Free Proposed Findings of Fact - District Court of Colorado - Colorado

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CONCLUSIONS OF LAW Legacy's Claims. As set forth in the Final Pretrial Order, Legacy is asserting the following discrete claims for relief: breach of fiduciary duty against Mr. Loyer and Mr. Boden; defamation against all Defendants; trademark infringement under 15 U.S.C. § 1114 against Defendant MVM; tortious interference and unfair competition against all Defendants; and breach of contract against all Defendants. Contract claims. The Final Pretrial Order listed the following contracts that Legacy claims the Defendants breached: an agreement by Mr. Loyer and Mr. Boden to work as employees of Legacy; an agreement to transfer sales representative agreements and vendor agreements from MVM to Legacy; an agreement to transfer customer accounts from MVM to Legacy; and an agreement to assign the federally registered trademark World's Best Inkjet Cartridge® to Legacy. Legacy's claim for breach of the contract to assign the trademark, although not pleaded in the complaint, was tried, and is discussed infra in connection with Legacy's claim for trademark infringement. The elements of a claim for breach of contract under Colorado law are: (1) the defendant entered into a contract with the plaintiff; and (2) the defendant failed to perform the contract. See Smith v. Mills, 225 P.2d 483, 484 (Colo. 1950). The Court finds no breach of any contract by Mr. Loyer and Mr. Boden to work as employees of Legacy. Whether Mr. Loyer and Mr. Boden were employees of Legacy was a disputed issue at trial. The so-called "employment forms" signed by Mr. Loyer and Mr. Boden (Exhibits 32-37, 9296) do not contain any promise by Legacy to employ them. Neither Mr. Loyer nor Mr. Boden ever signed a written employment agreement with Legacy (Loyer 394:25­395:5). While the evidence indicated that Mr. Loyer and Mr. Boden were placed on Legacy's payroll with its payroll service, ADP Total Source, there was also evidence that they were not paid on a regular basis (Loyer 398:5-7; Loyer 453:6-12; Exhibit N-8), see COLO . REV . STAT . § 8-4-103(1), as well as evidence that they were not paid directly the full amounts listed on their 2003 W-2 forms (Exhibits X-6, N-8; Loyer

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399:22­400:4; Loyer 400:5-22). This evidence suggests that although Legacy claimed that Mr. Loyer and Mr. Boden were its employees, it did not pay them like other employees, thus casting doubt on whether they were in fact employees. In contrast, Defendants considered themselves independent contractors (Loyer 337:24-338:7; Loyer 394:16-24; Exhibit O-6). Nevertheless, the evidence at trial clearly established that these Defendants, to the extent they were actual employees of Legacy, performed their contracts to work as Legacy's employees. The evidence showed that they made sales calls, filled purchase orders, prepared sales forecasts, worked at resolving manufacturing problems, and otherwise performed duties that would be expected of employees involved in the sales and marketing of Legacy's product (Loyer 302:7-20; Loyer 316:1825; Boden 539:8-16; Boden 536:21-23; Boden 541:8-18; Boden 544:3-9; Duke 56:1-7). The Court finds that, to the extent Mr. Loyer and Mr. Boden were employees of Legacy, Legacy has failed to present credible evidence that they breached their alleged contracts to work as Legacy's employees. (Legacy's claim that Mr. Loyer and Mr. Boden breached their fiduciary duties as employees is discussed infra.) In addition, based on the employee policies handbook that Mr. Duke testified was given to all of Legacy's employees (Exhibit X-9; Duke 32:8-12), the Court finds that Mr. Loyer and Mr. Boden, to the extent they were employees of Legacy, were employees-at-will. An employee-at-will is free to terminate his relationship with his employer at any time, for any reason, with or without cause or advance notice. Crawford Rehab. Servs., Inc. v. Weissman, 938 P.2d 540, 546 (Colo. 1997); Wisehart v. Meganck, 66 P.3d 124, 126 (Colo. App. 2002). See Exhibit X-9 at 2 (providing that employees "are free to end the relationship at any time, for any reason, with or without cause or advance notice."). For this reason, they did not breach any employment contract with Legacy when they terminated their relationship with Legacy on October 23, 2003. See Electrolux Corp. v. Lawson, 654 P.2d 340, 341 (Colo. App. 1982).

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With regard to the alleged agreement to modify vendor agreements to include Legacy's name and to transfer customer accounts from MVM to Legacy, the Court finds that MVM performed its obligations under this agreement and that there was no breach. The evidence established that MVM transferred the Neamco, Best Buy, and Costco US accounts to Legacy and modified the respective vendor agreements (Loyer 279:13-280:12; Loyer 280:20-281:13; Loyer 297:17-23; Loyer 298:14-16; Loyer 409:17-411:2; Loyer 517:2-23; Exhibits U-2, K-4 and 112). The Court further finds that MVM performed its agreement to transfer the Duckwall account to Legacy (Loyer 517:2-23); even if MVM did not transfer its vendor agreement with Duckwall to Legacy, it nevertheless transferred the revenue it received from this account to Legacy (Loyer 298:17-20; Loyer 307:24-308:13; Loyer 327:22-328:2; Loyer 346:22-347:17; Loyer 348:1-16; Exhibits J-6, G-9). The Court finds that MVM did not breach any agreement by failing to transfer its Wal-Mart vendor agreement to Legacy because it was undisputed that MVM' Wal-Mart vendor agreement and vendor number could not be transferred to Legacy under Wal-Mart's policies (Kennon 568:9-13). MVM's vendor agreement with Wal-Mart allows the right to receive payment to be assigned to another, but does not allow the vendor to assign the right to sell product to Wal-Mart to another (Exhibit Q-2 at 3). With regard to the alleged agreement to renegotiate sales representative agreements to transfer them from MVM to Legacy, the Court finds that Legacy has failed to prove the existence of such a contract. The testimony of Mr. Loyer established that this term was never part of any firm agreement, and was not part of the consideration to which Legacy agreed for making Mr. Loyer and Mr. Boden members of the limited liability company (Loyer 301:5-13; Loyer 314:8-15; Loyer 407:58). Legacy, moreover, presented no evidence of any written memorialization of this alleged contract term; the mere act of sending lists of sales representatives to Legacy (Exhibits 57, 58) fails to establish an intent by Defendants to transfer those sales representatives to Legacy. As Mr. Loyer explained, he sent a list of accounts and sales representatives to Mr. Duke because that Mr. Duke

