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Doc09 Sound Extreme Counterclaim 01 18 12 .pdf



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Title: DRAFT EXTENSTION REQUEST (01231471).DOC
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IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISRICT OF NORTH CAROLINA
CHARLOTTE DIVISION

SLEP-TONE ENTERTAINMENT
CORPORATION,

)
)
)
Plaintiff,
)
v.
)
) Case No. 3:11cv283
SOUND EXTREME ENTERTAINMENT
)
COMPANY, LLC; SOUND EXTREME
) JURY TRIAL DEMANDED
ENTERTAINMENT, LLC; and BENJAMIN )
A. SIKORSKI,
)
Defendants.
)
_____________________________________ )
ANSWER AND COUNTERCLAIM OF DEFENDANTS
Defendants Sound Extreme Entertainment Company, LLC, Sound Extreme

Entertainment, LLC, and Benjamin A. Sikorski respectfully submit the following answer and
counterclaim in response to the Complaint filed by the Plaintiff, Slep-Tone Entertainment
Corporation.

ANSWER

Defendants Sound Extreme Entertainment Company, LLC, Sound Extreme
Entertainment, LLC, and Benjamin A. Sikorski respond to the corresponding numbered
paragraphs of the Complaint as follows:

1.

Admitted.

2.

Admitted.

3.

Admitted.

4.

Defendants admit that Benjamin A. Sikorski is an individual residing in
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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 1 of 18

Transylvania County, North Carolina. Except as admitted, the allegations in Paragraph 4 are
denied.
5.

Defendants admit that Sound Extreme Entertainment Company, LLC and Sound

Extreme Entertainment, LLC were in the business of providing karaoke entertainment services to
bars, restaurants, social clubs, and private parties at various locations in North Carolina. Except
as admitted, the allegations in Paragraph 5 are denied.
6.

Paragraph 6 contains legal conclusions to which no response is required. To the

extent a response is required, Defendants deny the allegations in Paragraph 6.
7.

Paragraph 7 contains legal conclusions to which no response is required. To the

extent a response is required, Defendants deny the allegations in Paragraph 7.
8.

Paragraph 8 contains legal conclusions to which no response is required. To the

extent a response is required, Defendants deny the allegations in Paragraph 8.
9.

Paragraph 9 contains legal conclusions to which no response is required. To the

extent a response is required, Defendants deny the allegations in Paragraph 9.
10.

Paragraph 10 contains no allegation requiring a response from these answering

defendants. To the extent a response is required, the allegations in Paragraph 10 are denied.
11.

Paragraph 11 contains no allegation requiring a response from these answering

defendants. To the extent a response is required, the allegations in Paragraph 11 are denied.
12.

Paragraph 12 contains no allegation requiring a response from these answering

defendants. To the extent a response is required, the allegations in Paragraph 12 are denied.
13.

Paragraph 13 contains no allegation requiring a response from these answering

defendants. To the extent a response is required, the allegations in Paragraph 13 are denied.
14.

Paragraph 14 contains no allegation requiring a response from these answering

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 2 of 18

defendants. To the extent a response is required, the allegations in Paragraph 14 are denied.
15.

Paragraph 15 contains no allegation requiring a response from these answering

defendants. To the extent a response is required, the allegations in Paragraph 15 are denied.
16.

Paragraph 16 contains no allegation requiring a response from these answering

defendants. To the extent a response is required, the allegations in Paragraph 16 are denied.
17.

Paragraph 17 contains no allegation requiring a response from these answering

defendants. To the extent a response is required, the allegations in Paragraph 17 are denied.
18.

These answering Defendants admit that many KJs store accompaniment tracks on

recordable media. Except as admitted, the allegations in Paragraph 18 are denied.
19.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 19 and therefore deny same.
20.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 20 and therefore deny same.
21.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 21 and therefore deny same.
22.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 22 and therefore deny same.
23.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 23 and therefore deny same.
24.

Defendants admit that persons who illegitimately obtain, copy, share, distribute,

and/or sell accompaniment tracks, by definition, do not pay royalties to the owners of copyright
in the underlying musical works. Except as admitted, the allegations in Paragraph 24 are denied.
25.

Defendants are without knowledge or information sufficient to form a belief as to

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 3 of 18

the truth of the allegations in Paragraph 25 and therefore deny same.
26.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 26 and therefore deny same.
27.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 27 and therefore deny same.
28.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 28 and therefore deny same.
29.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 29 and therefore deny same.
30.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 30 and therefore deny same.
31.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 31 and therefore deny same.
32.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 32 and therefore deny same.
33.

