Tails’ social media account after the execution of the Redemption
Agreement.
68. On information and belief, after the Redemption Agreement was executed,
Defendant Elliot and Blankie Tails knowingly created a new product catalog which contained at
least eight images of the Rescate children, including Ms. Rescate’s daughters M.R. and L.R.
Defendants created this catalog to advertise Blankie Tails’ products, including a mermaid shaped
blanket. This new print material was, on information and belief, provided to retailers, potential
customers and product representatives.
69. On or about January 30, 2018, shortly after Ms. Rescate and Mr. Hindley founded
Luvsy, the Defendants included an image of Ms. Rescate’s daughter, M.R., in a new email
campaign distributed to, upon information and belief, over 100,000 people. Defendants used this
photo to advertise Blankie Tails’ products, including a mermaid shaped blanket. The
advertisement, knowingly made by Defendants after execution of the Redemption Agreement,
included an image of two prominently featured models, one of which was M.R. See Photo
19
attached hereto as Exhibit D. It was new material disseminated in electronic format to many
Blankie Tails contacts after the execution of the Redemption Agreement.
70. On or about February 1, 2018, Defendants made another new online posting
which again included an image of Ms. Rescate’s daughter, M.R., this time as part of Facebook
advertising campaign that received at least 9,600 views. Defendants used this photo to advertise
Blankie Tails’ products, including a mermaid shaped blanket. The advertisement contained a
single image of two prominently featured models, one of which was M.R. See Posting attached
hereto as Exhibit E. It was new online material posted to Blankie Tails’ social media account
after execution of the Agreement.
which again included an image of Ms. Rescate’s daughter, M.R., this time as part of an
Instagram advertising campaign that received at least 415 views. Defendants used this photo to
advertise Blankie Tails’ products, including a mermaid shaped blanket. The advertisement
contained a single image of two prominently featured models, one of which was M.R. See
Posting attached hereto as Exhibit F. It was new online material posted to Blankie Tails’ social
media account after the execution of the Redemption Agreement.
which again included an image of Ms. Rescate’s daughter, M.R., this time as part of another
Facebook advertising campaign that received at least 12,100 views. Defendants used this photo
to advertise Blankie Tails’ products, specifically a mermaid shaped blanket. The advertisement
contained a single image of two prominently featured models, one of which was M.R. See
Posting attached hereto as Exhibit G. It was new online material posted to Blankie Tails’ social
media account after the execution of the Redemption Agreement.
20
73. On or about February 6, 2018, Defendants made another new online posting,
which included an image of Ms. Rescate and her daughter, L.R., as part of an Instagram
advertising campaign, that was viewed by members of the public. Defendants used this photo to
advertise Blankie Tails’ products, including a mermaid shaped blanket. The advertisement
contained a single image of two prominently featured models, one of which was Ms. Rescate and
the other was M.R. See Posting attached hereto as Exhibit H. It was new online material posted
to Blankie Tails’ social media account after the execution of the Redemption Agreement.
74. Defendants were notified on multiple occasions that their advertising activities as
described herein were in violation of the Redemption Agreement, and instructed to cease-and-
desist from such activities. Defendants continued to violate Section IV.9 regarding the use of
photos on multiple occasions thereafter, evidencing that Defendants’ actions in this regard were
knowing, willful and/or reckless.
75. For example, on February 7, 2018, counsel for Defendant Elliot and Blankie Tails
purported to provide assurances that Blankie Tails would no longer post photos of Ms. Rescate’s
children on its social media accounts.
76. Despite these representations from their counsel, Defendants continued their
practice of using photos of the Rescate children as part of new Blankie Tails’ online advertising
and marketing materials.
77. Indeed, on or about February 11, 2018, just four days after Blankie Tails’ counsel
provided the aforementioned assurances that photos of Ms. Rescate’s children would no longer
be used, Defendants made a new online posting that included an image of Ms. Rescate’s
daughter, M.R., as part of a yet another new Blankie Tails Facebook advertising campaign.
Defendants used this photo to advertise Blankie Tails’ products, including a mermaid shaped
21
blanket. The advertisement contained a single image of two prominently featured models, one of
which was M.R. See Posting attached hereto as Exhibit I. It was a new online material posted
to Blankie Tails’ social media account after the execution of the Redemption Agreement.
78. Also on or about February 11, 2018, Defendants made another new online posting
that included an image of Ms. Rescate’s daughter, M.R., this time as part of another new
Instagram advertising campaign. Defendants used this photo to advertise Blankie Tails’