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was trying to attract investors and he was providing Mr. Duke with information to help him develop his presentation for those investors (Loyer 405:13-406:7; Loyer 406:23-407:4). Legacy did not present any evidence, other than Mr. Duke's testimony, from which it reasonably could be inferred that Mr. Loyer and Mr. Boden agreed to transfer sales representatives and vendor agreements and numbers to Legacy as consideration for the agreement to make Mr. Loyer and Mr. Boden members of the limited liability company. The Court finds as credible Mr. Loyer's testimony that it was never his intent that sales representatives agreements be transferred to Legacy as consideration for him and Mr. Boden being made members of the limited liability company, and that this term was never discussed (Loyer 301:5-13; Loyer 314:8-15; Loyer 407:5-8). Further, Mr. Duke agreed with Mr. Loyer that the sales representative agreements could not simply be transferred from MVM to Legacy (Duke 49:1-10; Loyer 527:8-13). At most, Legacy has shown only a naked promise by Mr. Boden to renegotiate sales representatives agreements (Exhibit 66), which was unsupported by consideration. Legacy's decision to make Mr. Boden a member of the limited liability company is not consideration for this promise because it occurred nearly four months before Mr. Boden's promise to transfer the sales representative agreements to Legacy and is therefore past consideration that will not support an enforceable contract. See Plains Iron Works Co. v. Haggott, 188 P. 735, 738 (Colo. 1920). Further, because Legacy failed to establish any detrimental reliance on that promise, Legacy cannot enforce it under the doctrine of promissory estoppel. See Frontier Explor., Inc. v. American Nat. Fire Ins. Co., 849 P.2d 887, 890 (Colo. App. 1992); Seeley v. Board of County Commrs., 771 P.2d 21, 23 (Colo. App. 1989). The Court further finds, as a matter of equity, that the prevention of injustice does not require the promise to be enforced. Judgment therefore enters for Defendants on Legacy's claims for breach of any contract by Mr. Loyer and Mr. Boden to work as employees of Legacy, for breach of any contract to transfer

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sales representative agreements and vendor agreements from MVM to Legacy, and for breach of any contract to transfer customer accounts from MVM to Legacy. Breach of fiduciary duty claims. Legacy's claim for breach of fiduciary duty against Mr. Loyer and Mr. Boden has two aspects: First, Legacy claims that Mr. Loyer and Mr. Boden were employees of Legacy and breached their fiduciary duty of loyalty as employees of Legacy by competing against Legacy or self-dealing. Second, Legacy claims that Mr. Loyer and Mr. Boden breached their respective fiduciary duties as a manager and a member of Legacy under Legacy's Operating Agreement (Exhibit 134). The Court finds that Legacy has not proved either claim for breach of fiduciary duty. The elements of a claim for breach of fiduciary duty under Colorado law are: (1) the defendant was acting as a fiduciary of the plaintiff with respect to a particular subject matter; (2) the defendant breached a fiduciary duty to the plaintiff; (3) the plaintiff had damages; and (4) the defendant's breach of fiduciary duty was a cause of the plaintiff's damages. COLO . JURY INSTR.CIV .4TH 26:1 (2005). A fiduciary relationship exists whenever one person is entrusted to act for the benefit of or in the interests of another and has the legal authority to do so. RESTATEMENT (SECOND )
OF TRUSTS

§ 2, cmt. b (1959). The existence and breach of a fiduciary duty is a question of fact to

be determined by the Court sitting as the trier of fact. Paine, Webber, Jackson & Curtis, Inc. v. Adams, 718 P.2d 508, 518 (Colo. 1986). As a general rule, an employee owes a fiduciary duty of loyalty to his employer not to compete with his employer. Jet Courier Serv., Inc. v. Mulei, 771 P.2d 486, 492-93 (Colo. 1989). This duty, however, terminates when the employee is terminated. Id., 771 P.2d at 499. Whether Mr. Loyer and Mr. Boden were employees of Legacy was disputed. The Court need not decide this issue, however, because even assuming that Mr. Loyer and Mr. Boden were Legacy's employees from mid-June through September 30, 2003, the date that notice of their termination by Legacy was given to ADP Total Source (Snead 430:8-122; Snead 434:15-23; Exhibits J-8, K-8, L-8),

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or even through October 23, 2003, the date their relationship with Legacy was finally terminated (Duke 118:4-7; Exhibit 84), the Court finds that Legacy failed to establish that either Mr. Loyer or Mr. Boden breached any fiduciary duty of loyalty that he may have owed to Legacy as an employee. At trial, Legacy presented scanty evidence of the alleged breaches of fiduciary duty. At most, Legacy presented evidence that it claimed would show the following breaches of a duty of loyalty: (1) Soliciting business for MVM; (2) Defendants' failure to use Legacy's name in connection with various sales efforts, particularly with Wal-Mart UK; (3) Mr. Boden's report on his July 9, 2003 sales call on Staples; and (4) Mr. Boden's purported formation of LB Imaging, which Legacy contends was an attempt to compete with it or make sales behind its back. The evidence, however, failed to establish any substance to these claims. Soliciting business for MVM. The Court finds that Legacy presented no credible evidence that Defendants solicited or attempted to solicit business for themselves or MVM, or that they attempted to steer customers to MVM, in competition with Legacy during the time they were allegedly employed by Legacy. To the contrary, the testimony of Mr. Loyer and Mr. Boden clearly and credibly established that their sales efforts were always intended to benefit Legacy (Loyer 302:720; Loyer 305:18-306:3; Loyer 316:18-25; Loyer 360:23-361:9; Loyer 402:12-403:5; Boden 539:816; Boden 541:1-7; Boden 544:3-9). There was no evidence that any customers were diverted to MVM (Loyer 317:1-4). Defendants' transmission to Legacy of payments that MVM received from Duckwall also contradicts Legacy's claim that Defendants were actively competing with Legacy during this time (Loyer 307:24-308:13; Loyer 346:22-347:17; 348:1-16; Exhibit G-9). The Court further finds that Legacy presented no evidence that Defendants were making preparations to compete with Legacy or that they solicited employees away from Legacy during the time of their alleged employment with Legacy. See Mulei, 771 P.2d at 493. Failure to use Legacy's name in sales efforts. Although Mr. Loyer and Mr. Boden admitted that sometimes they did not disclose Legacy's name or identity as the manufacturer of the

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products they were trying to sell, the evidence established that they did not use Legacy's name either because Mr. Duke expressly directed them not to, as in the case with Office Max and Office Depot, or because, in the case of Wal-Mart and Sam's Club, they needed to present MVM as the vendor because MVM had a Wal-Mart vendor number and Legacy did not. Both Mr. Loyer and Mr. Boden testified that Mr. Duke expressly told them not to disclose that Legacy was the manufacturer of the product they were selling in their dealings with Office Max and Office Depot (Loyer 401:3-20; Boden 544:10-545:1). At the time, Legacy's customers who were resellers of its product included NCR, Nu-Kote and Data Products (Duke 139:12-25). Mr. Duke told Mr. Loyer that Legacy was selling product to these resellers under their own brand and that he did not want Legacy to be perceived as competing directly against them in the marketplace (Loyer 266:15-267:4). Mr. Duke told Mr. Loyer not to use Legacy's name in connection with soliciting Office Max and Office Depot because NCR, Legacy's largest customer, was the vendor of record for Office Max, and he did not want Legacy to compete directly with NCR; because NuKote was vendor of record for Office Depot, Mr. Duke also told Mr. Loyer that he did not want Legacy to compete directly with Nu-Kote (Loyer 401:11-20). Mr. Duke told Mr. Loyer he was concerned that if NCR and Nu-Kote perceived that Legacy was competing with them directly, they would pull their business from Legacy (Loyer 401:21-24). Mr. Duke did not contest this testimony. The Court finds Defendants' testimony credible and therefore accepts it as true. In essence, Legacy used MVM as a "front" in order to do business behind its reseller customers' backs so they would not discover that Legacy was competing directly against them for the same accounts. Because Defendants' conduct in not disclosing to these accounts that Legacy was the manufacturer of the products was the result of an express direction by Mr. Duke, the Court finds that Defendants did not breach any fiduciary duty to Legacy by failing to disclose that Legacy was the manufacturer of the product they were trying to sell.

