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

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FINDINGS OF FACT 1. Legacy Manufacturing, LLC, is a Colorado limited liability company which operated

under an Operating Agreement. Duke 52:11-14; Duke 52:19-21; Exhibit 134. 2. 3. 4. 5. Legacy is a manufacturer and designer of inkjet cartridges. Duke 20:23-25. Charles Duke was President of Legacy Manufacturing, LLC in 2003. Duke 20:14-18. Mr. Duke was responsible for keeping the books of Legacy. Duke 147:13-19. Sherry Snead was the bookkeeper and office manager for Legacy in 2003. Duke

147:24-148:1; Snead 427:9-22. 6. 428:1. 7. Ms. Snead's duties as bookkeeper and office manager with Legacy included Ms. Snead reported to Charles Duke, who was her boss at Legacy. Snead 427:23-

responsibilities relating to the payroll. Snead 428:2-6. 8. Charles Wargin is the former purchasing manager for Legacy, and was purchasing

manager for Legacy in 2003. Wargin 440:2-12. 9. 10. 216:12-17. 11. 217:6-8. 12. MVM sells product directly to the public over the Internet and also sells inkjet MVM has been in the inkjet cartridge and printer supply business since 1995. Loyer Daniel W. Loyer is president of MVM Products, LLC. Loyer 216:10-11. MVM is predominantly a reseller of inkjet cartridges and printer supplies. Loyer

cartridges in retail kits to retailers. Loyer 216:18-217:5. 13. Steve Boden is employed by MVM Products, LLC, and handles marketing and sales

efforts for the company. His work entails analyzing markets or sales channels that MVM wants to pursue for the sale of printer supplies. Boden 536:21-25; 539:1-7.

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14.

MVM does not manufacture inkjet cartridges. Loyer 223:7-8. MVM sells inkjet

cartridges manufactured by other companies. Loyer 223:9-14. 15. MVM also sells refill kits, which it assembles from constituent parts into the final kit

at MVM Products. Loyer 244:2-6. 16. A refill kit consists of an ink injector, usually a syringe or injector bottle, that allows

the user to push the ink into the cartridge. Loyer 243:12-16. 17. Before MVM began its business relationship with Legacy, it bought cartridges from

a contract manufacturer named InkTech. Loyer 223:20-23. 18. Mr. Loyer explained that the term "contract manufacturer" is a term that is in

common use in his business and a term he has heard in other employment. Loyer 223:23-224:10. 19. Mr. Loyer testified that contract manufacturers in the printer supply industry are

basically the manufacturers who provide private label products. Loyer 224:18-22. 20. Mr. Loyer testified that the term "contract manufacturer" is not considered defamatory

or derogatory. Loyer 225:1-4. 21. In late 1999, MVM decided to find another contract manufacturer for its inkjet

cartridges because InkTech decided to open its own sales office in the U.S. and wanted to develop more distributors than MVM Products. Loyer 226:1-16. 22. In 1999, a Legacy salesman, Pete Sidley, contacted MVM about Legacy becoming

MVM's contract manufacturer. Loyer 226:22-227:11 23. When MVM entered into its relationship with Legacy, Mr. Duke and Mr. Sidley made

representations to Mr. Loyer that MVM would not have to worry about Legacy competing with MVM and that Legacy would not compete with MVM as one of its customers. Loyer 230:23-231:9. 24. MVM began buying product from Legacy for resale in either December 1999 or

January 2000. Loyer 227:15-17.

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25.

From 1999 through 2002, MVM's relationship with Legacy was that of customer to

vendor. Duke 138:1-4. MVM bought cartridges made by Legacy and resold them. Duke 138:1315. 26. Starting around December 1999, MVM began ordering product from Legacy for

approximately $5,000 to $10,000 on monthly basis; these orders grew over time until MVM ordered $200,000 to $300,000 worth of product. Loyer 234:24-235:4. 27. According to Mr. Loyer, once MVM began ordering product from Legacy, MVM

would send a purchase order to Legacy's Denver office; Legacy typically would acknowledge that purchase order with a facsimile back to MVM indicating when the shipment would probably be made. Loyer 227:18-23. 28. Legacy would ship the product to MVM and MVM would then ship the product to

its customers. Loyer 228:1-6. At some point in 2002, Legacy began shipping product directly to MVM's customers. Loyer 228:7-17. 29. When Legacy started selling product to MVM in 1999, Legacy did not have its own

label on the product when it was delivered to MVM. Legacy provided product to MVM in a couple of ways: One was a generic product that had no mention of any manufacturer on it, and the other was with labels whose designs were supplied by MVM. Loyer 229:7-18 30. When MVM started purchasing product from Legacy, the brand name that MVM used

was Universal Inkjet Cartridges. Loyer 229:18-22. Another brand name that MVM used was 24-7 Direct. Loyer 229:22-23. 31. In early to mid-2002, MVM started using a trademark called World's Best Inkjet

Cartridge. Loyer 230:9-15. 32. MVM ordered the boxes with the brand name labeling and Legacy put the cartridges

in those boxes. Loyer 229:24-230:3.

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33.

MVM assisted Legacy in the manufacture of products for MVM by providing

component parts and component subassemblies for refill kits, as well as labeling and retail boxes. MVM also provided the dies that were used to manufacture the plastic clamshells that were used in retail packaging, and also provided the dies that were used in the sealing machine located at Legacy's manufacturing facility for sealing these clamshell packages. Loyer 234:3-13. 34. After MVM began using Legacy as its contract manufacturer, MVM ordered inkjet

cartridges exclusively from Legacy. Loyer 250:7-10. All of the sales that MVM made to its retailer customers were sales of inkjet cartridges made by Legacy. Loyer 250:11-14. When MVM sold a product to a customer, it was selling product that MVM had bought from Legacy. Loyer 250:15-17. 35. At the beginning of 2003, Legacy did not have any outside sales people. Duke

138:19-21. Legacy's customers were predominantly resellers of cartridges made by Legacy. Duke 138:22-25. 36. According to Mr. Duke, a reseller is someone who either has a brand and sells it

under that brand in the marketplace, or is just simply selling the product. Duke 139:1-5. 37. Through 2003, Legacy continued to make products for resellers and private label

customers, including NCR, Nu-Kote, and Data Products or Hitachi Imaging Supplies. Duke 139:1225. 38. According to Mr. Duke, Legacy's strategy up through 2002 was not to compete with

its reseller customers, and it made representations to its customers to that effect. Duke 141:9-11. 39. At some point in late 2002 or early 2003, Legacy changed its strategy of not

competing with its reseller customers. Duke 141:12-14. Legacy made the decision to sell its product directly to purchasers and to eliminate middlemen, distributors, resellers or any form of intermediary. Duke 38:3-8. 40. It was Legacy's intent to eliminate the reseller or distributor entirely by using its own

sales force to sell directly to the market. Duke 38:11-15. Mr. Duke decided that Legacy needed to

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sell its product directly to retailers and needed to sell under a brand that was not Legacy. Duke 144:16-145:1. 41. On January 7, 2003, Mr. Duke sent an e-mail to Tom List, an attorney for Legacy,

asking for advice on how to structure a business relationship with MVM, Mr. Loyer and Mr. Boden. Duke 143:13-144:3; Exhibit M-1. Duke 144:1-3; Exhibit M-1. In his e-mail to Mr. List, Mr. Duke wrote that "Legacy has coincidentally been moving to sell up one channel of distribution as part of a current business plan, and it needs to sell under a brand that is not Legacy." Duke 144:8-15; Exhibit M-1. 42. As of December 2002, Legacy had been MVM's contract manufacturer for

approximately three years. Loyer 254:1-6. 43. In 2002, MVM considered entering into a relationship with Legacy that would be

different from the vendor-manufacturer relationship. Loyer 254:7-10. 44. In 2002, MVM had an opportunity to sell product to Bestbuy.com, the Internet

presence of Best Buy Corporation. Loyer 254:13-255:1. 45. Because of the relationship that MVM had developed over the summer and fall of

