TA Pelsue Co. v. Grand Enterprises, Inc., Civ. A. No. 89-S-1645.

• Citation: 782 F. Supp. 1476
• Decision Date: 25 June 1991
• Docket Number: Civ. A. No. 89-S-1645.
• Parties: T.A. PELSUE COMPANY, Plaintiff, v. GRAND ENTERPRISES, INC., Allan E. Beavers, and Robert A. Fulcher, Defendants.
• Court: U.S. District Court — District of Colorado

782 F. Supp. 1476

T.A. PELSUE COMPANY, Plaintiff, v. GRAND ENTERPRISES, INC., Allan E. Beavers, and Robert A. Fulcher, Defendants.

Civ. A. No. 89-S-1645.

United States District Court, D. Colorado.

December 30, 1991.

Nunc Pro Tunc June 25, 1991.

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Tom Young, Charles Goldberg, Rothgerber, Appel & Powers, Denver, Colo., for plaintiff.

George Matava, Craig Groseth, Sheridan Ross & McIntosh, Denver, Colo., for defendants.

MEMORANDUM OPINION AND ORDER

SPARR, District Judge.

This is a suit for patent infringement pursuant to 35 U.S.C. § 1 et seq. and for related pendent claims. This court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1338(a) and (b), and pendent jurisdiction. This court has personal jurisdiction over the Defendants, all of whom are residents of Colorado. Venue is proper pursuant to 28 U.S.C. §§ 1391 and 1400(b), in that all the Defendants reside in this judicial district. VE Holding Corp. v. Johnson Gas Appliance Co., 917 F.2d 1574 (Fed.Cir.1990), cert. denied, ___ U.S. ___, 111 S.Ct. 1315, 113 L.Ed.2d 248 (1991). This case came before the court for trial commencing on June 10, 1991. Having considered the evidence and argument by counsel, the court now makes the following Findings of Fact, Conclusions of Law, and Order.

I. PARTIES AND CLAIMS

On October 4, 1990, the court entered a Stipulated Consent Judgment and Dismissal With Prejudice of the claims against Defendants Robert Miller, Arthur Utech, and Mountain Utility Sales, Inc. (Mtn. Utility) (Exhibit 235). Defendants Beavers, Fulcher and Grand Enterprises, Inc. (Grand) are the only Defendants remaining in the case. Pelsue Co.'s Third Claim for Relief against Defendant Aguilar was resolved by a stipulated consent judgment approved by the court on September 20, 1990. (Exhibit 236). Judgment was previously entered in favor of Pelsue Co. and against Defendant Grand on the Fourth Claim for Relief pursuant to a confession of judgment at the preliminary injunction hearing on November 16, 1990. The Fourth Claim for Relief remains before the court for a determination of damages only. Pelsue Co.'s Fifth and Sixth Claims for Relief were dismissed by the court at the close of the Plaintiff's evidence pursuant to Fed.R.Civ.P. Rule 41(b). Pelsue Co.'s Eighth, Tenth, and Twelfth Claims for Relief were dismissed by the court at the close of all the evidence pursuant to Rule 41(b). Beavers has abandoned his Second Counterclaim for breach of contract.

Presently before the court are: (1) Plaintiff's First Claim for Relief for patent infringement against Defendant Grand; (2) Plaintiff's Second Claim for Relief for patent infringement against Defendants Beavers and Fulcher; (3) Plaintiff's Seventh Claim for Relief alleging breach of fiduciary duty and the duty of loyalty against Defendant Beavers; (4) Plaintiff's Ninth Claim for Relief alleging civil conspiracy against all three Defendants; (5) Plaintiff's Eleventh Claim for Relief alleging false representation and non-disclosure against all three Defendants; (6) Plaintiff's Motion for Fees Incurred in Connection with the Counterclaim of Grand Enterprises, Inc. for Tortious Interference with Existing and Prospective Contractual Relations; and (7) Defendant Beavers's First Counterclaim for breach of contract.

Pelsue Co. seeks injunctive relief, compensatory damages, enhanced damages pursuant to 35 U.S.C. § 284 for willful infringement, and attorneys' fees pursuant to 35 U.S.C. § 285, among other relief. Defendants generally deny the allegations. Defendant Beavers seeks compensation for breach of contract for Pelsue Co.'s failure to pay $35,000.00 due and owing under a letter agreement.

II. FINDINGS OF FACT

Plaintiff Pelsue Co. is a privately-held Colorado corporation with its principal place of business in Englewood, Colorado. Since 1962, Pelsue Co. has been in the business of manufacturing and selling products designed for use in construction and maintenance of utility company outside plant facilities. These products include tents, blowers, heaters, hoses, manhole shields and guards, and other portable equipment used in the outside plant industry.