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The Court finds that Legacy also used MVM as a "front" in trying to sell product to WalMart UK in July 2003. It was undisputed at trial that, at that time, MVM had a Wal-Mart vendor number and Legacy did not (Loyer 240:9-23; Duke 149:23-150:7; Duke 150:13-15; Duke 151:2-5); that Wal-Mart would not do business with any vendor who did not have a Wal-Mart vendor number (Loyer 241:19-25; Boden 546:8-10; Kennon 566:12-16; Kennon 567:22-568:5); and that Legacy needed MVM's Wal-Mart vendor number to make sales to Wal-Mart UK (Boden 545:6-23). Because Mr. Boden's and Mr. Kennon's testimony established that Wal-Mart UK would not have done business with Legacy directly because Legacy did not have a Wal-Mart vendor number, the Court finds that Mr. Boden did not breach any fiduciary duty by not disclosing Legacy's identity as the manufacturer to Wal-Mart UK. Indeed, unless the vendor was presented as MVM rather than as Legacy, it appears unlikely from the evidence that Wal-Mart UK would have even allowed Mr. Boden and Mr. Kennon to make their sales call. Accordingly, the Court finds that Legacy has failed to prove any claim for breach of fiduciary duty against Defendants based on their failure to use Legacy's name in connection with their sales efforts on Legacy's behalf. Staples sales report. The Court finds no merit to this aspect of Legacy's claim. Both Mr. Boden's uncontested testimony and the sales report Mr. Boden prepared concerning his July 9, 2003 sales call on Staples (Exhibit 120) makes clear that Staples's buyer, Mr. McAdams, and not Mr. Boden, was the sole source of the negative comments about Legacy, and that Mr. Boden was merely reporting Mr. McAdams's negative impressions of Legacy and its products (Boden 546:19-547:17; Boden 547:20-25; Exhibit 120). That Mr. Boden did not breach any fiduciary duty is confirmed by the comments he received from Ben Lyles, Legacy's technical director, in an e-mail dated the same day as Mr. Boden's Staples report, commending Mr. Boden for his efforts in spite of the negative reception from Mr. McAdams, and thanking him for "taking one on the chin for" Legacy (Boden 548:8-20; Exhibit P-7). Accordingly, the Court finds that Legacy has failed to prove any claim for breach of fiduciary duty against Defendants based on the Staples sales call or report.

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LB Imaging. The Court finds this to be a complete non-issue. Apparently, Mr. Boden had an idea for setting up a "front" company that would appear to be owned by women (his and Mr. Loyer's wives) in order to take advantage of diversity or minority programs at companies which give preferential treatment to companies owned by women or minorities (Boden 550:4-14). The evidence established that the only step Mr. Boden took toward setting up LB Imaging was to file a Fictitious Name Statement with the Orange County, California Clerk and Recorder (Exhibit 126). Mr. Boden testified, without contradiction, that LB Imaging never operated (Boden 551:6-14). Even so, Mr. Boden explained that LB Imaging was not intended to compete with Legacy or go behind Legacy's back (Boden 551:1-5), but was intended to make sales of product manufactured by Legacy (Boden 550:23-25) to companies which give preferential treatment to minority vendors (Boden 550:4-14). Because Legacy offered no evidence to show that LB Imaging ever operated or competed with it, the Court finds that Legacy failed to establish a claim for breach of fiduciary duty based on Defendants' activities, if any, concerning LB Imaging. After October 23, 2003, when Legacy's president, Mr. Duke, sent them the cease-and-desist letter advising that they no longer had any authority to act on Legacy's behalf (Exhibit 84), neither Mr. Loyer nor Mr. Boden owed any further duty of loyalty to Legacy. See Mulei, 771 P.2d at 499. Consequently, their conduct after October 23, 2003 cannot be the basis of any claim for breach of fiduciary duty In addition to its claim for breach of fiduciary duty arising from Mr. Loyer's and Mr. Boden's alleged employment with Legacy, Legacy also claimed that Mr. Loyer and Mr. Boden breached their fiduciary duty under the Legacy Manufacturing, LLC Operating Agreement (Exhibit 134). As a threshold matter, however, the Court finds as a matter of law that because of the nature of a limited liability company under Colorado law, and because of the provisions of the Operating Agreement, no such fiduciary duty was owed to Legacy either by Mr. Loyer as a manager, or by Mr. Boden as a member of the limited liability company.

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To determine whether a duty exists, the Court first examines the nature of a limited liability company. A limited liability company is a creature of statute, and any duty which members owe to the company must be set forth in the organic statute or in the company's operating agreement. McGee v. Best, 106 S.W.3d 48, 64 (Tenn. App. 2002). Legacy is a Colorado limited liability company and is therefore governed by Colorado law. Under the Colorado Limited Liability Company Act, COLO . REV . STAT . § 7-80-101 et seq., limited liability companies organized under Colorado law are governed by an Operating Agreement. See COLO . REV . STAT . § 7-80-102(11)(a). With several exceptions not pertinent here, the Operating Agreement "governs the rights, duties, limitations, qualifications, and relations among the managers, the members, the members' assignees and transferees, and the limited liability company," and its provisions control over any provision of the LLC Act to the contrary. COLO . REV . STAT . § 7-80108(1). See COLO . REV . STAT . § 7-80-108(4) ("It is the intent of this article to give the maximum effect to the principle of freedom of contract and to the enforceability of operating agreements."). The Legacy Manufacturing, LLC Operating Agreement (Exhibit 134) contains the following provision at ¶ 11.18, which provides in pertinent part: 11.18 Transactions with Company and Otherwise. Any of the Managers, or any agent, servant, or employee of any of the Managers, may engage in and possess any interest in other businesses or ventures of every nature and description, independently or with other persons, whether or not directly or indirectly in competition with the business or purpose of the Company, and neither the Company nor any of the Members shall have any rights, by virtue of this Agreement or otherwise, in and to such independent ventures or the income or profits derived therefrom, or any rights, duties, or obligations in respect thereof. [Emphasis added]. Where the operating agreement of a limited liability company contains a provision similar to ¶ 11.18, courts have held that no cause of action will lie for breach of the operating agreement or for breach of fiduciary duty based on a manager or member's act of competing with the limited liability company. See Stoker v. Bellemeade, LLC, 615 S.E.2d 1, 9-10 (Ga. App. 2005); McConnell v. Hunt Sports Enterp., 725 N.E.2d 1193, 1206-07, 1214-16 (Ohio App. 1999). See COLO . REV . STAT . § 7-80-404(4) ("A member or manager does not violate a duty or obligation to the limited