2002 with Bestbuy.com, MVM was invited by the Best Buy management to participate in a Request for Quote for inkjet cartridges that would be sold under the Best Buy private label. Loyer 255:4-9. 46. MVM received a Request for Quote, which is request by a customer to provide

pricing and delivery and product information in support of a program that the customer wants to develop in its store, from Best Buy Corporation for a complete line of compatible inkjet cartridges and remanufactured inkjet cartridges. Loyer 255:10-256-1. 47. Mr. Loyer testified that it was clear from MVM's discussions with Best Buy that one

of the main criteria for the Request for Quote would be that Best Buy would have access to the actual manufacturer of the product, so that Best Buy would be able to quickly roll out the sales program. Loyer 256:12-19.

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48.

Based on this criterion, Mr. Loyer and Mr. Boden decided that they needed to present

a united front to Best Buy with a manufacturer, and approached Legacy through Mr. Duke in order to submit the Best Buy Request for Quote from a team perspective between MVM and Legacy. Loyer 256:19-24. 266. Mr. Loyer testified that there was no attempt to conceal Legacy's role as a

manufacturer of the product from Best Buy. Loyer 303:10-14. 49. Mr. Duke proposed to Mr. Loyer that MVM and Legacy jointly prepare the response

to the Best Buy Request for Quote, and that, if they were successful in gaining the business, the product would be manufactured by Legacy, and MVM would handle the sales administration of the product, tracking sales and doing the reorder process. Loyer 256:25-257:6. 50. Part of Mr. Loyer's proposal to Mr. Duke was be that in the sale of the product,

Legacy would make its normal manufacturing product, and that the profitability over and above Legacy's normal manufacturing profit would be split between MVM and Legacy on a 50/50 basis. Loyer 257:6-10. 51. Mr. Duke was in favor of the proposal and jointly prepared the response to the Best

Buy Request for Quote with MVM. Loyer 257:11-14:259:5-7. The joint MVM/Legacy Request for Quote was submitted to Best Buy in January 2003. Loyer 259:8-11. On the Request for Quote, Legacy was identified as being the manufacturer of the product. Loyer 259:12-17. 267. Despite the parties' efforts, no sale was made to Best Buy. Loyer 303:15-16. The

reason Mr. Loyer believes that the sale was not made to Best Buy is because one of the cartridge types submitted to Best Buy for testing failed the ink test. Loyer 303:17-305:12. 52. In 2002, MVM also attempted to sell product to Wal-Mart and Sam's Club, and its

efforts culminated in an order from Wal-Mart and Sam's Club each in 2002. Loyer 235:11-16. The orders that MVM received from Wal-Mart and Sam's Club in July and August 2002 were $256,000 from Wal-Mart and $460,000 from Sam's Club. Loyer 242:1-14.

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53.

The order from Sam's Club was for what are called club packs, which consist of

several cartridges in a large clamshell package; the product that MVM sold to Wal-Mart was inkjet cartridge refill kits. Loyer 236:3-18. 54. The order that MVM received from Wal-Mart in 2002 was from Wal-Mart

Department 82, which is also known as the Impulse Department because it deals with impulse purchases by the consumer. Loyer 237:14-25. 55. Neamco is a wholesaler of office products; it is known as a business-to-business

wholesaler because it buys from the manufacturer and sells to businesses directly. Loyer 249:13-19. 56. 57. MVM took its first order from Neamco in January 2003. Loyer 246:3-6. Also in 2003, a company called Duckwall became a customer of MVM. Loyer 246:7-

9. Duckwall, like Wal-Mart, is a general merchandise store whose locations are mainly in the rural communities of the United States. Loyer 250:1-4. 58. MVM entered into a vendor agreement with Duckwall, which Duckwall required its

vendors to have before it would do business with them. Loyer 248:19-25. MVM obtained its first major order from Duckwall in mid-2003. Loyer 246:14-18. 59. The cartridges that MVM sold to Neamco and Duckwall were made by Legacy

Manufacturing. Loyer 249:21-25. 60. As of December 2002, MVM had 10 or more sales representatives with whom it had

written representation agreements. Loyer 251:12-17. MVM's sales representatives were its agents. Loyer 251:22-24. 61. MVM sales representatives had the ability to make contact with prospective

customers within their territory or account list and had the ability to negotiate pricing and delivery times on behalf of MVM. They also had the ability or duty to maintain ongoing contact with the customer through both the buying and shipping process. Loyer 251:25-252:9. Mr. Duke explained

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that a sales representative is "the gatekeeper between the customer and the manufacturer." Duke 121:16-17. 62. MVM sales representatives did not represent only MVM; they represented other

vendors of various products but were not allowed to represent vendors for products that competed with MVM's product line. Loyer 253:18-25. 63. TAK Marketing is a sales representative organization that is owned and operated by

Thomas Kennon. Loyer 238:12-18. TAK Marketing is a brokerage firm that helps clients get their products into Wal-Mart and Sam's Club stores. Mr. Kennon lives near Bentonville, Arkansas, where Wal-Mart Stores has its corporate headquarters. Kennon 557:16-558:3. TAK Marketing's clients include vendors of pet supplies and fresh and frozen foods, as well as inkjet cartridges. Kennon 562:8-12. 64. TAK Marketing was a sales representative for MVM. Loyer 252:17-18. MVM

Products had a written sales representative agreement with TAK Marketing pursuant to which TAK Marketing would act as MVM's agent. Loyer 238:19-239:7; Exhibit A-5. MVM has been a client of TAK Marketing since the summer of 2001, pursuant to a written representation agreement, which remains current. Kennon 564:22-565:5. TAK Marketing represented MVM to Sam's Club U.S. and Sam's Club Mexico, and to Wal-Mart U.S., Wal-Mart Mexico and Wal-Mart UK. Loyer 252:21-24. 65. Mr. Kennon became an independent sales representative after being employed by

Sam's Club for nearly seven years; first in the sales enhancement department, and then as an assistant manager of a Sam's Club, and then as an assistant buyer for Sam's Club. Mr. Kennon worked as an assistant buyer for Sam's Club for about four years, during which time he became familiar with the purchasing practices of Sam's Club, and the process by which Sam's Club purchases products for its retail outlets. Kennon 558:4-560:1. In his experience as an assistant buyer for Sam's Club, Mr. Kennon also became familiar with the buying practices of Wal-Mart. Kennon 561:6-17.

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66.

