2012 Decisions

Opinions of the United

States Court of Appeals

for the Third Circuit

5-11-2012

Health and Body Store v. Justbrand Limited

Precedential or Non-Precedential: Non-Precedential

Docket No. 11-4132

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Recommended Citation

"Health and Body Store v. Justbrand Limited" (2012). 2012 Decisions. Paper 1009.

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NOT PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

_____________

No. 11-4132

_____________

HEALTH AND BODY STORE, LLC; HOTHEADZ INTERNATIONAL, INC.,

 Appellants

v.

JUSTBRAND LIMITED; JUSTIN SILVERMAN; BRANDON SINGER,

_______________

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. No. 11-cv-6638)

District Judge: Honorable Mitchell S. Goldberg 

_______________

Argued: March 27, 2012

Before: FUENTES, SMITH, and JORDAN, Circuit Judges.

(Filed: May 11, 2012)

_______________

James J. Ferrelli, Esq.

Duane Morris

240 Princeton Avenue - #150

Hamilton, NJ 08619

Gregory A. Lomax, Esq.

Duane Morris

1940 Route 70 East - #200

Cherry Hill, NJ 08003
2

Robert M. Palumbos, Esq. [ARGUED]

Duane Morris

30 South 17th Street

United Plaza

Philadelphia, PA 19103

 Counsel for Appellant

Michael D. LiPuma, Esq. [ARGUED]

325 Chestnut Street - #1109

Philadelphia, PA 19106

 Counsel or Appellees

_______________

OPINION OF THE COURT

_______________

JORDAN, Circuit Judge.

Hotheadz International, Inc. (“Hotheadz”)1and Health and Body Store, LLC 

(“HBS”) (collectively, “Appellants”) appeal an order of the United States District Court 

for the Eastern District of Pennsylvania denying their motion for a preliminary 

injunction. The motion sought to preclude Appellees Justin Silverman and Brandon 

Singer from independently operating two websites (the “Websites”) that the parties had 

used together to conduct an Internet business. For the reasons that follow, we will vacate 

the District Court‟s order and remand the matter for proceedings consistent with this 

opinion.

 

1 Hotheadz‟s predecessors are Hotheadz of America, Inc. (“Hotheadz Inc.”) and 

Hotheadz of America, LLC (“Hotheadz America”). Hotheadz Inc. was formed by Jay 

Oxenhorn and Bruce Singer, the father of Appellee Brandon Singer. In 2006, a new 

ownership team acquired Hotheadz Inc. and formed Hotheadz America. Thereafter, 

Hotheadz America formed Hotheadz, which assumed ownership of Hotheadz America‟s 

business assets and took control of its business operations. For ease of reference, we 

refer to Hotheadz Inc., Hotheadz America, and Hotheadz collectively as “Hotheadz.”
3

I. Background

Hotheadz is in the business of manufacturing and selling products, including hats 

and other apparel, designed for use in cold weather. Its distribution channels include flea 

markets, kiosk retailers, television shopping channel retailers, and hardware stores. In 

January 2005, Hotheadz hired Silverman and Singer as sales trainees. Eventually they

became involved in marketing to Hotheadz‟s kiosk customers. 

A. The Websites

In 2007, while employed by Hotheadz, and with Hotheadz‟s permission, 

Silverman and Singer began to independently operate an Internet business selling winter 

apparel and health products. A majority of the items Silverman and Singer sold were 

ones they had purchased from Hotheadz. They operated the Internet business through the 

Websites, which were established when Silverman registered the domain names

www.healthandbodystore.com and www.thewarmingstore.com (collectively, the 

“Domain Names”) in January and September 2007, respectively. After the Domain 

Names were registered, Silverman and Singer put substantial effort into developing the 

Websites. They created all of the content on the Websites and paid all advertising costs, 

which included Internet advertising services. Eventually, as a result of their efforts, the 