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liability company solely because the member's or manager's conduct furthers the member's or manager's own interest."). As the court explained in McConnell, 725 N.E.2d at 1215, the provision of the operating agreement expressly allowing competition by members precluded any claim for breach of fiduciary duty arising from such competition as a matter of law: The operating agreement constitutes the undertaking of the parties herein. In becoming members of CHL, appellant and appellees agreed to abide by the terms of the operating agreement, and such agreement specifically allowed competition with the company by its members. As such, the duties created pursuant to such undertaking did not include a duty not to compete. Therefore, there was no duty on the part of appellees to refrain from subjecting appellant to the injury complained of herein. See Stoker, 615 S.E.2d at 10 (affirming summary judgment for members of limited liability company on breach of fiduciary duty claim against members based on competition with company where operating agreement expressly allowed members to compete, "These provisions make clear that, despite any duties described in the LLC Act that might otherwise have restrained a member from competing with the LLC, the members exercised the freedom granted by the LLC Act to restrict or eliminate those duties by contract and to engage in activities which competed with the LLC's business."). Accord: Ledford v. Smith, 618 S.E.2d 627, 636 (Ga.. App. 2005) ("Any fiduciary duty of disclosure that the Active Members may have owed Dyna-Vision with respect to such a business arrangement was eliminated by the terms of an operating agreement that allowed the business activity which occurred."). Although ¶ 11.18 of the Legacy Operating Agreement grants the freedom to compete with the company to managers, members of the company similarly owed no duty to refrain from competing with the company because no such duty is imposed either by the Operating Agreement or by Colorado law. Pursuant to COLO . REV . STAT . § 7-80-404(1)(c), the duty to refrain from competing with the limited liability company in the conduct of the limited liability company business is owed by a member only in a limited liability company in which management is not vested in managers. Because Legacy had managers, as provided in Section 11 of its Operating Agreement, -77-

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its members owed no duty to refrain from competing with it under § 7-80-404(1)(c). See COLO . REV . STAT . § 7-80-108(2)(c)(II)(A) (operating agreement can eliminate member's duty to refrain from competition in company without managers). Accordingly, neither Mr. Loyer, as a manager of Legacy, nor Mr. Boden, as a member of Legacy, is liable to Legacy either for breach of the Operating Agreement or for breach of fiduciary duty based on any activities allegedly undertaken in competition with Legacy. This includes MVM's sales of product over the Internet and to small accounts to which Legacy was not interested in selling product (Loyer 317:5-21). Although the evidence failed to establish that Defendants were engaged in soliciting Legacy's customers for their own purposes or otherwise diverting them to MVM, even if it had, Defendants still would have no liability for breach of fiduciary duty under the Legacy Operating Agreement because Section 11.18 precluded it. McConnell, 725 N.E.2d at 1215; Stoker, 615 S.E.2d at 9-10. The next issue is whether Mr. Loyer and Mr. Boden owed Legacy any other fiduciary duty under Legacy's Operating Agreement. The Operating Agreement contains an integration clause at Section 33.5, which provides: 33.5 Entire Agreement. This Agreement contains the entire agreement between the parties hereto and may be enforced at law or in equity to the extent necessary. Because integration clauses generally allow contracting parties to limit future contractual disputes to issues relating to the express provisions of the contract, Section 33.5 precludes consideration of extrinsic evidence to ascertain the intent of the parties. Nelson v. Elway, 908 P.2d 102, 107 (Colo. 1995). See Brooks v. Timberline Tours, Inc., 127 F.3d 1273, 1276 (10th Cir. 1997) (integration clause precludes extrinsic evidence to prove the existence of alleged agreements not specifically set forth in written contract). Accordingly, unless the fiduciary duty is expressly imposed by either the organic statute or the Operating Agreement, no such duty exists. See McGee, 106 S.W.3d at 64.

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Section 11 of the Operating Agreement governs the rights and responsibilities of managers of the limited liability company. Aside from Section 11.18, quoted above, the only provision creating duties of managers is Section 11.2, which provides, in pertinent part: 11.2 Duties of Managers. A Manager of the Company shall perform his, her, or its duties as a Manager, including his, her, or its duties as a member of any committee upon which he, she, or it may serve, in good faith, in a manner he, she, or it reasonably believes to be in the best interests of the Company, and with such care as an ordinarily prudent person in like position would use under similar circumstances. In performing his, her, or its duties, a Manager shall be entitled to rely on information, opinions, reports, or statements, including financial statements and other financial data, in each case prepared or presented by persons and groups listed in paragraphs (a), (b), and (c) of this Section 11.2; but he, she, or it shall not be considered to be acting in good faith if he, she, or it has knowledge concerning the matter in question that would cause such reliance to be unwarranted. A person who so performed his or her duties shall not have any liability by reason of being or having been a Manager of the Company (Exhibit 134). Section 11.2 does not impose any duty on a manager other than a general duty to act in "good faith"; this provision must also be read in light of Section 11.18, which expressly permits a manager to engage in competition with the company. The Court finds that Legacy has not presented evidence of any conduct by Mr. Loyer in his capacity as a manager of the limited liability company that would establish a breach of this generic duty of "good faith." Section 12 of the Operating Agreement governs the rights and responsibilities of members of the limited liability company, but does not impose any express fiduciary duty on members. Because Legacy had managers, a member of the limited liability company owed no duty to refrain from competing with it pursuant to COLO . REV . STAT . § 7-80-404(1)(c). Because neither the organic statute nor the Operating Agreement imposed any fiduciary duty on members of the limited liability company such as Mr. Boden, the Court holds that no such duty arose. McGee, 106 S.W.3d at 64. Consequently, neither Mr. Loyer nor Mr. Boden owed any fiduciary duty to Legacy by virtue of the Legacy Operating Agreement or under the Colorado Limited Liability Company Act. Judgement is therefore entered for Defendants on Legacy's claim for breach of fiduciary duty under the Legacy Operating Agreement.

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Defamation Claims. Legacy's complaint asserted one claim for "business libel" based on three alleged publications by Defendants. The specific publications alleged in the complaint were: Boden and Loyer falsely told a representative of a Legacy customer that Legacy's plant in Mexico only served as an assembly line for MVM inkjet cartridges. (Complaint, ¶ 42). Boden and Loyer told a representative of a Legacy customer that Legacy had no patents or patents pending and that MVM controlled the patents for the inkjet cartridges. (Complaint, ¶ 43). Boden and Loyer told a representative of a Legacy customer that Legacy could not acquire the chips necessary to continue production of certain inkjet cartridges. (Complaint, ¶ 44). The complaint does not identify either the speaker, the date of the alleged statements, or the specific persons to whom the statements were allegedly made. The complaint also does not plead any special damages incurred by Legacy as a result of any alleged business libel with the specificity required by Fed.R.Civ.P. 9(g). See, e.g., Woodmont Corp. v. Rockwood Center Partnership, 811 F.Supp. 1478, 1484 (D. Kan. 1993) ("In Paragraph 14 of the complaint, plaintiff has merely made the general allegation that defendants' public statements damaged its business reputation. It has not named any customer whose business was lost as a result of the statement, nor has it alleged the amount of such loss. The plaintiff's allegations are insufficient, in our judgment, to satisfy the dictates of Rule 9(g).") (internal citation omitted). Because Legacy's libel claim is based on state law, because federal jurisdiction over the claim is premised on diversity under 28 U.S.C. § 1332, and because the damages, if any, sustained by Legacy as a result of the publications were sustained in Colorado, Colorado substantive law of defamation governs Legacy's claim for libel. Anderson v. Cramlet, 789 F.2d 840, 842-43 (10th Cir. 1986); 28 U.S.C. § 1652. In Colorado, the elements of a cause of action for defamation by libel are: (1) a written defamatory statement of and concerning the plaintiff; (2) published to a third party; (3) with fault amounting to at least negligence on the part of the publisher; and (4) either actionability of the statement irrespective of special damages or the existence of special damages to the plaintiff caused