products, including a mermaid shaped blanket. The advertisement contained a single image of
two prominently featured models, one of which was M.R. See Posting attached hereto as Exhibit
J. It was a new online material posted to Blankie Tails’ social media account after execution of
the Agreement.
79. Additionally, Defendants improperly posted new online materials including
photos of the Rescate children on the Blankie Tails’ website. Upon information and belief, the
materials were posted to the website after August 23, 2017 but on or before March 5, 2018. See
Website screenshots taken March 5, 2018 attached hereto as Exhibit K. Defendants used these
two images to advertise Blankie Tails’ products, including a mermaid shaped blanket. Each
advertisement contained a single photograph of two prominently featured models, one of which
was L.R. Upon information and belief, these photos were posted to the Blankie Tails’ website at
some point after the execution of the Redemption Agreement, were present on at least March 5,
2018, and have since been removed.
80. At no point after execution of the Redemption Agreement did Ms. Rescate or her
children consent to Blankie Tails using their photos in any new materials.
81. Blankie Tails and Defendant Elliot have thus continually and knowingly
misappropriated and improperly used images of and association with the Rescate family in its
22
marketing and advertising materials reaching customers, both retailers and consumers, all over
the United States and internationally.
Defendants Misuse Commercially Valuable Rescate Images to Create Customer Confusion
82. As described above, since Ms. Rescate and Mr. Hindley separated from Blankie
Tails, Defendants have utilized new online and print materials including the images of Ms.
Rescate and her children. Defendants’ actions create or are likely to create public and customer
confusion surrounding the continued association of Ms. Rescate, and her family, and her
business partner Mr. Hindley, with Blankie Tails products. On information and belief, this use
has been made in an effort to increase Blankie Tails’ sales and improve its position in the market
vis-á-vis others, including Luvsy.
83. Ms. Rescate and Mr. Hindley have built nationally-recognized public personas
and brands as successful entrepreneurs and business people. Other successful ventures still in
operation to this day like CitiKitty, Inc., and HoodiePillow, Inc., both featured on ABC’s “Shark
Tank” program, have made Ms. Rescate and Mr. Hindley recognizably successful.
84. For example, Ms. Rescate’s company, CitiKitty, Inc., has grossed millions of
dollars in sales since she founded the company in 2005. When she appeared on Shark Tank in
2011, Ms. Rescate secured significant positive publicity for herself. She and her product were
seen by millions of consumers.
85. Ms. Rescate and Mr. Hindley began working together shortly thereafter and co-
founded HoodiePillow, Inc., which like CitiKitty, has grossed millions of dollars in sales since
its appearance on Shark Tank in February 2013. Ms. Rescate and Mr. Hindley secured praise for
HoodiePillow on Shark Tank, and won popular acclaim for their brand and their product with
customers such as Microsoft, Facebook, Xbox and others.
23
86. Due to their business success, Ms. Rescate and Mr. Hindley have both received
significant coverage in local, national and international media. This coverage has resulted in the
public associating Ms. Rescate and Mr. Hindley with successful entrepreneurism and business
acumen.
87. Specifically, Ms. Rescate and her three children—M.R., M.R., and L.R.—all
appeared together on Season 2, Episode 9 of Shark Tank, where Ms. Rescate presented her
successful cat toilet-training product, CitiKitty. This episode has re-aired on national and local
television over 30 times since it began in 2011, most recently airing on May 23, 2018.
88. Ms. Rescate and her daughter, L.R., have also appeared together in national print
media celebrating the success of Ms. Rescate’s products, such as CitiKitty and HoodiePillow.
The Wall Street Journal and the Daily Mail have both featured photos of Ms. Rescate and L.R.
together promoting Ms. Rescate’s successful products between 2011 and 2015.
89. The Rescate children have created a valuable interest in their likenesses through
years of modeling for profitable Rescate products. For example, M.R., M.R., and L.R. helped
promote successful products such as CitiKitty, HoodiePillow, and 3Purpose. See, e.g.,
https://www.hoodiepillow.com/collections/hoodiepillow-pals (last visited June 20, 2018);
http://www.3purpose.com/kids (last visited June 20, 2018).
90. Over several years, the Rescate children have invested time and effort to establish
themselves as valuable models whose likenesses help sell products associated with the Rescate
brand.
91. Indeed, the Rescate children continue to serve as models for Ms. Rescate’s and
Mr. Hindley’s newest business venture, Luvsy. Their images are featured on Luvsy’s product
packaging, in its displays at trade show booths and included in other Luvsy marketing materials
24
in print and online form, including social media. See, e.g., https://luvsy.com (last visited June
20, 2018); Exhibit L (Luvsy Instagram posting dated Mar. 1, 2018); Exhibit M (Facebook