Websites earned approximately $55,000.00 to 60,000.00 in gross revenue in 2007,

$150,000.00 in 2008, and $170,000.002in 2009.3 

 

2 Although Silverman testified that the Websites generated approximately 

$180,000.00 in 2009, his accounting records state that they earned $170,000.00 in 2009. 
4

B. The Parties Discuss a Joint Venture

In late 2008, Hotheadz‟s Chief Executive Officer, Jeff Zelenko became concerned 

that Silverman and Singer were devoting too much of their time at work to improving 

their Internet business. When he approached them to discuss the issue, Zelenko informed 

them that “they [had] a choice” to either “contribute the ... [Websites] into ... 

[Hotheadz‟s] business” and they could “work out some sort of a deal” with Hotheadz, or, 

they could “leave [Hotheadz]” and continue to run their business independently. (App. at 

549.) Zelenko also claimed that he offered Silverman and Singer the opportunity to 

create a joint venture with Hotheadz. According to Zelenko, Hotheadz proposed: (1) that 

it would own a 75% interest in the joint venture and that Silverman and Singer would 

collectively own a 25% interest; (2) that it would provide “complete financial support for 

... the growth of the [new] business”; and (3) that it would “offer its infrastructure to 

manage the [new] business day in and day out.” (Id.) 

When Zelenko explained his proposal to Silverman and Singer, he did not 

expressly ask them to transfer ownership of the Websites to Hotheadz, and there is no

written documentation containing such an agreement.4 Nevertheless, although Silverman 

and Singer did not explicitly agree to the terms Zelenko proposed for a joint venture, 

 

3 During this period, Hotheadz also owned a website called www.hotheadz.net, 

but, according to Hotheadz itself, the website was “undeveloped,” and “did a very 

minimal amount of volume.” (App. at 546.)

4

Silverman testified that he specifically refused to transfer ownership of the 

Domain Names unless the parties reached “a full agreement that outlined how this new 

proposed business would have run,” and made clear that “[o]nce [the parties] came to an 

agreement, that [the Websites were] going to be [his] contribution to the business.” 

(App. at 855.)
5

they did begin to operate the Websites with Hotheadz in the latter part of 2009.

Before September 11, 2009, and sometime after the first discussion of a possible 

business arrangement, Zelenko sent Silverman and Singer two versions of a “Letter of 

intent to form [a] Partnership for Internet Division Between [Hotheadz] and Brandon 

Singer and Justin Silverman” (collectively, the “Letters of Intent” or the “Letters”). 

(App. at 198, 200.) The Letters of Intent acknowledged that the Websites were 

“currently owned by Brandon Singer and Justin Silverman,” and the Letters included a 

provision stating that the Websites “would be transferred to [Hotheadz] as of 

[August/September] 2009” for “no financial consideration.” (App. at 198, 200.) 

Silverman testified that he refused to sign the Letters of Intent because they were “very 

incomplete” and “didn‟t have a lot of what [he] felt should be in a contract,” including 

provisions governing revenue sharing (App. at 856), and Singer testified that he refused 

to sign for the reasons that Silverman explained.

From August 2009 until January 2010, Silverman and Singer continued to operate 

the Websites to support Hotheadz‟s business. During that period, Hotheadz purchased 

the inventory sold on the Websites and paid a large portion of the out-of-pocket expenses 

Silverman and Singer incurred in operating the Websites. Between September and 

December of 2009, the Websites generated approximately $75,000.00 in gross revenue. 

C. The Formation and Operation of HBS

On January 14, 2010, Hotheadz formed HBS as a limited liability company. The

new entity had no employees, and every individual who performed services for it, 

including Silverman and Singer, was employed by Hotheadz. Although the record does 
6

not contain a certificate of ownership interest, subsequent documents filed by the parties, 

as well as Silverman‟s testimony during the preliminary injunction hearing, indicate that 

the only members of HBS were Hotheadz5and Justbrand Ltd. (“Justbrand”),6a 

Pennsylvania LLC owned and operated by Silverman and Singer.

