The opinion of the court was delivered by: Dale S. Fischer United States District Judge
FINDINGS OF FACT AND CONCLUSIONS OF LAW
A trial by the Court was held January 10-13, 2012.
The Court ordered that counsel for Card Tech International LLLP (Card Tech) submit Card Tech's proposed Findings of Fact and Conclusions of Law to counsel for Defendants Sharyn Nappi a.k.a. Sharyn Provenzano and Prodeen, Inc. (referred to jointly and severally as Provenzano except as otherwise indicated). Apparently because of defense counsel's trial schedule, he was unable to provide timely comments. Card Tech lodged its [Proposed] Findings of Fact and Conclusions of Law on February 23, 2012. On February 27, 2012, Provenzano lodged Defendants and Counterclaimants' [Proposed] Findings of Fact and Conclusions of Law On March 12, 2012, Provenzano lodged her Opposition to Card Tech's Proposed Findings of Fact and Conclusions of Law, and Card Tech lodged its Objections to Defendants' [Proposed] Findings of Fact and Conclusions of Law. Although the Court has reviewed and considered all of these documents, and has made some additions, deletions, and changes based on its detailed review of the transcript and the documentary evidence and its own recollection of the trial and assessment of the credibility of the witnesses, where Provenzano has not objected to paragraphs of Card Tech's [Proposed] Findings of Fact and Conclusions of Law, the Court generally accepts those findings as accurate, and has not sought or cited to further support in the record. The Court has included proposed Findings of Fact and Conclusions of Law proposed by Provenzano, to the extent relevant and not contradicted by the evidence. The deletion of a proposed finding or conclusion does not necessarily mean that the Court disagrees with the proposed finding or conclusion. The Court may simply have determined that the finding was not necessary to its determination.
1. This Court has subject matter jurisdiction pursuant to the Trademark Act of 1946, as amended (the Lanham Act), 15 U.S.C. § 1125(a) and § 1125(d). Also, the Court has diversity jurisdiction pursuant to 28 U.S.C. § 1332: the matter in controversy exceeds the sum or value of $75,000, exclusive of interest and costs and there is complete diversity of citizenship between the parties. The Court has supplemental jurisdiction over the state-law claims. 28 U.S.C. § 1367.
2. Venue is proper in this district as the defendants reside here.
3. Card Tech is a Maine limited liability limited partnership, with its principal place of business in Maine.
4. At the time of trial, the employees of Card Tech were Norman Farrar, his son Stephen Farrar, and one other person. Norman Farrar is a principal of Card Tech.
5. Provenzano is an individual residing in Acton, California.
6. Prodeen, Inc. is a California corporation with its principal place of business in California. Provenzano directs the conduct of Prodeen. From 2003 through 2010 there were no other employees of Prodeen. Tr. 1/12/12 at p. 162:11-18. There is no evidence of any other employees of Prodeen since 2010.
7. Card Tech is, and since March 2010 has been, in the business of selling technical cleaning products. Technical cleaning products are used to clean the slots of credit card machines, bill readers, slot machines, key cards, and similar magnetic card readers. It is a niche business. Individual technical cleaning products are very inexpensive. Tr. 1/12/12 at p. 161:8-9.
8. In the late 1990s Norman Farrar was a principal of a company named Enefco, which decided to go into the card cleaning products business. Farrar met Provenzano at a trade show and eventually hired her as Enefco's first sales manager for the card cleaning business. Provenzano worked from her home in Acton, California, and was in charge of sales and market development. Farrar worked well with Provenzano and thought she was talented.
9. In or around 2003, Farrar sold his company. The new owners "released" Provenzano -- she was terminated. Tr. 1/10/12 at p. 42:24-25, Tr. 1/11/12 at pp. 179:22-180:1.
10. In 2003 Provenzano began marketing and selling technical cleaning products. In or around March 2006, Provenzano established Prodeen, Inc. dba Proven Products, which sold cleaning cards. Tr. 1/11/12 at pp. 180:14-181:6. Provenzano owns all of the stock of Prodeen, Exhibit 75, and directs the conduct of Prodeen.
11. As of the beginning of 2010, Provenzano marketed and sold technical cleaning products under the trademarks and trade dress PROVEN PRODUCTS, a stylized V symbol, PRESAT with a water droplet symbol, PRESAT with a rippled water image, DIAMOND TECHNOLOGY, a "magnifying glass and dollar bill" image, an orange area on the left side and images of certain machines in certain layouts, CLEAN SWAB, EASY WIPES, EASY CLEAN CARD, and EASY SWAB, and the slogan "The Results Are Obvious"; and utilized a website. Tr. 1/10/12 at pp. 64:15-70:10; Tr. 1/11/12 at pp. 181:12-22, 183:1-185:6, Exhibit 26. On June 10, 2008, trademark registration number 3443482 was issued to Provenzano for the mark PRESAT. See Exhibit 93-2.