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by the publication. Williams v. District Court, 866 P.2d 908, 911 n.4 (Colo. 1993); Card v. Blakeslee, 937 P.2d 846, 850 (Colo. App. 1996); see Walters v. Linhof, 559 F. Supp. 1231, 1234 (D. Colo. 1983); Stump v. Gates, 777 F. Supp. 808, 825 (D. Colo. 1991), aff'd, 986 F.2d 1429 (10th Cir. 1993). Libel is characterized either as per se or per quod. To be libelous per se, a statement: must contain defamatory words specifically directed at the person claiming injury, which words must, on their face, and without the aid of intrinsic proof, be unmistakably recognized as injurious. Lininger v. Knight, 226 P.2d 809, 813 (Colo. 1951); see also Inter-State Detective Bureau, Inc. v. Denver Post, Inc., 484 P.2d 131, 133 (Colo. App. 1971). Libel per se is actionable without an allegation of actual damages. Inter-State Detective, 484 P.2d at 133. Whether a writing constitutes libel per se is a question of law for the Court. Id.; Lininger, 226 P.2d at 813. See Stump v. Gates, 777 F. Supp. at 825. Any libel that, unlike libel per se, does not carry a defamatory imputation on its face is libel per quod, which exists where the person to whom the defamatory statement applies can only be ascertained by introducing extrinsic proof. Lind v. O'Reilly, 636 P.2d 1319, 1320 (Colo. App. 1981). Libel per quod is actionable only where special damages are pleaded and proved. Inter-State Detective Bureau, Inc. v. Denver Post, Inc., 484 P.2d 131, 133 (Colo. App. 1971); Lind, 636 P.2d at 1321. "Special damages" are limited to specific monetary losses that a plaintiff incurs because of the defamatory publication. Lind, 636 P.2d at 1321. Special damages must result "from conduct of a person other than the defamer or the one defamed and must be legally caused by the defamation." Id., citing RESTATEMENT (SECOND ) OF TORTS § 575, cmt. b (1977). To be a actionable, moreover, the alleged defamatory publication must be "of and concerning" the plaintiff. Inter-State Detective, 484 P.2d at 133. In Stump v. Gates, 777 F. Supp. at 825-26, the Court held that publication of a police report that the plaintiffs' father committed suicide was not libelous per se of the plaintiffs because it was specifically directed at the deceased,

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not at the plaintiffs. See Dorr v. C.B. Johnson, 660 P.2d at 519 (publication not actionable when it does not refer to plaintiff); Martin v. Weld County, 598 P.2d 532, 535 (Colo. App. 1979). The tort of disparagement consists of the following elements: (1) a false statement; (2) published to a third party; (3) derogatory to the plaintiff's title to his property or its quality, to his business in general or to some element of his personal affairs; (4) through which defendant intended to cause harm to the plaintiff's pecuniary interest or either recognized or should have recognized that it was likely to do so; (5) malice; and (6) special damages. Thompson v. Maryland Cas. Co., 84 P.3d 496, 507 n.16 (Colo. 2004); Williams v. Burns, 540 F. Supp. 1243, 1248 (D. Colo.1982). Special damages are an essential element of a claim for business disparagement or trade libel. As the Colorado Court of Appeals explained in Teilhaber Mfg. Co. v. Unarco Materials Storage, Inc., 791 P.2d 1164, 1167 (Colo. App. 1989), cert. denied, 803 P.2d 517 (Colo. 1991): In a product disparagement action, the plaintiff must always prove special damages. He is required to establish a pecuniary loss that has been realized or liquidated, as in the case of specific lost sales. If a plaintiff cannot show special damages, no cause of action is established. To make the required showing, a plaintiff usually must identify those persons who refuse to purchase his product because of the disparagement. [Citations omitted]. See also Henderson v. Times-Mirror Co., 669 F. Supp. 356, 362 (D. Colo. 1987); Williams v. Burns, 540 F. Supp. at 1251 ("In disparagement actions, the plaintiff must always plead and prove special damages."). Defendants' principal defenses to Legacy's libel claims are substantial truth, which is an absolute defense, and qualified privilege for communications to persons with an interest in the subject matter. One who is alleged to have defamed another has a constitutional and statutory right to assert the truth of the defamatory statement as a defense and have the factfinder decide such a defense. Churchey v. Adolph Coors Co., 759 P.2d 1336, 1341 (Colo. 1988). See COLO . CONST . art. II, § 10; COLO . REV . STAT . § 13-25-125; Gomba v. McLaughlin, 504 P.2d 337, 339 (Colo. 1972). This issue turns not upon literal truth of every word published, but on the truth of "the gist, or the sting" of the

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published matter. Stated differently, the question is whether the publication as a whole "produces a different effect upon the reader than that which would be produced by the literal truth of the matter." Gomba, 504 P.2d at 339. Substantial truth is an absolute defense. Id.; Lindemuth v. Jefferson County School Dist. R-1, 765 P.2d 1057, 1058 (Colo. App. 1988); Miles v. Ramsey, 31 F.Supp.2d 869, 875 (D. Colo. 1998). If the persons involved share common interests in the subject matter of an allegedly defamatory publication, a qualified privilege to defame exists. Dominguez v. Babcock, 727 P.2d 362, 365-66 (Colo. 1986); Price v. Conoco, Inc., 748 P.2d 349, 350-51 (Colo. App. 1987); Patane v. Broadmoor Hotel, Inc., 708 P.2d 473, 475 (Colo. App.1985); RESTATEMENT (SECOND ) OF TORTS § 596 (1977). Although qualified privilege is not an absolute defense, if established, it requires Legacy to prove that Defendants published a statement with actual knowledge of its falsity or with reckless disregard for whether or not it was true. See Dominguez, 727 P.2d at 365-66. In other words, to overcome the qualified privilege, Legacy must prove that Defendants had a "high degree of awareness" that a particular statement was probably false when it was made. Id. The privilege also requires Legacy to prove that the statement was false. Williams v. Boyle, 72 P.3d 392, 401 (Colo. App. 2003). The Court finds that Legacy has failed to present evidence that would establish a claim for libel based on any of the three publications specifically alleged in the complaint. As for the publication alleged in ¶ 42 of the complaint, the Court finds that Legacy presented no credible evidence to establish that this publication was ever made. As for the publications alleged in ¶¶ 43 and 44 of the complaint, the Court finds that Legacy failed to present any evidence that any of the Defendants published either of these statements alleged to be defamatory. Accordingly, the Court finds that Legacy has failed to establish a claim for libel based on the only publications alleged in the complaint, and therefore enters judgment for Defendants on Legacy's libel claim.