Between January 2010 and October 2011, Silverman and Singer continued to 

operate the Websites with Hotheadz‟s support. According to Charles Donato, Hotheadz‟s 

Chief Financial Officer, Hotheadz provided HBS the following logistical and 

administrative support during that period:

(a) [Hotheadz] paid Silverman and Singer their salaries. ...;

(b) [Hotheadz] sold HBS the majority of the goods sold on 

the Websites at [Hotheadz‟s] cost. ...;

 

5

The Schedule K-1‟s generated from HBS‟s Internal Revenue Service Form 1065

for the year 2010 state that Hotheadz owned a 75% interest in HBS, and Justbrand owned 

a 25% interest in HBS. HBS‟s Pennsylvania Enterprise Registration Form states that 

Hotheadz owned a 50% interest in HBS and that Silverman and Singer each owned a 

25% interest in the company. Thus, although the precise ownership interest of each party 

is unclear, the documentation described above demonstrates, at a minimum, that either 

Justbrand or Silverman and Singer were the only members of HBS besides Hotheadz.

6

Silverman testified that he and Singer formed Justbrand in order to hold their 

ownership interest in HBS:

Q: Okay. Now you are also aware that [Justbrand] was 

formed [sometime] in – was formed sometime in March of 

2010?

[Silverman]: Yes.

Q: And you and Mr. Singer caused that to be formed, is that 

right?

[Silverman]: Yes.

Q: And you agreed to form that company to take your equity 

in [HBS], is that right?

A: Yes.

(App. at 816.) 
7

(c) [Hotheadz] ... provided ... all of HBS‟s warehousing, 

shipping, accounting, informational technology, customer 

services, and all of its management services and controls ...;

(d) [Hotheadz] ... routinely infused capital into HBS to cover 

any budgetary shortfalls;

(e) [Hotheadz] ... carr[ied] large receivables from HBS for 

inventory sales; and

(f) ... . [Hotheadz bore] [a]ll costs of operating the websites 

... .

(App. at 55.) However, that support came at significant cost – according to Silverman, 

Hotheadz informed him that HBS would be charged $240,000.00 in “management fee[s]” 

in 2010, and that Hotheadz would increase the management fee to $360,000.00 in 2011.

(App. 864.) 

During 2010 and 2011, sales generated by the Websites increased substantially. 

Between January 2009 and September 11, 2009, the Websites had generated 

approximately $170,000.00 in revenue. In 2010, revenue from the Websites grew to 

approximately $358,000.00. Hotheadz projected that revenue from the Websites would 

grow to $1,100,000.00 in 2011. All of the revenue that HBS generated through the 

Websites was deposited into a bank account that HBS opened with Wachovia Bank. 

D. The Proposed Operating Agreement

In July 2011, Hotheadz‟s management team prepared and delivered to Silverman 

and Singer a draft operating agreement (the “Operating Agreement”). Under the terms of 

the Operating Agreement, Hotheadz was entitled to take a management fee of at least 

$20,000.00 per month from the sales generated by the Websites. The Operating 

Agreement also contained a provision requiring Silverman and Singer to transfer the 

Domain Names and the Websites to HBS:
8

Title to property. All real, intellectual, and personal property 

owned by the Company [i.e., HBS] shall be owned by the 

Company as an entity and, insofar as permitted by applicable 

law, no Member shall have any ownership interest in such 

property in its individual name or right, and each Member‟s 

interest in the Company shall be personal property for all 

purposes. Moreover, the internet domain names, web site 

addresses, and Pay Pal accounts ... as well as all future 

domain names, web sites and any other type of accounts used 

by the Company, are hereby absolutely transferred and 

conveyed to Company without further consideration.

(App. at 202.) Silverman and Singer did not sign the Operating Agreement. 