posting dating January 23, 2018).
92. Positive exposure in national media alongside Ms. Rescate, in addition to
appearances modeling successful products for Ms. Rescate’s brands, have also strengthened both
the commercial value of the Rescate children’s images and customers’ association between Ms.
Rescate and the images of her children.Ms. Rescate and Mr. Hindley have carefully curated their
names through these public appearances and in their online presence. As a result, the brand
surrounding their names has attained significant commercial value following the success of their
companies. Ms. Rescate and Mr. Hindley have participated in paid speaking engagements and
public appearances over the last decade.
93. After the Redemption Agreement was executed, and indeed in violation thereof,
the Company made new online postings and print materials that used images of the Rescate
children, specifically M.R., M.R., and L.R., in an effort to continue to popularize Blankie Tails’
blankets.
94. The fact that Defendants continue to use Ms. Rescate’s and her children’s images
in new online postings and print material for advertising campaigns demonstrates the images and
likeness have commercial value.
95. On information and belief, Defendant Elliot’s and Blankie Tails’ continued
misuse of images of Ms. Rescate’s children causes or is likely to cause confusion and deceives
consumers by suggesting affiliation or association of Ms. Rescate and Mr. Hindley with Blankie
Tails’ products after they are no longer with the Company. Indeed, many of these new online
postings were made by Defendants soon after Luvsy was created.
25
96. On information and belief, use of these images is likely to influence buying
decisions where customers buy Blankie Tails products thinking they are associated with the
Rescate and Hindley brand and/or also where it takes away business opportunities that might
otherwise exist for Luvsy.
97. Customer confusion created by Defendants’ misleading efforts to suggest current
endorsement by Ms. Rescate of Blankie Tails—a company she no longer owns or runs—could
further harm the brand Ms. Rescate has carefully built as a successful business manager and
entrepreneur.
Defendants’ False and Misleading Statements
98. Since at least 2017, Defendant Elliot has made repeated public statements falsely
crediting herself as the sole original owner and creator of Blankie Tails and misrepresenting the
foundation story and history of Blankie Tails for her personal benefit and for purposes of
creating market confusion and to willfully discredit Ms. Rescate and Mr. Hindley from Blankie
Tails’ success.
99. For example, in a November 2017 interview, Defendant Elliot gave the false
impression that she did everything for the business’s start, including sourcing the fabrics, and
even made the patently false claim that she started the business with under $5,000 and that this
was the only funding the Company received. See
https://business.facebook.com/TheBabyGuyNYC/videos/10155380231052087/?hc_ref=ARTvh
A4sJNJSYcifGI2fG2rBoF6X4_gi1rUZwtZUvlganYjPXNsrrIMh4TaUoNd1ylo (last visited June
20, 2018).
100. Similarly, in a separate interview in November 2017, Defendant Elliot purported
to recount her creation of the Company and made statements falsely giving herself sole credit for
26
getting the patents and trademarks and designing Blankie Tails’ products. See
https://www.facebook.com/GeekMomBlog/videos/1635128519878028/UzpfSTYxNDE0NjkxN
TM4ODIxNzoxMTMwMTYyNDgzNzg2NjU1/ (last visited June 20, 2018).
101. Defendant Elliot made additional public statements giving the false impression
that she herself built a “multi-million-dollar business” in less than five months and falsely
claiming that “she designed the styles herself.” See, e.g., Kim Bhasin and Polly Mosendz, The
$16 Million Battle Over Mermaid Tail Blankets, available at
https://www.bloomberg.com/news/articles/2017-01-12/the-16-million-battle-over-mermaid-tail-
blankets (Attached hereto as Exhibit N).4
102. Additionally, Blankie Tails’ current website falsely represents that Defendant
Elliot herself launched the Company, without any acknowledgment of the co-founders. See
Blankie Tails, https://www.blankietails.com/pages/about-us (last visited June 20, 2018)
(Attached hereto as Exhibit O).
103. Indeed, Defendant Elliot now falsely represents herself to be the designer of the
original mermaid and shark tail products. See https://www.blankietails.com/collections/baby-
tails/products/mermaid-baby-tails (last visited June 20, 2018) (“Blankie Tails is the creator of the
ORIGINAL mermaid (sic) tail and shark blankets, which were designed by the Chief Mermaid
Enthusiast, Hattie.”). The known designers of the products are Ms. Rescate and Mr. Hindley,
and Ms. Rescate is even listed as the inventor on the United States Design Patent. See
https://patents.google.com/patent/USD796151S1/en (last visited June 20, 2018) (Attached hereto
as Exhibit P).
4
The Bloomberg article was then republished by multiple other news outlets and websites.
27
104. These statements are false, misleading and do not accurately represent the nature
of Blankie Tails’ products or the history and founding of the Company. These statements tend to
confuse customers or potential customers and the public. They fail to properly recount Blankie
