1:15-cv-01793
D. Colo.Jul 22, 2019Background
- ConcealFab (plaintiff) and Sabre (defendant, incl. MUTI) negotiated an acquisition beginning in 2014, executed an NDA (Aug. 4, 2014), a non‑binding Term Sheet (Feb. 3, 2015), and a Licensing Operating Agreement (LOA) (Mar. 13, 2015).
- LOA created a new Sabre EPG segment to market/operate non‑small‑business work; Sabre agreed to prepay licensing fees/working capital to CFG/ConcealFab (including $160,000 immediate infusion and $120,000 to buy out a consultant).
- Fitzhugh (ConcealFab CEO) began working at Sabre under LOA terms; a separately negotiated Employment Agreement was finalized but not executed; Fitzhugh assigned his sign‑on bonus and severance rights to ConcealFab.
- Sabre paid $160,000 and two $12,000 installments (total $184,000), paid Fitzhugh salary March–May 2015 but did not execute the Employment Agreement, did not pay the $125,000 sign‑on bonus or $300,000 severance, and ceased further LOA payments.
- Sabre terminated the LOA (May 26, 2015), filed a UCC‑1 lien against ConcealFab’s IP (May 27, 2015), delivered a promissory note demand ConcealFab declined to sign, and the lien was not removed until May 18, 2017.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of NDA — misuse of confidential info (Cincinnati Bell order) | Sabre used ConcealFab pricing/specifications to undercut ConcealFab and win Cincinnati Bell business | Sabre used its preexisting 180/180E product line and its own part numbers; no misuse of ConcealFab materials | Court: No breach — evidence shows Sabre quoted its legacy 180 products and did not use ConcealFab trade secrets or part numbers |
| Breach of LOA — failure to fund/ repay obligations & severance | Sabre breached LOA by not funding certain accounts payable and by refusing Fitzhugh's severance per Employment Agreement; ConcealFab suffered $366,897.54 | Sabre contends LOA did not obligate it to repay some working capital and asserts offsets/other breaches by ConcealFab | Court: ConcealFab proved breach; awarded $66,897.54 (unpaid AP) + $300,000 (severance) = $366,897.54, subject to offset by Sabre’s recovery |
| Sabre counterclaim — ConcealFab failed to repay prepaid licensing fees / sign one‑year note | Sabre seeks repayment of $184,000 prepaid licensing fees and interest; argues ConcealFab refused to execute note | ConcealFab argued promissory note Sabre drafted overstated amounts and LOA limits repayment obligations | Court: Sabre established breach re: unpaid prepaid licensing fees; awarded principal $184,000 plus 11% interest to $266,984.00; ConcealFab not required to sign Sabre’s $621k note |
| Employment Agreement — enforceability and damages | ConcealFab contends the finalized but unsigned Employment Agreement became binding by conduct (Fitzhugh onboarded, paid salary) and Sabre breached by not paying bonus/severance | Sabre maintains no executed employment contract and did not intend to be bound | Court: Employment Agreement enforceable by conduct/promissory estoppel; awarded $125,000 sign‑on bonus (severance already accounted in LOA award) |
Key Cases Cited
- Level 3 Commc’ns, LLC v. Liebert Corp., 535 F.3d 1146 (10th Cir.) (plain meaning governs contract interpretation)
- Albright v. McDermond, 14 P.3d 318 (Colo.) (court’s primary task is to effectuate parties’ intent from contract language)
- Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310 (Colo.) (parol/extrinsic evidence cannot vary an unambiguous written contract)
- Nahring v. City & County of Denver, 484 P.2d 1235 (Colo.) (practical construction and parties’ conduct in performance may clarify ambiguity)
- East Ridge of Fort Collins, LLC v. Larimer & Weld Irrigation Co., 109 P.3d 969 (Colo. App.) (contract is ambiguous only if fairly susceptible to more than one interpretation)