E. Silverman and Singer Terminate their Relationship with Hotheadz 

Sometime around August 2011, Silverman and Singer came up with a plan to 

break off their operating relationship with Hotheadz and HBS. They began to quietly

acquire inventory on their personal credit and ship it directly to Silverman‟s home in 

Philadelphia, Pennsylvania. Silverman testified that he began stockpiling the inventory 

so that he and Singer could continue operating the Websites after they terminated their 

employment with Hotheadz. Silverman and Singer also placed orders for Hotheadz‟s 

products through a company called Novell Brands, LLC (“Novell”) at wholesale prices,

so that they could repurchase the same items from Novell after terminating their 

operating relationship with Hotheadz. At the time, Silverman and Singer did not tell 

Hotheadz and HBS of their preparation for terminating their employment with Hotheadz 

and their relationship with HBS. 

On October 11, 2011, Silverman and Singer resigned from Hotheadz and changed 

the passwords associated with the Websites and the PayPal account that HBS used to 

collect payments from customers purchasing Hotheadz‟s products on the Websites. By 
9

changing those passwords, they cut Hotheadz off from any control over the Websites and 

they seized the revenue generated through the Websites. Thereafter, Silverman and 

Singer operated the Websites exclusively for their own benefit, as they had before the 

formation of HBS. According to Hotheadz, the appearance of the Websites was identical 

both before and after October 11, 2011. 

F. Procedural History

Hotheadz and HBS commenced this action on October 24, 2011 by simultaneously 

filing a complaint and a motion for a preliminary injunction. The complaint alleged 

several claims under the Lanham Act, 15 U.S.C. § 1051 et seq., including trademark 

infringement, unfair competition, and false designation of origin. It also asserted a

violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030, and various common 

law claims, including misappropriation of trade secrets and confidential information, 

unfair competition, breach of fiduciary duty, tortious interference with contract, and 

conversion. The following day, the District Court entered an order requiring Justbrand, 

Silverman, and Singer to refrain from using, “any trademark owned by Plaintiffs on the 

websites „The Warming Store‟ (www.thewarmingstore.com) and „Health and Body 

Store‟ (www.healthandbodystore.com).” (App. at 995.)

On November 3 and 4, 2011, the District Court held a hearing on the motion for a 

preliminary injunction. After considering the parties‟ arguments and taking testimony 

from witnesses, the Court issued an oral opinion denying the motion. The Court made 

clear that the focus of its analysis was on the question of whether “there [was] a valid 

partnership as it relates specifically to the web sites[.]” (App. at 7.) It found that the 
10

parties never formed a partnership because there was “no meeting of the minds as to the 

essential terms of any partnership,” including “percentage of ownership,” “the duties of 

... partners,” “dissolution of the partnership,” and “profit distribution.” (App. at 10-11.) 

In addition, the Court found that there was no evidence that the Operating Agreement, 

which contained a provision governing ownership of the Websites, “was ever signed and 

consummated.” (App. at 12.) Based on its determination that the parties did not form a 

partnership, the District Court rejected Appellants‟ breach of fiduciary duty claim, saying

that “there has not been sufficient proof ... of a showing of an agreement which would 

give rise to [a fiduciary] duty so the claim of breach of fiduciary duty ... fails.” (App. at

14.)

The District Court also held that Hotheadz and HBS were unlikely to succeed on 

the merits of their Lanham Act claims. It found that their trademark infringement claim 

was moot because Singer, Silverman, and their vehicle, Justbrand, agreed to remove all

of Hotheadz‟s trademarks from the Websites. As to the unfair competition and false 

designation of origin claims, the Court rejected the contention that Singer, Silverman, and 

Justbrand were “representing that the goods sold on the web sites [were] coming from 

[HBS] when they‟re not actually coming from [HBS].” (App. at 14.) The Court 

determined instead that the Domain Names “www.thewarmingstore.com” and 

“www.healthandbodystore.com” were unlikely to cause confusion as to the source of the 

goods sold on those Websites. 