Defendants admit that certain accompaniment tracks used by KJs working some

events booked by Sound Extreme Entertainment Company, LLC’s were authorized phonorecords
and some were unauthorized phonorecords. Except as admitted, the allegations in Paragraph 33
are denied.
34.

Defendants admit that certain accompaniment tracks used by KJs working some

events booked by Sound Extreme Entertainment Company, LLC were authorized phonorecords
and that some were unauthorized phonorecords. Except as admitted, the allegations in Paragraph
34 are denied.

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 4 of 18

35.

Defendants admit that karaoke companies face tremendous pressure to use

unauthorized copies of accompaniment tracks in order to compete in the business. Except as
admitted, the allegations in Paragraph 35 are denied.
36.

Defendants admit that U.S. Trademark Registration No. 1,923,448 is registered to

Plaintiff. Except as admitted, the allegations in Paragraph 36 are denied.
37.

Defendants admit that U.S. Trademark Registration No. 2,000,725 is registered to

Plaintiff. Except as admitted, the allegations in Paragraph 37 are denied.
38.

Defendants are without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 38 and therefore deny same.
39.

Defendants admit that Defendant Sikorski organized and managed Defendant

Sound Extreme Entertainment, LLC and Sound Extreme Entertainment Company, LLC. Except
as admitted, the allegations in Paragraph 39 are denied.
40.

Admitted.

41.

Admitted.

42.

Defendants admit that Defendant Sikorski organized Sound Extreme

Entertainment Company, LLC. Except as admitted, the allegations in Paragraph 42 are denied.
43.

Paragraph 43 contains legal conclusions to which no response is required. To the

extent a response is required, the allegations in Paragraph 43 are denied.
44.

Defendants admit that Sound Extreme Entertainment, LLC was administratively

dissolved.
45.

The allegations in Paragraph 45 are so vague and imprecise that Defendants are

unable to admit or deny same. Defendants cannot know what Plaintiff means by “many of the
acts complained of herein” and therefore the allegations in Paragraph 45 are denied.

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 5 of 18

46.

Defendants admit that SECOND SE was organized after FIRST SE and that both

limited liability companies were in the business of providing music entertainment services.
Except as admitted, the allegations in Paragraph 46 are denied.
47.

Paragraph 47 contains legal conclusions to which no response is required. To the

extent a response is required, the allegations in Paragraph 47 are denied.
48.

Paragraph 48 contains legal conclusions to which no response is required. To the

extent a response is required, the allegations in Paragraph 48 are denied.
49.

Defendants admit that certain accompaniment tracks used by KJs working some

events booked by Sound Extreme Entertainment Company, LLC were authorized phonorecords
and that some were unauthorized phonorecords. Except as admitted, the allegations in Paragraph
49 are denied.
50.

Defendants admit that Sound Extreme Entertainment Company, LLC owns

audiovisual equipment. Except as admitted, the allegations in Paragraph 50 are denied.
51.

Defendants admit upon information and belief that at least ten hard drives in use

at various times by various KJs performing at events booked by Sound Extreme Entertainment
Company, LLC contained authorized and unauthorized phonorecords. Except as admitted, the
allegations in Paragraph 51 are denied.
52.

Defendants admit that KJs performing at certain karaoke events booked by Sound

Extreme Entertainment Company, LLC play accompaniment tracks from a computer hard drive.
Except as admitted, the allegations in Paragraph 52 are denied.
53.

Defendants admit that KJs performing at certain karaoke events booked by Sound

Extreme Entertainment Company, LLC maintain a hard drive with at least 30,000 files. Except
as admitted, the allegations in Paragraph 53 are denied.

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 6 of 18

54.

Defendants admit that each of the hard drives used by KJs performing at certain

karaoke events booked by Sound Extreme Entertainment Company, LLC contain mostly the
same accompaniment tracks. Except as admitted, the allegations in Paragraph 54 are denied.
55.

Defendants admit that certain accompaniment tracks on hard drives used at

certain karaoke events booked by Sound Extreme Entertainment Company, LLC are tracks
purportedly created by Plaintiff.
56.

Paragraph 56 contains legal conclusions to which no response is required. To the

extent a response is required, Defendant deny the allegations in Paragraph 56.
57.

Paragraph 57 contains legal conclusions to which no response is required. To the

extent a response is required, Defendant deny the allegations in Paragraph 57.
58.

Defendants admit that unauthorized phonorecords of accompaniment tracks have

been played at karaoke events booked by Sound Extreme Entertainment Company, LLC. Except
as admitted, the allegations in Paragraph 58 are denied.
59.