Tails’ start and early success credited to its original co-founders Ms. Rescate and Mr. Hindley,
and they give undue credit solely to Defendant Elliot.
105. Indeed, Blankie Tails’ early success from 2015-2017 is important to the
reputations and business portfolios of Ms. Rescate and Mr. Hindley. By misrepresenting Blankie
Tails’ foundation story, Defendant Elliot’s statements have the tendency to mislead customers to
believe Defendant Elliot is solely responsible for the brand’s creativity, performance abilities,
trustworthiness, accomplishments, and awards during the years Ms. Rescate and Mr. Hindley
were associated with the Company and to continue to buy Blankie Tails products because of
these attributes. At the same time, her statements unfairly interfere with Ms. Rescate’s and Mr.
Hindley’s efforts to be recognized by the industry and the public as the parties responsible for
Blankie Tails’ success, and from having their brands capitalize on this critical piece of their hard
work.
106. For entrepreneurs like Ms. Rescate and Mr. Hindley, who are in the business of
launching successful but unrelated businesses, brand recognition is critical. That brand
recognition includes, among other things, a portfolio of successful past products and businesses.
Thus, by falsely attributing Blankie Tails’ early success solely to herself, Defendant Elliot is
directly harming Ms. Rescate and Mr. Hindley and their current business, Luvsy.
Defendant Elliot therefore does significant harm to Luvsy and Ms. Rescate and Mr. Hindley in
two distinct ways: through her false statements she diminishes the important brand recognition
Ms. Rescate and Mr. Hindley have built up in the past, and by creating customer confusion she
28
misdirects current customers to Blankie Tails who would otherwise make purchases from brands
where Ms. Rescate and Mr. Hindley currently work, namely Luvsy.
Defendants Improperly File Blankie Tails’ Federal Tax Return
107. Pursuant to the process set forth in the Redemption Agreement, Defendants
provided Ms. Rescate and Hindley Investments with draft 2017 tax returns in February 2018.
Ms. Rescate and Hindley Investments reviewed the initial draft tax returns and objected to those
returns as they showed significant discrepancies and underreported taxable income during their
and Defendant Elliot’s time of ownership.
108. After several weeks of back-and-forth between the parties, including Defendants’
issuance of revised tax returns, Ms. Rescate’s and Hindley Investments’ counsel sent Defendants
a letter on March 9, 2018 outlining further specific and detailed objections to the Blankie Tails
2017 draft tax returns.
109. Those objections related to discrepancies in Blankie Tails’ income statements,
specifically concerning Defendants’ improper inclusion and/or treatment of certain legal fees on
the Company ledger, unexplained increases to the costs of goods sold for the period of time Ms.
Rescate and Hindley Investments were shareholders of the Company, and a six-figure reduction
in the reported net income of the Company.
110. Blankie Tails’ draft tax returns were inaccurate and underreported taxable
income of the shareholders, including Defendant Elliot.
111. Indeed, Defendants have already acknowledged that they will make changes to
the tax returns as a result of the objections but the Selling Shareholders’ objections have not yet
been resolved.
29
112. Ms. Rescate’s and Hindley Investments objections to the draft tax returns were
not resolved by an independent accountant per Section IV.13 of the Agreement prior to the filing
of the 2017 federal return, nor did Defendants seek an extension to file the Company’s tax
returns in order to resolve the objections as they were required to do under the Agreement.
Instead, Defendant Elliot, via her accounting agent, filed Blankie Tails’ 2017 federal tax returns
on March 13, 2018 without addressing Ms. Rescate’s and Hindley Investment’s objections, and
without their consent and approval.
113. Defendants have admitted that the Company’s Federal tax return should not have
been filed.
114. As a result of the erroneous tax filing, Ms. Rescate and Hindley Investments have
incurred unanticipated legal costs and other damages in an amount to be proven at trial.
CLAIMS FOR RELIEF
COUNT I
FALSE ENDORSEMENT, 15 U.S.C. § 1125 (a)(1)(A)
(By Luvsy and Rebecca Rescate Against All Defendants)
115. The facts alleged in the preceding paragraphs are incorporated herein as if set
forth in full.
116. Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A), prohibits the use in
commerce of any name or symbol which, “is likely to cause confusion, or to cause mistake, or to
deceive as to the affiliation, connection, or association of such person with another person, or as
to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by
another person.”
30
117. Ms. Rescate and Mr. Hindley have created a nationally-recognized brand of
business success. Ms. Rescate’s persona and likeness have commercial value because consumers
recognize her as a successful entrepreneur due to, for example, her multiple appearances on
ABC’s Shark Tank and other prominent national broadcasts, her successful launch of numerous
consumer products and her management of several profitable businesses.