Mr. Kennon explained that the services that TAK Marketing provides for its clients

are to get the vendor ready to present its products to Wal-Mart and Sam's Club, and then, once those products are ready, to help the clients fill out the correct forms and other paperwork and get them in front of the buyers. Mr. Kennon explained that he typically goes to all sales meetings so that he can help with any specific questions that the buyer might have, that the supplier would not be familiar with. He testified that once the sale is actually made, TAK Marketing becomes responsible for servicing the account and keeping Wal-Mart happy with what it is purchasing, making sure that deliveries are on time, and getting all of the deductions and credits they deserve. Kennon 561:18562:7. Mr. Kennon gets paid directly from the vendor based on a percentage of the sale, which varies by product and company. Kennon 564:6-10. 67. The brand name under which MVM shipped products to Wal-Mart and Sam's Club

in 2002 was World's Best Inkjet Cartridge®. Loyer 244:19-24. MVM obtained a federally registered trademark for World's Best Inkjet Cartridge® in 2002. Exhibit 136; Loyer 230:16-22. 68. 69. Wal-Mart is the parent company of and owns Sam's Club. Kennon 560:21-22. MVM had a vendor agreement with Wal-Mart stores. Loyer 239:21-240:4; Exhibit

Q-2. MVM's vendor agreement with Wal-Mart stores was executed by Mr. Loyer on March 30, 2002. Exhibit Q-2. 70. Vendors who do business with Wal-Mart must have a vendor number from Wal-Mart;

MVM obtained a Wal-Mart vendor number in 2002. Loyer 240:9-23. 71. Wal-Mart required MVM to obtain a vendor number before it would order product

from MVM and would not do business with MVM before MVM had a Wal-Mart vendor number. Loyer 241:19-25. MVM also has a Sam's Club vendor number, which it acquired in 2002. Loyer 241:3-6. 72. A Wal-Mart vendor number is a tracking system by which Wal-Mart tracks all of its

vendors. The vendor number is linked to the vendor's taxpayer identification number; without a

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vendor number, the vendor cannot get paid by Wal-Mart. Each different vendor has its own vendor number with Wal-Mart. Kennon 565:6-14. 73. Sam's Club also has vendor numbers, which are the same as Wal-Mart except for

three numbers that identify the department, including foreign branches of Wal-Mart and Sam's Club. Kennon 565:15-23. 74. Wal-Mart requires a potential vendor to get a vendor number before Wal-Mart will

do business with it or purchase anything from that vendor. Kennon 566:12-16. 75. Mr. Kennon assists his clients in obtaining vendor numbers with Wal-Mart, but

explained that it can take anywhere from two to three weeks, to two months to get a Wal-Mart vendor number. He explained that if a vendor obtains a vendor number from Wal-Mart, the vendor number will go dormant after six months if the vendor does not put any items under the number to purchase within six months. Kennon 567:5-21. 76. Neither Wal-Mart nor Sam's Club will buy product from a vendor who does not have

a Wal-Mart vendor number. This includes the foreign branches of Wal-Mart and Sam's Club. Kennon 567:22-568:5. 77. Wal-Mart will not allow vendor numbers to be transferred from one vendor to

another. Kennon 568:9-13. 78. In 2003, Legacy did not have a vendor number with Sam's Club US or Sam's Club

Mexico. Duke 150:16-22. 79. As of July 2004, Legacy still did not have a vendor number with Wal-Mart US or any

of the Sam's Clubs entities. Duke 151:2-5. 80. Duke 151:6-8. 81. Legacy did not have UPC (Universal Product Code) bar codes for its products until Legacy did not get a vendor number with Wal-Mart Mexico until October 2003.

October 2003. Until then, Legacy used the UPC codes provided by MVM. Duke 151:20-25.

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82.

In early 2003, in addition to discussions about doing business with Best Buy, Mr.

Loyer had other discussions with Mr. Duke about other business proposals that would involve MVM and Legacy. Loyer 259:18-21;260:13-14. 83. In his discussions with Mr. Duke, Mr. Loyer proposed that MVM products would sell

the World's Best Inkjet Cartridge® trademark to Legacy for amounts that MVM owed Legacy for products that it had purchased earlier in the year. Loyer 260:15-20. 84. Mr. Loyer drafted a proposal setting forth MVM's proposed agreements with Legacy

and presented it to Mr. Duke in December 2002 or January 2003. Loyer 260:21-261:8; Exhibit L-5. The memo that Mr. Loyer sent to Mr. Duke outlining the proposed agreements included a sales agency agreement that would pay a commission to Bolo Management; an asset purchase agreement that called for Legacy to purchase refill kit components and the World's Best Inkjet Cartridge® trademark and trade name; and further proposed that Legacy would offset amounts owed by MVM for assets purchased from MVM products. Exhibit L-5. 85. Previously, in January 2001, Mr. Loyer had written to Mr. Duke proposing that MVM

and Legacy form an exclusive joint venture that would involve the sharing of costs and profits. Loyer 261:16-25; Exhibit W-4. At that time in 2001, Mr. Duke met with Mr. Loyer and stated that although he was appreciative of MVM's offer, he declined. Loyer 262:1-10. 86. When Mr. Loyer contacted Mr. Duke in early 2003, however, Mr. Duke was more

amenable to the suggestion of doing business with MVM. Loyer 262:11-15. 87. In late 2002, MVM was not in great financial shape; it had debt and had trouble

keeping its cash flow going because orders had slowed down. Loyer 265:1-6. 88. Mr. Loyer explained that his proposal to Mr. Duke in late 2002 was basically two

proposals: one was a joint approach to the retail business where MVM and Legacy could go as a team to the large retailers so they would have a marketing side and a manufacturing side; the second proposal was to sell the World's Best Inkjet Cartridge® trademark to Legacy for a specific purchase

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price that would include the receivables that MVM owed Legacy, with additional engineering charges and other assets that MVM wanted to sell, including refill kit parts and some of the product of MVM that Legacy already had in its possession. Loyer 263:25-264:13. 89. After Mr. Loyer made his initial proposal to Mr. Duke in late 2002, Mr. Duke invited

Mr. Loyer and Mr. Boden to a meeting in Nogales, Mexico in December 2002. Loyer 265:7-16. 90. At the meeting in Mexico in December 2002, Mr. Loyer and Mr. Boden met with Mr.

Duke and other Legacy employees to discuss both the Best Buy Request for Quote and of Mr. Loyer's proposal to split profits and to sell the World's Best Inkjet Cartridge® trademark and other properties. Loyer 265:23-266:3. 91. In addition to his discussions with Mr. Duke about the proposed transfer of the

World's Best Inkjet Cartridge® trademark from MVM to Legacy and the joint Request for Quote submitted to Best Buy, Mr. Loyer had other discussions with Mr. Duke in January 2003 about a potential business relationship between MVM and Legacy. Loyer 270:21-271:7; Loyer 271:8-12. 92. These discussions between Mr. Loyer and Mr. Duke concerned approaching the

general marketplace jointly so that MVM and Legacy would be able to represent to its customers that their products were direct from the factory, or factory-direct products. Loyer 271:4-7. 93. On January 22, 2003, Mr. Loyer sent Mr. Duke an e-mail that included an attachment

entitled "Asset Deal Points." Loyer 271:15-24; Exhibit H-5. Mr. Loyer explained that the attachment to his e-mail to Mr. Duke entitled "Asset Deal Points," was his proposal for the relationship between MVM and Legacy, including the assets that MVM would sell. Loyer 272:5-9; Exhibit H-5. 94. Mr. Loyer explained that MVM had certain assets that it would be able to transfer to

Legacy, which were listed on the "Asset Deal Points" memorandum, Exhibit H-5. Loyer 273:2-11. 95. The "Asset Deal Points" prepared by Mr. Loyer also included a proposal for Legacy

to purchase MVM's current customer base and best efforts. Exhibit H-5; Loyer 273:12-16.

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96.