Defendants admit that the words “Sound Choice” appeared on the display screen

during the playback of certain accompaniment tracks played at certain karaoke events booked by
Sound Extreme Entertainment Company, LLC. Except as admitted, the allegations in Paragraph
59 are denied.
60.

Defendant is without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 60, and therefore deny same.
61.

Paragraph 61 contains legal conclusions to which no response is required. To the

extent a response is required, Defendant deny the allegations in Paragraph 61.
62.

Denied.

63.

Defendants admit that certain accompaniment tracks used by KJs working some

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 7 of 18

events booked by Sound Extreme Entertainment Company, LLC were authorized phonorecords
and that some were unauthorized phonorecords. Except as admitted, the allegations in Paragraph
63 are denied.
64.

Defendant is without knowledge or information sufficient to form a belief as to

the truth of the allegations in Paragraph 64, and therefore deny same.
65.

Defendants hereby incorporate by reference the preceding responses as if restated

verbatim.
66.

Denied.

67.

Denied.

68.

Denied.

69.

Denied.

70.

Defendants admit that they did not enter into any written license agreements with

Plaintiff. Except as admitted, the allegations in Paragraph 70 are denied.
71.

Denied.

72.

Denied.

73.

Denied.

74.

Defendants hereby incorporate by reference the preceding responses as if restated

verbatim.
75.

Defendants admit that the words “Sound Choice” appeared on the display screen

during the playback of certain accompaniment tracks played at certain karaoke events booked by
Sound Extreme Entertainment Company, LLC. Except as admitted, the allegations in Paragraph
75 are denied.
76.

Denied.

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 8 of 18

77.

Denied.

78.

Defendants admit that Plaintiff receives revenue when its goods are purchased.

Except as admitted, the allegations in Paragraph 78 are denied.
79.

Denied.

80.

Denied.

81.

Defendants hereby incorporate by reference the preceding responses as if restated

verbatim.
82.

Denied.

83.

Denied.

84.

Denied.

85.

Denied.

86.

Denied.

AFFIRMATIVE DEFENSES
By and for their affirmative defenses, Defendants state:
FIRST AFFIRMATIVE DEFENSE
87.

The Complaint fails to state a claim upon which relief can be granted.

SECOND AFFIRMATIVE DEFENSE
88.

Plaintiff’s claims are barred by the doctrine of laches.

THIRD AFFIRMATIVE DEFENSE
89.

Plaintiff’s claims are barred by the applicable statute of limitations.

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 9 of 18

FOURTH AFFIRMATIVE DEFENSE
90.

Plaintiff’s claims are barred by the doctrine of unclean hands.

FIFTH AFFIRMATIVE DEFENSE
91.

Plaintiff’s purported trademark has been or is being used to violate the antitrust

laws of the United States.

SIXTH AFFIRMATIVE DEFENSE
92.

Plaintiff has engaged in trademark misuse and is therefore barred from recovering

for any claims alleging violation of its purported trademark.

SEVENTH AFFIRMATIVE DEFENSE
93.

Plaintiff’s state law claim is preempted by Federal Law.

EIGHTH AFFIRMATIVE DEFENSE
94.

Defendants’ alleged use of Plaintiff’s purported trademark refers to Plaintiff’s

own goods.

NINTH AFFIRMATIVE DEFENSE
95.

Plaintiff’s claims are preempted by the Copyright Act of 1976, 17 U.S.C. § 101 et

seq.

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 10 of 18

COUNTERCLAIM
Defendant Sound Extreme Entertainment Company, LLC, in counterclaiming against
Plaintiff Slep-Tone Entertainment Corporation, alleges and says as follows:
96.

This is an action for tortious interference with contract, tortious interference with

prospective advantage, unfair and deceptive trade practices, and trademark misuse in violation of
the laws of the United States and the State of North Carolina.
97.

Jurisdiction of this Court over this counterclaim is based upon 28 U.S.C. §§ 1331

and 1338 and Rule 13 of the Federal Rules of Civil Procedure. Jurisdiction over the
counterclaims brought under the statutory and common law of the State of North Carolina is
conferred pursuant to 28 U.S.C. §§ 1338(b) and 1367(a).
98.

Venue in this Court is proper pursuant to 28 U.S.C. § 1391.

99.

Prior to January 15, 2012, Counterclaimant Sound Extreme Entertainment

Company, LLC (“Counterclaimant”) had been in the business of, in part, promoting karaoke
events at certain bars, restaurants and other venues, including without limitation Fat Cat’s
Billiards in Arden, Waynesville Inn Golf Resort & Spa, Club Hairspray Café in Asheville, and
Stingray’s in Maggie Valley (collectively the “Karaoke Venues”) in the western part of North
Carolina.
100.