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The Court further holds that no other allegedly defamatory publications are at issue in the case because Legacy never pleaded them in the complaint and never amended the complaint to plead them as separate claims for relief as required by Colorado law. Under Colorado law, each publication of a libel is a separate and independent claim, and each must be pleaded as a separate cause of action. Lininger v. Knight, 226 P.2d at 812. As the Colorado Supreme Court stated in Lininger, id., "No law is better settled than that each publication of a libel is a separate and independent claim, and that each must be pleaded as a separate cause of action." See Pittman v. Larson Distrib. Co., 724 P.2d 1379, 1387 (Colo. App. 1986) ("[e]ach statement, as a separate publication, constitutes a distinct claim for relief"); Corporon v. Safeway Stores, Inc., 708 P.2d 1385, 1389 (Colo. App. 1985) ("each defamatory statement upon a separate publication is a separate claim"). Legacy nonetheless argues that Defendants had "notice" of such claims because of statements made by Legacy's counsel during depositions of the Defendants. However, giving "notice" of a claim is the function of a complaint under Fed.R.Civ.P. 8(a)(2). A defamation claim cannot simply be "noticed" at a deposition; Rule 8(a)(2) requires notice to be given by a proper pleading which contains "a short and plain statement of the claim showing that the pleader is entitled to relief." The purpose of a modern complaint under Rule 8 is "to give opposing parties fair notice of the basis of the claim against them so that they may respond to the complaint, and to apprise the court of sufficient allegations to allow it to conclude, if the allegations are proved, that the claimant has a legal right to relief." Monument Builders of Greater Kansas City, Inc. v. American Cemetery Ass'n, 891 F.2d 1473, 1480 (10th Cir. 1989). Rule 8(a)(2) is intended to afford an adverse party notice of the claims asserted against it so that it may investigate and adequately respond to the charges. Mountain View Pharmacy v. Abbott Labs., 630 F.2d 1383, 1388 (10th Cir. 1980). Rule 8(a)(2) therefore requires the plaintiff to allege specific facts on those material elements that must be proved to recover on each claim. Hall v. Bellmon, 935 F.2d 1106, 1110 (10th Cir. 1991).

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This requirement is particularly appropriate in a defamation case. A leading commentator on the federal rules points out that "a defamation complaint must give the defendant sufficient notice of the communications claimed to be defamatory so that the defendant may adequately defend itself." 2 MOORE 'S FEDERAL PRACTICE 3D ¶ 12.34[1][b] at 12-64 (2005). See McGeorge v. Continental Airlines, Inc., 871 F.2d 952, 955 (10th Cir. 1989) ("in the context of a defamation claim, Fed.R.Civ.P. 8(a) requires that the complaint provide sufficient notice of the communications complained of to allow Continental to defend itself."); e.g., Bushnell Corp. v. ITT Corp., 973 F. Supp. 1276, 1287 (D. Kan. 1997). Where, as here, there is no pleading served that gives the Defendants "fair notice of what the plaintiff's claim is and the grounds upon which it rests," there is no claim in issue. In reality, Legacy's claim of "notice" establishes that it had notice of additional potential claims for defamation during the summer of 2004, such that Colorado's one-year statute of limitations for defamation, COLO . REV . STAT . § 13-80-103(1)(a), began running at that time. See Taylor v. Goldsmith, 870 P.2d 1264, 1266 (Colo. App. 1994). Because each separate publication constitutes a separate and distinct claim for defamation, each separate publication is therefore subject to a separate and distinct statute of limitations bar. Walker v. Associated Press, 417 P.2d 486, 488 (Colo. 1966); Russell v. McMillen, 685 P.2d 255, 258 (Colo. App. 1984); Corporon, 708 P.2d at 1390. The one-year statute of limitations runs against each separate publication independently. Walker, 417 P.2d at 488; Dorr v. C.B. Johnson, Inc., 660 P.2d 517, 520 (Colo. App. 1983); Corporon, 708 P.2d at 1390; Russell, 685 P.2d at 258. Pursuant to Fed.R.Evid. 201, the Court takes judicial notice from its file that Legacy's complaint was filed in Colorado state court on November 10, 2003. Because Legacy never amended its complaint to assert claims for defamation based on these additional publications of which it had notice more than one year ago, and because the statute of limitations has clearly run on any defamation claims arising from publications not specifically pleaded in the complaint, the Court

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finds that any claims for defamation not specifically pleaded in the complaint are barred by the oneyear statute of limitations and therefore may not form the basis of a claim for relief in this action. Moreover, Legacy cannot contend that these new claims relate back to the date of the original complaint pursuant to Fed.R.Civ.P. 15(c), because an amendment to a complaint which asserts a defamation claim based on a publication for which the statute of limitations has already run does not relate back under Rule 15(c) to save the claim from the bar of limitations. "The doctrine of relation back in [Rule] 15(c) does not permit a party to maintain a claim for libel filed after the statute of limitations has run." Even v. Longmont United Hosp. Assn., 629 P.2d 1100, 1103 (Colo. App. 1981); see Walker, 417 P.2d at 488. This is because each allegedly libelous publication, being a separate and distinct claim for relief, does not arise from the same "conduct, transaction, or occurrence" as any other libelous publication set forth in the complaint so as to relate back under Rule 15(c). Rickman v. Cone Mills Corp., 129 F.R.D. 181, 185-86 (D. Kan. 1989) (new defamation claims asserted in amended pleadings were based on separate publications on which one-year statute of limitations had already run and thus did not relate back under Fed.R.Civ.P. 15(c) because each publication is separate and distinct claim for relief subject to separate and distinct statute of limitations under state law). See Walker, 417 P.2d at 488; Lininger, 226 P.2d at 812; Pittman, 724 P.2d at 1387; Corporon, 708 P.2d at 1389; Russell, 685 P.2d at 258; Dorr, 660 P.2d at 520; Even, 629 P.2d at 1103; Rickman, 129 F.R.D. at 185-86; see generally 6A Wright & Miller, FEDERAL PRACTICE & PROCEDURE § 1497 at 71-73 (2005) (stating that "amendments alleging the separate publication of a libelous statement . . . may be subject to the defense of statute of limitations because of a failure to meet the [same] transaction standard" of Rule 15(c)). Consequently, any claim for defamation based on a publication not specifically alleged in the complaint is barred by the statute of limitations and does not relate back under Rule 15(c) to save it from the bar. Further, any claims based on Exhibits 16, 86, or 87, which are publications that occurred after Legacy's complaint was filed, cannot relate back under Rule 15(c) and are therefore

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barred by COLO . REV . STAT . § 13-80-103(1)(a). Based on their persistent objections to these claims, the Court finds that Defendants did not consent to the trial of these claims under Fed.R.Civ.P. 15(b). Judgment is therefore entered for Defendants on all of Legacy's libel claims, whether actually pleaded or not. But even if Legacy's additional, unpleaded defamation claims were properly placed in issue, and even if they were not already barred by limitations, the Court would nonetheless find that Legacy has failed to establish the elements of a claim for defamation as to all of the publications on which these additional, non-pleaded claims are based. Because each of these additional claims is based on an e-mail communication by one of the Defendants, they are addressed in order of Exhibit number. Exhibit 14. Exhibit 14 is an e-mail from Mr. Loyer to Thomas Kennon, MVM's Wal-Mart and Sam's Club sales representative, dated November 5, 2003, which reads: I am writing to advise you of a potential problem with the cartridges that you have been testing. We have experienced a performance issue in the BCI-3 cartridge from our contract manufacturer. It does not fit correctly in the newer Canon printheads (the F50/F80 and i550/i560 series of printers). This causes the cartridge not to feed properly through the life of the cartridge. The print degrades as the cartridge becomes depleted. The Court concludes that any claim based on this language from Exhibit 14 is in the nature of a claim for disparagement. However, Exhibit 14 itself contains no reference to or mention of Legacy as the manufacturer or source of the product discussed in the e-mail, and Legacy presented no evidence that the e-mail was sent, forwarded or published to anyone other than Mr. Kennon and Mr. Boden. The Court further finds that the term "contract manufacturer" is not defamatory per se as a matter of law, even if its recipient understood the term to refer to Legacy, because it is not a term that is "unmistakably recognized as injurious" (Loyer 223:23-224:10; Loyer 225:1-4). See Bernstein v. Dun & Bradstreet, Inc., 368 P.2d 780, 783-84 (Colo. 1962). The evidence at trial established that Mr. Kennon was a sales representative and agent of MVM (Loyer 238:19-239:7; Loyer 251:22-24). Mr. Loyer testified that when he becomes aware of a problem with a product, he generally notifies the sales representative of the problem because the

