169 F. Supp. 3d 1119
D. Colo.2016Background
- ELI is a Colorado corporation operating as Rocky Mountain Laser College (RMLC); Kunze owned and operated it prior to selling to the Fluken-Riggs group.
- PSA dated December 22, 2009 provided a $1,000,000 stock sale with $250,000 via a 5-year Promissory Note and an ICA governing Kunze’s role post-sale.
- Amendment dated April 4, 2011 amended the ICA and Promissory Note to permit limited off-site teaching and use of curricula, with compensation and non-compete terms.
- The Promissory Note is subordinate to ABC Bank’s loan; amendments altered payment terms but were contested after Kunze engaged in off-site teaching and equipment sales.
- Around 2010–2011 Kunze engaged in competition using ELI’s marks and curriculum, including off-site classes in Texas/Washington, and took equipment and client data for his own use.
- The court found breaches of the ICA/Amendment by Kunze, awarded damages on several claims, and granted injunctive relief and other remedies against Kunze with some claims favoring Kunze for others (including a Promissory Note recovery).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Fraud in inducement of PSA | Fluken-Riggs allege Kunze lied to induce PSA formation. | Kunze argues no damages from inducement and the claim should fail. | Fraud claim failed; no damages proven. |
| Breach of PSA/ICA/Amendment | Kunze breached by equipment sales, off-site teaching, and misuse of marks; requested damages and remedies. | Limited breach; seeks contractual limitations as defenses. | Court found multiple breaches by Kunze and awarded damages totaling $127,608, plus related relief; some claims favor Kunze on others. |
| Economic duress to void Amendment | Amendment voidable due to improper threats by Kunze. | No duress; amendment negotiated and mutual. | No economic duress; Amendment not void. |
| Misappropriation of trade secrets and UTSA | Customer list is a trade secret; Kunze misappropriated it and used ELI materials. | Curriculum not a trade secret; other harms denied. | Customer list protected; misappropriation damages awarded ($174,294 total); curriculum not a trade secret; injunctive relief granted. |
| Lanham Act claims and remedies | Kunze used and misrepresented marks; false advertising and unfair competition harmed ELI; seek treble damages and injunctive relief. | Argues limitations per economic loss rule and scope of marks. | ELI prevails on key Lanham Act claims; treble actual damages awarded; injunctive relief and attorney’s fees granted; prejudgment interest awarded; costs awarded. |
Key Cases Cited
- Town of Alma v. AZCO Constr., Inc., 10 P.3d 1256 (Colo. 2000) (economic loss rule framework and independent duties)
- Makoto USA, Inc. v. Russell, 250 P.3d 625 (Colo. App. 2009) (statutory remedies may trump economic loss rule)
- Nicholson v. Ash, 800 P.2d 1352 (Colo. App. 1990) (standing for injury to corporation; indirect injuries not recoverable)
- Donchez v. Coors Brewing Co., 392 F.3d 1211 (10th Cir. 2004) (protectable marks and secondary meaning considerations under § 43(a))
- Western Diversified Servs., Inc. v. Hyundai Motor America, Inc., 427 F.3d 1269 (10th Cir. 2005) (exceptional cases for attorney’s fees under Lanham Act; willful conduct)