118. Ms. Rescate and her children have appeared together numerous times to advertise
her products. The children’s consistent presence alongside Ms. Rescate, and indeed as the
advertising face of many of her successful business ventures, aligns the images of M.R., M.R.,
and L.R. with Ms. Rescate in the minds of potential customers.
119. Accordingly, use of Ms. Rescate’s and her children’s photos associates her
valuable likeness and persona with the product being advertised.
120. Blankie Tails, by and through its director and sole owner Defendant Elliot, has
continued to use images of Ms. Rescate and her children as part of new advertising and
marketing efforts related to Blankie Tails products—in violation of the parties’ Redemption
Agreement—in a manner that is likely to cause confusion regarding whether Ms. Rescate is the
current source of or currently sponsors or approves of Blankie Tails products.
121. The photos used to advertise Blankie Tails’ products were posted and/or
published on the Internet or in print materials and viewed by the public.
122. These photos serve to advertise and promote Blankie Tails’ products which are
sold throughout the United States and therefore traveled in interstate commerce.
123. Current association of Ms. Rescate with Blankie Tails’ products has caused harm
to Ms. Rescate’s personal and business reputation and interests, including Luvsy, because, on
31
information and belief, customers may purchase Blankie Tails products due to the mistaken
belief that Ms. Rescate and Mr. Hindley continue to be associated with Blankie Tails products.
124. Furthermore, Defendants’ use of these images has harmed Ms. Rescate and
Luvsy, in part, because it confuses customers who have come to associate the Rescate children
with Ms. Rescate and her successful businesses. The Rescate children’s continued role as
models of other Rescate products, including Luvsy’s, and the several advertising photos of M.R.
and L.R. alongside Ms. Rescate have created an association between their likeness and Ms.
Rescate. Misusing both Ms. Rescate’s and the children’s photos in Blankie Tails’
advertisements therefore has the effect of confusing customers about Ms. Rescate’s involvement
with Blankie Tails or endorsement of its products.
WHEREFORE, Plaintiffs request this Court enter judgment in their favor and against
Defendants Elliot and Blankie Tails, and award any and all relief that this Court deems just and
proper.
COUNT II
N.Y. Gen. Bus. Law § 349(a)
(By Luvsy and Rebecca Rescate against All Defendants)
forth in full.
126. Section 349(a) of the New York General Business Law prohibits “[d]eceptive acts
or practices in the conduct of any business, trade or commerce or in the furnishing of any service
in [New York].”
127. Blankie Tails, by and through its director Defendant Elliot, has on multiple
occasions made false, deceptive and misleading statements concerning the nature of Blankie
Tails’ products, including but not limited to, the origins and history of Blankie Tails as a
32
company, Defendant Elliot’s involvement and responsibility in the growth of the business, and
Ms. Rescate’s and Mr. Hindley’s involvement and responsibility in the growth of the business.
128. Blankie Tails’ and Defendant Elliot’s public false statements about the origin of
Blankie Tails and the role that Defendant Elliot played relative to her co-founders Ms. Rescate
and Mr. Hindley have deceived or have the tendency to deceive consumers by falsely crediting
solely Defendant Elliot with Blankie Tails’ success and giving the false impression that Ms.
Rescate and Mr. Hindley were not co-founders, designers and the key contributors to the early
success of Blankie Tails, thereby discrediting them and reducing their hard-earned reputation as
successful business owners.
129. In addition, Blankie Tails, by and through its director and sole owner Defendant
Elliot, has engaged in false, deceptive and misleading conduct by continuing to misuse images of
Ms. Rescate and her children as part of new advertising and marketing efforts related to Blankie
Tails products to enhance a current association between Blankie Tails’ products and the brands
successfully established by Ms. Rescate and to confuse consumers concerning Ms. Rescate’s
current sponsorship or approval of Blankie Tails products.
130. The misleading statements and the photos of the Rescate children appear either in
videos, news articles or social media advertising that were posted and/or published on the
Internet and were viewed by the public, including, on information and belief, consumers in New
York.
131. These statements and photo advertisements relate to Blankie Tails and its
products which are sold to consumers throughout the United States, including consumers in New
York.
33
132. On information and belief, Defendant Elliot made one or more false or misleading
statements while in New York.
133. These statements and photo advertisements were directed at current or potential
consumers or retail customers of Blankie Tails for the intended purpose of advertising or
marketing Blankie Tails products and thus increasing sales in Blankie Tails’ products.
134. The Defendants’ conduct is materially misleading as it tends to influence
consumer buying decisions. Indeed, the statements and misuse of photos confuse and deceive or
