Commitments and Contingencies

3 Months Ended

Mar. 31, 2016

Commitments and Contingencies [Abstract]

COMMITMENTS AND CONTINGENCIES

8. COMMITMENTS AND CONTINGENCIES

The Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer. The lease, as extended, expires on December 31, 2023. The lease requires an annual minimum base rent of $94,800 and provides for a maximum annual 2% increase in subsequent years, although the entity has not raised the minimum rent since the Company entered into a previous lease agreement in 1998. Additionally, the leasing entity is entitled to reimbursement of all taxes, assessments, and any other expenses that arise from ownership. Each of the parties to the lease has agreed to review the terms of the lease every three years at the request of the other party.  Rent expense under the lease was approximately $24,000 for each of the three months ended March 31, 2016 and 2015. 

On August 13, 2014, Star-Brite Distributing, Inc. (“Star-Brite”), a wholly-owned subsidiary of the Company, filed a complaint for injunctive relief and damages against Gold Eagle Co. (“Gold Eagle”) in the United States District Court for the Southern District of Florida. The complaint alleged that Gold Eagle, in violation of Section 43(a) of the Lanham Act, the Florida Deceptive and Unfair Trade Practices Act, and the Florida False Advertising Statute, made false and/or misleading statements in a comparative marketing campaign against Star Tron® Enzyme Fuel Treatment, an enzyme based fuel additive for the marine market, used to treat ethanol gasoline, commonly referred to as E10 fuel. The complaint also constitutes a claim for common law unfair competition.

Gold Eagle filed an answer to complaint and counterclaim, generally denying the allegations in Star-Brite’s complaint and asserting affirmative defenses to Star-Brite’s claims. Gold Eagle’s counterclaim alleged, among other things, that in various advertising and marketing materials for Star Tron, which Star-Brite markets for use in various types of engines, Star-Brite makes false and misleading claims that are causing harm to Gold Eagle, which markets competitive products under the STA-BIL brand, thereby violating the same statutory provisions as Gold Eagle was alleged to have violated in Star-Brite’s complaint, and also constituting common law unfair competition. 

Star-Brite filed an answer to the counterclaim, generally denying the allegations, and asserting affirmative defenses.

A jury trial was conducted during February 2016. On March 1, 2016, the jury unanimously found that (i) Gold Eagle’s advertising was not literally false; (ii) Gold Eagle did not commit false advertising under the Florida False Advertising Statute; (iii) Star-Brite’s advertising was not literally false and (iv) Star-Brite did not commit false advertising under the Florida False Advertising Statute. As a result of the jury’s verdict, the Court determined that (i) Star-Brite would recover nothing from Gold Eagle, and Star-Brite’s action was dismissed on the merits and (ii) Gold Eagle would recover nothing from Star-Brite, and Gold Eagle’s counterclaim was dismissed on the merits. Neither party has filed an appeal.

In post-trial proceedings, Star-Brite is seeking attorneys’ fees and costs under the Florida False Advertising Statute, which provides that a prevailing party in a civil action for violation of the statute will be awarded costs, including attorneys’ fees.  Star-Brite is asserting, among other things, that the issues asserted by Gold Eagle in its counterclaim were the significant issues in the case, that Star-Brite obtained a defense judgment in its favor on the counterclaim, and, therefore, Star-Brite is the prevailing party, entitled to costs and attorney’s fees under the statute.  Star-Brite also asserts that it is entitled to attorney’s fees and costs as a prevailing party on the counterclaim under the Florida Deceptive and Unfair Trade Practices Act.  Gold Eagle has asserted, among other things, that because both parties were denied the relief they sought, neither party should be deemed a prevailing party, or, in the event the Court determines that either party is a prevailing party, Gold Eagle, as defendant in the action, should be deemed the prevailing party. The Court has referred the matter to a Magistrate Judge for appropriate disposition or report and recommendation.