HBS and Hotheadz filed a timely notice of appeal. 
11

II. Jurisdiction and Standard of Review

The District Court exercised jurisdiction over this case pursuant to 28 U.S.C. 

§§ 1331 and 1367. We have jurisdiction under 28 U.S.C. § 1292(a).

“We review the denial of a preliminary injunction for „an abuse of discretion, an

error of law, or a clear mistake in the consideration of proof.‟” Kos Pharm., Inc. v. Andrx 

Corp., 369 F.3d 700, 708 (3d Cir. 2004) (quoting Am. Tel. & Tel. Co. v. Winback & 

Conserve Program, Inc., 42 F.3d 1421, 1427 (3d Cir. 1994)). “[A]ny determination that 

is a prerequisite to the issuance of an injunction ... is reviewed according to the standard

applicable to that particular determination.”7 Winback, 42 F.3d at 1427 (internal 

quotation marks omitted). “Thus, we exercise plenary review over the district court‟s 

conclusions of law and its application of law to the facts, but review its findings of fact 

for clear error, which occurs when we are left with a definite and firm conviction that a 

mistake has been committed.” Duraco Prods., Inc. v. Joy Plastic Enters., Ltd., 40 F.3d 

1431, 1438 (3d Cir. 1994) (citations and internal quotation marks omitted). Our 

deferential review 

 

7

The familiar test for whether to grant a motion for a preliminary injunction, 

requires a district court to ask: 

(a) did the movant make a strong showing that it is likely to 

prevail on the merits? (b) did the movant show that, without 

such relief, it would be irreparably injured? (c) would the 

grant or denial of a preliminary injunction substantially have 

harmed other parties interested in, or affected by, the 

proceedings? (d) where lies the public interest?

Klitzman, Klitzman and Gallagher v. Krut, 744 F.2d 955, 958-59 (3d Cir. 1984) (citation 

omitted).
12

is appropriate because a court nearly always bases the grant 

or denial of [a preliminary] injunction on an abbreviated set 

of facts, requiring a delicate balancing of the probabilities of 

ultimate success at [the] final hearing with the consequences 

of immediate irreparable injury that possibly could flow from 

the denial of preliminary relief.

Krut, 744 F.2d at 958.

III. Discussion

Hotheadz and HBS assert that the District Court abused its discretion by holding 

that they are unlikely to succeed on the merits of their breach of fiduciary duty claim. To 

determine whether the District Court‟s holding regarding that claim was an abuse of its 

discretion, we must first decide whether the Court could justifiably have concluded that

the parties had no relationship giving rise to fiduciary obligations. Hotheadz and HBS 

contend that there is no justification for the District Court‟s ruling because Hotheadz and 

Justbrand “are both co-members of ... HBS” – a relationship that necessarily “[gives] rise 

to ... fiduciary and other obligations ... .” (Appellants‟ Opening Br. at 40.) Silverman, 

Singer, and Justbrand respond that, even if HBS was duly formed, they never agreed to 

transfer ownership of the Websites to HBS and, therefore, Justbrand could not have 

breached any fiduciary duty to Hotheadz or HBS. That response is beside the point, and 

Hotheadz and HBS have the far more persuasive position.

Under Pennsylvania‟s Limited Liability Company Law of 1994 (the “LLC Act”), 

“[o]ne or more persons may organize a limited liability company,” Pa. Cons. Stat. 
13

§ 8912, by filing a certificate of organization,

8

id. at § 8913. Here, the parties did just 

that. The evidence of record demonstrates that Hotheadz and Justbrand duly formed HBS 

as a Pennsylvania LLC by filing a certificate of organization (the “Certificate”) with the 

Commonwealth of Pennsylvania on January 14, 2010.9 The Certificate contains (1) the 

name of the LLC (HBS); (2) HBS‟s initial registered office; (3) the name and address of 