are likely to confuse and deceive consumers as to the quality and nature of Blankie Tails
products vis-á-vis other products in the wearable blanket market, thereby undermining New
York consumers’ ability to evaluate their market options and make a free and intelligent choice.
135. On information and belief, these false and misleading statements, along with the
misuse of photos, improperly enrich Defendants and harm Ms. Rescate and Luvsy, including by
confusing consumers and/or taking away business opportunities that might otherwise exist for
Luvsy.
proper.
COUNT III
UNAUTHORIZED USE OF NAME OR LIKENESS, 42 Pa. Cons. Stat. § 8316 (a)
(By Rebecca Rescate Individually and On Behalf of M.R., M.R., and L.R.
Against All Defendants)
forth in full.
137. Pennsylvania statutory law creates a cause of action for unauthorized use of name
or likeness, specifically for “[a]ny natural person whose name or likeness has commercial value
34
and is used for any commercial or advertising purpose without the written consent of such
natural person.” 42 Pa. Cons. Stat. § 8316.
138. The statute authorizes parents and guardians to bring action on behalf of their
minor children. See id. § 8316 (b)(2).
139. Ms. Rescate has built a valuable brand surrounding her name and likeness, in
particular related to her success as a businesswoman and entrepreneur. Likewise, the Rescate
children’s images and likeness have attained commercial value by virtue of their association with
the Rescate family brand and following their service as models for Blankie Tails’ products, in
particular, their appearance on tens of thousands of Blankie Tails’ product packaging.
140. Ms. Rescate did not consent to Blankie Tails or Defendant Elliot using images of
her or her children in new advertisements following the departure of Ms. Rescate and Mr.
Hindley from Blankie Tails and in an effort to protect her children and brand she specifically
restricted Defendants from doing so.
141. Defendants’ use of images of the Rescate family in new online postings on social
media and in new advertisements connects Blankie Tails’ products to the Rescate and Hindley
names and brands, and upon information and belief, was done in order to increase Blankie Tails’
sales.
142. Defendants’ misuse of the images of the Rescate family has caused harm to Ms.
Rescate, her children, and her current company Luvsy because it diminishes their brand of
business success and, upon information and belief, causes or is likely to cause customer
confusion.
35
proper.
COUNT IV
MISAPPROPRIATION OF PUBLICITY
forth in full.
144. Pennsylvania recognizes the common law right of individuals to protect the
commercial value of one’s name and likeness, and to prevent others from exploiting it without
permission.
145. Ms. Rescate brings this claim on behalf of herself and her minor children, M.R.,
M.R., and L.R.
particular, their appearance on thousands of Blankie Tails’ products packaging.
147. Defendant Elliot and Blankie Tails have used the images of the Rescate family in
Blankie Tails commercial advertisements without the permission of Ms. Rescate or her children
and, on information and belief, for the purpose of increasing Blankie Tails’ sales.
Rescate, her children and Luvsy because it diminishes their brand of business success.
36
proper.
COUNT V
INVASION OF PRIVACY BY MISAPPROPRIATION OF IDENTITY
forth in full.
150. Pennsylvania recognizes the common law right of individuals to pursue a cause of
action to protect against invasion of privacy by misappropriation of name or likeness.
151. Ms. Rescate brings this claim on behalf of herself and her children, M.R., M.R.,
and L.R., for the misappropriation of their likeness through Defendants’ unauthorized use of
their images in Blankie Tails’ advertisements without their consent.
particular, their appearance on tens of thousands of Blankie Tails’ product packaging.
Rescate, her children, and Luvsy because it diminishes their brand of business success.
proper.
37
COUNT VI
BREACH OF CONTRACT – MISAPPROPRIATION OF PHOTOS
UNDER THE TERMS OF THE PARTIES’ REDEMPTION AGREEMENT
Against Blankie Tails)
forth in full.
155. The parties entered into a valid and binding contract on August 23, 2017 through
execution of the Redemption Agreement. Defendants Elliot and Blankie Tails are parties to that
agreement and continue to be bound by its terms, including Section IV.9, which prohibits Blankie
Tails from using images of the Rescate children “in any new materials in print or any other
media (including online)” (emphasis added).
156. Moreover, Defendants Blankie Tails and Elliot agreed to indemnify Ms. Rescate
for “any activities . . . from and after the Closing.” See Section II.V of the Agreement.
157. Defendants owed a duty to Ms. Rescate not to use Ms. Rescate’s children’s
images and likeness in any new advertising materials without her consent.
158. Further, Ms. Rescate’s children, M.R., M.R. and L.R, were intended third party
beneficiaries of the Redemption Agreement, Section IV.9. As such, Defendants also owed Ms.
Rescate’s children a duty not to use their images in any new advertising materials without
consent.
159. Nonetheless, Defendants Elliot and Blankie Tails used images of the Rescate
children in new materials at least ten times between August 2017 and February 2018 in digital