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sales representative is the closest person he has to the customer and the sales representative will typically have the best idea of how to deal with the problem with the customer (Loyer 413:10-19). Therefore, because the statements in Exhibit 14 were made to a person who shared a common interest in the subject matter with Defendants, Legacy must prove that the alleged statement was made by Mr. Loyer with either knowledge of its falsity or reckless disregard for its truth or falsity. Dominguez v. Babcock, 727 P.2d at 366. Legacy has not met this burden here. Mr. Loyer testified that the factual basis for his statement about the potential problems with the cartridge in Exhibit 14 was the fact that there had been several problems with that cartridge, the BCI-3, from January 2003 all through that year. He testified that many of these problems culminated in the summer when the cartridge failed the initial test performed by a buyer at Costco US named Steve Messmer (Duke 152:16-22). He testified that although Legacy thought that it had fixed the problem with a different clip that it put on the back side of the cartridge because those samples initially worked satisfactorily, they eventually failed as well (Loyer 413:20­414:7). Legacy nevertheless relies on Exhibit 127 to show Mr. Loyer's knowledge that his statement was false. At the time Mr. Loyer received Mr. Messmer's e-mail on August 26, 2003 (Exhibit 127), the Legacy BCI-3 cartridge had not been tested in all Canon printers, and there were printers that it had not been tested in (Loyer 529:5-12). After Mr. Loyer received Mr. Messmer's August 26, 2003 e-mail (Exhibit 127), he became aware of more problems that he experienced with that cartridge; he was called by Greg Shavey of Costco to advise that the cartridges were not working properly again. Those problems were the same problems that Mr. Loyer mentioned in Exhibit 14 (Loyer 529:13530:2). On October 8, 2003, Mr. Loyer sent an e-mail to Mr. Duke and others at Legacy advising that the BCI-3 cartridge degraded in Steve Messmer's printer again, exhibiting the same problems as before, which were the spreading of the ink on the paper and missing nozzle prints as if they were clogged (Exhibit 128). Hence, at the time Mr. Loyer sent Mr. Kennon Exhibit 14, he was not

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convinced that there was no fit problem with the BCI-3 cartridge manufactured by Legacy (Loyer 530:17-20). When Mr. Loyer sent Exhibit 14 to Mr. Kennon, he believed that the statements in his e-mail concerning the potential problem with the BCI-3 cartridge that had been manufactured by Legacy were true (Loyer 418:16-23). Although Legacy maintains that it advised him that the problem had been fixed, Mr. Loyer was not required to accept Legacy's version of the events as conclusive. See Lewis v. McGraw-Hill Broadcasting Co., 832 P.2d 1118, 1124 (Colo. App. 1992). Based on this evidence, the Court finds that Legacy has failed to establish the actual malice necessary to overcome the qualified privilege. Further, there was evidence that this alleged statement was true or substantially true. Mr. Duke acknowledged that Legacy had received complaints from Mr. Messmer about the BCI-3 cartridges (Duke 212:10-13). There was evidence at trial that the cartridge did not fit into the printer or would not stay in the printer (Loyer 415:9-23; Loyer 416:10-25; Exhibit W-1). Therefore, the Court finds that the defense of substantial truth has also been proved. To the extent a claim based on the statements in Exhibit 14 alleges trade libel or product disparagement, Legacy has also failed establish the fact or causation of special damages. See Teilhaber, 791 P.2d at 1167. Exhibit 14 did not mention Legacy by name or otherwise identify it as the source of the cartridge samples, as Mr. Duke conceded (Duke 209:20-210:5). Mr. Kennon did not tell the buyer at Sam's Club when he dropped off the first sample that it was a cartridge manufactured by Legacy (Kennon 583:1-10). There was no evidence that the e-mail was republished to anyone at Sam's Club or to anyone else (Duke 169:11-14; Loyer 419:1-6.; Kennon 577:4-10; Kennon 578:1-10; Kennon 579:2-4), and Legacy presented no evidence that anyone at Sam's Club either received the e-mail or its content, or understood that Legacy was the manufacturer of the cartridge samples. There was also no evidence that Legacy lost a pending or prospective order with Sam's Club, either, particularly because it did not have a Sam's Club vendor number at the time (Duke 150:16-22). Therefore, because Legacy has presented no evidence that it sustained any

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specific pecuniary loss as a result of the publication in Exhibit 14, its claim for disparagement (or for libel per quod) fails for failure to prove special damages. For these reasons, even if the publication in Exhibit 14 had been properly pleaded as a separate claim for relief, and even if such claim were not already barred by limitations, the Court finds that Legacy has failed to establish all of the elements of a claim for disparagement based on the statements in Exhibit 14. Exhibit 16. Exhibit 16 is an e-mail from Mr. Boden to Mr. Kennon dated November 5, 2003, after the complaint in this case was filed. Exhibit 16 states: Please contact Robby and Debbie to let them know that we have determined that there is a problem with the ink in the BCI-3 black cartridges he is testing. We have found a solution and would like to provide other samples for an additional test. The problem occurs in some of the printers including i550, i560, F50 and F70. After a period of use, the quality of the output starts to deteriorate. We have determined that it is caused by build-up on the print head nozzles. This build up is the result of the ink that is used by the contract manufacturer that we just replaced about 30 days ago. There is no mention of Legacy in this e-mail, by name or otherwise, as the manufacturer or source of the product discussed in the e-mail. As with Exhibit 14, Legacy presented no evidence that the e-mail was sent, forwarded or published to anyone other than Mr. Kennon. As previously found, the term "contract manufacturer" is not defamatory per se as a matter of law. Mr. Boden explained that he sent Exhibit 16 to Mr. Kennon because he wanted to make him aware of Mr. Boden's understanding that there was a problem with the BCI-3 black cartridge that had been sent to Mr. Kennon for possible testing with Sam's Club (Boden 553:19-554:3). Because this e-mail to Mr. Kennon is therefore protected by the common interest privilege, Legacy must prove that Mr. Boden made the alleged statement with either knowledge of its falsity or reckless disregard for its truth or falsity. Legacy has failed to meet this burden. Mr. Boden testified that he had no doubts about the truth of his statement about the problem with the ink when he sent Exhibit 16 to Mr. Kennon, that he believed it to be true, and that he was not aware of any information that suggested that his statement about the ink was not true (Boden 554:6-14). Legacy failed to present -90-