Defendant Beavers is a former employee of Pelsue Co. who presently resides in Grand Junction, Colorado. Defendant Fulcher has been married to Beavers's daughter, Diana Fulcher, since 1967 and also resides in Grand Junction. Defendant Grand is a Colorado corporation incorporated by Beavers and Fulcher on February 2, 1987 with its principal place of business in Grand Junction, Colorado. Grand also manufactures portable products and tents for the utility industry. Since Grand's incorporation, Beavers has been, at various times, Grand's president, a director, a shareholder, a consultant, and a source of substantial financial backing. Fulcher has been an officer, director, and substantial shareholder. Grand is presently owned by Fulcher and his wife, Diana.

Defendant Beavers was employed by Pelsue Co. from 1965 until January of 1987, at which time he retired. Beavers was responsible for engineering, design, and manufacturing at Pelsue Co. He was promoted to the position of Executive Vice President and was on the board of directors of Pelsue Co. from 1972 until approximately mid-autumn of 1988. Beavers patented several inventions while working for Pelsue Co., including the tent which is the subject of United States Patent No. 3,810,482 (the 482 patent) and the "tent hub" which is the subject of United States Patent No. 4,637,748 (the 748 patent). The 482 patent and the 748 patent were assigned by Beavers to Pelsue Co. (Exhibits 33 and 156).

On December 15, 1967, Beavers entered into an agreement (Exhibit A) with Al Pelsue, the founder of Pelsue Co. and the father of Brad Pelsue. Exhibit A provided that Beavers was to receive a monthly salary from Pelsue Co. and an annual bonus based on a percentage of income as shown on Pelsue Co.'s income tax returns. In the event the company were sold, merged, or liquidated while the agreement was in effect or within one year after termination of Beavers's employment, Beavers was to receive five percent (5%) of the net gain realized from the sale, merger, or liquidation. (See Exhibit A). Beavers was employed at Pelsue Co. pursuant to the terms of this agreement until approximately mid-November of 1986.

Beavers announced his decision to retire at a meeting of the Board of Directors on March 20, 1986. The Board was concerned about losing Beavers and his design and engineering skills. In November of 1986, Beavers and Pelsue Co. entered into a new agreement. (Exhibit B). Exhibit B was negotiated in response to the Board's concerns and retained Beavers as a consultant to Pelsue Co. from February of 1987 to February of 1991. Exhibit B superseded all previous agreements between Beavers and Pelsue Co., including the agreement reflected in Exhibit A. Exhibit B provided that Beavers was to receive his full salary as an employee through January of 1987 and, beginning in February of 1987, Beavers was to be paid $3,000.00 per month for a period of four (4) years, until February 1, 1991). Beavers was to remain on Pelsue Co.'s group insurance policy, the cost of which would be deducted from his monthly pay. Beavers was to continue to serve on the Board of Directors and was to be compensated separately for that service. Beavers could continue to provide specialized services for Pelsue Co. on a fee basis even beyond February of 1991.

After leaving Pelsue Co. and moving to Grand Junction, Beavers joined Fulcher in establishing Grand Enterprises, Inc. Grand was incorporated by Beavers and Fulcher on February 2, 1987. At the time of incorporation, Beavers and Fulcher were equal owners of the common stock in Grand. Beavers was the president, Fulcher the vice president, and both were directors of the corporation.

During 1987, Grand made products for the nursery business and Beavers worked part-time on other research. But, by December 7, 1987, Grand did not have enough money to continue in business. (Exhibit 168). Fulcher and his wife, Diana Fulcher, decided that Grand should begin making products for the utility industry. This would put Grand in direct competition with Pelsue Co. Fulcher explained this decision to Beavers on or about Christmas of 1987. Beavers initially disputed the decision, recognizing that he could not compete directly with Pelsue Co. while Pelsue Co. was paying him a salary and while he continued to serve as a director of Pelsue Co.

To avoid impropriety, Beavers attempted to distance himself from Grand by selling his Grand stock to his daughter, Diana Fulcher, in exchange for a note. (Exhibit I-2). Beavers resigned as president and as a director of Grand. (Exhibit 167). However, Beavers continued to use the facilities at Grand, maintained an office at Grand, corresponded on Grand stationery, and provided Grand with substantial capital. Although he argues that he was divested of any interest in Grand, Beavers ultimately contributed approximately $180,000 to Grand. (Exhibit 23).

Beavers also continued to work on research and development of Grand products after Christmas of 1987. In fact, as early as June of 1987, Beavers was designing products that directly competed with Pelsue Co. products. He worked on a bottle warmer, a heater blower, a hose canister, a jig for a manhole guard, and other pieces of equipment. (Exhibits 176, 177). Although Beavers claims he was designing these products for Pelsue Co., the evidence indicates otherwise.

In January of 1988, Beavers, Fulcher, and Grand learned that Art Utech and Bob Miller had formed Mtn. Utility. Mtn. Utility had a distributors' agreement with Pelsue Co. to sell Pelsue Co. products. (Exhibit 100). Grand discussed with Utech and Miller the possibility of selling Grand products through Mtn. Utility in direct competition with Pelsue Co. The purpose of...