and print media.
160. Defendants’ new uses of images of the Rescate children are a clear breach of
Section IV.9 of the Agreement.
38
161. Ms. Rescate’s personal and business interests have been harmed by Defendants’
conduct.
Rescate, her children and Luvsy because it diminishes their brand of business success.
Defendant Blankie Tails, and award any and all relief that this Court deems just and proper.
COUNT VII
BREACH OF CONTRACT – IMPROPER TAX FILINGS
UNDER THE TERMS OF THE PARTIES’ REDEMPTION AGREEMENT
(By Rebecca Rescate and Hindley Investments Against All Defendants)
forth in full.
164. The parties entered into a valid and binding contract on August 23, 2017 through
execution of the Redemption Agreement. Defendants Elliot and Blankie Tails are parties to that
agreement and continue to be bound by its terms, including Section IV.13, which prohibits
Defendant Elliot from filing the Blankie Tails 2017 tax returns over the objections and without
the consent of Ms. Rescate and Hindley Investments.
165. Moreover, Defendants Blankie Tails and Elliot agreed to indemnify Ms. Rescate
and Hindley Investments for “any activities . . . from and after the Closing.” See Section II.V of
the Agreement.
166. Defendants breached the Agreement both by failing to engage an independent
accountant to resolve differences between the financial statements of Defendant Elliot on the one
hand and Ms. Rescate and Hindley Investments on the other, and by filing the 2017 federal tax
return over the known objections of Ms. Rescate and Hindley Investments.
39
167. Defendants’ filing of the unauthorized 2017 Blankie Tails federal tax return has
harmed Ms. Rescate and Hindley Investments. Among other things, Ms. Rescate and Hindley
Investments have incurred expenses related to engaging tax-related counsel to assess the impact
of the mis-filing and the risks and options they face as a result. Further, because Ms. Rescate’s
and Hindley Investments’ own tax returns are dependent on Blankie Tails’ tax return being filed
correctly, Ms. Rescate and Hindley Investments have been deprived of a material right under the
Agreement to review the returns for accuracy as they impact their own tax liability.
proper.
COUNT VIII
BREACH OF CONTRACT – UNAUTHORIZED DISCLOSURE OF
CONFIDENTIAL INFORMATION IN BREACH OF THE NDA
(By Rebecca Rescate and Hindley Investments
Against Defendant Elliot)
forth in full.
169. The parties entered into a valid and binding contract effective August 10, 2017
through execution of the NDA. Defendant Elliot was bound by its terms including those
restricting the use and disclosure of Blankie Tails’ confidential information. See NDA,
Background and ¶¶ 1-2.
170. Defendant Elliot breached the terms of the NDA by disclosing highly confidential
and sensitive business information belonging to Blankie Tails to unauthorized third parties.
171. Plaintiffs have been damaged by these actions because, had they known of
Defendant Elliot’s breach and disclosure of confidential and sensitive business information at the
40
time the parties were negotiating the terms of the final Redemption Agreement, Ms. Rescate and
Hindley Investments would not have agreed to sell their interests on the terms eventually agreed-
upon.
Defendants Elliot, and award any and all relief that this Court deems just and proper.
PRAYER FOR RELIEF
WHEREFORE, Plaintiffs pray that this Court enter Judgment in their favor and enter an
Order:
1. Enjoining Defendants and their agents, servants, directors, principals, officers,
employees, successors, assigns, and all those acting under their control from any
further use of photos of Ms. Rescate or her children in new publications or
advertisements;
2. Directing Defendants and their agents, servants, directors, principals, officers,
employees, successors, assigns, and all those acting under their control to remove
any and all images of Ms. Rescate or her children that are deemed “new use”
under the terms of the parties’ contract.
3. Enjoining Defendants and their agents, servants, directors, principals, officers,
employees, successors, assigns, and all those acting under their control from
making false and misleading statements concerning Blankie Tails’ formation and
the contributions made by its co-founders, Defendant Elliot, Ms. Rescate and Mr.
Hindley.
41
4. Directing Defendants to (a) pay actual and compensatory damages, such damages
to be trebled, where appropriate; (b) disgorge all profits resulting from the harm
caused by the above wrongful conduct; and (c) pay exemplary and punitive
damages.
5. Directing Defendants to pay all reasonable attorneys' fees and costs allowable
under the laws cited herein.
6. For such other and further relief as the Court deems just and proper.
DEMAND FOR JURY
Plaintiff hereby demands trial of this matter by jury.
Dated: June 21, 2018 Respectfully submitted,
. 7" ,. .
Bnan W. Shaffer (!%)AD No. 78851)
J. Kevin Fee (PA*f5No. 81715)
Lindsey T. Mills (PA ID No. 307081)
John G.M. Coit (PA ID No. 324409)
MORGAN, LEWIS & BOCKIUS LLP
1701 Market Street
Philadelphia, PA 19103-2921
215.963.5000 (Telephone)
215.963.5001 (Facsimile)
brian.shaffer@morganlewis.com
kevin.fee@morganlewis.com
lindsey.mills@morganlewis.com
john.coit@morganlewis.com
Attorneys for Plaintiffs
42