HBS‟s organizer; (4) a statement that “[a] member‟s interest in [HBS] is to be evidenced 

by a certificate of membership interest”10; and (5) the hour, month, day and year of the 

effective date of HBS. (App. at 246.) The evidence also reveals that Justbrand and 

Hotheadz are the only members of HBS,11 and that Silverman and Singer are the only 

members of Justbrand. As noted above, Silverman testified that he and Singer formed 

Justbrand to hold their interest in HBS, and state and federal tax documents filed by the 

parties demonstrate that Justbrand is a member of HBS. It seems plain, then, that 

 

8

The certificate must contain: (1) the name of the LLC; (2) “the address, 

including street and number, if any, of [the company‟s] initial registered office”; (3) 

“[t]he name and address, including street and number, if any, of each of the organizers”; 

(4) a statement of a member‟s interest in the company if that interest is “evidenced by a 

certificate of membership interest”; (5) a statement that “management of the company is 

vested in a manager or managers,” if the company chooses to vest management in 

managers; (6) the hour, month, day, and year of the effective date of the company; (7) a 

statement that the company is a restricted professional company, if applicable; and (8) 

any other provision the members of the LLC choose to include in the certificate of 

organization. 15 Pa. Cons. Stat. § 8913.

9 Hotheadz and HBS pointed this out to the District Court. (See App. at 521 (“[I]n 

January of 2010 there was a reconfiguration of the relationship [between Hotheadz and 

Appellees] ... and that‟s when Health and Body Store, LLC was formed.”); id. at 525 

(“[A]ll the indicia of a commonly owned partnership relationship existed, first in the form 

of a partnership, secondarily, in the form of an LLC.”).)

10 We note that the parties did not include the “certificate of membership interest” 

in the appellate record.

11 See supra notes 4 and 5.
14

Silverman and Singer, acting through Justbrand, cooperated with Hotheadz in the 

formation of HBS, a valid Pennsylvania LLC, and that Hotheadz and Justbrand are the

members of that LLC.

By operation of law, because it is a member of HBS, Justbrand owes fiduciary 

duties to its fellow member, Hotheadz. Under Pennsylvania‟s LLC Act, “[i]f [an LLC‟s] 

certificate of organization does not contain a statement to the effect that [a] limited 

liability company shall be managed by managers,” then the provisions of partnership law 

govern the relations between the members of the LLC. See 15 Pa. C.S. § 8904 (“If the 

certificate of organization does not contain a statement to the effect that the limited 

liability company shall be managed by managers, the provisions of Chapters 81 (relating 

to general provisions) and 83 (relating to general partnerships) govern, and the members 

shall be deemed to be general partners for purposes of applying the provisions of those 

chapters.”). Because HBS‟s certificate of organization does not state that it “shall be 

managed by managers,” id., Pennsylvania partnership law governs the relationship 

between Justbrand and Hotheadz, and “[t]here is a fiduciary relationship between 

partners,” Clement v. Clement, 260 A.2d 728, 729 (Pa. 1970). The rationale for that rule 

is that “[o]ne should not have to deal with his partner as though he were the opposite 

party in an arms-length transaction,” and “should be allowed to trust his partner, to expect 

that he is pursuing a common goal and not working at cross-purposes.” Id. Among the 

fiduciary duties that partners owe each other are the duty of loyalty, id., and the 

corresponding obligation to act for the benefit of the other members of the partnership, 

see Hamberg v. Barsky, 355 Pa. 462, 465 (1947) (stating that a “confidential relation ... 
15

is one wherein a party is bound to act for the benefit of another, and can take no 

advantage to himself” (internal quotation marks omitted)); Poeta v. Jaffe, 51 Pa. D. & 

C.4th 78, 84 (Pa. Ct. Com. Pl. 2001) (“In general, partners owe a fiduciary duty to each 

other to act in good faith during the life of the partnership.”); cf. 15 Pa. Cons. Stat. § 8334 

(noting that partners have a duty to account).