On January 28, 2003, Mr. Loyer sent another e-mail to Mr. Duke in which he tried

to make clearer what MVM wanted to get out of the proposed association between MVM and Legacy. Loyer 274:23-275:14; Exhibit J-5. In his January 28, 2003 e-mail to Mr. Duke, Mr. Loyer stated that MVM was not interested in selling MVM as a company to Legacy, and that MVM was not going out of business. Exhibit J-5. 97. During this time frame of January 2003, Mr. Loyer and Mr. Duke continued

discussions over a proposed business relationship between MVM and Legacy. Loyer 275:25-276:3. 98. One of the proposals that Mr. Loyer made to Mr. Duke during these discussions was

that MVM and Legacy would approach customers jointly, that Legacy would make its normal manufacturing profit that would be negotiated between MVM and Legacy, and that any profit generated over and above those costs would then be split between MVM and Legacy on a fifty-fifty percentage basis. Loyer 276:4-14. 99. One of the proposals that Mr. Loyer made to Mr. Duke was that MVM and Legacy

split profits from MVM sales to Neamco. Loyer 278:1-6. 100. Mr. Loyer explained that the proposal that he made to Mr. Duke concerning Neamco

was the same as the proposal with Best Buy, that is, that Legacy would make its normal manufacturing costs and MVM would share the profitability over and above that with Legacy on a fifty-fifty basis. Loyer 278:7-10. 101. Mr. Loyer sent Mr. Duke an e-mail on January 24, 2003 outlining how the profit on

the sale to Neamco would be split. Loyer 277:2-8; 278:18-25; Exhibit I-5. 102. To explain the relationship between MVM and Legacy, Mr. Loyer and Mr. Duke

jointly wrote and sent a letter to Dave Holland, Vice President of Sales and Marketing of Neamco, and Lance Frieday, Neamco's buyer, asking them to modify current and future purchase orders so that they were placed directly with Legacy Manufacturing, LLC. Loyer 279:13-280:12; Exhibit K-4.

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103.

MVM asked Neamco to rewrite its purchase orders to MVM to put them in the name

of Legacy, because Legacy requested that Neamco orders be placed in its name. Loyer 280:20281:4. 104. Subsequently, Neamco issued checks for payment of product purchased from MVM

directly to Legacy on May 7, May 28 and October 1, 2003 in the respective amounts of $40,290.48, $3,673.30, and $10,335.62 respectively. Loyer 281:5-13; Exhibit U-2. 105. After Mr. Loyer and Mr. Duke sent the joint letter to Mr. Holland at Neamco, Mr.

Loyer and Mr. Duke continued to have discussions over the proposed relationship between MVM and Legacy; Mr. Loyer and Mr. Duke were in contact nearly every day over these discussions. Loyer 282:11-21. 106. In connection with these discussions, Mr. Duke presented Mr. Loyer with drafts of

two proposed agreements between MVM and Legacy. Loyer 282:22-283:17; Exhibits O-1, U-4. 107. One of the documents that Mr. Duke e-mailed to Mr. Loyer was a document Mr.

Duke prepared entitled "Accord," dated February 1, 2003. Loyer 283:16-19; Exhibit U-4. 108. The other document that Mr. Duke sent to Mr. Loyer as an attachment to his e-mail

on February 11, 2003 was a draft sales representative agreement between Legacy Manufacturing, LLC and Bolo Management, LLC, which was a company that Mr. Loyer and Mr. Boden started in order to enable them to enter into representation agreements. Loyer 285:6-24; Exhibit X-2. 109. Mr. Loyer was dissatisfied with the commission structure set forth in the proposed

sales representative agreement because he thought it was difficult to understand and wanted to clarify it. Loyer 286:2-7. 110. After Mr. Loyer received the draft Accord and sales representative agreement from

Mr. Duke, he prepared a response, which he e-mailed to Mr. Duke on February 13, 2003. Loyer 286:8-287:16; Exhibit P-5.

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111.

The e-mail that Mr. Loyer sent to Mr. Duke on February 13, 2003 included an

attachment that recited additional proposals for a relationship between the two companies. Exhibit P-5. 112. After he received Mr. Duke's e-mail of February 19, 2003, Mr. Loyer called Mr. Duke

and talked to him in an attempt to resuscitate the proposed relationship between MVM and Legacy. Loyer 290:16-22. 113. In response to Mr. Duke's e-mail of February 19, 2003, Mr. Loyer prepared a draft

"Affiliation Agreement" between MVM Products, LLC and Legacy Manufacturing, LLC." Loyer 292:6-23; Exhibit V-4; 293:4-10. 114. Under the draft Affiliation Agreement prepared by Mr. Loyer, the parties would

continue to do business under their respective names, they would continue to maintain their individual places of business, and the purpose of the affiliation would be for them to join forces in sharing the profits generated in the manufacturing, marketing and sales of printer supplies. Exhibit V-4. 115. The draft Affiliation Agreement prepared by Mr. Loyer also provided that the profits

made on the sales of product would by split by Legacy and MVM, and that MVM and Legacy would be equal partners in managing the affiliation. There was no provision respecting the transfer of the World's Best Inkjet Cartridge® trademark from MVM to Legacy. Exhibit V-4. 116. Around the same time that he sent Mr. Duke the draft Affiliation Agreement, Mr.

Loyer also sent Mr. Duke an e­mail on February 20, 2003 setting forth an agenda for a meeting between them to discuss their proposed relationship. Loyer 295:6-16; Exhibit R-5. 117. In his e-mail to Mr. Duke (Exhibit R-5), Mr. Loyer wrote the following: Here are the points I think we need to nail down: ! Purchase of World's Best® brand. " $139,000 A/R

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" !

!

! !

$13,000 for 3 months (we didn't touch on this today) MVM gets to sell the World's Best ® brand product " Irrevocable license " Irrevocable, exclusive license for the new product line being developed NEAMCO stays with Legacy (don't confuse the customer) " MVM gets paid commissions on sales " Rep commission is paid before any split and reduces principal amount on which to base commission/split calculation Pricing for business between MVM and Legacy Partnership approaches to appropriate customers " Each should have an agreement (maybe a general paper with specifics on a separate sheet)

118.

After Mr. Loyer sent his e-mail to Mr. Duke on February 20, 2003, he participated

in a meeting with Mr. Boden and Mr. Duke and other members of Legacy in February 2003 at which the deal points Mr. Loyer had sent to Mr. Duke were discussed. Loyer 296:3-23. 119. Following this meeting, Mr. Loyer believed that an agreement had been reached

between MVM and Legacy on a manner of doing business together that would have MVM and Legacy split the profits from sales, and would have MVM either transfer a license to use the trademark to Legacy, or else transfer the trademark to Legacy with an irrevocable license back to MVM for the amounts of the receivables that MVM owed plus three payments of $13,000 to be made directly to MVM. Loyer 296:24-297:12. 120. It was also Mr. Loyer's understanding that MVM would receive revenue from the

accounts that MVM transferred to Legacy, specifically half of the profit from the accounts that MVM

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booked orders with and shipped products to. Loyer 300:19-23. According to Mr. Loyer, the split of profits was to be calculated based on anything received over the amount for which MVM sold the product. Loyer 300:24-301:4. 480. Mr. Loyer, however, testified on cross-examination that he did not think that MVM

ever had an agreement with Legacy to split profits on sales, and that there was no written agreement that reflected that agreement between the parties. Loyer 463:7-14. 121. The customer accounts that MVM transferred to Legacy included Neamco, Costco

US, Best Buy, and Duckwall. Loyer 297:17-23; Loyer 298:14-16; Loyer 517:2-23. 122. MVM retained the Duckwall account in its own name because it had not yet received

an order from Duckwall, and because it would be able to factor Duckwall's payments through its factor, KBK Financial. Loyer 298:17-20. 123. In late February and early March 2003, the only one of the Costco entities with which

MVM was doing business as a customer was Costco USA, with whom MVM was in negotiations and had been assigned a vendor number. Loyer 299:3-17. 124. Mr. Duke testified that Legacy purchased the customer accounts from MVM in

exchange for membership interests in Legacy Manufacturing, LLC for Mr. Loyer and Mr. Boden. Duke 48:2-13. 125. It was Mr. Loyer's understanding the MVM was to receive from Legacy an offer of

equity in the limited liability company that would be 10% of the company; Mr. Duke agreed that 5% of the equity in Legacy would be transferred to Mr. Loyer and Mr. Boden (or 2-1/2% each) in exchange for the transfer of the Neamco, Costco USA and Best Buy to Legacy. Loyer 299:25300:18. 126. Effective June 1, 2003, Defendants Loyer and Boden were made members of the

limited liability company by unanimous written consent by Legacy's members. Exhibit 110; Duke 51:20-22.