Prior to January 15, 2012, Counterclaimant had routinely entered into contracts

with the Karaoke Venues for the promotion of karaoke events.
101.

Prior to January 15, 2012, Counterclaimant had a reasonable anticipation of

continuing to enter into contracts for karaoke promotion with the Karaoke Venues.
102.

Upon information and belief, in about December 2011, Plaintiff and Counter-

defendant Slep-Tone Entertainment Corporation (“Slep-Tone”) sent a communication via Slep-

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 11 of 18

Tone’s attorney to one or more Karaoke Venues.
103.

Upon information and belief, in the aforementioned communication to the

Karaoke Venues, Slep-Tone stated, “If you register for the Safe Harbor program by January 15,
2012, or if you certify to us by that date that Sound Extreme is no longer providing karaoke
services to your establishment, you will not be named as a defendant in a lawsuit based upon
liability arising from your hiring of Sound Extreme.”
104.

Upon information and belief, by virtue of the aforementioned communication,

Slep-Tone threatened to sue one or more Karaoke Venues unless said Karoke Venues stopped
doing business with Counterclaimant regardless of whether Counterclaimant was continuing the
use of unauthorized Slep-Tone accompaniment tracks.
105.

Upon information and belief, by sending the aforementioned communication,

Slep-Tone sought to force Karaoke Venues to stop doing business with Counterclaimant even if
Counterclaimant was using a fully authorized catalog of karaoke music.
106.

Slep-Tone’s demand that the Karaoke Venues stop doing business with

Counterclaimant far exceeds any lawful remedy under the trademark laws of the United States.
107.

Upon information and belief, Slep-Tone’s unlawful demand that the Karaoke

Venues stop doing business with Counterclaimant was a willful and deliberate abuse and misuse
of the trademark laws of the United States.
108.

Upon information and belief, Slep-Tone’s unlawful demand that the Karaoke

Venues stop doing business with Counterclaimant was part of a scheme concocted by Slep-Tone
to “make an example” of Counterclaimant and to increase Slep-Tone’s share of the karaoke
accompaniment track market.
109.

Upon information and belief, pursuant to the aforementioned scheme, Slep-Tone

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 12 of 18

sought to put Counterclaimant out of the karaoke promotion business altogether to “make an
example” out of Counterclaimant to frighten other potential users of unauthorized
accompaniment tracks. As of January 15, 2012, Slep-Tone has succeeded in this part of the
scheme in that the Karaoke Venues have stopped hiring Counterdefendant for karaoke promotion
which has caused and will continue to cause significant financial harm to Counterclaimant.
110.

Upon information and belief, Slep-Tone’s unlawful demand that the Karaoke

Venues stop doing business with Counterclaimant had a further improper purpose of creating a
vacancy in the karaoke promoter market in western North Carolina, which vacancy Slep-Tone
would seek to fill with one or more purchasers of Slep-Tone’s accompaniment track catalog.
111.

Upon information and belief, by pressuring Karaoke Venues to cease doing

business with Counterclaimant in an attempt to replace Counterclaimant with a purchaser and
user of Slep-Tone’s karaoke catalog, Slep-Tone sought to monopolize, attempt to monopolize, or
combine or conspire with any other person or persons to monopolize the karaoke accompaniment
track market in at least the western part of North Carolina in violation of North Carolina General
Statutes § 75-2.1.

FIRST COUNTERCLAIM
(TORTIOUS INTERFERENCE WITH CONTRACT)
112.

Counterclaimant had valid contracts to perform karaoke promotion services with

the Karaoke Venues, which contracts conferred upon Counterclaimant a contractual right, to wit
the right to be paid for Counterclaimant’s services.
113.

Upon information and belief, Slep-Tone knew of Counterclaimant’s contracts

with the Karaoke Venues.

13

Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 13 of 18

114.

Slep-Tone has intentionally and without lawful justification induced one or more

Karaoke Venues into not performing their contractual obligations.
115.

As a direct and proximate result of Slep-Tone’s conduct, Counterclaimant has

been damaged, including damages for lost profits, in an amount to be determined at trial.

SECOND COUNTERCLAIM
(TORTIOUS INTERFERENCE WITH PROSPECTIVE ADVANTAGE)
116.

Counterclaimant hereby realleges the preceding paragraphs as if restated

verbatim.
117.

By virtue of Slep-Tone’s aforementioned wrongful conduct, Slep-Tone

maliciously sought to induce, and did induce, certain Karaoke Vendors not to enter into further
contracts with Counterclaimant.
118.