12. There is nothing about the layout or overall appearance of the trade dress, both packaging and website, that enables the package or website, respectively, to function. The "V"-shaped Proven Products logo, and the Diamond Technology logo with its three overlapping diamonds, are wholly nonfunctional; the water drop design and the rippled water designs, the magnifying glass and dollar bill images, and the slogan, are wholly non-functional for cleaning cards. The content of the website can be arranged differently; the package can have a different appearance. Neither the appearance of the packaging nor the website provides a benefit apart from identifying the source of the product. Neither the layout of the website nor the layout or color of the packaging describes the products. The particular arrangement of the depictions and instructions, and the overall visual impression created by Card Tech's website and packaging, is not essential to use of the products Card Tech sells. Moreover, there are numerous ways to design a website or product packaging for cleaning card products. See Exhibit 26. Therefore, protecting Card Tech's trade dress will not impair competition in the industry.
The Asset Purchase Agreement
13. In 2006 Farrar reconnected with and provided some assistance to Provenzano. He was impressed with the package design she used. At about the time that Farrar's "non-compete" agreement with Enefco was about to end, Farrar and Provenzano began negotiating for Card Tech's purchase of Provenzano's business. Card Tech was established to purchase the assets of Proven Products from Prodeen. TR. 1/10/12 at p. 46:5-19. Prior to entering into the Asset Purchase Agreement, Farrar wanted Provenzano to be sure she would be happy in her new role. Tr. 1/10/12 at pp. 44:8 -56:15; see Exhibit 21.
14. On March 8, 2010, Provenzano and Card Tech entered into an Asset Purchase Agreement. Exhibit 75. The signatories for the seller are Prodeen, Inc. and Provenzano. Pursuant to that Agreement, Provenzano sold to Card Tech and Card Tech bought from Provenzano the business assets including, among other things:
* All right, title and interest in and to all of the trademarks, trade names, dbas and assumed names used to any extent in the operation of the business or otherwise related thereto;
* All business records, including but not limited to all customer and supplier lists;
* The internet websites: www.4cleaningcard.com and www.presat.com, including the content and all rights necessary to access, operate and use those websites, and the domain names related to the business;
* All goodwill of the business.
Exhibit 75 at 1.1. Card Tech understood it was purchasing all trademarks, trade names, business records, customers, promotional material, and goodwill. Tr. 1/10/12 at pp. 62:23-70:21. Provenzano understood she was selling to Card Tech all of the trademarks, trade names, and dbas, assumed names, the art work for the packaging and all business records. Tr. 1/12/12 at pp. 3:24-4:4, 5:13-17, 6:22-24. Provenzano executed a separate written assignment of the PRESAT trademark. Exhibit 93.
15. In the Agreement, Provenzano represented that there were no undisclosed liabilities, and that she had disclosed to Card Tech all material facts. Exhibit 75 at 8.11, 8.17.
16. Acquiring all of Provenzano's intellectual property was important to Card Tech. Card Tech considered the name, the packaging and the website important to have. Tr. 1/10/12 at pp. 51:7-21, 57:20-58:14.
17. Provenzano's packaging was attractive and desirable to Card Tech. No other competitors were using a design similar to the Provenzano packaging that Card Tech purchased. Tr. 1/10/12 at p. 68:23-25. It was important to Card Tech to go into the market with a known product and trade name. Tr. 1/10/12 at pp. 51:15-18, 58:1-4.
18. The purchase price to be paid by Card Tech to Provenzano is $253,315.36, payable $205,795.36 at closing and $47,520.00 paid over two years. Card Tech paid $205,795.36 at closing and executed a promissory note for $47,520.00. It appears that the $205,795.36 was for the inventory, and the $47,520.00 was for the goodwill and all of the other assets. Tr. 1/10/12 at p. 73:21-23; 1/12/12 at p. 14:14-23. The Agreement itself states that there was an allocation of the purchase price set forth in Schedule 7, Exhibit 75 at 7, but no schedules were provided to the Court. Card Tech has paid $23,760.00 on the promissory note. The last payment Card Tech made on the promissory note was the February 2011 payment. Tr. 1/11/12 at p. 107:15-17. The amount unpaid on the note is $23,760.00.
