Electrology Lab., Inc. v. Kunze
Decision Date | 14 March 2016 |
Docket Number | Civil Case No. 11-cv-01907-RM-KMT |
Citation | 169 F.Supp.3d 1119 |
Parties | Electrology Laboratory, Inc., d/b/a Rocky Mountain Laser College, a Colorado corporation, Plaintiff, v. Larry Paul Kunze a/k/a Lorenzo Kunze and Lorenzo Blackstone Kunze, M.E., d/b/a American Laser College and The Laser College, and Larry Paul Kunze, Jr., a/k/a Lorenzo Kunze Jr., Defendants and Third-Party Plaintiffs, v. Ray Fluken, Jody Riggs Fluken, and Jessica Riggs, Third-Party Defendants. |
Court | U.S. District Court — District of Colorado |
Harold R. Bruno, III, Jena Rae Akin, Robinson, Waters & O'Dorisio, P.C., Denver, CO, for Plaintiff.
Peter Bron Goldstein, Gubbels Law Office, P.C., Castle Rock, CO, for Defendants.
FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
Defendant Larry Paul Kunze a/k/a Lorenzo Kunze1 sold his “family” business (Plaintiff Electrology Laboratory, Inc. (“ELI”), d/b/a ROCKY MOUNTAIN LASER COLLEGE (“RMLC”)) but couldn't give it up. So, as the evidence revealed, even while negotiating the sale of ELI to the purchasers (Third-Party Defendants Ray Fluken, Jody Riggs Fluken, and Jessica Riggs, collectively, the “Fluken-Riggs”), Mr. Kunze was trying to figure out how to continue the same business he was selling. The purchasers of the business took exception to Mr. Kunze's actions, and rightly so. The Fluken-Riggs and ELI (collectively, “Plaintiffs') brought this action seeking to recover damages caused by the actions of Mr. Kunze and his son, Defendant Larry Paul Kunze, Jr. (“Mr. Kunze, Jr.”) (Mr. Kunze and Mr. Kunze, Jr., collectively, “Defendants”). In response, Mr. Kunze filed counterclaims and third-party claims asserting it is Plaintiffs who are at fault. The Fluken-Riggs returned with third-party counterclaims against Mr. Kunze. After examining the evidence, considering the parties' stipulations (including the stipulations dismissing certain claims), evaluating the credibility of the witnesses, and analyzing the law, and being otherwise fully advised, the Court finds relief is warranted—to both sides. The Court finds in favor of Plaintiffs, in whole or in part, on eight of their 11 claims for relief. The Court finds Mr. Kunze's credibility sorely lacking and is unpersuaded by his testimony, but nonetheless finds he is entitled to relief on his counterclaim and third-party claim for breach of the Promissory Note given in partial payment for the purchase of ELI. The Court's rationale is as follows.
To the extent that any conclusions of law are deemed to be findings of fact, they are incorporated herein by reference as findings of fact.
1. ELI is a Colorado corporation with its principal place of business at 651 Garrison St., Suite 200, Lakewood, Colorado. ELI does business as “ROCKY MOUNTAIN LASER COLLEGE” and RMLC, and operates on a fiscal year which runs from February 1st to January 31st.
2. Mr. Kunze is a Colorado citizen who, during the relevant time period, resided at 16545 W. Bayaud Dr., Golden, Colorado, less than 10 miles from ELI. Mr. Kunze operated ELI in its current form since at least the 1990s. Mr. Kunze was the sole shareholder of ELI until he sold it to the Fluken-Riggs. ELI was, essentially, a family business.
3. In addition to owning and operating ELI, Mr. Kunze also did business under the name “American Laser College.”
4. Mr. Kunze, Jr. is Mr. Kunze's son and, during the relevant time period, also a Colorado citizen and resident. Mr. Kunze, Jr. worked for ELI under his father's ownership and briefly thereafter.
5. Ray Fluken and Jody Riggs Fluken are husband and wife, and Colorado citizens. Jessica Riggs, also a Colorado citizen, is Mrs. Fluken's daughter and Mr. Fluken's stepdaughter.
6. Under the ownership of Mr. Kunze, ELI earned income primarily from three sources—its occupational school, its clinic, and the sale of laser equipment.
7. ELI's laser education course consisted of 40 hours of training through a curriculum approved and regulated by the Colorado Department of Higher Education, Division of Private Occupational Schools (“DPOS”). ELI's students received RMLC written materials and hands-on training on laser equipment in the course taught by Mr. Kunze.