Justbrand also owed fiduciary duties to HBS. Under Pennsylvania law, a partner 

is accountable as a fiduciary to the partnership, which is here embodied in the LLC. See

15 Pa. Cons. Stat. § 8334 (“Every partner must account to the partnership for any benefit 

and hold as trustee for it any profits derived by him without the consent of the other 

partners from any transaction connected with the formation, conduct or liquidation of the 

partnership or from any use by him of its property.”). Thus, “[w]here one partner has so 

dealt with the partnership as to raise the probability of wrongdoing” it is his 

“responsibility to negate that inference.” Clement, 260 A.2d at 729.

Here, the District Court abused its discretion by failing to recognize that Justbrand 

owed fiduciary duties to Hotheadz and HBS, and by neglecting to examine whether 

Justbrand breached those duties through the conduct of Silverman and Singer.

12

 

 

12 Under Pennsylvania law, “[e]very partner is an agent of the partnership for the 

purpose of its business and the act of every partner ... for apparently carrying on in the 

usual way the business of the partnership ... binds the partnership ... .” 15 Pa. Cons. 

Stat. § 8321. Here, the record reveals that Silverman and Singer were the only members 

of Justbrand and acted as agents of Justbrand. Thus, as agents of Justbrand (see App. at 

177 (demonstrating that Silverman and Singer used website 

www.healthandbodystore.com to further the business operations of Justbrand)), they were 

obligated to operate the Websites in a manner consistent with Justbrand‟s fiduciary 

obligations to Hotheadz and to HBS. 
16

Specifically, the District Court did not consider whether Justbrand knowingly and 

intentionally deprived HBS of access to, and use of, the Websites and associated bank 

accounts, which were the sole means by which HBS marketed products and generated

and collected revenue. Nor did the Court appropriately consider whether Justbrand or its 

agents breached fiduciary duties by using the Websites to market and sell the same 

products HBS sold through the same Websites without putting consumers on notice that 

HBS was not actually selling those products,

13 and thus expropriating the goodwill 

associated with the Websites. 

Given the procedural posture of this case, we will not decide in the first instance 

whether the actions of Singer, Silverman, and Justbrand constitute breaches of 

Justbrand‟s fiduciary obligations to Hotheadz and HBS.

14

 See Forestal Guarani S.A. v. 

 

13 Donato‟s affidavit states that “the Websites which the Defendants took from 

HBS are absolutely identical to the Websites owned, operated and developed for nearly 

... three years by HBS. There have been no material changes to them ... .” (App. 59.) 

14 Whether Singer and Silverman independently owed duties to Hotheadz and HBS 

is a matter we also leave to the District Court to determine upon remand. It is worth 

noting, for example, that there is evidence that Silverman was acting as an agent of HBS. 

At times, Silverman represented that he was a “partner,” “owner,” “president,” and “vicepresident,” of HBS and he executed various agreements as a manager of HBS. To the 

extent that Silverman actually held any of those positions with HBS, he was evidently an 

agent of HBS and had fiduciary obligations to that company. See Garbish v. Malvern 

Fed. Sav. & Loan Ass’n, 517 A.2d 547, 553-54 (Pa. Super. Ct. 1986) (“Under 

Pennsylvania law, the duty of an agent to his principal is one of loyalty in all matters 

affecting the subject of his agency, and the agent must act with the utmost good faith in 

the furtherance and advancement of the interests of his principal.”) (citation and internal 

quotation marks omitted); id. at 554 (“Because the relationship between the parties ... 

was an agency relationship, appellant owed appellees a fiduciary duty and its conduct 

must be measured against the standard of care owed by a fiduciary.”).

Whether duties were owed independently or through Justbrand, even Singer, 

Silverman, and Justbrand seemed to acknowledge at oral argument that it would be 
17

Daros Int’l., Inc., 613 F.3d 395, 401 (3d Cir. 2010) (“We ordinarily decline to consider 

issues not decided by a district court, choosing instead to allow that court to consider 

them in the first instance.”). It is enough to say that the District Court abused its 

discretion by failing to recognize that fiduciary duties were owed and by failing to 

consider whether those duties were breached.