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127.

In June 2003, Mr. Loyer and Mr. Boden were made members of the limited liability

company, and each received 2-1/2% interest in the company. Duke 146:20-22; Loyer 301:14-25. Between them, Mr. Loyer and Mr. Boden received membership interests in the limited liability company of a total of 5%. Duke 53:5-6. 128. Mr. Loyer was also made a manager of Legacy in addition to a member at about the

same time. Duke 94:17-95:2; Duke 146:23-25. 129. According to Mr. Duke, the value of Mr. Loyer's and Mr. Boden's interests in the

LLC was $75,000 each. Duke 53:1-12. Mr. Duke valued the combined membership interests in Legacy LLC of Mr. Loyer and Mr. Boden at approximately $150,000; this valuation was based on a contribution made by Brian Addy, an outside investor, to Legacy, around the same time Mr. Loyer and Mr. Boden were made members of the limited liability company. Duke 147:1-9. Mr. Duke advised Mr. Loyer that the value of this combined 5% membership interest in the LLC in the limited liability company was worth $150,000. Duke 48:10-16; Loyer 302:1-6. 130. Exhibit 134 is the Operating Agreement under which Legacy operated as a limited

liability company. Duke 146:8-12. 131. provisions: 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. 132. At the time Mr. Loyer and Mr. Boden were admitted as members to the limited The Legacy Operating Agreement, Exhibit 134, contains the following material

liability company, the Legacy Operating Agreement had not been amended. Duke 146:13-16. 133. According to Mr. Duke, in addition to customer accounts that were transferred to

Legacy from MVM in exchange for membership interests in the limited liability company for Mr.

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Loyer and Mr. Boden, MVM was also supposed to transfer its sales representative agreements or renegotiate them in favor of Legacy and to transfer vendor numbers and vendor agreements from MVM to Legacy. Duke 48:17-25. 134. Mr. Loyer testified that it was never his intent that sales representative agreements

be transferred to Legacy as consideration for him and Mr. Boden being made members of the limited liability company. Loyer 314:8-15. Mr. Loyer testified that he never agreed to transfer the sales representatives listed in Exhibit 57 to Legacy. Loyer 407:5-8. 135. Mr. Loyer explained that sales representative agreements cannot just be transferred

to another vendor, but must be negotiated with the sales representative organization. Loyer 527:813. 136. Mr. Duke acknowledged that the sales representative agreements could not simply

be transferred from MVM to Legacy, but the agreements had to be renegotiated with each sales representative to provide that Legacy is the company that the sales representatives were representing. Duke 49:1-10. 137. Mr. Loyer testified that the reason he sent a list of accounts and sales representatives

to Mr. Duke was that Mr. Duke was in the process of trying to attract investors into Legacy and he was providing Mr. Duke with information to help him develop his presentation for those investors. Loyer 405:13-406:7; 406:23-407:4. 138. MVM did not reach an agreement with Mr. Duke under which MVM agreed to assign

its sales representative agreement to Legacy; Mr. Loyer testified that the transfer of the sales representative agreements to Legacy is part of the consideration for making him and Mr. Boden members of the limited liability company was never discussed. Loyer 301:5-13. 139. Plaintiff did not present any evidence, other than Mr. Duke's testimony, from which

it 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.

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Boden members of the limited liability company. Although Defendants sent Mr. Duke a listing of accounts and sales representatives (Exhibits 57 and 58), nothing in these exhibits indicates or even suggests that these accounts and sales representatives were to be transferred from MVM to Legacy. Plaintiff's Exhibit 66, an e-mail from Mr. Boden to Mr. Duke dated September 26, 2003 which recites that Mr. Boden is "in the process of modifying [sales representative agreements] for renegotiation and signatures under the Legacy name" establishes at most a bare promise unsupported by consideration. Mr. Loyer testified that Mr. Duke did not promise to give MVM anything of value for the transfer of the sales representative agreements. Loyer 527:5-7. 140. Mr. Boden testified that he never modified MVM's sales representative agreements

to make Legacy the named manufacturer because the relationship between MVM and Legacy had never been reduced to a written agreement, and that he was tired of being asked to get something done that he thought would only be done once the parties had come to a written agreement and written terms. Boden 549:16-550:3. 141. Also in 2003, Legacy entered into a tentative agreement with MVM to transfer the

World's Best® Inkjet Cartridge® federally registered trademark to Legacy for approximately $139,000 in forgiven debt that was owed to Legacy by MVM. Duke 41:8-16. 142. Mr. Loyer explained that MVM's proposal to transfer the World's Best Inkjet

Cartridge® trademark to Legacy would be for the amount of the accounts receivable that was due to Legacy at the time, which Mr. Loyer estimated at about $139,000. He explained in trial that the proposal to transfer the trademark also involved Legacy paying MVM a fee that was negotiated to three months at $13,000 a month. Loyer 266:4-14. 143. Mr. Loyer testified that Legacy wanted to purchase the World's Best Inkjet

Cartridge® Trademark in order to hide its identity behind the mark, because Legacy did not want the Legacy name to be used as the brand of the product in the marketplace. Loyer 495:11-18.

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144.

Mr. Duke told Mr. Loyer that he was acquiring the trademark because he would like

to have a separate brand for Legacy to sell in the marketplace; Mr. Duke explained to Mr. Loyer that he did not want to sell under the Legacy brand because he was currently selling to some very large resellers in the marketplace, including NCR, Nu-Kote and Data Products. Mr. Duke told Mr. Loyer that Legacy was selling product to these resellers under their own brand and did not want to be perceived as competing with them in the marketplace. Loyer 266:15-267:4. 145. On January 15, 2003, Mr. Duke advised Mr. Loyer by e-mail that Legacy wanted to

purchase the World's Best Inkjet Cartridge® trademark from MVM, and that the purchase price would come from amounts owing from MVM to Legacy. Exhibit N-1. 146. Mr. Loyer testified that the consideration that MVM wanted to receive in exchange

for assignment of the World's Best Inkjet Cartridge® trademark to Legacy was a forgiveness of $139,000.00 worth of accounts receivable and three payments of $13,000.00, which were supposed to start in February or March 2003. Loyer 389:12-25. 147. Although Legacy made several payments of $13,000.00 to MVM, they were not

characterized as payments for assignment of the trademark, but rather as consulting fee payments. Loyer 390:4-10. 148. One of the points that Mr. Loyer and Mr. Duke discussed concerning the transfer of

the World's Best Inkjet Cartridge® trademark to Legacy was that MVM would still be able to use the trademark after it was transferred to Legacy. Loyer 269:9-10. 149. Mr. Loyer testified that it was always part of MVM's proposal to have an irrevocable

rather than a revocable license to use the trademark, and he made that clear to Mr. Duke during his negotiations over the transfer of the trademark. Loyer 284:19-23. 150. The "Asset Deal Points" memo prepared by Mr. Loyer and sent to Mr. Duke on

