Advertising and Marketing and Banking & Finance and Lawsuits and Stephen Hilbert and Media & Marketing

Menard lawyers question Trump's value as spokeswoman

November 13, 2013

Attorneys for John Menard questioned the value of Melania Trump as a celebrity spokeswoman during an ongoing trial over a skincare marketing deal gone sour.

The trial, playing out this week before US. District Court Judge Jane Magnus-Stinson, stems from a licensing agreement signed by Trump, a former model and wife of Donald Trump, with New Sunshine LLC, an Indianapolis-based maker of tanning and skin care products.

An expert witness for Menard on Tuesday afternoon said one glaring problem with the deal was that it only allowed New Sunshine to use the name Melania, not her more recognizable last name.

New Sunshine is one of several companies owned by MH Private Equity, an investment fund formed by Menard, the founder of the Menard Inc. chain of hardware stores, and Indianapolis businessman Steve Hilbert.

The two men had been longtime friends but had a falling out in 2011 that ultimately led Menard to sue for a court order removing Hilbert as the manager of MH Private Equity and the companies that the $495 million fund had purchased.

After a judge in Wisconsin ousted Hilbert in February, Menard moved swiftly to fire the exectives Hilbert had hired at New Sunshine and to renegotiate nearly all the contracts New Sunshine had signed with outside parties. But Melania Trump refused to renegotiate, and instead filed an arbitration claim seeking $50 million in damages.

That dispute has since been moved to federal court, where New Sunshine, now in Menard's control, is arguing that the deal the company struck with Trump was so one-sided in her favor—and also included giveaways to Hilbert and his family—that it is no longer valid.

To buttress that argument, Menard's attorneys on called marketing expert Erik Rosenstrauch, CEO of Florida-based marketing firm FUEL Partnerships. He summarized an analysis he conducted of the deal that New Sunshine signed with Trump. His analysis highlighted many unusual provisions, not least the clause that entitles Hilbert and his family to $50,000 worth of the Trump skin care products each year.

Also, Rosenstrauch's analysis questioned why the licensing agreement did not allow New Sunshine to use the Trump name, only the name Melania. That would have been problematic because Melania Trump, individually, has a small stature as a celebrity. For example, she does not even have a Q score, which is a standard metric used in the marketing and media industry to measure the value of brands and celebrities.

"It is atypical to provide that the celebrity/licensee's last name not be used, particularly where the licensee is not generally known by just her first name," stated Menard attorneys Kevin Tyra and Jerry Padgett, in documents filed before the trial. They also noted that the Trumps are friends with Steve Hilbert and his wife Tomisue. For example, the Trumps purchased the Hilberts' vacation home in St. Martin earlier this year.

But Eric Weber, who was president of New Sunshine before Hilbert's ouster, testified Wednesday morning that consultants hired by New Sunshine had a series of conversations with retailers that might purchase a skin care line with Melania Trump's name on it, and received good feedback. New Sunshine also hired a consultant with expertise in selling products on the television station QVC, where Melania Trump had already marketed a jewelry line. That consultant also approved of using Trump as a spokeswoman.

That feedback, as well as New Sunshine's analysis of sales of other high-end skin care products, led Weber to predict the new product could achieve first-year sales of more than $1 million. And because of those estimates, Weber said, he felt the deal's upfront payments to Trump of $1 million were a good deal for New Sunshine.

"You can look at a marketplace, and if other competitors are in that marketplace, you can assume that there is demand," Weber said.

After Weber was fired by Menard representatives on March 1, New Sunshine decided not to pay $750,000 in upfront royalty payments to Trump that were called for in the licensing agreement. That decision sparked the litigation that has led to the trial this week.

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