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any evidence suggesting that Mr. Boden had a high degree of awareness that his statements in Exhibit 16 were probably false when he made them. See Dominguez, 727 P.2d at 367. As with Exhibit 14, to the extent a claim based on the statements in Exhibit 16 alleges trade libel or product disparagement, Legacy presented no evidence that it sustained any specific pecuniary loss as a result of the publication in Exhibit 16, and therefore has failed establish the fact of special damage. See Teilhaber, 791 P.2d at 1167. Exhibit 16 did not mention Legacy by name or otherwise identify it as the source of the cartridge samples (Duke 209:20-210:5), and Mr. Kennon did not tell the buyer at Sam's Club that the first sample cartridge was manufactured by Legacy (Kennon 583:110). There was no evidence that Exhibit 16 was republished to anyone at Sam's Club or to anyone else (Duke 169:11-14; Kennon 578:14-23; Kennon 579:2-4), and Legacy presented no evidence that anyone at Sam's Club either received the e-mail or its content, or understood that Legacy was the manufacturer of the cartridge samples. There was also no evidence that Legacy lost a pending or prospective order with Sam's Club. Because Legacy presented no evidence it sustained any specific pecuniary loss as a result of the publication in Exhibit 16, its failure to prove special damages is fatal to any claim for disparagement or libel per quod based on Exhibit 16. Accordingly, even if the publication in Exhibit 16 had been properly pleaded as a separate claim for relief, and even if such a claim were not already barred by limitations, the Court finds that Legacy has failed to establish all of the elements of a claim for disparagement based on the statements in Exhibit 16. Exhibit 86. Exhibit 86 is an e-mail from Mr. Boden to Brad Meyer, another of MVM's sales representatives, dated December 5, 2003, after the complaint was filed in this case. Like Exhibits 14 and 16, this is another e-mail that was published to only one person. The portion of this e-mail alleged by Legacy to be defamatory is: Will you take a few minutes and e-mail me a recap of your conversation with Duke today. You are not the only rep he has tried to highjack[sic] since late October.

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As with Exhibits 14 and 16, there is no reference in this e-mail to Legacy, only to Charles Duke, who is not a plaintiff in this case. Because this publication therefore is not "of and concerning" Legacy, Legacy has failed to establish an actionable claim for defamation based on Exhibit 86. See Stump v. Gates, 777 F. Supp. at 825-26; Dorr v. C.B. Johnson, 660 P.2d at 519. As with Defendants' communications to Mr. Kennon, the statement in Exhibit 86 is also protected by the privilege accorded to communications to those with a common interest in the subject matter. Like Mr. Kennon, Mr. Meyer was MVM's sales representative under contract with MVM and therefore this communications is qualifiedly privileged (Boden 551:21-25). Legacy must therefore prove that Mr. Boden made the statement in Exhibit 86 either with knowledge of its falsity or with reckless disregard for its truth or falsity. Under the facts as established at trial, Legacy cannot meet this burden here. Based on the evidence at trial, the statement that Mr. Duke has "tried to highjack" another of MVM's sales representatives is substantially true. In late October 2003, Mr. Duke sent Mr. Kennon an e-mail (Exhibits 173 and H-10) asking him to leave MVM and come to work for Legacy instead (Duke 112:5-15). That e-mail advised Mr. Kennon, in part: I believe that we are best served by moving forward with a direct relationship with TAK Marketing and you and serving Sam's and Wal-Mart with the product direct from the manufacturer as I understand they have been negotiating with you. I would like to offer to come visit you both to become better acquainted and to assist in any way that is sensible with Sam's and Wal-Mart. Mr. Duke testified that he sent Mr. Kennon this e-mail (Duke 112:5-15; Duke 166:1-3), and Mr. Kennon testified that he received it (Kennon 573:9-13). In addition, both Mr. Duke and Mr. Kennon testified that Mr. Duke called Mr. Kennon on several occasions in late October 2003, with the intent of asking Mr. Kennon to cease being a sales representative for MVM and become a sales representative for Legacy instead (Duke 167:18-21; Duke 168:3-5; Kennon 575:2-19). Mr. Kennon testified, and Mr. Duke admitted, that Mr. Duke offered to buy Mr. Kennon a golf cart if Mr. Kennon would come to work for Legacy (Duke 168:6-12; Kennon 575:14-21).

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Based on this evidence, which is undisputed, the Court finds that the statement in Exhibit 86 that Mr. Duke "tried to highjack" one of MVM's sales representatives, namely Mr. Kennon, is substantially true. Mr. Boden testified that he used the term "highjack" to characterize Mr. Duke's attempt Duke to convince Mr. Kennon to work directly for Legacy (Boden 552:20-553:3). Although used in a slang or colloquial sense in Exhibit 86, "hijack" has a commonly understood meaning of to commandeer without authority. See MERRIAM -WEBSTER 'S COLLEGIATE DICTIONARY 548 (10th ed. 1983). This is fair comment on Mr. Duke's efforts to persuade Mr. Kennon to discontinue his representation of MVM and represent Legacy instead. Because this statement in Exhibit 86 is substantially true, Legacy cannot prove that Mr. Boden made the alleged statement with either actual knowledge of its falsity or a high degree of awareness that it was probably false. Further, Mr. Boden testified that he believed his statement in Exhibit 86 to be true at the time he made it, and that he was not aware of any information which suggested to him that his statement was not true (Boden 553:4-9). Based on the evidence at trial, there was no any evidence that Mr. Boden's statement in Exhibit 86 was not true, nor was there any evidence suggesting that Mr. Boden had a high degree of awareness that his statement in Exhibit 86 was probably false when he made it. The Court thus finds that Legacy has failed to establish the kind of "actual malice" that would defeat the qualified privilege that attaches to this communication. See Dominguez, 727 P.2d at 367. Finally, Legacy has failed to establish the fact of special damages. Although the publication in Exhibit 86 is not actionable by Legacy as libel per se because it is not "of and concerning" Legacy, but rather is "of and concerning" Mr. Duke, it could nonetheless be actionable as libel per quod if Legacy proved that the recipient understood it to refer to Legacy and if Legacy established special damages. Even assuming, however, that Mr. Meyer knew that Mr. Duke was Legacy's president, Legacy still failed to prove the fact of special damage as a result of this publication. Therefore,

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Legacy has failed to establish a claim for libel per quod based on Exhibit 86. See Lind v. O'Reilly, 636 P.2d at 1321. For these reasons, even if the publication in Exhibit 86 had been properly pleaded as a separate claim for relief, and even if such a claim were not barred by the statute of limitations, the Court finds that Legacy has failed to establish all of the elements of a claim for libel based on the statements in Exhibit 86. Exhibit 87. Exhibit 87 is an e-mail dated November 18, 2003 from Mr. Boden to Robert Wax, who was identified at trial as a member and owner of MVM Products, LLC (Boden 554:1925). This e-mail was sent after the complaint in this case was filed. Legacy contends that the emphasized language in Exhibit 87 supports a claim for libel; the allegedly libelous language is quoted here in the context of the entire paragraph in which it appears: The Sam's Club Mexico buyer held a meeting last Thursday in Mexico City with us and Manuel from Legacy. We presented documentation as to our ownership of our trade marks and barcodes. Legacy did not. He has decided to wait until we can demonstrate that WalMart will not be in the middle of any legal actions between Legacy and us.