15

 

fundamentally unfair for Silverman and Singer, acting as agents of Justbrand, to 

undermine the interests of Hotheadz and HBS, to the extent that Justbrand owed those 

entities fiduciary duties. Indeed, when asked during oral argument “if Justbrand were 

found to be in violation of its fiduciary duties to Health and Body Store LLC because of 

the actions of the only human beings associated with it ..., would the response ... by your 

clients be „well that‟s Justbrand; we don‟t have anything to do with that,‟” counsel for 

Singer, Silverman, and Justbrand responded, “no, I don‟t think that would be fair your 

honor; I don‟t think that would be fair.” (Oral Argument at 18:23, Health and Body 

Store, LLC and Hotheadz Int‟l, Inc. v. Justbrand Limited et al. (No. 11-4132), available 

at http://www.ca3.uscourts.gov/oralargument/audio/11-

4132HealthandBodyStorev.JustbrandLtd.wma.)

15 Appellants also challenge the District Court‟s decision regarding their Lanham 

Act unfair competition and false designation of origin claims. In order to succeed on a 

false designation of origin or unfair competition claim under the Lanham Act, a plaintiff 

must prove that: “(1) the mark [it seeks to protect] is valid and legally protectable, (2) 

[the plaintiff] owns the mark, and (3) the defendant‟s use of the mark is likely to create 

confusion concerning the origin of goods or services” associated with the mark. E.T. 

Browne Drug Co. v. Cococare Prods., Inc., 538 F.3d 185, 191 (3d Cir. 2008) (citation 

omitted) (elements of trademark infringement claim); see A & H Sportswear, Inc. v. 

Victoria’s Secret Stores, Inc., 237 F.3d 198, 210 (3d Cir. 2000) (“We measure federal 

trademark infringement, 15 U.S.C. § 1114, and federal unfair competition, 15 U.S.C. 

§ 1125(a)(1)(A), by identical standards.”). At this juncture in the litigation, we lack a 

sufficient evidentiary basis for determining whether the District Court abused its 

discretion by denying Appellants‟ motion for a preliminary injunction as to their Lanham 

Act claims because it is unclear who has a valid and legally protectable interest in the 

identity and appearance of the Websites. We note that there appears to be considerable 

overlap between the Lanham Act claims and the breach of fiduciary duty claim. Those 

claims center on the allegation that Singer, Silverman, and Justbrand engaged in wrongful 

behavior by using identical Websites both before and after they discontinued their 

relationships with Hotheadz and HBS, and that, in doing so, they stole all of the business 
18

IV. Conclusion

We will thus vacate the District Court‟s order denying Appellants‟ motion for a 

preliminary injunction and remand the matter for further proceedings.

16

 

 

and customer goodwill associated with the Websites. We leave it to the District Court to 

decide in the first instance how the claims may be interrelated.

16 We say nothing about the remedy that may be appropriate in the event that the 

District Court determines that HBS and Hotheadz are entitled to some form of 

preliminary relief for breach of fiduciary duties. It is possible, of course, that no remedy 

at all should be given, even if there has been a breach, since the balance of equities may 

make a preliminary injunction inadvisable. Cf. Weinberger v. Romero-Barcelo, 456 U.S. 

305, 312 (1982) (in deciding whether to award injunctive relief, “the court balances the 

conveniences of the parties and possible injuries to them according as they may be 

affected by the granting or withholding of the injunction.” (internal quotation marks and 

citation omitted)). And, if some relief is warranted, that does not necessarily mean that 

the relief HBS and Hotheadz seek is equitable or even feasible. Whether control of the 

Websites can or should be returned to HBS or whether some other relief is in order is a 

matter committed to the sound discretion of the District Court.