8. In order to market classes and sell laser equipment, ELI maintained a customer list, identifying students who took the RMLC laser education course. The list changed over time to reflect additional enrollments. The student information was exchanged only between students within class, not to other classes and their students. ELI did maintain some precautions in keeping its student information confidential, such as keeping the files under lock and key and keeping the lists password protected on the computer system.
9. Sometime in the 1990s, ELI began awarding its students “Certified Laser Specialist” or “CLS” certificates, showing they were trained at ROCKY MOUNTAIN LASER COLLEGE.
10. In connection with its business, ELI has long used the marks “ROCKY MOUNTAIN LASER COLLEGE,” “RMLC,” “Certified Laser Specialist,” and “CLS.” ELI advertised ROCKY MOUNTAIN LASER COLLEGE and RMLC extensively through the internet and on its course materials.
11. For a significant period of time, ELI used laserlaser.com to advertise its goods and services, e.g. , its clinic and educational course. ELI used this site to promote ROCKY MOUNTAIN LASER COLLEGE and to drive business to ELI.
12. Although laserlaser.com was the primary source of ELI's advertisement, it also used www.laser-college.com, www.no-hair.com, www.yes-hair.com, www.no-vein.com, www.polyfacial.com, www.laser-white.com, www.no-tattoo.com, and www.no-wrinkle.com (the eight sites, collectively, the “Websites”). ELI paid for the cost of servicing at least some, if not all, of the Websites and laserlaser.com through December 31, 2008 or 2009, even though Mr. Kunze owned them and registered them in his name individually.
13. Through his many years in the industry and in teaching the RMLC laser education course, Mr. Kunze was well known in the aesthetic laser education industry, and touted his experience on the internet, including laserlaser.com. While Mr. Kunze was a “gifted” teacher, he was not as educated or experienced as he touted. While ELI's business and Certified Laser Specialist were recognized by some in the industry, they were also not as Mr. Kunze represented. Instead, Mr. Kunze intentionally made numerous misrepresentations on the laserlaser.com website, including misrepresentations concerning the extent of his education, experience, and certifications; the number of CLS certifications that ELI had awarded to RMLC students; and that Certified Laser Specialist was a registered trademark when it was not.
14. It was through laserlaser.com that Ms. Riggs found ELI in October 2007 and took the RMLC course taught by Mr. Kunze. Ms. Riggs received course materials but was not restricted in any way as to its use. ELI placed no restrictions on the use of its curriculum by its students, during or after the course was completed.
15. In January 2008, Ms. Riggs began working for ELI.
16. In June 2008, Mr. Kunze submitted a trademark application for the mark “CLS (Certified Laser Specialist)” (Ex. 124), to be registered in the Principal Register, stating the mark was first used as of July 28, 1997. Mr. Kunze had a specimen prepared for a Certified Laser Specialist certificate, with the date July 24, 1997. (Ex. 57.) But, Mr. Kunze never completed the registration process. Nonetheless, Mr. Kunze continued to represent to the public that the mark was in fact registered.
17. Sometime in 2008, Mr. Kunze approached Ms. Riggs and others to see if they were interested in buying ELI. Over the course of 2008 and 2009, the Fluken-Riggs investigated purchasing ELI from Mr. Kunze for $1 Million. During this process, Mr. Kunze made a number of representations to the Fluken-Riggs that were untrue, including, as material to this case:
18. Mr. Fluken was skeptical about paying $1 Million for ELI and believed Mr. Kunze overstated or exaggerated how much money the business made. Mr. Fluken received a schedule of fixed assets and inventory stated to be worth $455,248.00 (Ex. 41), but he did not believe they were worth that much. So, Mr. Kunze asked ELI's accountant for financial information and asked Ms. Riggs for backup documentation to check the accuracy of ELI's financials.
19. Mr. Fluken also relied on Ms. Riggs to verify what equipment was on the premises and what was owned or on loan, including two working MediDerms on loan from the manufacturer.
20. Meanwhile, in about November 2009, Mr. Kunze met with Arthur Barbera, an owner of a pre-owned laser equipment company, to discuss laser related business opportunities, including selling lasers to former and current students of ELI. Mr. Barbera was introduced to Mr. Kunze by Mike Sparks of Cynosure, a manufacturer of esthetic and medical equipment. Mr. Sparks sold laser equipment to ELI's students.
21. By December 2009, Mr. Kunze and the Fluken-Riggs agreed to a stock purchase of ELI. The purchase price was...
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