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Lesbian tennis legend Martina Navratilova has filed suit in federal court to block a gay-friendly credit card company from continuing to use her image in its promotions, but the card company has now fired back with counterclaims that accuse Navratilova of lodging false accusations in an attempt to “destroy” the company. In the suit, Navratilova — who is represented by attorneys Paul J. Kennedy, Daniel J. Anders and Barbara L. Delaney of Pepper Hamilton — claims that in the fall of 2004, she became “very dissatisfied” with the marketing and promotion of the Rainbow Card and told Do Tell Inc. to cease using her name and image in its advertisements, brochures and Web site. According to court papers, the dispute grew heated in recent months when Navratilova objected to the Rainbow Card being associated with the cable television soap operas “The L Word” and “Queer as Folk” on the Showtime channel. In January, Navratilova allegedly told the top officers of Do Tell Inc. that she no longer approved of any association between the Rainbow Card and the Showtime programs. According to the defense answer, filed last week, Navratilova called the shows “depraved” and said she believes “The L Word” falsely represents lesbians. Navratilova’s suit, filed in late March, alleges that Do Tell Inc. has refused to stop using her name and image. It seeks an injunction permanently barring the use of her name in connection with the Rainbow Card. Now Conshohocken, Pa.-based Do Tell Inc. has filed a formal answer to the suit that disputes some of Navratilova’s most basic allegations and adds counterclaims that accuse Navratilova of breaching her fiduciary duty as an officer of the company. Navratilova says in the suit that she founded Do Tell Inc. in January 1995 along with Pamela Derderian and Nancy Becker. But Navratilova claims that she is “not an officer” of the company and has no management role, but instead was told that she was an “honorary officer.” But in their answer to the suit, Derderian, Becker and Do Tell Inc. dispute that claim, alleging that Navratilova is president of the company and also serves as a director. Their lawyers — Samuel W. Silver and Stephen J. Shapiro of Schnader Harrison Segal & Lewis — also dispute Navratilova’s claim that she demanded that her name and image be removed in the fall of 2004. Instead, the answer says, Navratilova first made that demand just one month before she filed suit. And in an allegation that goes to the heart of the dispute, the answer alleges that Navratilova has no right to deny Do Tell Inc. the right to use her name and image. “It is denied that Navratilova retained the right to terminate at any time her general consent and approval to the use of her name, likeness and photographs by Do Tell. To the contrary, Navratilova was obligated to consent to and approve all uses or her name, likeness and photographs during the entire term of Do Tell’s contract with the bank that issues the Rainbow Card,” the answer says. The answer also says that Do Tell Inc. complied with Navratilova’s demand that her name and image be removed “though it had no obligation to do so.” Anders, one of Navratilova’s lawyers, said he had no comment on the counterclaim allegations except to say that they are “without merit” and that Navratilova “looks forward to her day in court.” In their counterclaims, the defendants outline the decade-long history of the Rainbow Card and the events in recent months that led to the court battle. According to the counterclaims, documents created when Do Tell Inc. was founded show that Navratilova was elected president, Derderian was elected to the positions of CEO and treasurer, and Becker was elected to the positions of chief operations officer and secretary. Navratilova received one-third of the shares of Do Tell, and in return “agreed to contribute to Do Tell the right to use her name and likeness in marketing and promoting the credit card,” according to the counterclaims. Do Tell then entered into a contract with Traveler’s Bank, which agreed to issue an affinity credit card called the Rainbow Card and Do Tell agreed to assist in marketing, promoting and advertising the card. Citibank later acquired the Rainbow Card through merger, and MBNA America Bank later purchased the Rainbow Card portfolio from Citibank. In its current contract with MBNA, Do Tell Inc. agreed to “use its best efforts to have Navratilova use her best efforts to publicly promote the Rainbow Card,” the counterclaim says. Under its contract with the bank, a percentage of every transaction is paid to Do Tell Inc. and to the Rainbow Endowment, a non-profit organization that “is committed to promoting the health and social well being of lesbian, gay, bisexual and transgender people,” the counterclaim says. For nearly 10 years, the counterclaim says, Navratilova permitted Do Tell Inc. to use her name and likeness in marketing and advertising of the Rainbow Card, and also helped to promote the card by attending promotional events, including one as recently as November 2004. Since the debut of the Rainbow Card, the counterclaim says, the Rainbow Endowment has received more than $1.5 million to support its charitable works. Navratilova has also received shareholder distributions of nearly $500,000, the counterclaim says. According to the counterclaim, Navratilova became dissatisfied with her share in 2003 and was paid an additional $25,000 “marketing fee” for participating in a Rainbow Card sweepstakes. But over the ensuing months, the disputes between Navratilova and Do Tell Inc. grew more heated, the counterclaim says, when Navratilova’s companion, Antoinette Layton-Lambert, allegedly made threats to Derderian to destroy the company. The counterclaim says that “in light of Navratilova’s and Layton-Lambert’s threatening and profane comments, Derderian and Becker concluded that it would be difficult for the parties to remain in business together.” Derderian claims that she proposed that Navratilova either purchase Derderian’s and Becker’s shares in Do Tell Inc., or that Navratilova sell her shares to Derderian and Becker. But as negotiations were underway, the counterclaim says, Navratilova filed suit. In a claim for breach of fiduciary duty, the defendants allege that Navratilova, as an officer of the company, has taken steps to harm its reputation and injure its contracts. “Navratilova, an officer, director, shareholder and fiduciary of Do Tell, threatened to shut down the Rainbow Card,” the counterclaim says. “Consistent with Navratilova’s threat to shut down the card and her threat (via Layton-Lambert) to tear apart Do Tell, Navratilova has engaged in a campaign to destroy the Rainbow Card and Do Tell, vowing her intent to make a public dispute of the matter,” the counterclaim says. The counterclaim says Navratilova recently accused Derderian “of reducing the Rainbow Card to a skeleton membership” and accused Derderian of “deliberately misleading Navratilova into believing that the Rainbow Card was stable.” “These accusations by Navratilova were false,” the counterclaim says. The defendants also claim that the bank “has informed Do Tell that it considers the loss of Navratilova’s endorsement of and participation in the Rainbow Card program to constitute a material breach of [its] contract, and has threatened to terminate the contract if the supposed breach is not cured.”

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