19. Card Tech contends that Provenzano did not disclose a liability that she was obligated to disclose by the terms of the Asset Purchase Agreement, in the amount of about $6,000. Card Tech contends it paid that liability at Provenzano's request and was not able to offset this liability completely. Tr. 1/11/12 at p. 135:3-25. Provenzano's objection that she was not required to disclose the liability because Card Tech was not assuming liabilities is legally incorrect. The Asset Purchase Agreement contained a specific warranty that all liabilities had been disclosed. Provenzano breached this warranty by her failure to disclose. Moreover, that Card Tech paid the amount is undisputed. Nevertheless, this breach does not appear to have been material to Card Tech.
20. The Asset Purchase Agreement, Employment Agreement, and promissory note were executed in connection with one another. See Exhibits 75, 76, and 77.
21. Both Card Tech and Provenzano wanted Provenzano to have a five year employment contract. Tr. 1/11/12 at p. 15:22-23. Provenzano, at the age of 62, wanted job security through an agreement that could be terminated only for just cause. Tr. 1/12/12 at p.168:4-11. Card Tech felt Provenzano would be a very important part of the company and wanted her services. Tr. 1/10/12 at pp. 52:11-14, 125:15-17. During the negotiations, Provenzano's attorney was asking for a salaried position. Tr. 1/10/12 at p. 53:1-4.
22. Concurrently with the sale of the business, Card Tech and Provenzano entered into an Employment Agreement. Exhibit 77.
23. By the Employment Agreement, Provenzano was employed by Card Tech for five years as Vice President of Sales. Exhibit 77 at 2a. Provenzano was to devote her full time and exclusive attention to perform duties for Card Tech. Tr. 1/12/12 at p. 70:10-13; Exhibit 77 at 3. The Agreement provides for termination for just cause. Just cause is defined as, inter alia, dishonesty, disobedience of reasonable directives, breach of Card Tech policies and procedures not cured within seven days after written notice, misappropriation of assets, material inaccuracy in any report, any breach under the Asset Purchase Agreement. Exhibit 77 at 6c.
24. Provenzano was Vice President of Sales and reported directly to the President of Card Tech. See Exhibit 77 at 3. Provenzano's role was to develop and implement a sales program to increase the business of Proven Products. She was the entire sales and marketing staff of Card Tech. Tr. 1/10/12 at p. 53:8-11; Tr. 1/11/12 at p. 31:24-25.
25. Card Tech did not supervise or micro-manage Provenzano's work.
Instead, she operated autonomously, submitting reports on her activities from time to time. Tr. 1/10/12 at p. 85:4-12. She did many things on her own initiative, including: ordering inventory to have on hand, Tr. 1/12/12 at p. 18:19-24; giving discounts to customers, Tr. 1/13/12 at p. 18:8-22; and seeking to register domain names, Tr. 1/12/12 at p. 75:19-24. As Vice President of Sales, she thus had duties and responsibilities that involved the performance of the office or non-manual work directly related to Card Tech's management policies and general business operations; she customarily and regularly exercised discretion and independent judgment; she executed special assignments and tasks without any supervision or, at most, under only general supervision; and she spent most of her Card Tech work time engaged in such duties. Though Provenzano objects to what she refers to as Card Tech's attempts to qualify her employment as exempt from overtime, her own description of her employment relationship in her proposed findings is somewhat more favorable to Card Tech's position than is Card Tech's own description. The Court concludes this inconsistency results from her recognition that the only possible -- though ultimately unsuccessful -- response that she has to the evidence of her wrongful conduct is her complete autonomy in her employment.
26. The Employment Agreement provides for an annual base salary of $55,000 per year, plus sales commissions under certain circumstances. Exhibit 77 at 4a. There was never any consideration of overtime. Both parties agree Provenzano had complete autonomy to keep her own hours and flexibility to take whatever time off she wished for any reason. Tr. 1/11/12 at p. 112:10-14; 1/13/12 at
p. 76:22-77:11. The Agreement also provided that Provenzano would be entitled to medical benefits, two weeks paid vacation, and reimbursement for all authorized business expenses. Exhibit 77.
27. Prior to April 13, 2011, Provenzano did not indicate that she was working overtime or expected to be compensated for overtime. Tr. 1/10/12 at pp. 100:24-101:6, 230:11-15; Tr. 1/11/12 at p. 112:8-11; Tr. 1/13/12 at p. 76:11-21.
Card Tech told her she did not have to work weekends. Tr. 1/11/12 at p. 112:19-23. When Card Tech learned she was working overtime, Card Tech instructed her not to do so. Exhibit 147-1.