January 22, 2003 proposed that Legacy would purchase the World's Best Inkjet Cartridge®

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trademark in exchange for an accounts payable of MVM of $129,000. Exhibit H-5; Loyer 273:22-274:10. 151. The "Accord" prepared by Mr. Duke dated February 1, 2003 provided in paragraph

2(b) that MVM "hereby conveys and sells to Legacy all right, title and interest MVM has in and to the items of intangible personal property referred to herein as the `World's Best trademark and trade name'. . . ." The draft Accord further provided that "The parties agree that the value of the World's Best Trademark and Trade Name for the purposes of this Accord is $93,500.00." Exhibit U-4. 152. The Accord prepared by Mr. Duke further provided in paragraph 3 as follows:

Legacy hereby grants to MVM a revocable license to allow MVM to use the World's Best Trademark and Trade Name in various markets and with various customers of MVM as agreed upon by Legacy in its sole and absolute discretion. The markets and customers to which Legacy agrees to allow MVM to use the World's Best Trademark and Trade Name shall be evidenced by the prior written consent of Legacy. Exhibit U-2. 153. The draft Accord was not signed by anyone on behalf of MVM because, Mr. Loyer

explained, it was not acceptable to MVM because it provided for no use of the World's Best Inkjet Cartridge® trademark by MVM other than a revocable license that would allow Legacy at its sole discretion to stop MVM from using the trademark in the marketplace. Loyer 284:2-18. 154. In his letter to Mr. Duke dated February 13, 2003, Mr. Loyer stated as follows

concerning the proposed transfer of the World's Best Inkjet Cartridge® trademark from MVM to Legacy: World's Best® License Legacy is interested in a license to use World's Best® brand trade name. This brand has become recognized in the retail market in the U.S. and Mexico. MVM Products would be interested in granting an irrevocable exclusive license to Legacy in Mexico and selected accounts in the U.S. in return for compensation as follows. Exhibit P-5. 155. Mr. Loyer's intent in including this proposal concerning the trademark was as an

alternative to the transfer, and would authorize the granting of a license to use the trademark to Legacy in exchange for royalty payments. Loyer 287:22-288:6.

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156.

The proposal that Mr. Loyer made to Mr. Duke on February 13, 2003 was that instead

of a transfer of the trademark from MVM to Legacy, Legacy would instead be granted a license to use the trademark and MVM would retain ownership of it. Loyer 288:15-289:11. 157. Within a week of Mr. Loyer's proposal to Mr. Duke of February 13, 2003, Mr. Duke

responded by e-mail to Mr. Boden and Mr. Loyer on February 19, 2003, which. instead of a transfer of the World's Best Inkjet Cartridge® trademark from MVM to Legacy, called for immediate payments of amounts owing to Legacy from MVM. Loyer 289:12-290:1; Exhibit P-1. 158. Mr. Duke's proposal in his e-mail of February 19, 2003 (Exhibit P-1) was not

acceptable to Mr. Loyer because he believed it was punitive in nature. Loyer 290:6-14. 159. After February 2003, Mr. Loyer had further discussions with Mr. Duke about

transferring the World's Best Inkjet Cartridge® trademark to Legacy, which discussion centered around MVM's ability to continue to use the trademark. Loyer 318:3-13. 160. According to Mr. Loyer, there was a hangup in the negotiations between MVM and

Legacy over the transfer of the trademark from MVM to Legacy; Mr. Loyer explained that every proposed or draft document that he received from Mr. Duke contained either a revocable license where Legacy retained control of whether MVM was able to use the trademark, or no license at all that would allow MVM to continue using the trademark. Loyer 318:25-319:9. 161. On June 5, 2003, Mr. Loyer sent Mr. Duke an e-mail which addressed in part the

trademark transaction. Loyer 319:12-18; Exhibit U-1. 162. In his June 5, 2003 e-mail to Mr. Duke, Mr. Loyer advised Mr. Duke that a proposed

agreement "is basically ok with the exception that it does not incorporate our ability to use the trademark as we had agreed." Exhibit U-1. 163. In response to Mr. Loyer's e-mail of June 5, 2003, Mr. Duke e-mailed Mr. Loyer

back, and, in response to Mr. Loyer's comments regarding the trademark transaction, wrote that "I think the reason [MVM's ability to use the trademark] is not in there is because I had thought that

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MVM, who is the "our," I presume, was not going to trade the business. Where did I go wrong in my thinking?" Exhibit U-1. 164. After he received Mr. Duke's responsive e-mail on June 6, 2003 concerning the

trademark transaction, Mr. Loyer did not think that MVM still had an agreement with Legacy to transfer the World's Best Inkjet Cartridge® trademark to Legacy because there was no provision for MVM to continue using the trademark, which to Mr. Loyer's understanding, was always a condition of the transfer of the trademark. Loyer 319:19-320:4. 165. Mr. Loyer testified that although MVM agreed in principle to transfer the World's

Best Inkjet Cartridge® trademark to Legacy, he testified it was always with the caveat that Legacy would grant MVM a license back to continue using the trademark; he testified that this was a condition that MVM imposed on the assignment of the trademark to Legacy and that he had made this clear to Mr. Duke. Loyer 389:4-11. 166. According to Mr. Loyer, Mr. Duke disagreed with MVM's position about a license

of the trademark back to MVM and would not agree to give MVM an irrevocable license to use the trademark if MVM transferred the trademark to Legacy, which Mr. Loyer testified was a "deal killer." Loyer 390:11-21. 167. For this reason, Mr. Loyer began to have doubts about the assignment of the

trademark around the end of summer 2003 because the documents he kept receiving from Mr. Duke all had provisions that provided either for a revocable license, or else no ability to use the trademark at all. Loyer 391:4-10. 168. Mr. Duke's testimony established that he knew that a written document was necessary

to be executed in order to complete the transfer of the trademark from MVM to Legacy. Duke 41:17-21; Duke 102:22-103:2. 169. Mr. Duke testified that Legacy never received from MVM a formal, written

assignment of the World's Best Inkjet Cartridge trademark. Duke 154:10-13.

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170.

Although Mr. Loyer sent Mr. Duke a copy of the registration certificate for the

World's Best Inkjet Cartridge® trademark (Exhibit 136), it was not his intention in sending that registration certificate to Mr. Duke that it be an assignment of the trademark. Loyer 318:14-24. 171. MVM did not execute a formal written assignment of the trademark to Legacy

because the parties could not agree on the specific ability of MVM to continue using the trademark. Loyer 391:11-16. 172. An assignment of the World's Best Inkjet Cartridge® trademark to Legacy was never

recorded with the United States Patent & Trademark Office. Loyer 391:17-20. 173. The Certificate of Registration from the United States Patent & Trademark Office

establishes that MVM Products, LLC is the record owner of the federally registered trademark World's Best Inkjet Cartridge® on the supplemental register. Exhibit 136. 174. Nevertheless, MVM allowed Legacy to use the World's Best Inkjet Cartridge®

trademark during the time of MVM's relationship with Legacy, with MVM's consent and approval. Loyer 391:21­392:2. 175. 5. 176. Members of MVM, a limited liability company, reported the sale of the trademark Legacy made sales using the World's Best Inkjet Cartridge® trademark. Loyer 392:3-

as a capital gain on their 2002 state and federal income tax returns. Loyer 392:6-12; Loyer 473:5-16; Exhibits 25, 30. The tax returns reported a net gain of $122,572 on the transfer of the trademark. Loyer 474:4-14; Exhibits 25, 30. 177. Mr. Loyer testified that he reported the gain for the sale of the trademark, even though

the transaction had not been completed, because he thought it would make the 2002 books of MVM look better by reducing the amounts of payables. Loyer 392:21-24. Mr. Loyer testified that the transfer of the trademark to Legacy was not contingent on some future event. Loyer 526:16-23.