Upon information and belief, said Karaoke Vendors would have continued to

enter into contracts for karaoke promotion with Counterclaimant but for Slep-Tone’s unlawful
and unjustified interference.
119.

As a direct and proximate result of Slep-Tone’s malicious conduct,

Counterclaimant has been damaged, including damages for lost profits, in an amount to be
determined at trial.

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 14 of 18

THIRD COUNTERCLAIM
(UNFAIR AND DECEPTIVE TRADE PRACTICES – N.C.G.S. § 75-1.1)
120.

Counterclaimant hereby realleges the preceding paragraphs as if restated

verbatim.
121.

Slep-Tone’s aforementioned conduct in furtherance of its scheme to “make an

example” out of Counterclaimant by putting Counterclaimant out of business, and to unlawfully
monopolize the karaoke accompaniment track market in at least the western part of North
Carolina, which conduct was in or affected commerce within North Carolina, constitutes unfair
and deceptive trade practices in violation of North Carolina General Statutes § 75-1.1.
122.

As a direct and proximate result of Slep-Tone’s unfair conduct, Counterclaimant

has been damaged, including damages for lost profits, in an amount to be determined at trial.

FOURTH COUNTERCLAIM
(TRADEMARK MISUSE)
123.

Counterclaimant hereby realleges the preceding paragraphs as if restated

verbatim.
124.

By demanding that certain Karaoke Venues stop doing business with

Counterclaimant or risk being sued for trademark infringement irrespective of whether or not
Counterclaimant was presently using unauthorized accompaniment tracks, Slep-Tone knowingly
sought to use, and did use, the trademark laws of the United States for an improper purpose and
to achieve an improper result, to wit, the effective removal of Counterclaimant from the karaoke
promotion business.
125.

By using the threat of a trademark lawsuit against the Karaoke Venues in a

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 15 of 18

successful effort to remove Counterclaimant from the karaoke promotion business in favor of,
upon information and belief, a karaoke promoter who has or will purchase a Slep-Tone
accompaniment track catalog, Slep-Tone used the trademark laws of the United States to
promote a monopoly of the accompaniment track market in at least the western part of North
Carolina in violation of at least North Carolina General Statute § 75-2.1.
126.

Slep-Tone’s aforementioned wrongful conduct constitutes trademark misuse.

127.

As a direct and proximate result of Slep-Tone’s misuse of the trademark laws of

the United States, Counterclaimant has been damaged, including damages for lost profits, in an
amount to be determined at trial.

PRAYER FOR RELIEF
WHEREFORE, Defendants Sound Extreme Entertainment Company, LLC, Sound
Extreme Entertainment, LLC, and Benjamin A. Sikorski respectfully request:
1.

That Plaintiff recover nothing of the Defendants and that all of Plaintiff’s claims

against Defendants be dismissed with prejudice;
2.

That Defendant Sound Extreme Entertainment Company, LLC have and recover a

money judgment against Plaintiff on its counterclaim in an amount to be determined at trial;
3.

That the money judgment against Plaintiff on the counterclaim be trebled

pursuant to N.C.G.S. § 75-16;
4.

That the judgment on the counterclaims bear interest at the maximum legal rate

from the date of the institution of this action;
5.

That Defendants be awarded the costs of this action, including reasonable

attorney’s fees pursuant to N.C.G.S. § 75-16.1 and as otherwise allowed by law;
6.

That all issues of fact be determined by a jury trial; and

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 16 of 18

7.

That Defendants be granted such other and further relief the Court may deem just

and proper.

This the 17th day of January, 2012.

s/John C. Nipp
John C. Nipp
N.C. State Bar No. 23406
SUMMA, ADDITON & ASHE, P.A.
11610 N. Community House Rd., Suite 200
Charlotte, NC 28277-2199
Tel: (704)945-6710 (direct)
Fax: (704)945-6735
Email: jnipp@summalaw.com
Attorney for Defendants

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 17 of 18

CERTIFICATE OF SERVICE
I hereby certify that a true and correct copy of the foregoing ANSWER AND
COUNTERCLAIM OF DEFENDANTS was served on the below-listed counsel on this date
via the electronic filing system of the Western District of North Carolina:
James M. Harrington
HARRINGTON LAW, P.C.
PO Box 403
Concord, North Carolina 28026-0403
jharrington@harringtonlawpc.com
Attorney for Plaintiff

This the 17th day of January, 2012.
s/John C. Nipp
John C. Nipp
Attorney for Defendants

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Case 3:11-cv-00283-GCM Document 9 Filed 01/18/12 Page 18 of 18


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