28. Provenzano did not produce any documentary evidence of working more than 40 hours per week for the benefit of Card Tech, or any requests for overtime during the course of her employment.
29. Provenzano admits she understood that she had an obligation to keep Card Tech informed of her business activities. Tr. 1/12/12 at p. 9:14-17. As set forth throughout these findings, the evidence establishes that -- at least since December 2010 -- she failed to do so in material respects.
Provenzano's conduct with regard to the presat.com website and domain name
30. Provenzano makes much of the distinction between the presat.com website, which she apparently owned, and the presat.com domain name, which she has at all relevant times known she did not own. Tr. 1/11/12 at p. 68:7-16; p. 185:7-11; Tr. 1/12/12 at p. 170:8-10. The Court is not entirely certain that either the Court or the parties or their counsel fully grasp the distinction between the two concepts. But Provenzano's efforts to defend her wrongful conduct based on this technicality fail. By at least September 25, 2009, before the execution of the Asset Purchase Agreement, Card Tech made clear that it required that "presat.com" - both the website and the domain name - be provided as part of the sale. Tr. 1/10/12 at p. 57:20-24; Exhibit 21. Farrar's email of that date specifically stresses the importance to Card Tech of ownership of the domain name. Exhibit 21 ("We never spoke specifically regarding domain names. I am surprised that you would not include those used on your letterhead. I really don't care about the others but it is necessary that both 4cleaningcards.com and presat.com be included in the sale."). And the Asset Purchase Agreement specifically provides that among the "assets of the Sellers" being sold are "the following internet web sites (including without limitation the content located thereon and all rights necessary to access, operate and use such web sites) and domain names related to the Business: www.4cleaningcards.com and www.presat.com." Exhibit 75 at 1.1(g).
31. Because it was important to Card Tech to enter the market with a known website and a way for customers to contact Card Tech, and a way to refer people to the website for information, the presat.com website was a material part of the assets Card Tech was buying. Tr. 1/10/12 at pp. 57:22-59:5. But for at least several years before the 2010 sale, Provenzano knew that Richard Rzasa owned the domain name. Tr. 1/11/12 at pp. 68:9-69:2; Exhibit 81, p. 34. Provenzano also knew that without ownership of the domain name, one could not be assured of access to the website through use of "presat.com." See Tr. 1/11/12 at p. 68:9-16.
32. Although the presat.com website could be accessed through 4cleaningcards.com, Provenzano clearly knew that this was not what Card Tech had bargained for. Indeed, she made efforts to keep from Card Tech the fact that she did not own the presat.com domain name. For example, on December 29, 2010, she affirmatively deceived Card Tech by stating to Card Tech that the website's server had possibly been hacked and that Card Tech should not use presat.com. Tr. 1/10/12 at pp. 118:17-119:3; Exhibit 37-1. There is no evidence that Provenzano informed Card Tech that the website was accessible through the domain name 4cleaningcards.com. Provenzano never explained the ownership of presat.com. Tr. 1/10/12 at p.120:1-3.
33. On January 20, 2011, Card Tech stated that it was "very concerned that sales and shipments have dropped off so drastically since the start of December." Exhibit 37-2. Card Tech had seen a drop off of about $5,000 to $6,000 sales per month after early December 2010, with little or no orders through the websites. Card Tech asked the status of the problem with the presat.com website; Provenzano did not respond. Tr. 1/10/12 at pp. 120:4-121:13, 122:12-25.
34. On February 2, 2011, Card Tech again asked Provenzano about the presat.com website, and when it could "start using this site." She delayed revealing her previous misrepresentations by stating: "It is something we need to discuss." Tr. 1/10/12 at pp.123:22-124:15; 1/11/12 at p. 196:5-18; Exhibit 37-3. There is no evidence that such a discussion ever took place and Provenzano does not appear to contend that it did.
35. Card Tech did not know that Provenzano did not own the right to access the presat.com website because she did not own the domain name until it was discovered on or about February 10, 2011. Tr. 1/11/12 at pp. 133:19-134:12; see Exhibit 59; see Tr. 1/11/12 at p. 92:2-15. That the website was not "down" at all, that it was "down" only for a few days, that Card Tech eventually decided to abandon it, etc., even if true, is irrelevant.
36. There is no evidence that Provenzano ever transferred to Card Tech the presat.com website or the content, rights necessary to access, operate and use the website, or the domain names. In fact, the evidence shows that Provenzano did not own the rights necessary to provide access to the website at any relevant time. See Tr. 1/11/12 at pp. 86: 2-87:12. Provenzano materially breached the Asset Purchase Agreement by failing to provide all necessary rights to presat.com or reveal the truth of the status of presat.com.
