Yeti Enterprises Incorporated v. NPK, LLC et al

Filing 312

Findings of Fact and Conclusions of Law. On July 25 and 26, 2017, the Court held a bench trial and took this case under advisement. In this document are my findings of fact and conclusions of law. These are my conclusions: NPK established by a p reponderance of the evidence that Jackson and Lilga acted in concert to convert NPK's customer database. NPK also demonstrated by a preponderance of the evidence that Jackson and Lilga violated their respective nondisclosure agreements. Finally, NPK proved by a preponderance of the evidence that Jackson violated the Lanham Act. In total, Jackson and Lilga caused NPK to suffer damages in the amount of $82,980.90. Of this amount, Jackson and Lilga are jointly and severally liable for $27,660.30; Lilga is individually liable for $13,830.15; and Jackson is individually liable for the remaining $41,490.45. Pursuant to NPK's request for injunctive relief, the Court will enter judgment declaring Jackson in unlawful possession of NPK's customer database and in violation of the Lanham Act. He will be ordered to show cause why further injunctive relief should not be granted in NPK's favor. Please access entire text by document number hyperlink. Ordered and Signed on 08/14/2017 by Magistrate Judge Mark D. Clarke. (rsm)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
MEDFORD DIVISION

YETI ENTERPRISES
IN CORPORATED,
an Oregon corporation; ALEXANDER
J. HEAGLE, and individual;
and FREQ WATER, INC., an Oregon
corporation,
Civ. No. 1:13-cv-01203-CL
Plaintiff,
FINDINGS OF FACT &
CONCLUSIONS OF LAW
v.
ORION TANG, an individual;
OREGON GLOBAL DISTRIBUTION, INC.,
an Oregon corporation; RENY TOWNSEND,
an individual; RICHARD ROWE, an
individual; WETA, INC., an Oregon
corporation; IN AND OUT
GARDENS LLC, an Oregon limited liability
company; HEADQUARTERS, LLC, an Oregon
limited liability company; and NPK, LLC, an
Oregon limited liability company,

Defendants,

NICHOLAS JACKSON, an individual; and
JESSICA LILGA, an individual,
Counter-Defendants.

CLARKE, Magistrate Judge.

Page 1 - FINDINGS OF FACT & CONCLUSIONS OF LAW

On July 25 and 26, 2017, the Court held a bench trial and took this case under
advisement. The following are my findings of fact and conclusions of law. Fed. R. Civ. P.
52(a)(l). I
FACTUAL FINDINGS

NPK, LLC ("NPK"), has sued Nicholas Jackson ("Jackson") and Jessica Lilga ("Lilga")
for events taking place largely between October 2012 and December 2013, when NPK alleges
Jackson and Lilga conspired with Jim Heagle ("Heagle") to eliminate NPK from the distribution
market for frequency-water products.
NPK manufactures, distributes, and markets gardening supplies and materials. In 2009,
NPK entered into a contract with Yeti Enterprises, Inc. ("Yeti), which was memorialized into a
written distribution agreement on September 28, 2010, and again on November 11, 2010. The
agreement provided that NPK would market, bottle, and distribute Yeti's product known as
frequency water.2 See Pl.'s Ex. 2. Heagle is the president and majority owner of Yeti. Subsequent
to this agreement, NPK created three plant washes: Mighty Wash, Power Wash, and PM Wash,
all of which contained and were marketed as containing frequency water. The products were sold
to wholesale distributors. This partnership rapidly increased revenue for both NPK and Yeti.
Jackson owns 22.5 percent of NPK. In October 2012, Jackson was incarcerated for
fourteen months. Prior to his incarceration, Jackson was also employed by NPK as vice president
of sales; Jackson believed he was chronically underpaid for this position-he was paid
$12,250.72 in 2011 and $28,733.98 in 2012. Pl.'s Exs. 76, 77. As soon as his incarceration
began, NPK ceased paying Jackson wages, though he did retain his ownership interest in the

1

The parties have consented to Magistrate Judge jurisdiction over this action pursuant to 28 U.S.C. §
636(c)(l).
2
Yeti produces a liquid plant wash using a process called electronic frequency imprinting; the end-product
is called frequency water.

Page 2 - FINDINGS OF FACT & CONCLUSIONS OF LAW

company. As part of a deal apparently worked out between Jackson, Lilga, and NPK's President,
Richard Rowe ("Rowe"), Lilga, at the time Jackson's girlfriend, would take over many if not all
of Jackson's responsibilities at the company and be paid in his stead. At the outset, the setup
proved difficult; Lilga complained of "being treated like an incompetent child," being
overwhelmed, and being asked to do more than Jackson was ever asked to do. Pl.'s Ex. 115, at
11:26-12:1. 3 Although agreeing with Lilga that she was being treated improperly, Jackson told
her to "[j]ust listen to them" and not to take anything personally. PL 's Ex. 115, at 12:26.
Nevertheless, Lilga's relationship with NPK continued to rapidly deteriorate; she
described her treatment to Jackson as "[a]bsolutely awful," and stated Rowe told her that because
she is not Jackson she would not like working at NPK, the job would be tough, and she would
have to do what he says. PL Ex. 117, at 20:5. She felt her treatment was improper and described
being "sick to [her] stomach" at work every day. Pl. Ex. 117, at 20:26. She further stated Rowe
threatened to fire her three times in the first two weeks. By November 2012, Lilga no longer
worked for NPK; she was employed by the company for three weeks.
Jackson's relationship with NPK appears to have been fraught prior to his incarceration.
Part of his disillusionment with NPK arose because he felt NPK was attempting to improperly
cut his pay. In addition to this, Jackson felt Rowe and the rest of NPK's management were
excluding him from critical management-level decision-making; as he described it, "[N]obody
talks to [me] that should be talking to [me] about business and what's going on out there besides
my lady, you know, which you guys are keeping her in the dark." Pl.'s Ex. 118, at 3:2-5.
Jackson also felt NPK "stabbed" him in the back; indeed, he felt that if any of the other
members had been in the legal predicament he was in, "they would have put a lot more energy
towards" ensuring adequate legal representation. Pl.'s Ex. 117, at 18:21-24. He also testified that
3

Plaintiff s Exhibits 115-147 are transcripts of telephone calls Jackson made while incarcerated.

Page 3 - FINDINGS OF FACT & CONCLUSIONS OF LAW

Rowe promised to take care of his family while he was incarcerated but that Rowe failed to
follow through on this promise, at least to the extent Jackson expected. Finally, Jackson strongly
believed Rowe was taking the company in the wrong direction by introducing products that were
not "safe for the environment" and were outside of the markets he felt NPK stood to succeed in.
Pl.'s Ex. 116, at 10:9. Consequently, at the outset of his incarceration, Jackson began talking
with Lilga about the possibility of leaving NPK and working for Yeti, stating, "If all of a sudden,
you know, me and you work for Yeti Enterprises ... , so be it." Pl.'s Ex. 116, at 11:13-15.
Jackson further said that he was "going to make sure that we have a game plan set up and that's
with Jim [Heagle]." Pl.'s Ex. 117, at 6:10-11.
In addition to discussing these plans with Lilga, Jackson also routinely conversed with
Heagle while incarcerated; the two discussed their common disdain for NPK and its other
members, Jackson's intent to leave and work for Yeti or in a business partnership with Heagle, as
well as Beagle's intent to end Yeti's distribution agreement with NPK. Heagle believed he had
been "soaked[] for all of [his] resources," Pl.'s Ex. 119, at 3:4, and that NPK had breached their
distribution agreement on multiple occasions by double billing and failing to pay Yeti in a timely
matter, among other things. Jackson was well aware of Beagle's intent to end his distribution
agreement with NPK; as Jackson stated to Lilga in October 2012, "Jim's gonna pull the line from
them almost regardless, and it's pretty much regardless." Ex. 117, at 7:22-23. Jackson also knew
that NPK was unaware of his conversations with Heagle and concurrent knowledge of Beagle's
intentions, saying, "[T]hey don't know that I'm conversing with you like this." Pl.'s Ex. 122, at
14:8-9.
During this time, Jackson decided he wanted to sell his "part of the company," opining
that he would "rather just be positive with [his] life instead of promote more of their negativity