Luvsy v. Elliot - Complaint

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Case 2:18-cv-01589-ER Document 15 Filed 06/21/18 Page 1 of 42

UNITED STATES DISTRICT COURT

LUVSY, INC., HINDLEY INVESTMENTS

HADLEY GRACE ELLIOT and BLANKIE

Plaintiffs Luvsy, Inc., (“Luvsy”), Hindley Investments LLC (“Hindley Investments”),

Guardian (collectively, “Plaintiffs”), by and through their undersigned attorneys, upon

(“Blankie Tails” or “the Company”) (collectively, “Defendants”) as follows:

Defendant Elliot regarding the history and formation of Blankie Tails.

Confidentiality Agreement as part of Defendant Elliot’s efforts to secure a licensing agreement

4. In early 2015 Rebecca Rescate – a successful entrepreneur and businesswoman,

the shapes of mermaid tails and sharks.

Defendant Elliot both agreed.

handle sales, fulfillment, press inquiries and residual opportunities.

separate themselves from Defendant Elliot.

August 23, 2017 (“Redemption Agreement”). Among other deliberately-selected restrictions,

recognition created by Ms. Rescate and Mr. Hindley.

discrediting Ms. Rescate and Mr. Hindley.

the harm caused by Defendants’ unauthorized use of images, misleading statements,

unauthorized and concealed disclosure of highly confidential information in violation of the

and impair consumers’ ability to make informed purchasing decisions.

principal place of business at 61 Green Lane, Bristol, Pennsylvania. Luvsy manufactures,

plaintiff in this case with respect to Counts I and II only.

behalf in Blankie Tails through Hindley Investments. Hindley Investments is named as a

18. Plaintiff Rebecca Rescate is an individual residing in Morrisville, Pennsylvania.

Ms. Rescate is a citizen of the Commonwealth of Pennsylvania. She is a former co-founder

brings certain claims in this lawsuit on their behalf as well.

this case with respect to Counts III-VI only.

21. Defendant Blankie Tails is a corporation organized under the laws of

with respect to Counts I-VII.

22. On information and belief, Defendant Blankie Tails is registered to do business in

activities to this forum.

JURISDICTION AND VENUE

to unlawful acts in the Eastern District of Pennsylvania, as alleged in this Complaint.

26. Venue is proper in this District pursuant to 28 U.S.C. § 1391(b), as a substantial

within the Eastern District of Pennsylvania.

Formation of Blankie Tails

launching over 20 consumer products and brands since 2005.

and HoodiePillow – and receive praise from the show’s investors.

their shared business interests and common brands since 2012.

networking service, The Grace List.

experience in manufacturing and distribution (consumer goods).”

Elliot formed Blankie Tails.

an arrangement to which Ms. Rescate and Defendant Elliot both agreed.

manufacturing process, distribution, warehousing, human resources, website development,

handled warehousing, order fulfillment and other important tasks.

over the last three years.

successful business brand of Ms. Rescate.

Tails’ marketing and advertising materials and on its product packaging.

significant funds to resolve.2

due diligence purpose. See id., Background & ¶ 2.

as Exhibit B (previously filed under seal).3

circulation no later than December 31, 2018”) (emphasis added).

52. Additionally, because of Ms. Rescate’s and Hindley Investments’ involvement

possible inaccurate or fraudulent tax returns.

after the Closing.” See Section II.V, Indemnity.

Defendant Elliot Shared Confidential and Proprietary Blankie Tails Information in

physically produce the product.

in the NDA and the contemporaneously executed term sheet.

without authorization disclosed some of this confidential information, including potentially

shared with Defendant Elliot in August 2017 pursuant to the NDA.

denied any involvement.

products with My Little Pony print already on the production line.

62. As discussed above, the Redemption Agreement specifically prohibited Blankie

Blankie Tails and Defendant Elliot.