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178.

Mr. Loyer reported the sale of the trademark on his state and federal income tax 179.

returns as a taxable gain and was assessed taxes on that gain. Loyer 393:4-7. 180.

Mr. Loyer testified that he and the other members of MVM have not amended their

2002 tax returns to eliminate this gain because it would require all of MVM's members to refile their taxes and Mr. Loyer decided that this effort was not worth it. Loyer 393:19-24. 181. Mr. Loyer testified that the idea of the trademark transfer was for MVM to transfer

the World's Best Inkjet Cartridge® trademark to Legacy, while reserving an irrevocable license for MVM. Loyer 468:21-25. 182. MVM has never offered to return to Legacy the amount that was the consideration

for the transfer of the World's Best Inkjet Cartridge® trademark. Loyer 475:24-476:2. 493. Mr. Loyer testified that Legacy had never asked for the money back that was allegedly

paid for the transfer of the World's Best Inkjet Cartridge® trademark. Loyer 527:2-4. 183. In 2003, ADP Total Source was the payroll administrator for Legacy Manufacturing.

Duke 22:13-14; Duke 147:20-23. 184. Legacy distributed to its employees a handbook for employees prepared by ADP Total

Source entitled Basic Employment Policies. Duke 32:8-12; Exhibit X-9. 185. The ADP Total Source employment handbook provides that employees are employees

at will, and that "your job status does not guarantee employment for any specific length of time." It further provides that "your employment with ADP Total Source is entered into voluntarily and both you and ADP Total Source are free to end the employment relationship at any time, for any reason, with or without cause or advance notice." Exhibit X-9 at pg. 2. 186. In June 2003, Defendants Loyer and Boden executed various forms furnished by

Legacy and ADP Total Source, including W-4 forms, that were preliminary to becoming employees of Legacy. Duke 22-26; Exhibits 33, 34, 35, 37, 92, 93, 94, 95, 96. None of the so-called

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"employment forms" signed by Mr. Loyer or Mr. Boden (Exhibits 32-37 and 92-96), specifically referenced any promise by Legacy to employ the person who fills out the form. 187. Mr. Loyer testified that the reason he signed the employment forms with Legacy,

Exhibits 92, 93, 94 and 96, was because Mr. Duke told him that becoming employees of Legacy was the only way he and Mr. Boden could get paid any monies from Legacy. Loyer 394:9-15. 188. Mr. Loyer testified that he and Mr. Boden did not want to be employees of Legacy

but rather wanted to be independent contractors. Loyer 394:16-24. 189. Neither Mr. Loyer nor Mr. Boden ever signed a written employment agreement with

Legacy or any other agreement in which they promised to become employees of Legacy. Loyer 394:25­395:5. 190. Neither Mr. Loyer nor Mr. Boden signed a noncompetition agreement with Legacy.

Duke 145:25-146:4. 191. According to Mr. Duke, Legacy hired Mr. Loyer and Mr. Boden in order to bring on

a direct sales force for Legacy product. Duke 38:20-38:2. 192. Mr. Loyer testified that he was given a title at Legacy of Senior Vice President of

Sales and Marketing and that he may have been introduced with that title at a meeting with Costco personnel. Loyer 311:1-10. Mr. Loyer testified that he told Mr. Duke that he was uncomfortable with Mr. Duke using a title like Vice President of Marketing, and that when Mr. Loyer was introduced to a meeting of potential investors in June 2003, he was introduced as the "marketing guy." Loyer 311:13-312:3. 193. Mr. Loyer testified that he never considered himself an employee of Legacy because

he was still President of MVM Products; he testified that he felt that he could consult with Legacy and still run MVM Products at the same time. Loyer 395:11-16.

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194.

Mr. Loyer initially received a Form 1099-MISC for the year 2003 from Legacy

showing nonemployee compensation paid to Mr. Loyer by Legacy in the amount of $12,677.46. Loyer 395:17­396:5; Exhibit X-6. 195. Subsequently, Mr. Loyer received from Legacy a "corrected" Form 1099-MISC for

2003, which changed the amount of nonemployee compensation from $12,677.46 to 0 dollars. Loyer 397:16-398:1; Exhibit Q-7. Mr. Loyer testified that he received the corrected Form 1099, Exhibit Q-7, after his deposition in this case. Loyer 398:2-4. 196. Mr. Loyer testified that he and Mr. Boden did not receive a regular salary from

Legacy. Loyer 398:5-7. Mr. Loyer testified that he never received payment through ADP Total Source on a regular date. Loyer 453:6-12. 197. Mr. Loyer and Mr. Boden received W-2 Forms for the year 2003 from ADP Total

Source in January 2004. Loyer 398:21-399:6; Exhibit X-6. 198. Mr. Loyer did not receive a separate W-2 Form or corrected W-2 Form from Legacy,

and did not receive a corrected W-2 Form from ADP Total Source. Loyer 399:14-21. 199. Mr. Loyer testified that the amount shown as being paid to him as wages in his W-2,

$33,469.09, was not the same amount he personally received from Legacy. He testified that he calculated the amount he actually received directly from Legacy as approximately $14,000.00. Loyer 399:22­400:4. 200. Mr. Loyer also testified that Mr. Boden did not receive the amount from Legacy that

was indicated on the W-2 Form issued to Mr. Boden by ADP Total Source, which was $33,521.59; Mr. Loyer testified that he calculated the amount that Legacy paid directly to Mr. Boden as approximately $11,500.00. Loyer 400:5-9; Exhibit X-6. 201. Mr. Loyer testified that he based his calculations of the amounts paid directly to

himself and Mr. Boden on checks or transfers that were made directly to himself or Mr. Boden from

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Legacy, and relied on a document prepared by Sherry Snead for Mr. Duke to determine the amounts that were paid directly to him and Mr. Boden. Loyer 400:10-22; Exhibit N-8. 202. Ms. Snead testified that she prepared Exhibit N-8 at Mr. Duke's request, that the

information in Exhibit N-8 was based on information she reviewed in Legacy's accounting system, and that the information in Exhibit N-8 is accurate to the best of her knowledge. Snead 432:23433:17. 203. Exhibit N-8 indicates that the amount of money paid directly to Mr. Loyer in 2003

by Legacy as salary was $20,833.09. Exhibit N-8 indicates the amount paid directly to Mr. Boden in 2003 by Legacy as salary was $17,970.40. 204. Exhibit N-8 does not show any payments made to Mr. Loyer, Mr. Boden or MVM

after September 30, 2003. 205. Mr. Loyer filed his tax returns using the W-2's furnished to him by ADP Total Source

(Exhibit X-6), and paid tax on the income that had been reported to him. Loyer 419:9-24. 206. From late February 2003 forward, MVM worked to make sales that would benefit

Legacy; these efforts included developing sales presentations, visiting customers and making sales presentations, negotiating pricing and delivery with customers, filling out vendor applications to be assigned vendor numbers with various customers, and finalizing negotiations with Costco USA to do a market test in their U.S. stores. Loyer 302:7-20. 207. Between January and October 2003, Mr. Boden was engaged in efforts to sell inkjet

cartridges manufactured by Legacy to Wal-Mart, Sam's Club, Sam's Club Mexico, Costco, Costco Mexico, Target, Best Buy and a variety of grocery and drug store chains. Boden 539:8-16. In his sales efforts from January through October 2003, Mr. Boden did not sell anything except the product that was manufactured by Legacy; those products were sold under the brand name World's Best Inkjet Cartridge®. Boden 541:1-7.