Page 4 - FINDINGS OF FACT & CONCLUSIONS OF LAW

or even their selfishness ...." Pl.'s Ex. 119, at 2:14-17. Heagle stated that he would wait to end
his distribution agreement and to notify NPK of his intent to do so until Jackson was "taken care
of," at which point, he stated, "I'm gonna jump ship" by "throw[ing] enough shit at them that
they're not gonna want to go forward." Pl.'s Ex. 119, at 3:7-8; Ex. 119, at 4: 21-22. In addition to
waiting for Jackson's exit, Heagle also wanted to ensure NPK signed a new five-year nondisclosure agreement with Yeti prior to ending their business relationship so that, as he told
Jackson, he could guard against any attempt on NPK' s part to "copy [his] product. ... " PL' s Ex.
128, at 10:19. In January 2013, NPK did in fact renew the parties' non-disclosure agreement.
In 2012, NPK was in the process of spinning off into three separate corporations, Griffin
Holdings, Inc., Intelligent Technologies, Inc., and Oregon Global Distribution, Inc. Jackson was
offered a 22.5 percent interest in each of the three companies; however, for the above-mentioned
reasons, because he disagreed with the decision to split, and because NPK wanted Jackson to
sign a two-year non-compete agreement, Jackson refused to sign the shareholder agreement for
any of the new entities. Then, in December 2012, Jackson notified Rowe, via a letter from his
attorney, that Jackson wanted a "full accounting" of the new entities and NPK's tax returns from
2010 onward. Pl.'s Ex. 28. After receipt of Jackson's attorney's letter, Rowe reached out to
Jackson to inquire about Jackson's request. On December 21, 2012, Jackson described his
conversation with Rowe to Lilga. According to Jackson, Rowe did not understand why Jackson
wanted out of the company, to which Jackson said he replied, "[B]ecause I don't believe [you]
have my best interests at heart." Pl.'s Ex. 126, at 3:19-20. He further stated he felt Rowe and
others had minimally communicated with him since his incarceration and had gone forward
without his consent on various decisions regarding the direction ofNPK. Rowe implored Jackson
to reconsider and then offered to buy Jackson out for ten or twenty thousand dollars. Jackson felt

Page 5 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

the offer was far too low and said he believed it was necessary to have an internal audit of NPK
performed to determine the value of his shares. Jackson said Rowe replied, "You don't have to
do that ... we can figure this out just me and you, Nick." Pl.'s Ex. 126, at 7:21-23. According to
Jackson, Rowe did not want an audit because "he's been doing a lot of wrong stuff." Pl.'s Ex.
126, at 8:15-16.
During much of the next year, Jackson continued to negotiate his exit from NPK and
continued to plan a future business relationship with Heagle. Meanwhile, in January 2013, with
Jackson and Heagle continuing their communications about arranging a future business
relationship, Jackson sent Heagle a draft copy of a proposed advertisement from NPK that
depicted a series of products beyond those that Yeti was apparently aware of; as Jackson told
Heagle, "They've been lying to you. I mean, sitting there telling you they weren't going to do
other products. They already did.... They've got their whole nutrient line .... " Pl.'s Ex. 130, at
10:2-7. Jackson apparently received the advertisement from Rowe, and he never notified NPK
that he forwarded it on to Heagle.
During the same month, Jackson and Heagle agreed that Heagle should move forward
and terminate Yeti's distribution agreement with NPK, even though Jackson had not yet divested
himself of his interest in NPK. Consequently, on January 28, 2013, Yeti, through its attorney,
sent NPK a letter notifying NPK that it was in breach of the parties' distribution agreement,
citing as "[t]he last straw" the above-referenced advertisement Jackson had passed along to
Heagle. Pl.' s Ex. 5, at 1. 4 Yeti claimed this advertisement showed NPK was "blatantly" using
Yeti's creation in an "attempt to market other products. . . ." Pl.' s Ex. 5, at 1. Yeti's attorney

4

The distribution agreement between Yeti and NPK allowed Yeti to terminate the agreement for a number
of reasons, including nonpayment. While other reasons for termination required notice, nonpayment did not. See
Pl.'s Ex. 2.

Page 6 - FINDINGS OF FACT & CONCLUSIONS OF LAW

attached a copy of the advertisement to the letter. NPK was given ten days to, in effect, end its
relationship with Yeti and to turn over all of Yeti's property, including any money owed to Yeti.
Instead of abruptly ending their business relationship, however, Yeti and NPK worked
out an agreement whereby Yeti would continue to supply its frequency water to NPK through
January 2014. In exchange, NPK would tum over to Yeti certain frequency-water-related
trademarks that NPK registered in its name. Heagle, however, still made clear to Jackson that,
once the new contract expired in the beginning of 2014 and all trademarks were "handed over,"
he did not intend to continue distributing his product to NPK; Heagle stated to Jackson that he
intended to walk off at that point "and just leave them alone and do our own business .... "Pl. 's
Ex. 137, at 18:16; Pl.'s Ex. 137, at 13:17-18.
The new Yeti-NPK distribution agreement did not pan out. In April 2013, Yeti notified
NPK that it was raising the prices it would charge NPK for its products, to which NPk objected
and sent a letter asking for reassurance of performance; Yeti never responded. Shortly thereafter,
NPK filed suit in Jackson County Circuit Court claiming Yeti tortuously interfered with NPK's
relationship by wrongfully communicating and seeking business with NPK's customers.
Subsequently, on June 17, 2013, Yeti filed a complaint in Multnomah County Circuit Court
arguing NPK misappropriated Yeti's trademarks and had engaged in unlawful competition and
false advertising. 5 The next day, Yeti notified NPK that it was terminating the parties'
distribution agreement.
As stated, while the Yeti-NPK relationship deteriorated, Jackson and Heagle continued to
develop their own business plans, and Jackson continued his attempt to divest from NPK. In
January 2013, NPK presented Jackson with a membership-redemption agreement, offering to
purchase his 22.5 percent ownership for $50,000. Jackson, however, believed this was an
5

NPK removed the case to this Court on July 17, 2013.

Page 7 - FINDINGS OF FACT & CONCLUSIONS OF LAW

insufficient sum of money and that his shares were worth much more; thus, he did not sign the
offer and continued to press for an internal audit.
On February 8, 2013, having failed to receive an overt acceptance or rejection of its offer,
NPK notified Jackson that it was revoking the redemption offer because it believed Jackson had
breached his fiduciary duties to the company and improperly disseminated proprietary
information. Indeed, NPK evidently tied Jackson to Heagle when NPK received the January 28,
2013, letter from Yeti's attorney containing a draft copy of NPK's proposed advertisement.
Rowe testified that Jackson was the only person the proposed advertisement was sent to. In
addition, NPK believed Jackson disseminated false, misleading, and damaging statements
regarding NPK's products. On April 9, 2013, NPK notified Jackson, through his attorney, that it
had "decided to pursue a judicial expulsion action against [him]." Def. 's Ex. 220. On April 12,
2013, NPK filed the expulsion action in Jackson County Circuit Court. The case is currently
abated pending resolution of this case.
By this time, NPK's distribution agreement with Yeti had been terminated and NPK had
relaunched its product line without Yeti's frequency water. Around the same time, Jackson
began working in earnest with Dennis Hunter, owner of Left Coast Garden Wholesale ("Left
Coast"), a former distributor of NPK's products, to launch a competitive product line using
Yeti's frequency water. To aid in this endeavor, Jackson promised to supply Hunter with a list of
1,300 Sunlight Distributors, Inc. ("Sunlight"), stores. At the time, Sunlight was a major
purchaser of NPK's products. Jackson later instructed Lilga to provide Hunter with a copy of
"that list of all those stores." Pl.'s Ex. 144, at 9:25-26. It is not perfectly clear where this list
originated. On October 14, 2012, early in Jackson's incarceration, he appeared to direct Lilga to
download NPK's customer database, stating:

Page 8 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

And if you can-if you can find a way to download that database
information, and I don't know, you know, you might have to be squirrelly
about it or whatever, download it on a hard drive, but find a way to
download all that so that we have it as well, and do it periodically.
Pl.' s Ex. 116, at 13 :5-10. Jackson goes on to say that it is important to have all that information
"because we've worked for that." Pl.'s Ex. 116, at 13:13-14. Lilga replies, "That's a good idea."
Pl.'s Ex. 116, at 13:11. Lilga never confirms she took this database; however, Rowe testified at
trial that NPK discovered Lilga had taken NPK's database of customers and every interaction
with those customers, as well as trade secrets and sales processes. Rowe also testified, and the
physical evidence confirms, that Left Coast had NPK's customer lists and sent out damaging emails to NPK's customers stating that it had "decided to discontinue distributing products from
NPK industries" because NPK's new plant-wash line, which no longer contained frequency
water, was susceptible to molding and that Left Coast6 would now "provide the original
frequency altered formulations and will be marketing under the trade names Mega Wash, White
Wash, and Freq Wash.... " Pl.'s Ex. 24, at 4. Accordingly, it would seem that the list of 1,300
stores Jackson referred to was taken from NPK's database of customers.
Rowe testified at trial that Left Coast's damaging e-mails, as well as the introduction of
Left Coast's new product line, halved NPK's sales, which had already been halved earlier in the
year due to the loss of Yeti's frequency-water products. As Rowe put it, the goodwill that NPK
had generated over the years marketing its plant washes transferred to Left Coast's new products.
Upon Jackson's release from prison in December 2013, he continued to work for Left
Coast. See, e.g., Pl.'s Ex. 17, 18. He remains a member of NPK, and on July 29, 2013, he filed
suit against NPK, Rowe, and NPK's additional members in Jackson County Circuit Court

6

Both Left Coast and Green Planet Wholesale are owned by Hunter. It appears that Green Planet Wholesale
owned/owns Mega Wash, White Wash, and Freq Wash, and that Left Coast distributes the products. The Court's use
of Left Coast refers to both companies.

Page 9 - FINDINGS OF FACT & CONCLUSIONS OF LAW

seeking an assessment and payment of the value of his membership interest in the company. That
case is also abated pending resolution of this matter.
CONCLUSIONS OF LAW
I.

Nicholas Jackson

NPK brings two claims against Jackson for fraudulent misrepresentation, as well as
claims for violations of the Lanham Act, common law trade libel, conversion, and breach of the
parties' nondisclosure agreement. NPK contends Jackson is liable for these claims on an
individual basis and in concert with others and therefore is also liable for these tortious acts on
the basis of civil conspiracy and aiding and abetting. The Court addresses each of these claims.
A. Fraudulent misrepresentation - failure to disclose

To establish a claim for fraud in Oregon, a party must prove (1) a material
misrepresentation that was (2) false, (3) made with knowledge of its falsity or with ignorance of
its truth, (4) with the intention that it be acted upon by the party claiming fraud, and (4) that the
acting party in fact justifiably relied on the material misrepresentation, (5) suffering an injury as
a result. Handy v. Beck, 282 Or. 653, 659 (1978). The party bringing a claim for fraud must
prove its case by clear and convincing evidence, not merely a preponderance of the evidence,
since "[t]he stigma of fraud is not lightly laid upon a defendant." Fahrenwald v. Hemphill, 239
Or. 421, 425-26 (1965).
"Actionable fraud may be committed by a concealment of material facts as well as by
affirmative and positive misrepresentations." Musgrave v. Lucas, 193 Or. 401, 410 (1951)
(internal citation omitted). Indeed, typically, "mere silence is not fraud," but "[w]here the law
imposes a duty on one party to disclose all material facts known to him and not known to the

Page 10 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

other, silence or concealment in violation of this duty with intent to deceive will amount to fraud .

. . ."Id
NPK contends Jackson "had a special relationship with [NPK] which included the duty to
disclose to [NPK] all information which could damage its business," including his assistance in
bringing competitive products to the market and assistance in cutting NPK out of the plant-wash
distribution market. Pretrial Order, at 8. Because these detrimental activities were not disclosed,
NPK contends Jackson breached this "special relationship."
Jackson had no duty to disclose information that could damage NPK's business. A
manager of a limited liability company ("LLC") carries with him specific duties that are owed to
the LLC. See ORS § 63.155(9)(a). Specifically, those duties include the obligation "to refrain
from dealing with the limited liability company in a manner adverse to the limited liability
company and to refrain from representing a person with an interest adverse to the limited liability
company, in the conduct ... of the limited liability company's business." ORS § 63.155(2)(b).
Mere members of an LLC, however, who are not also managers of the company, "owe no duty to
the LLC or the other members." Synectic Ventures I, LLC v. EV! Corp., 353 Or. 62, 78 (2012)
(citing ORS § 63.155(9)(a)). Hence, unlike managers, these passive members are not agents of
the LLC and owe no duty ofloyalty to put the company's interests first. Id
Here, NPK readily acknowledges that, once Jackson's incarceration began, he was no
longer paid for his role as vice president of sales. Indeed, the facts demonstrably show that, at
this point, Jackson's only affiliation with NPK was his 22.5 percent membership interest; Lilga
took on his former responsibilities and received his pay. Accordingly, without any managementlevel position at NPK, Jackson was simply a passive member of the company. Thus, as Oregon
law makes clear, he owed "no duties to the limited liability company or the other members solely

Page 11 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

by reason of being a member" of NPK and therefore no duty to put the company's interests first
and to disclose his own business interests, which were adverse to NPK's. ORS § 63.155(9)(a).
Beyond Jackson's relationship with NPK as a member, NPK fails to point to any other
relationship that imposed upon Jackson a duty to disclose his private business dealings, and the
Court finds none. Accordingly, NPK has failed to prove that Jackson's failure to disclose his
negotiations with Heagle, Hunter, Lilga, or any others renders him liable for fraud.

B. Fraudulent misrepresentation - active concealment of facts
Next, NPK contends Jackson "conspired to deprive NPK, LLC of the market for
Frequency Water products" by setting up "an exclusive business relationship with Sunlight and
Green Planet7 and others in the marketplace to distribute" Yeti's frequency-water products and
"to cause said entities to stop distributing" NPK' s products. Pl.' s Trial Mem., at 6-7. NPK opines
that "[t]hese activities were actively concealed from" NPK. Pl.'s Trial Mem., at 7. Finally, at
trial, Rowe testified that Jackson concealed his intent to withdraw from NPK and concealed his
communications with Heagle, Lilga, and Hunter. NPK charges Jackson had a duty to disclose
these activities "as he is a member of that LLC." Pretrial Order, at 6.
As articulated in the prior section, when there is not duty to disclose, fraud requires an
active misrepresentation of a material fact. "[E]ven in the absence of a duty to speak," however,
"actions by a defendant to actively conceal the truth can constitute fraud." Wieber v. FedEx
Ground Package Sys., Inc., 231 Or. App. 469, 485 (2009) (internal citation omitted).
Here, there is nothing in the evidence showing Jackson actively concealed facts from
NPK or from any manager at the company. First, the prison phone records NPK has submitted
show that Jackson repeatedly attempted to leave NPK and made his intentions to do so quite
clear. Second, while he did not disclose to NPK his ongoing negotiations with Heagle, Lilga, and
7

Green Planet is referred to as Left Coast in the Court's Findings of Fact.

Page 12 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

Hunter, and his intent to create a competitive product line to the detriment of NPK, he had no
duty to disclose these activities to NPK. A failure to disclose private business negotiations is
distinct from active concealment; as the Oregon Court of Appeals explained, "[A]n active
concealment such as the filling in of [a] ditch . . . is to be distinguished from a simple
nondisclosure." Paul v. Kelley, 42 Or. App. 61, 65 (1979) (internal citation omitted). Citing
Prosser, the court further explained that active concealment is defined as "[a]ny words or acts
which create a false impression covering up the truth, ... or which remove an opportunity that
might otherwise have led to the discovery of a material fact as by floating a ship to conceal the
defects in her bottom[.] Id. at 66 (citing Prosser, Law of Torts§ 106, at 695 (4th ed. 1971)).
The closest piece of evidence NPK can point to in demonstrating active concealment is a
letter Jackson wrote to Heagle after Jackson discovered that Beagle's attorney had mistakenly
forwarded to NPK the draft advertisement Jackson had secretly provided to Heagle. Indeed, upon
finding out from Heagle that his attorney forwarded this draft advertisement, Jackson-worried
that this would expose his coordination with Heagle-said, "I'm just gonna play-play stupid"
and pretend to know nothing about the advertisement. Pl.'s Ex. 133, at 17:11-12. Later, though,
he and Heagle decided that Jackson would write a mock letter to Heagle that would statefalsely-that Jackson sent the advertisement to Heagle because he thought Rowe wished him to
do so. Upon receipt, Heagle stated he intended to "take the letter and stuff it in the envelope that
I got on-back in the first letter I got from you," which contained the draft advertisement. Pl.'s
Ex. 133, at 21:5-7. Hence, the letter would conceal the fact that Jackson and Heagle were
working together to start their own business relationship without NPK.
While such a plan is unquestionably an attempt to actively conceal the truth, NPK has not
shown, through physical evidence or testimony, that this letter was ever actually forwarded to

Page 13 - FINDINGS OF FACT & CONCLUSIONS OF LAW

NPK. Consequently, while nefarious and unethical, the letter was never physically used to
conceal anything from NPK. Fraud requires that the relying party actually rely on the
concealment and do so to their detriment. Handy, 282 Or. at 659. That did not occur here.
Beyond this letter, the record is devoid of clear and convincing evidence demonstrating
Jackson did anything other than stay silent on his secretive business dealings with Heagle, Lilga,
and Hunter. "[M]ere silence," however, "is not fraud," unless "the law imposes a duty on one
party to disclose all material facts known to him and not known to the other...." Musgrave 193
Or. at 410. As discussed, no such duty existed here. Accordingly, without any facts showing
Jackson overtly concealed facts from NPK or its managers, NPK has failed to demonstrate that
Jackson is liable for fraud.
C. Lanham Act
NPK alleges Jackson distributed false statements to NPK's customers, stating that NPK's
plant-wash products were susceptible to molding; that their products no longer contained
frequency water; that frequency-water products would no longer be distributed by NPK; that
Lest Coast and other wholesalers discontinued distribution ofNPK's products; and that Yeti was
releasing a "new and improved product line .... " Pretrial Order, at 11. Moreover, NPK contends
Jackson aided in distributing e-mails falsely claiming NPK was being investigated and going to
be shut down by the EPA, IRS, DEQ, and other agencies. Because the false statements were
made in a commercial setting, in bad faith, and for the purpose of directing sales toward
Jackson's competing product line and away from NPK, NPK argues it violated the Lanham Act.
To make out a claim for false advertising under the Lanham Act, a plaintiff must show:
(1) a false statement of fact by the defendant in a commercial

advertisement about its own or another's product; (2) the statement
actually deceived or has the tendency to deceive a substantial segment
of its audience; (3) the deception is material, in that it is likely to

Page 14 - FINDINGS OF FACT & CONCLUSIONS OF LAW

influence the purchasing decision; (4) the defendant caused its false
statement to enter interstate commerce; and (5) the plaintiff has been or
is likely to be injured as a result of the sale statement, either by direct
diversion of sales from itself to defendant or by a lessening of the
goodwill associated with its products.

Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir. 1997) (internal citation
omitted). A plaintiff must prove each element of a Lanham Act claim by a preponderance of the
evidence. See Merck Eprova AG v. Brookstone Pharm., LLC, 920 F. Supp. 2d 404, 415-16
(S.D.N.Y. 2013) (internal quotation and citation omitted) (stating that a plaintiff must prove its
false advertising claim under the Lanham Act by a preponderance of the evidence, meaning that
the existence of the fact is more probable than its nonexistence).
Here, there is no question that NPK sufficiently proved the fourth and fifth elements of a
false-advertising claim; indeed, by e-mailing these statements to NPK's customers throughout
the country, the statements entered interstate commerce. Healthport Corp. v. Tanita Corp. of
Am., 563 F. Supp. 2d. 1169, 1180-81 (D. Or. 2008). Moreover, as set forth in the Findings of

Fact, Rowe testified that these e-mails halved NPK's sales and transferred its goodwill to West
Coast Wholesale, thus demonstrating injury as a result of the statements.
Additionally, it is more probable than not that Jackson participated in the distribution of
these statements. While the e-mails NPK cites in support of its claim are sent from Left Coast,
not Jackson, his statements while incarcerated clearly illustrate an intent to target NPK's
customers with the very statements NPK takes issue with. See Pl.'s Ex. 147, at 8:24-26, andPl.'s
Ex. 142, at 18:8-9. Accordingly, Jackson's telephonic statements, combined with the fact that he
provided Hunter, Left Coast's owner, with NPK's customer database and overtly suggested
reaching out to these customers, sufficiently convinces the Court that Jackson participated in the
distribution of the statements at issue in NPK's Lanham Act claim.

Page 15 - FINDINGS OF FACT & CONCLUSIONS OF LAW

Nevertheless, the evidence is insufficient to support a finding that all but two of these
statements were false. A statement is false if a claimant can show that the statement was literally
false, false by necessary implication, or literally true but likely to mislead or confuse customers.

Southland Sod Farms, 108 F.3d at 1139. First, the statement that NPK's products no longer
contain Yeti's frequency water is true and not likely to mislead or confuse consumers; indeed, at
the time the statement was made, November 2013, Yeti had canceled its distribution agreement
with NPK. Second, the statement that Left Coast and others discontinued distribution of NPK' s
products is also true and unlikely to mislead or confuse; Rowe admitted as much, stating all of
the goodwill NPK had generated transferred to Left Coast. The same is true with the statement
that Yeti was releasing a new-and-improved product line; Yeti agreed to supply frequency water
to Left Coast to market the product under the tradenames Mega Wash, White Wash, and Freq
Wash.
On the other hand, statements claiming NPK was being investigated by the EPA, IRS,
DEQ, and other agencies, while perhaps not literally false-Rowe testified at trial that NPK was
being investigated by various agencies during this time, though he claimed Jackson and Left
Coast had prompted their investigations by providing false information-the statements were
likely to, and in fact did, mislead or confuse consumers, as these statements implied the agencies
were going to shut down the company. Similarly, the statement that NPK's products were
susceptible to molding was also vigorously refuted by Rowe during trial, and there is nothing
outside of Left Coast's unsupported statements to indicate NPK's products did in fact cause, or
were susceptible to, mold. Hence, the Court finds NPK has sufficiently proved that these
representations were false.

Page 16-FINDINGS OF FACT & CONCLUSIONS OF LAW

Next, the evidence clearly demonstrates the statements were commercial speech,
therefore satisfying the first element of a Lanham Act claim. Indeed, Left Coast's statement
about NPK's products' susceptibility to mold was made in an advertisement sent out to
customers and thus was clearly made with the sole intent of burnishing its economic interests
vis-a-vis NPK. See Healthport Corp., 563 F. Supp. 2d at 1178 (internal citation and quotation
omitted) (stating that "[c]ommercial speech is expression related solely to the economic interests
of the speaker and its audience). Likewise, from the evidence the Court has been presented with,
including Rowe's testimony at trial, it appears beyond doubt that that statements over NPK being
investigated by state and federal agencies were made to undermine NPK in the eyes of the
targeted audience, thus elevating West Coast's market share among NPK's customers or former
customers.
The second element is also clearly met in this case. Neither party can dispute that these
statements were made by individuals, including Jackson, who were in commercial competition
with NPK; Jackson himself alludes to as much, stating, "[T]he resources that I have built for
NPK are my resources. And once they know that I'm detached from that and that I'm promoting
those washes, there's still going to be a huge market and that's what I've created []." Pl.'s Ex.
124, at 8:4-7.
Finally, NPK has supplied the Court with sufficient evidence to show that it is more
likely than not that the two false statements described above were likely to influence the
purchasing decision of the targeted audience and, thus, were material. In Healthport Corp., the
court held that false statements regarding the defendant's president's lofty credentials was a
material claim because it "may deceive consumers and influence consumer decisions on whether
to purchase" the defendant's product. 563 F. Supp. 2d at 1180. Here, as in Healthport Corp.,

Page 17 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

false statements that NPK's products are susceptible to mold is material because it has the
potential to deceive customers into believing that NPK's products did not work as intended and
thus had the potential to influence consumers' decisions on whether to purchase NPK's plantwash line. In addition, false statements indicating NPK would be shut down by regulatory
agencies also had the potential to influence consumer decisions on whether to purchase NPK's
products, since the notion that NPK could be shut down for regulatory noncompliance certainly
raised the presumption that its products or business was operating improperly or outside the law.
Therefore, in sum, NPK has adequately proved that the statements regarding NPK's
products' susceptibility to molding as well as statements indicating NPK would was being shut
down by regulatory agencies violate the Lanham Act. Moreover, NPK has shown that it is more
likely than not that Jackson contributed to the dissemination of these statements and,
consequently, violated the Lanham Act.
D. Common law trade libel

"Trade libel is the publication of matter disparaging the quality of another's property ...
." ComputerXpress, Inc. v. Jackson, 93 Cal. App. 4th 993, 1010 (Cal. Ct. App. 2001). Oregon

has referred to this tort as slander of title. See Woodard v. Pac. Fruit & Produce Co., 165 Or.
250, 255 (1940). As NPK points out, to make out a claim, a plaintiff must prove that the
defendant made a false or malicious statement that was published to a third party, causing the
plaintiff to suffer pecuniary damages as a result. Id. at 253. Malice may be shown by presenting
evidence that the statement was published with knowledge of its falsity or with reckless
disregard as to its truth or falsity. Lonsdale v. Swart, 143 Or. App. 331, 338-89 (1996) (internal
citation and quotation omitted). Relying on the same evidence that it presented for its Lanham

Page 18 - FINDINGS OF FACT & CONCLUSIONS OF LAW

Act claim, NPK contends that the false representations were made with knowledge of their
falsity or with reckless disregard to their truth or falsity.
As discussed, the Court finds that the evidence proves it is more likely than not that
Jackson participated in the distribution of statements NPK contends were false. Moreover, the
Court finds that the statements regarding NPK's products' propensity to mold, in addition to
statements that NPK was being investigated by federal and state agencies and was set to be shut
down, were false; however, the Court finds all other statements cited by NPK to be true. Next,
because the statements were e-mailed to NPK's customers, they were plainly published to third
parties. See Wallulis v. Dymowski, 323 Or. 337, 343 (1996) (internal citation omitted) ("a
statement is published when it is communicated to a third party"). Fourth, Rowe testified that the
statements caused NPK's sales to halve; thus, the company clearly suffered some sort of
pecuniary damage due to these statements. The only issue that remains, then, is whether Jackson
made or aided in the distribution of these statement maliciously or with knowledge that they
were false. And while there is evidence that points in both directions, the Court finds that it is
more likely that he did not.
First, the setting and context in which Jackson makes his statement about NPK's products
molding is illustrative. Indeed, the prison phone transcripts demonstrate that Jackson mentions
molding while educating Hunter's workforce on the benefits of frequency water; in doing so, he
states that because NPK no longer puts "frequency" in their water, "it's molding, it's you know,
having really negative results, because all they're doing essentially is PH'ing water." Pl. 's Ex.
147, at 8:24-26. There is nothing in this statement to indicate Jackson knew what he was saying
was false; in fact, the context of the statement leads the Court to conclude he believed what he

Page 19 - FINDINGS OF FACT & CONCLUSIONS OF LAW

was saying, as he was attempting to explain the perceived virtues of frequency water, one of
which, he believed, was that it prevented molding.
Nor is there evidence of malice. As stated, to show malice, NPK must show Jackson
acted with reckless disregard as to whether his statement was true or false. Recklessness requires
the actor to be aware of and consciously disregard the risk that the statement was false. See, e.g.,
State v. Stuart, 283 Or. App. 672, 676-77 (2017) (defining recklessness). As Jackson's comments

indicate, he was not aware of the risk that his statement might be false; in fact, the statement is
made as part of his overall argument that frequency water prevents mold: "And that will help
obviously, when you research bugs or mildew, will help in killing and kind of controlling the
situation. And that's where this frequency comes into play." Pl.'s Ex. 147, at 8:26-9:1-3. Hence,
it seems more likely than not that Jackson truly believed that, without adding Yeti's frequency
water, NPK's products were susceptible to molding, thus leading to his statement. Consequently,
the Court finds he did not act maliciously.
This is not to say that Jackson did not demonstrate a complete disdain for NPK; he
expressed his adverse feelings repeatedly throughout the phone transcripts, and, in fact, in the
statement at issue here, he refers to NPK's management as "the three stooges." Pl.'s Ex. 147, at
8:23. But disdain toward NPK, without more, does not translate into a finding that he made a
malicious or knowingly false statement about NPK, especially where, as here, the context in
which his statement was made indicates his belief in its veracity.
The same is true with respect to statements involving agency investigations into NPK. At
one point while incarcerated, Jackson tells Hunter, "OSHA and DEQ is going to come in and
probably stop sale to a lot of their products." Pl.'s Ex. 142, at 18:8-9. Again, however, nothing in
the evidence suggests Jackson knew this statement was false, or believed it was at risk of being

Page 20 - FINDINGS OF FACT & CONCLUSIONS OF LAW

untrue. To the contrary, he explicitly says that his brother-in-law, at the time an employee of
NPK, told him that that was the case. Hence, there is no evidence of malice.
Thus, while Jackson expressed a clear disdain, perhaps even hatred, for NPK and its
members, the evidence the Court has been presented indicates it is more likely than not that
Jackson truly believed NPK's products were inferior because they were susceptible to mold and
that NPK would be shut down by one or more state or federal agencies. In sum, then, NPK has
failed to make out a claim for common law trade libel.
E. Conversion

In Oregon, conversion is defined as the "intentional exercise of dominion or control over
a chattel which so seriously interferes with the right of another to control it that the actor may
justly be required to pay the other the full value of the chattel." Musto/a v. Toddy, 253 Or. 658,
663 (1969) (internal quotation and citation omitted). Each element of conversion must be proved
by a preponderance of the evidence. Mason v. Miller, 90 Or. App. 538, 541 (1988).
NPK contends that at the direction of Jackson, Lilga improperly obtained NPK's
customer database prior to her termination of employment, as well as all customer files,
corporate minutes, proprietary marketing information, exclusive distribution contacts, and
proprietary customer information.
First, the record is replete with evidence that Jackson or Lilga took customer files,
corporate minutes, proprietary marketing information, exclusive distribution contacts, and
proprietary customer information. While Rowe testified at trial that Lilga snuck back in after she
was terminated and stole these documents, Rowe's explanation for how he discovered Lilga's
"break-in" was nonexistent and unconvincing at best. Moreover, no other evidence suggests she
did so.

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The evidence does, however, show that Jackson directed Lilga to download NPK's
customer database; in fact, he stated as much:
And if you can-if you can find a way to download that database
information, and I don't know, you know, you might have to be squirrelly
about it or whatever, download it on a hard drive, but find a way to
download all that so that we have it as well, and do it periodically.
Pl.'s Ex. 116, at 13:5-10. Jackson goes on to say that it is important to have all that
information "because we've worked for that." Pl.'s Ex. 116, at 13:13-14. The evidence also
confirms Lilga's improper procurement of NPK's customer database, as Jackson later promises
to supply Hunter with a copy of the database and later instructs Lilga to provide Hunter with a
copy of"that list of all those stores." Pl.'s Ex. 144, at 9:25-26.
Jackson's procurement of NPK's customer database, with the help of Lilga, constitutes
conversion. First, the evidence shows he exercised control over the property, as demonstrated by
his ability to direct Lilga to provide it to Hunter. Second, his exercise of control over it
constituted a serious interference because it severely impacted the economic value of the
database. See Fogh v. McRill, 153 Or. App. 159, 166-67 (1998) (citing Restatement (Second)
Torts § 222A(2) (1965)) (stating that one of the factors the court looks at in evaluating whether
conversion occurred is the harm done to the chattel). Indeed, as Rowe testified, the only value in
NPK's customer list was the competitive advantage the expansive contact list provided over
competitors like Left Coast. As soon as that information was out, the value of the customer list
was vastly diminished. Hence, Jackson severely interfered with NPK's right to exclusive control
of this proprietary information.
NPK has not, however, provided the Court with an accurate assessment of the value of
any of the information it claims was converted, including NPK's customer database. Generally,
"the measure of damages for conversion . . . is the reasonable market value of the goods

Page 22 - FINDINGS OF FACT & CONCLUSIONS OF LAW

converted at the time and place of the conversion with interest thereon from that date." Hall v.
Work, 223 Or. 347, 357 (1960) (internal citation omitted). Here, NPK has provided no estimate

of the value of the goods Jackson allegedly converted-or did convert in the case of the customer
database. Instead, NPK simply states, "Damages for the conversion are the same as they are for
the other claims at issue." Pl.'s Trial Mem., at 16.
Nevertheless, NPK's failure to attach any market value to the converted property does not
preclude the Court from coming to a satisfactorily accurate assessment of the damages NPK
incurred. Indeed, "if the property has no market value at the time and place of conversion, either
because of its limited product, or because it is of such a nature that there can be no general
demand for it, and it is more particularly value to the owner than any one else, then it may be
estimated with reference to its value to him." Barber v. Motor Inv. Co., 136 Or. 361, 366 (1931)
(internal citation and quotation omitted). Here, the Court finds no specific market value for
NPK's customer database; the customer database is clearly a proprietary piece of information of
unique and limited production. Because of this, there is no general demand for it; indeed, as a
piece of secret, proprietary corporate information, it is not for sale in the marketplace.
Accordingly, its value may be estimated by reference to its value to NPK.
At trial, when asked about the value of this information, Rowe stated that it was, at the
very least, the cost NPK incurred in developing the goodwill necessary to successfully market
and sell its line of plant-wash products. The Court believes that NPK's customer database, while
valuable, is only a single component derived from its marketing campaign and cannot represent
the entire value of NPK's goodwill, which includes other elements such as name recognition.
Nevertheless, the customer relationships it developed while marketing its product is clearly an
integral part of the value of its goodwill. Accordingly, as will be discussed in greater detail

Page 23 - FINDINGS OF FACT & CONCLUSIONS OF LAW

below, the Court believes the conversion of NPK's customer database, when combined with the
other violations the Court finds herein, adds up to damages in the amount the Court finds were
directly and proximately related to marketing and developing the reputation of its Mighty Wash,
Power Wash, and PM Wash.
F. Breach of nondisclosure agreement

On April 11, 2011, Jackson signed a nondisclosure agreement with NPK. The agreement
prevented the disclosure of confidential information, which was defined to include company
know-how, business and contractual relationships, as well as customer lists. The agreement
expired two years after the signing date; however, it expressly stated that Jackson's "obligations
under this Agreement shall survive termination of the Agreement between the parties and shall
be binding upon" Jackson and his heirs, successors, and assigns for a period of five years after
the signing date. Pl.'s Ex. 3, at 2. As both parties acknowledge, the agreement was signed by
Jackson in his official capacity as an employee of NPK, namely vice president of sales.
Nevertheless, nothing in the agreement indicates that Jackson's obligations of confidentiality
terminated upon the end of his employment with NPK.
Because Jackson distributed NPK's customer lists to Hunter, NPK contends Jackson
breached the parties' nondisclosure agreement. NPK also argues Jackson distributed all customer
files, proprietary marketing information, corporate minutes, exclusive distribution contacts, and
proprietary customer information, also in violation of the nondisclosure agreement.
Under Oregon law, which governs this nondisclosure agreement, a plaintiff in a breachof-contract action "has the burden to establish the existence of a valid contract and the breach
thereof." Pendleton Grain Growers v. Pedro, 271 Or. 24, 28 (1975). Moreover, "[t]he rule in
Oregon is that a party seeking to recover damages for an alleged breach of contract"-as NPK

Page 24 - FINDINGS OF FACT & CONCLUSIONS OF LAW

does here-"must plead and prove either substantial performance on his part or a valid excuse
for his own failure to perform." Aurora Aviation, Inc. v. AAR W Skyways, Inc., 75 Or. App. 598,
602 (1985) (internal citation omitted) (emphasis in original). The plaintiff must establish each of
the above-mentioned factors by a preponderance of the evidence. Nw. Nat. Gas Co. v. Chase
Gardens, Inc., 333 Or. 304, 312 n.3 (2002). Additionally, the plaintiff must establish damages

with reasonable certainly; damages that are too speculative will not suffice. Bixler v. First Nat 'l
Bank of Or., 49 Or. App. 195, 201-02 (1980). Damages as a consequence of the breach, such as

those alleged by NPK as a result of Jackson's breach of the nondisclosure agreement, must be
reasonably foreseeable by the parties at the time they entered into the contract. Nw. Pump &
Equip. Co. v. Am. States Ins. Co., 144 Or. App. 222, 228 (1996) (internal citation omitted).

Here, Jackson does not dispute that the nondisclosure agreement is an enforceable
contract between the parties, nor that it was applicable at the time of the allegedly wrongful
conduct, as the alleged conduct occurred well within the agreement's five-year timeframe.
Accordingly, the three questions are whether his distribution of NPK's customer files and
proprietary marketing information to third parties constituted a breach of that contract, whether
NPK substantially performed its side of the bargain or excusably failed to perform, and whether
NPK has sufficiently proved damages.
First, there is no question that Jackson breached the express terms of the contract; the
parties' nondisclosure agreement explicitly prevents Jackson from disclosing NPK's customer
lists, yet the evidence shows both that Jackson directed Lilga to download NPK's customer
database and that he then distributed that information to Hunter via Lilga. The evidence also
proves Jackson distributed proprietary marketing information, in violation of the nondisclosure
agreement, in the form of the proposed advertisement he forwarded to Heagle. There 1s,

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however, insufficient evidence to find that Jackson, or anyone on Jackson's behalf, wrongfully
took and distributed customer files, corporate minutes, exclusive distribution contacts, and
proprietary customer information. Nevertheless, by disclosing NPK's database of customer lists
and by disclosing a proposed advertisement, Jackson plainly breached the nondisclosure
agreement.
Next, Jackson did not present evidence, nor did the Court find any, to suggest NPK failed
to substantially perform any part of the nondisclosure agreement. Thus, NPK has adequately
proved the existence of a contract, Jackson's breach, as well as its performance of the contract.
Finally, as will be shown below, NPK suffered ascertainable damages that were foreseeable by
the parties at the time they entered into this agreement. Consequently, NPK has shown Jackson
breached the parties' nondisclosure agreement.
G. Civil conspiracy and aiding and abetting

NPK contends Jackson, Lilga, Heagle, and others conspired with each other to damage
NPK by converting proprietary information, commercially disparaging NPK and its products,
and making false claims to the industry about NPK. NPK contends these parties aided, advised,
and acted in concert with each other "for the express purpose of damaging[] NPK, LLC." Pl.'s
Trial Mem., at 18.
"A civil conspiracy is a combination of two or more persons by concerted action to
accomplish an unlawful purpose, or to accomplish some purpose not itself unlawful by unlawful
means." Bonds v. Landers, 279 Or. 169, 174 (1977) (internal citation and quotation omitted).
While a criminal act is not required, the conspiracy's primary purpose "must be to cause injury
to another." Id (internal citation omitted). Likewise, "all who aid, command, advise, or
countenance the commission of a tort by another, or who approve of it after it is done, if done for

Page 26 - FINDINGS OF FACT & CONCLUSIONS OF LAW

their benefit, are liable in the same manner as they would be if they had done the same tort with
their own hands." Perkins v. McCullough, 36 Or. 146, 149 (1899).
"Neither 'conspiracy' nor 'aid and assist' is a separate theory of recovery." Granewich v.
Harding, 329 Or. 47, 53 (1999) (internal citation omitted). "Rather, conspiracy to commit or

aiding and assisting in the commission of a tort are two of several ways in which a person may
become jointly liable for another's tortious conduct." Id The case Sprinkle v. Lemley, 243 Or.
521 (1966) sets out this principle well. In that case, a patient was injured due to her doctor's
negligence. The patient sued her general practitioner and a specialist, who was called into assist
the patient's general practitioner. Id at 523-24. The court explained that "[a] general practitioner
or family physician who calls in a specialist to treat or perform surgery on a patient is not liable
for the negligence of the specialist if there is no concert of action." Id at 528. On the other hand,
"[t]he court there stated that persons acting in concert can be liable ... for harm resulting from
the other's negligence." Granewich, 329 Or. at 54 (discussing Sprinkle, 243 Or. at 528). Because
the doctors acted together in treating the plaintiff, they were found jointly liable. Springle, 243
Or. at 523-31.
Here, NPK argues that, as with the doctors in Sprinkle, the Court should impute liability
to Jackson for acting in concert with Lilga, Heagle, and others to "convert proprietary information,
to commercially disparage the products of [] NPK, LLC, and to make false claims to the industry
regarding the business of[] NPK, LLC." Pretrial Order, at 19. First, the Court has already found
Jackson violated the Lanham Act. Additionally, it found that NPK has adequately proved Jackson
wrongfully converted NPK's customer database. Thus, neither civil conspiracy nor aiding and
abetting provides an independent basis of recovering for either of these claims.
Beyond these two claims, NPK has failed to present evidence showing any other tort was
committed, either by Jackson or by individuals whom he acted in concert with. Hence, because
Page 27 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

none of the individuals Jackson purportedly acted in concerted with committed a tort for which
Jackson did not independently commit, Jackson cannot, as a matter of law, be independently
liable on a theory of conspiracy or aiding and abetting.

H. Damages
NPK seeks damages in the amount it contends it spent marketing its original, frequencyaltered product line. Prior to and during its case-in-chief, NPK submitted dozens of exhibits
consisting of meal and hotel receipts, costs of attending trade shows to market the frequencyaltered product line, fuel expenses, and many others. Rowe, NPK's president, testified that each
of these exhibits were independent expenses NPK incurred in marketing its product and
developing the product line's, as well as the company's, goodwill, all of which was lost as a
result of Jackson's actions. NPK represented that the exhibits added up to roughly $625,000. On
cross-examination, however, Jackson pointed to numerous duplicative expenses within these
exhibits, prompting NPK to acknowledge that its damages figure of $625,000 was clearly
incorrect and indeed lower, though it did not present the Court with a number. Jackson also
called into question many expenses' purported relationship to NPK's marketing of its frequencyaltered product line, stating that some expenses were incurred to promote different products.
A plaintiff must prove damages caused by tortious conduct by a preponderance of the
evidence. See Dizick v. Umpqua Cmty. Coll., 287 Or. 303, 311 (1979) (holding that the standard
of proof for all torts, including fraud, is preponderance of the evidence). "Proof by a
'preponderance of the evidence' means that the jury must believe that the facts asserted are more
probably true than false." Riley Hill Gen. Contractor, Inc. v. Tandy Corp., 303 Or. 390, 402
(1987). NPK's damages are compensatory, as it seeks to be compensated for the cost it incurred
developing its product line's and the company's goodwill. See Allen v. Cty. of Jackson, 191 Or.

Page 28 - FINDINGS OF FACT & CONCLUSIONS OF LAW

App. 185, 201-02 (2003) ("compensatory damages are damages sufficient in amount to
indemnify the injured person for the loss suffered") (internal quotation and citation omitted). "It
is the law with respect to compensatory damages that a tort-feasor is liable to the person injured
for all the natural and direct proximate consequence of his wrongful act or omission." Gilman v.

Burlingham, 188 Or. 418, 423 (1950).
Next, as explained above, in a claim for breach of contract, a plaintiff must establish
damages with reasonable certainly, meaning they cannot be unduly speculative. Bixler, 49 Or.
App. at 201-02. Damages as a consequence of the breach, such as those alleged by NPK as a
result of Jackson's breach of the nondisclosure agreement, must be reasonably foreseeable by the
parties at the time they entered into the contract. Nw. Pump & Equip. Co., 144 Or. App. at 228.
Third, a claim for damages for false advertising under the Lanham Act does not require
"empirical quantification nor expert testimony," Skydive Ariz., Inc. v. Quattrocchi, 673 F.3d
1105, 1113 (9th Cir. 2012), it does require, as an essential element "actual evidence of some
injury resulting from the deception . .. ."Harper House, Inc. v. Thomas Nelson, Inc., 889 F.2d
197, 210 (9th Cir. 1989) (emphasis in original).
Finally, if the plaintiff proves with the requisite degree of certainty that the defendant's
violative actions have resulted in damage, the actual amount of damages need not be proved with
exact certainty. Sol-a-Lite Laminating Corp. v. Allen, 223 Or. 80, 94 (1960). Indeed, "[i]t is well
settled that [a] plaintiff is not required to prove the amount of his damages with mathematical
certainty." N Pac. Lumber Co. v. Moore, 275 Or. 359, 366 (1976). That said, however, the
plaintiff must "establish the fact of damage and evidence from which a satisfactory conclusion as
to the amount of damage can be reached." Id. (emphasis added).

Page 29 - FINDINGS OF FACT & CONCLUSIONS OF LAW

Here, while NPK has not proved its actual amount of damages with exact certainty, it has
certainly proved that it suffered damages as a direct and proximate result of Jackson's actions.
First, it is certainly true that at least some of the financial consequences NPK suffered were a
result of Heagle's independent decision to end his agreement with NPK and the fact that NPK
could no longer inject frequency water into its plant-wash line of products. However, as Rowe
testified, due to Jackson's conversion and subsequent distribution ofNPK's customer database in
violation of the parties' nondisclosure agreement, as well as Jackson's role in disseminating false
statements regarding NPK's products' susceptibility to mold and the fact that the company may
be shut down by federal or state regulators, NPK went from sales of $3 million in 2012 and a
profit of around $125,000 to virtually no revenues and strictly losses in the years since. He
further testified that scores of customers transitioned to Left Coast or other competitors as a
result; indeed, as he put it all of NPK's goodwill transferred to Left Coast. Thus, NPK was
certainly damaged as a result of Jackson's conduct. The question, however, is the amount of
damages it is entitled.
Damages for loss of goodwill are recoverable damages. Sol-a-Lite Laminating Corp., 223
Or. at 91; see also Southland Sod Farms, 108 F.3d at 1139 (internal citation omitted) (stating that
for a claim under the Lanham Act, the plaintiff must show he "has been or is likely to be injured
as a result of the sale statement, either by direct diversion of sales from itself to defendant or by a
lessening of the goodwill associated with its products) (emphasis added). And while, "such

damages are not capable of exact ascertainment," "(u]ncertainty precluding recovery of damages
relates to uncertainty whether any damages have resulted, not to damages which are the certain
result ... but which are uncertain in amount." Sol-o-Lite Laminating Corp., 223 Or. at 91, 93-94
(internal citation omitted). Here, for reasons mentioned, there is uncertainty as to the amount of

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expenses which were in fact incurred in the process of developing the goodwill behind the
product line involved in this case; however, as explained, there is no uncertainty that NPK
suffered damages as a direct and proximate result of Jackson's conduct.
It is clear by NPK's own admission, however, that its request for $625,000 was too

generous and that that number was arrived at by including the same expenses more than once, as
well as tangentially related items such as food and coffee receipts. Beyond this, the Court is not
convinced that each of the expenses NPK submitted was incurred in developing, marketing, and
producing goodwill for its frequency-altered product line and not other products.
That said, it is clear upon examination of these exhibits that many of them were incurred
in marketing frequency-induced Mighty Wash, Power Wash, and PM Wash; after all, as Rowe
testified, these were NPK's main products. Thus, after assessing NPK's exhibits, the Court
believes an adequate amount of damages for the injury NPK suffered to its goodwill is
$165,961.80.
This is the amount of damages the Court has concluded, based on physical evidence and
Rowe's testimony, are directly and proximately related to marketing and developing the
reputation of its Mighty Wash, Power Wash, and PM Wash. These expenses include nonduplicative costs for attending trade shows to promote the plant-wash product line; the provision
of sample products without charge for trade shows and for new customers, which Rowe testified
was critical to developing name recognition 8 ; and the cost of advertising the plant-wash line in
various industry-wide magazines. See Pl.'s Exs. 49, 58, 59, 60, 62, 63, 66, 75, 79, 84, 89, 91, 94,
95, 97, 109. The Court has excluded from its assessment of damages any exhibits whose origins
8

1t was unclear to the Court whether some of the exhibits purporting to be samples that NPK provided to
new customers had in fact been given away free of charge or at the expense of NPK. Additionally, others were
duplicative. Accordingly, the damages figure the Court arrives at includes only those in which the Court was certain
that NPK incurred the cost and that the cost was not duplicative. See Pl.'s Ex. 75, at 1, 3, 4, 6, 8, 10, 13, 14, 15, 16,
18, 19, 20.

Page 31 - FINDINGS OFF ACT & CONCLUSIONS OF LAW

were unclear, duplicative, or simply tangentially related to development of goodwill. Moreover,
it has excluded the expenses NPK incurred in building Yeti's factory in Jackson County, Oregon.
To the extent NPK failed to recoup any of its expenses for building this factory, the Court
believes that was solely the consequence of Yeti's cancellation of its contractual relationship
with NPK and had nothing to do with NPK loss of goodwill. Finally, the Court excludes the
salaries NPK paid Jackson; NPK received the benefit of Jackson's personal services in exchange
for this salary, and therefore was not damaged.
The arrival at $165,961.80 is not, however, the end of the Court's analysis. As stated,
Beagle's decision to terminate Yeti's distribution agreement is also responsible for NPK's loss in
goodwill. Given the dueling reasons for NPK's loss of goodwill-Beagle's termination of the
distribution agreement and Jackson's and others' unlawful actions-the Court believes the
damages figure should be divided by one-half to properly account for this. Therefore, the amount
is $82,980.90; however, as will be discussed below, Jackson is not independently, or even jointly
and severally, liable for this entire award, as Lilga shares some responsibility.
II.

Jessica Lilga
NPK alleges Lilga committed, conspired to commit, or aided others in converting

proprietary information, in commercially disparaging NPK and its products, and in making false
claims to the industry about NPK. Lilga failed to appear in this matter, and on April 13, 2015, the
Court entered an order of default against her. On January 19, 2017, NPK moved for a default
judgment against Lilga. On March 7, 201 7, the Court denied with leave renew the motion at trial,
and NPK did so.
The evidence undeniably shows Lilga acted in concert with Jackson in converting NPK's
customer database; in fact, she was the one who downloaded the database from NPK's computer

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network. Tortfeasors who act in concert to cause injury to a plaintiff are liable jointly and
severally for the damages caused to the plaintiff. Am. Fed'n of Teachers-Or., AFT, AFL-CIO v.
Or. Taxpayers United PAC, 209 Or. App. 518, 522 (2006) (quoting Granewich, 329 Or. at 47,

55). Consequently, Lilga is jointly and severally liable for the damages caused by her and
Jackson's conversion.
As the Court stated, there is no reasonably ascertainable market value for NPK's
converted customer database; however, given Rowe's testimony about the database's integral
importance to the company, the Court believes that it is reasonable to value it at $27,660.30
(one-third of the damages figure). Indeed, developing an extensive customer database and
thereby a recurrent relationship with customers is certainly an important component in any
company's strategy of developing goodwill. Hence, because Lilga acted in concert with Jackson
in converting this property, she is jointly and severally liable for this amount.
Next, there is no evidence to show Lilga played any part in disseminating the false
statements that gave rise to Jackson's liability on the Lanham Act. At best, NPK could show she
supplied the customer database to Hunter, which he then used to supply false statements to
NPK's customers. But "[j]oint tortfeasor liability [under the Lanham Act] is available only when
the defendant has 'knowingly participated in the creation, development and propagation of the
false advertising campaign."' In re Century 21-REIMAX Real Estate Advert. Claims Litig., 882
F. Supp. 915, 925 (C.D. Cal. 1994). And there is no evidence Lilga was aware of or participated
in the creation, development, and propagation of the false statements at issue here. Thus, she
cannot be held jointly liable simply by suppling Hunter with the customer database.
Nevertheless, Lilga's distribution of NPK's customer database to Hunter constituted a
breach of her nondisclosure agreement with NPK. Indeed, her nondisclosure agreement

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precluded her from distributing information of commercial value. Pl.'s Ex. 4. The customer
database would certainly fall under this category: It was information, in the form of NPK's
customers, and had commercial value based on the competitive advantage that Rowe testified the
database provided NPK over its rivals. Because Lilga' s turning over of the database to Hunter
led directly to the dissemination of false information and therefore to the loss of goodwill on the
part of NPK, the Court believes NPK has adequately shown it suffered damages as a
consequence of Lilga' s breach. These damages were also foreseeable; in fact, the purpose of the
parties' nondisclosure makes clear that it was to prevent the disclosure of NPK's confidential and
proprietary information to competitors, like Hunter, due to the potential that such disclosures
could result in a loss in NPK's competitive or commercial advantage.
As with its other claims, NPK seeks damages in the amount of goodwill it lost as a result
of this breach. As discussed, damages for loss of goodwill are recoverable. Sol-a-Lite Laminating
Corp., 223 Or. at 91. And while they may not be alleged with exact precision, any "[u]ncertainty

precluding recovery of damages relates to uncertainty whether any damages have resulted, not to
damages which are the certain result ... but which are uncertain in amount." Id. at 91, 93-94
(internal citation omitted).
Here, as explained, there can be no question that Lilga's actions were certain to and did in
fact damage NPK. The only uncertain question is the amount in which NPK was damaged. As
set forth above, the Court calculates that one-third of the damages figure resulted from
converting NPK's database; the remaining two-thirds, then, resulted from the dissemination of
false statements to NPK customers. And but for Lilga's distribution of NPK's customer
database-i. e., the breach of her nondisclosure agreement-this dissemination could not have
occurred. Accordingly, her breach played a critical role in this injury. Notably, though, Lilga did

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not act alone. Instead, she acted at the behest of Jackson, who directed her to turn over the
database to Hunter. And, as discussed, Jackson's direction to tum over the database breached his
own nondisclosure agreement. The Court therefore believes that another third of the damages
figure---0r $27,660.30-should be attributed to Jackson's and Lilga's breaches; thus, it follows
that Lilga is independently liable for one-sixth, or $13,830.15, for breaching her nondisclosure
agreement. The remaining one-third of damages is attributable to the Lanham Act violation.
Therefore, in sum, the Court finds the following:
Jackson and Lilga are jointly and severally liable for $27,660.30 in damages, and Lilga is
independently liable for $13,830.15. 9 Jackson is individually liable for the remaining $41,490.45,
which is derived from the breach of his nondisclosure agreement as well as his Lanham Act
violation.
Total loss of goodwill

$165,961.80

Amount attributable to Yeti

$82,980.90 (1/2 of total)

Amount attributable to Lilga and
Jackson
Amount attributable to conversion

$82,980.90 (1/2 of total)

Amount attributable to Lanham Act

$27,660.30 (1/3 of $82,980.90)

$27,660.30 (1/3 of $82,980.90)

Amount attributable to breach of $27 ,660.30 ( 1/3 of $82,980.90)
nondisclosure agreements
$13,830.15 (1/2 of $27,660.30)
Amount attributable to Lilga's breach
of her nondisclosure agreement
$13,830.15 (1/2 of $27,660.30)
Amount attributable to Jackson's
breach of his nondisclosure agreement

I II

9
The Court does not find sufficient evidence to conclude Lilga committed any other tort, either
independently or in concert with others. Notably, there is no evidence to suggest Lilga committed fraudulent
conduct during the three weeks she worked at NPK.

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III.

Injunctive relief

Finally, NPK also seeks injunctive relief; it contends it "is entitled to a permanent
injunction restraining and enjoining [] Jackson from possessing or otherwise using the
proprietary information of [] NPK, LLC including but not limited to its customer lists, corporate
minutes, distribution contracts, customer files and advertising data." Pretrial Order, at 23.
28 U.S.C. § 2202 as well as ORS § 28.080, which is based on the federal act, Samuel v.
Frohnmayer, 308 Or. 362, 365 (1989), provide for "[f]urther necessary or proper relief based on

a declaratory judgment ... after reasonable notice and hearing, against any adverse party whose
rights have been determined by such judgment." 28 U.S.C. § 2202.
Here, as discussed, the evidence indicates Jackson improperly procured, and apparently
still possesses, NPK's customer lists, though there is insufficient evidence to suggest he retains
NPK's corporate minutes, distribution contracts, or customer files and advertising data.
Accordingly, the Court will enter a judgment in NPK's favor finding Jackson wrongfully
procured, and retains possession of, NPK's customer database. However, "[a]ny injunctive relief
due plaintiff is appropriate only after a declaratory judgment has been entered in his favor and
there has been notice and a hearing on his request for further relief." Southworth v. Steelworkers
W Indep. Shops Pension Plan, No Civ. 04-6252-AA, 2004 WL 2958419, at *2 (D. Or. Dec. 21,

2004); see also Ken Leahy Const., Inc. v. Cascade Gen., Inc., 329 Or. 566, 575 (1999) (stating
ORS § 28.080 requires that, once a declaratory judgment or decree has been entered in the
plaintiffs favor, the court mandate that the adverse party show cause why further relief, such as
injunctive relief, should not be granted). Consequently, once this declaratory judgment is
entered, the Court will order Jackson to show cause why injunctive relief should not be granted
in NPK's favor.

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CONCLUSION

NPK established by a preponderance of the evidence that Jackson and Lilga acted in
concert to convert NPK's customer database. NPK also demonstrated by a preponderance of the
evidence that Jackson and Lilga violated their respective nondisclosure agreements. Finally,
NPK proved by a preponderance of the evidence that Jackson violated the Lanham Act. In total,
Jackson and Lilga caused NPK to suffer damages in the amount of $82,980.90. Of this amount,
Jackson and Lilga are jointly and severally liable for $27,660.30; Lilga is individually liable for
$13,830.15; and Jackson is individually liable for the remaining $41,490.45. Pursuant to NPK's
request for injunctive relief, the Court will enter judgment declaring Jackson in unlawful
possession ofNPK's customer database and in violation of the Lanham Act. He will be ordered
to show cause why further injunctive relief should not be granted in NPK's favor.

MARK D. CLARKE
United States Magistrate Judge

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