37. In response to Card Tech's request for the password to the presat.com website, on or about April 20, 2011, Provenzano provided the password for 4cleaningcards.com. There is no evidence that she provided Card Tech the password for 4cleaningcards.com before April 2011. She did not provide the password for presat.com. Tr. 1/13/12 at p. 73:24-25; see Exhibit 307.
38. Provenzano owned the 4cleaningcards.com domain name. That domain name linked to presat.com. Tr. 1/10/12 at pp. 50:18-51:1. There is no evidence that Provenzano transferred to Card Tech the content, rights necessary to access, operate and use any website, or the domain name. Nor would it have served any purpose because it linked to a site that relied on a domain name that Card Tech did not own. See Tr. 1/11/12 at pp. 86: 21 -- 87:12.
39. Sales through the presat.com website were about $2,968 in 2008 and increased steadily through the first three months of 2011: $3,042 in 2009; $9,304 in 2010; and $3,781 in the first three months of 2011. Tr. 1/11/12 at pp. 85:20-86:5.
40. Because Provenzano did not own the domain name and did not transfer the website to Card Tech, since late April 2011 Card Tech has not had a website. Card Tech eventually decided that it would develop its own website rather than dealing with the issues created by Provenzano's conduct concerning the presat.com website. Tr. 1/11/12 at p. 48:2-11. At the time of trial, Card Tech was in the process of developing a website, but it would not be completed for several more months. Card Tech had to that point spent about $4-5,000 and expects to spend an additional $2-3,000 for a new website. Management of Card Tech has contributed "untold" hours to the process.
Normal Procedures at Card Tech 41. The parties dispute whether there were any "normal procedures" at Card Tech. Provenzano at times claims there were none, and at times explains such procedures in significant detail (including in her post-trial submissions). To the extent that the nature of such procedures is relevant (which is minimal), the Court generally accepts the testimony of Farrar and rejects the testimony of Provenzano, as the Court finds Provenzano was not credible.
42. Card Tech believed UPS account # X8535 was a "Proven Products" account utilized for shipping goods from Acton, California to fill orders. Tr. 1/11/12 at pp. 25:22-26:11. Provenzano was to send end-of-day reports, provided by UPS, daily. Until November 2010, she did so. Tr. 1/11/12 at p. 138:4-9, Exhibit 94-12. Exhibits 53-1 and 150. Some orders were invoiced and shipped by Provenzano from her location in California. For those orders Provenzano testified that she prepared the invoice and sent a copy of the invoice and "UPS daily reports" weekly (or sometimes less frequently) to Card Tech in Maine via fax. Tr. 1/11/12 at pp. 185:1-186:1.
43. Other orders were shipped from Maine. UPS account # A3766 was used to ship these orders. For any order placed through Provenzano to be shipped from Maine, Provenzano testified that she prepared and faxed to Maine a packing slip. After it was shipped, Card Tech would inform Provenzano and she would prepare and send out an invoice and send a copy of the invoice to Maine. Provenzano was to make deposit slips each day for payments received and fax them to Card Tech in Maine. Tr. 1/11/12 at pp. 22:23-23:3; Tr. 1/12/12 at p. 186:8-14.
44. Sales proceeds received by Provenzano were to be deposited into a bank account in California authorized by Card Tech (set up by Provenzano) and then paid over to Card Tech in Maine. Tr. 1/11/12 at p. 16:17-18.
45. From March through November 2010, sales averaged $32,000 to $35,000 per month. Tr. 1/10/12 at p. 99:18-24.
Provenzano's control of bank accounts
46. At Provenzano's request and with the approval of Card Tech, Provenzano opened a bank account in California in the name of Prodeen, Inc. (account number 3572122277-the '277 account). This account was for the purpose of Provenzano depositing any sales proceeds Provenzano received. Tr. 1/12/12 at p. 105:6-11. Provenzano would issue a check from this account to Card Tech as money was received. Tr. 1/11/12 at p. 28:14-19. Provenzano received the statements for this account and provided the statements to Card Tech. Tr. 1/10/12 at pp. 95:18-96:10. Provenzano was responsible for this bank account; she maintained it in the name of her corporation for the benefit of Card Tech. Tr. 1/11/12 at p.17:15-20.
47. Card Tech trusted Provenzano with the bank account. Tr. 1/11/12 at p. 17:11-14. Provenzano provided reports to Maine; Card Tech relied on her for accurate information. Tr. 1/10/12 at p. 82:8-10.
48. Provenzano had, and continued to maintain, a pre-existing bank account in the name of Prodeen, Inc. (account number 3572134207-the '207 account). Tr. 1/12/12 at p. 105:19-22. Card Tech did not have access to this account and Provenzano never provided a statement for this account to Card Tech. Tr. 1/12/12 at p. 110:17-21.
49. In December 2010, and January and February 2011, there was a trend of decreasing deposits into the '277 account and a trend of increasing deposits to the '207 account. Tr. 1/11/12 at p. 163:9-24; Exhibit 87. One reason for that up-trend is that Provenzano was depositing Card Tech funds into the '207 account. Tr. 1/12/12 at p. 108:12-20. A customer named Castle Six made a $14,766.55 payment by check. It was deposited to the '207 account, though it should have been deposited into the '277 account. Tr. 1/12/12 at pp. 109:11- 110:2.
50. In March and April 2011, there was a substantial increase in electronic bank transfers from the '207 account to the '277 account. $46,000 was transferred in March and April 2011; for the entire year or year plus period $95,000 was transferred. Tr. 1/11/12 at p. 166:13-20. This occurred after Card Tech began asking Provenzano questions and requesting information about the UPS '046 account. Before March 2011, there had been some months when there were no transfers between the accounts, and in other months the transfers were much smaller than the amounts transferred in March and April 2011. Tr. 1/11/12 at p. 171:1-10.
51. Card Tech established that Provenzano has not transferred approximately $21,000 of proceeds from sales received into Provenzano's two Prodeen accounts. Tr. 1/11/12 at pp. 159:1 -- 160:16. Nappi admits that she still holds at least $20,000 of Card Tech's money that should have been transferred to Card Tech. Tr. 1/12/12 at pp. 98:24-99:14.
Provenzano resists notice of the transfer of her business to Card Tech
52. Card Tech had originally planned to send a notice to the trade that it had acquired Proven Products. After discussions with Provenzano, Card Tech felt it was best not to notify the customers until the inventory was relocated in Maine -which took place over the summer months - and until the business had settled into the new shipping routine. At Provenzano's request Card Tech agreed to delay an announcement. Tr. 1/10/12 at p. 101:21-25, Tr. 1/11/12 at p. 27:1-15.
53. From Card Tech's perspective, the main reason that the bank account was set up in California was that Provenzano was afraid that if customers sent funds to a bank account in Maine, it might cause the customers to question what was going on. Tr. 1/10/12 at p. 102:9-12.
54. Provenzano kept secret from vendors that Card Tech had acquired her business. Michael Caulley of Plastic Printing Professionals (P3), a supplier, had been dealing with Provenzano for some time. On March 18, 2010, Provenzano instructed P3 to change the billing address to Card Tech. Caulley asked who Card Tech was. She responded: "We have set up an accounting, marketing communications and east coast shipping office. . . . " Tr. 1/10/12 at pp. 148:19-152:17, Exhibit 79-312 and 313. Before April 2011 Provenzano deliberately referred to Card Tech as an "investor," though it was not. In early April 2011, Provenzano told George Mouchet, her website designer, for the first time that she had sold her company to Card Tech and she was hired to do its sales. Tr. 1/11/12 at pp. 77:18-78:4, Tr. 1/10/12 at p. 168:1-3, Exhibits 79-128, 81-42.
55. In December 2010, Card Tech decided that enough time had passed for an announcement that it had acquired Proven Products. On December 7, 2010, Card Tech told Provenzano that a notice must go out by mid-December, and asked her to draft a letter. Tr. 1/10/12 at pp. 101:21-102:2, 104:8-21; Tr. 1/11/12 at pp. 27:16-20, 28:20-23, 198:12-20; Exhibit 94-8. Card Tech determined this announcement was important for customers to know who Card Tech was, to have administrative control in Maine, and most importantly to get bank accounts directed to Maine. Tr. 1/10/12 at pp. 102:4-8, 104:19-106:7.
56. On January 18, 2011, Card Tech again asked Provenzano for an announcement letter, and directed that certain points be included. Tr. 1/10/12 at pp. 106:14-110:15; Exhibit 94-4, 5. Provenzano responded the next day that she would put something together. Tr. 1/10/12 at pp. 111:23-112:12; Exhibit 94-3.
57. On February 1, 2011, Card Tech received from Provenzano, by fax, a draft outline as a proposed notice to the trade. Tr. 1/10/12 at pp. 112:16-113:4; Exhibit 94-10. It did not include any of the points requested. It did not satisfy Card Tech's request that the marketplace be informed of Card Tech ownership and that accounting would be in Maine; and it contained false statements -- for example, that Card Tech was an investment company and that the transaction occurred January 31, 2011. Tr. 1/10/12 at pp. 112:16-7, 114:5-115:22, Tr. 1/11/12 at p. 203:5-12; Exhibit 94-10. It seemed to Card Tech that Provenzano was resisting notice of the actual circumstances. Tr. 1/10/12 at p. 116:8-13. Provenzano testified that she thought that since it was now almost a year since the purchase "it would be more of a problem to say 'Hey, guess what, I sold the company a year ago but you're only finding out about it now.'" Tr. 1/11/12 at p. 203:12-15. The Court agrees with Card Tech.
Purchases of inventory from P3
58. On or about November 30, 2010, Provenzano issued a purchase order to P3 for 15 cases (500 per case) of item #207, with the following instructions: "ALSO VERY, VERY IMPORTANT: INVOICE TO ME IN ACTON, CA! PLEASE CHANGE THE BILLING ADDRESS BACK TO ACTON, CA." Card Tech was not aware of this order. Tr. 1/10/12 at pp. 157:16-158:11; Exhibit 79-310, 311.
59. On or about December 9, 2010, Provenzano ordered 18,200 pieces of item # 200 and made note to bill to Proven Products in California; and she directed the use of UPS X8535 account. Tr. 1/10/12 at pp. 160:14-161:18; Exhibit 79-239.
60. On or about December 27, 2010, Provenzano ordered from P3 100,000 units of item # 207. It was billed to her in Acton, California. Exhibit 50-1. This was for a product sold to a customer in Europe; Card Tech had previously informed Provenzano that it had 300,000 of this item in production. Tr. 1/10/12 at pp. 130:17-131:11. On the same date Provenzano also ordered from P3 40,000 units of item # 200, which is the most popular card Card Tech sold. At the time, Card Tech had inventory which Provenzano knew was being packaged at that time in California. Tr. 1/10/12 at p. 135:4-14, Exhibit 50-2.
61. On or about January 4, 2011, Card Tech received two invoices from P3 for these orders, though Card Tech had no knowledge of these transactions. One invoice was addressed to Provenzano, individually, in Acton, California. Card Tech was shocked when it received the invoices for these large orders. Normal procedure would be for Provenzano to coordinate with Card Tech in Maine any purchases of inventory Provenzano wished to make, but Provenzano did not coordinate this purchase with Maine. These invoices caused Card Tech concern. Tr. 1/10/12 at pp.129:9-135:17. Provenzano contends that she had ordered goods in the past and been commended for her actions and reimbursed for the purchases. As with her other wrongful conduct, Provenzano had a purported explanation. She contended that she was concerned that products Card Tech had ordered for manufacture in China would not be ready in time to deliver to the customer, and that Card Tech's inventory levels were low. 1/13/12 at pp. 12-13. The Court concludes that this purchase was significantly different -- especially in light of the fact that Provenzano went to great lengths to be sure Card Tech was unaware of the purchase. The Court does not find Provenzano's testimony credible. Even if Provenzano were truthful in this case, her after-the-fact explanation does not justify concealing her conduct from Card Tech, both before and after she ordered the goods.
62. Card Tech did not contact Provenzano for an explanation because it hoped this was an oversight. Card Tech decided to wait until the end of the month to see if Provenzano would provide an explanation. No explanation was ever provided. Tr. 1/10/12 at 135:19-22.
63. On January 5, 2011, P3 confirmed to Provenzano that as of December 31, 2010, she had not paid invoice number 8703. Provenzano responded that she had no record of it and hoped it was not sent to another office. Tr. 1/10/12 at p. 163:11-24; 1/12/12 at p. 27:7-13; Exhibit 79-295. On or about January 31, 2011, P3 followed up to ask Card Tech about payment of outstanding invoices. Tr. 1/10/12 at pp. 177:20-179:1; Exhibit 79-257.
64. Provenzano tried to conceal from Card Tech that she had purchased inventory for her own account. Provenzano spoke to a P3 representative on the phone and told P3 that the email was sent to Card Tech in error and that P3 should send her the invoices. Tr. 1/10/12 at p. 181:7-11. P3 told Provenzano "if it's OK with you," P3 would tell Card Tech her request for payment was sent to the wrong account. Provenzano responded: "Thanks, that should be fine." Tr. 1/12/12 at pp. 28:12-29:8.
65. On January 31, 2011, Card Tech responded to P3 that it had no record of outstanding invoices. P3 replied that the email requesting payment was sent to Card Tech in error; it should have gone to a different company. Tr. 1/10/12 at pp. 178:9-16, 183:9-21; Exhibit 64. P3 justifiably interpreted Provenzano's "Thanks, that should be fine" response as condoning this misleading strategy. Tr. 1/10/12 at pp. 182:6-183:4.
66. On about January 31, 2011, Card Tech asked Provenzano if she was holding any P3 invoices. Provenzano clearly knew what Card Tech was referring to, and she admits that she deliberately misled her employer by denying that she had the invoices. See Tr. 1/12/12 at pp. 32:2-33:15. The Court finds Provenzano's explanation of why this answer was acceptable to be simply another step in her efforts to conceal her wrongdoing.
67. Provenzano did not inform Card Tech that she had purchased inventory from P3, and Card Tech would have known that only if it needed the inventory. Tr. 1/13/12 at p. 53:17-24. Provenzano admitted -- and the Court finds -- that she breached her obligation to be truthful to her employer by encouraging a vendor to withhold material information from Card Tech. See Tr. 1/12/12 at p. 30:20-24.
Card Tech's investigation reveals Provenzano is shipping with an unknown UPS account, not reporting sales, and not depositing sales proceeds into the approved '277 account.
68. Card Tech received UPS daily reports from Provenzano through November 2010; she stopped sending them in December 2010. Tr. 1/10/12 at p. 197:2-6. On or about January 7, 2011, Card Tech noted to Provenzano that it had not received UPS end-of-day reports since November 2010. Provenzano responded that she faxed them in December. Card Tech did not receive any UPS dailies from Provenzano in December, but did receive other faxes from Provenzano in December. Tr. 1/10/12 at pp. 202:23-204:9; Exhibit 94-12.
69. Also on or about January 7, 2011, Provenzano sent a handwritten list confirming shipments, and days with no shipments, in December 2010. Tr. 1/10/12 at pp. 205:15-207:13; Exhibit 74. Sending such a handwritten list was unusual. Tr. 1/10/12 at p. 208:2-5. There was only one discrepancy with the information Card Tech had. Tr. 1/10/12 at pp. 206:15-18, 208:13-17.
70. Having received the P3 invoices and not having received UPS end-ofday reports, Card Tech investigated Provenzano's conduct. It decided to test the website by arranging for several orders to be placed to see if the billing would be done in the normal manner. Tr.1/10/12 at pp. 188:22-189:3.
71. Card Tech asked three individuals to place such orders: Hibscher, Robert, and Lakhani. Hibscher placed an order, and a few weeks later Card Tech received a package from Hibscher that contained a sealed carton with Card Tech products, in Card Tech trade dress, with a Card Tech packing slip indicating that the order was placed by Hibscher on January 11, 2011. Card Tech expected that it would have received an invoice that same day and the payment would have been deposited into the '277 account the same day. But Card Tech did not receive invoicing for that shipment at that time, and the money was not then deposited into the '277 account. Tr. 1/10/12 at pp. 188:22-193:7. Instead, Card Tech received a batch of invoices at the end of February that accounted for some sales in January and February. There was a new numbering system used on those invoices. Hibscher's invoice was among these. Tr. 1/11/12 at p. 56:9:17.
72. Card Tech then decided to conduct another test purchase. Card Tech wanted to give Provenzano the benefit of the doubt by placing another order to see if the results would be the same. It did not contact Provenzano directly to ask for an explanation. Tr. 1/11/12 at p. 50:12-19. It requested Robert to place an order from presat.com or 4cleaningcards.com. Shortly thereafter a package was received from Robert in the same fashion as the Hibscher package, with a Card Tech packing slip indicating "sold to Stacy Robert" and that the order was placed on February 2, 2011. Tr. 1/10/12 at pp. 193:16-195:18; Exhibit 1. Card Tech received the invoice "quite a long time after" the order was placed. Tr. 1/11/12 at p. 56:19-24.
73. The shipping label on the Robert package indicated that it was shipped using a UPS account in the name "Proven Products" - the UPS '046 account. Tr. 1/10/12 at pp. 195:21-196:24; Exhibit 1. Although Provenzano had earlier expressed concern about keeping her personal shipping separate from Card Tech's shipping, this was the first indication Card Tech had of this UPS '046 account. Tr. 1/10/12 at p. 197:2-11; Tr. 1/11/12 at p. 61:3-20. Card Tech also made a test purchase through Lakhani. Card Tech did receive payment for that purchase. Tr. 1/11/12 at p. 130:5-16. Contrary to Provenzano's implication, this establishes only that on one of the three test orders, Provenzano promptly and properly accounted for the sale.
74. Card Tech decided to wait to see if Provenzano would come forward with an explanation for this situation, but she did not offer any ...