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208.

Mr. Boden testified that from January through October 2003, he made 34 unique face-

to-face sales calls in an attempt to sell cartridge manufactured by Legacy; only one of those calls was made in southern California where Mr. Boden lives. Boden 536:21-23; Boden 541:8-18. 209. Between January and October 2003, Mr. Boden successfully made sales of products

manufactured to Legacy to Duckwall Stores, Neamco, and Wal-Mart Mexico, which sale occurred later in 2003. Boden 544:3-9. 210. 211. Staples is an office products superstore. Duke 71:18-19. On behalf of Legacy, Mr. Boden went on a sales trip after the July 8, 2003 meeting

to meet with Bob McAdams, a buyer for Staples. Duke 69:8-17. 212. Mr. Boden testified that in connection with his meeting with Mr. McAdams of Staples

on July 9, 2003, Mr. McAdams asked Mr. Boden if the North American manufacturer who was identified in the sales literature as the source of the cartridges he was trying to sell was located in Mexico, to which Mr. Boden replied that that was correct. Boden 546:19-547:10. 213. Mr. Boden testified that Mr. McAdams next asked him if the manufacturer was

Legacy Manufacturing, and Mr. Boden informed him that it was. Mr. McAdams then told Mr. Boden that he had visited Legacy's factory nine or twelve months prior to their meeting, and that he was the fourth reseller who had been in Mr. McAdams' office in the last three to four weeks representing Legacy products. Boden 547:11-17. 214. Following the sales trip to Staples, Mr. Boden submitted a report to Legacy dated July

11, 2003. Duke 72:4-8; Duke 74:6-12; Exhibits 119 and 120. 215. In the report on the Staples sales call, Mr. Boden related that he met with Bob

McAdams, merchandise manager-private label on July 9, 2003. Exhibit 120. 216. According to Mr. Boden's sales report on Staples, Mr. McAdams opened the meeting

by informing Mr. Boden that he knows Legacy and had visited Legacy's factory, and that he had been approached by three or four different companies representing that they are tied to Legacy. Mr.

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McAdams also told Mr. Boden that he had been approached by Mr. Duke several times directly. Mr. McAdams told Mr. Boden that Legacy is "acting the same as the Chinese by selling to every distributor in sight and then trying to sell direct to the accounts that the distributors worked so hard to get!" Exhibit 120. 217. Mr. Boden's sales report on the Staples sales call also related Mr. McAdams'

comments concerning the poor quality of the remanufactured cartridge and "funky manufacturing techniques." Mr. McAdams also made several negative comments concerning Legacy's loyalty to its customers. Exhibit 120. 218. In his report on the Staples sales call, Mr. Boden reported to Mr. Duke that he had

revived the Staples account to the point of having the opportunity to send in the new crosscompatible cartridges for the C-60, 62, 80, 82 printers. Exhibit 119. 219. After Mr. Boden sent the Staples sales report to Mr. Duke (Exhibit 120), he received

an e-mail from Ben Lyles on July 24, 2003. Boden 548:8-20; Exhibit P-7. In his e-mail to Mr. Boden, Mr. Lyles wrote, "Good luck with this, Steve, I know you defended us. . . because nothing looks as bad as if you don't have confidence in your product or your company. . . . Thanks for taking it on the chin for us." Exhibit P-7. 220. Although Mr. Boden's report on the Staples sales call contained a number of

comments that were critical of Legacy, it also made clear that Mr. Boden was not the source of these critical comments but rather that they were made by Mr. McAdams of Staples and not by Mr. Boden. Exhibit 120. In the sales report that Mr. Boden prepared for Mr. Duke (Exhibit 120), Mr. Boden was not criticizing Legacy but rather reporting Mr. McAdams' criticisms of Legacy. Boden 547:20-25. The Court does not find any comments critical of Legacy in Mr. Boden's report, that are attributable to Mr. Boden or are not attributed to Mr. McAdams of Staples. Exhibit 120.

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In July 2003, Mr. Boden went on a sales trip to England to make a sales call on Wal-

Mart UK. Duke 83:8-24. Legacy paid for Mr. Boden's expenses on his sales trip to Wal-Mart UK. Duke 83:14-15. 222. Mr. Kennon went with Mr. Boden on the trip to England for the sales meeting with

Wal-Mart UK to discuss the possibility of selling inkjet cartridges to them for the United Kingdom. Kennon 568:14-16; 568:22-569:1. TAK Marketing paid Mr. Kennon's expenses for the trip to England in July 2003. Boden 541:19-25. Legacy Manufacturing did not reimburse him for any of his expenses for that trip. Kennon 568:17-21. 223. The brand of product that Mr. Kennon and Mr. Boden were trying to sell to Wal-Mart

UK was World's Best Inkjet Cartridge®. Kennon 569:8-10. 224. Sales literature prepared by Mr. Boden and sent to the buyer at Wal-Mart UK was

sent on stationery containing the World's Best Inkjet Cartridge® trademark and the name and address of MVM Products, LLC. Exhibit 7. 225. At the time Mr. Boden made his trip to England in July 2003 to call on Wal-Mart UK,

Legacy did not have a Wal-Mart vendor number. Duke 149:23-150:7. Legacy did not have a vendor number with Wal-Mart UK either. Duke 150:13-15. 226. Mr. Boden testified that in connection with his efforts to make a sale to Wal-Mart UK

in July 2003, he did not disclose to Wal-Mart UK that Legacy was the manufacturer of the cartridges because they were selling the World's Best brand, which was the focus, and because Legacy did not have a Wal-Mart vendor number at the time; MVM Products had the Wal-Mart vendor number that was used in the attempt to make a sale to Wal-Mart UK. Boden 545:6-23. Mr. Boden testified that Wal-Mart UK would not have done business with Legacy because it did not have a vendor number. Boden 546:8-10.

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Wal-Mart UK did not buy product from MVM or Legacy in July 2003. Boden 543:5-

6; Kennon 569:11-12. Mr. Boden reported what happened on the Wal-Mart UK, sales trip to Mr. Duke. Boden 543:14-21. 228. Later in July 2003, Mr. Boden made a sales call on behalf of Legacy on Costco

Canada. Duke 87:9-14. 229. Mr. Loyer explained that for sales that MVM made, Legacy would receive two

benefits: First, Legacy would always make the manufacturing profit on its sale of the inkjet cartridges; and second, if there was a profit above that, Legacy would receive half of that profit as well. Loyer 305:18-306:3. Mr. Loyer testified that when he was attempting to sell product by Legacy, these sales were made with the intention that Legacy would receive a benefit from them. Loyer 305:18-23. 230. In May 2003, MVM Products, LLC entered into a wholesale vendor agreement with

Costco USA. Loyer 306:4-20; Exhibit D-3. The Costco vendor agreement was assigned by MVM to Legacy in late May or June 2003. Loyer 307:1-12. 231. Mr. Loyer testified that he sent an e-mail to Sue Tompkins, an assistant to Greg

Shavey, a buyer with Costco, on July 23, 2003, in order to make sure that Costco knew that it was dealing with Legacy and that it was buying Legacy products. Loyer 409: