Riggs Investment Management Corp. v. Columbia Partners, L.L.C.

MEMORANDUM OPINION

The court conducted a bench trial of this case from January 13,1997 through January 17, 1997, and hereby makes the following findings of fact and conclusions of law pursuant to Rule 52 of the Federal Rules of Civil Procedure.

FINDINGS OF FACT

Plaintiff Riggs Investment Management Corporation (“RIMCO”) manages investment funds for individuals, pension funds, and other corporate and institutional investors. RIMCO is a wholly-owned subsidiary of Plaintiff Riggs Bank, N.A. (“Rigg”). Tr. 48-44 (Dudley). ■

*1254 From January 1990 through September 1995, RIMCO achieved an exceptional performance record in equity investments, and its assets under management — the money it invested for clients — went from approximately $1.4 billion dollars to over $2.5 billion dollars. Tr. 410 (von Pentz). Year-to-year and quarter-by-quarter, RIMCO’s portfolios generally outperformed the relevant indices — the S & P 500 for “large cap” stocks and the Russell 2000 for “small cap” stocks. Tr. 527-28 (Tasho); PX 101A-D.

In June 1989, defendant Robert von Pentz left a competitor, American Securities Bank Capital Management (“ASB”), to become RIMCO’s Managing Director of Equity Strategy and Management. When von Pentz became CEO of RIMCO in January 1990, he hired Philip Tasho, a former ASB colleague, as von Pentz’s replacement as the head of equities at RIMCO. Tr. 347-48, 353-56 (von Pentz). Von Pentz served as Chief Executive Officer, Chief Investment Officer and Chairman of the Board of RIMCO from late 1989 until his resignation on September 28, 1995. Tr. 322, 347 (von Pentz); DX 1 at T109, DX 5,122-127; PX 116.

In June 1994, Tasho went to Tim Coughlin, the president of Riggs National Corporation, and told him he had an offer of employment from Shawmut Investment Advisors in Boston. He said he would stay at RIMCO, however, if Riggs fired von Pentz and put Tasho in charge of RIMCO. Tr. 529, 657, 665-66 (Tasho). Riggs declined and Tasho was ordered to submit his resignation. Tr. 362 (von Pentz), 665-66 (Tasho). Tasho left RIMCO for Shawmut in June 1994, and another RIMCO employee, Clifford Dyhouse, followed Tasho there in September. Tr. 360, 364-65 (von Pentz).

Following Tasho’s departure from RIMCO, von Pentz resumed day-to-day responsibility of selecting the stocks for all of RIMCO’s equity portfolios. Tr. 350, 362 (von Pentz). He recruited Gary Dickinson from Riggs’ Trust Department in early 1995 to assist him, and hired Dan Goldstein to take over Dyhouse’s responsibilities. Tr. 362-65 (von Pentz). In a memo to Riggs executives on July 21, 1994, written shortly after Tasho’s departure, Coughlin wrote, “Bob [von Pentz] has displayed continuing loyalty to Riggs ... and has shown real leadership in rallying the remaining RIMCO employees in the aftermath of resignations by Messrs. Marshall and Tasho.” DX 30.

Von Pentz renewed his employment contract with RIMCO that very month. The contract, which extended through December 31, 1995, entitled von Pentz to an annual salary of $175,000, as well as additional incentive compensation based on RIMCO’s profits and performance. (PX 7). In July 1995, Tim Coughlin and Henry Dudley — successor to George Grosz, head of Financial Services at Riggs Bank — met with von Pentz to discuss a possible extension of his employment contract, which was set to expire December 31, 1995. Tr. 41-42, 50-51 (Dudley), 383 (von Pentz); PX 7. Von Pentz was not eager to enter into a new contract, but was willing to listen to Riggs’ proposal. He wanted an equity interest in RIMCO as an inducement to enter into any new contract, Tr. 65-66 (Dudley), 383-85 (von Pentz), but when Dudley and Coughlin finally presented von Pentz with a draft employment agreement in late September, it contained no provision for an equity interest in RIMCO, and the changes in terms from the existing contract were not particularly favorable to von Pentz. DX 3, 39; Tr. 387-89 (von Pentz). Von Pentz found the terms in the draft contract to be unacceptable, and told them he would not sign it given the other opportunities he had available to him. Tr. 66 (Dudley), 387-90 (von Pentz).

On September 28, 1995, more than three months before his contract was to expire, von Pentz resigned without advance notice. He immediately went to work for defendant Columbia Partners, an investment company in which he holds a ten percent interest. Tr. 286, 322 (von Pentz). Within two days, von Pentz hired eight RIMCO employees to join him at Columbia Partners, including everyone involved in marketing, client service, and equity investment. Tr. 84r-86 (Addison).

On Monday, October 2, 1995, Columbia Partners officially opened for business at fully appointed offices on Pennsylvania Avenue, and Columbia Partners was actively soliciting investment clients, including RIMCO clients. *1255 Tr. 230-31 (Collins). As a result of defendant von Pentz’s actions in starting up his new business and hiring away RIMCO employees, plaintiffs have alleged breaches of fiduciary duty by von Pentz. As a result of the alleged actions of Columbia Partners, plaintiffs charge Lanham Act and unfair competition violations.

Formation of Columbia Partners

Beginning no later than February or March 1994, von Pentz had begun discussions with Terry Collins, then the President of ASB Capital Management, a RIMCO competitor, about establishing their own investment management firm. Tr. 311-12 (von Pentz); Tr. 129 (Collins). Their plan was to join RIMCO’s equity side with ASB’s fixed income side. Tr. 126 (Collins).

By the summer of 1994, Collins and von Pentz were seeking investors for their prospective firm. They had a number of meetings with Putnam Lovell, a New York investment banking firm. Tr. 125-26, 273-74 (Collins); Tr. 312-13 (von Pentz). Although von Pentz claimed at trial that Putnam Lo-vell had not been “involved in any serious way with developing financial projections,” Tr. 313, the evidence reveals that von Pentz did provide Putnam Lovell with information to assist it in creating projections for Columbia Partners. Yon Pentz Dep. 193-96; Tr. 274 (Collins); PX 21. 1

In the fall of 1994, Collins began discussions with Ruff Fant of Galway Partners, a D.C.-based merchant bank, about the prospect of Galway backing the new venture. Tr. 1011 (Fant); Tr. 126-27 (Collins). By early November 1994, Collins disclosed to Galway von Pentz’s interest in the project. See PX 12. Galway was keenly interested in establishing an investment management firm. Id. Von Pentz and Collins understood that if they did not go forward with Galway, Galway would proceed with someone else. Tr. 135 (Collins).

In the first half of 1995, von Pentz was extensively involved in negotiations about the new venture. Tr. 1026 (Fant); PX 16, 22, 28, 29, 82. A final “Term Sheet” was signed on July 12,1995, see PX 33-34A, and in August, Galway informed some prospective investors that Collins and von Pentz were committed to the project. PX 39,120-21.

Well before the Term Sheet was signed, and at least since the beginning of 1995, von Pentz worked closely with both Collins and Fant to establish Columbia Partners as a “full blown company.” Tr. 208-10 (Collins). With Galway, they agreed to establish a “turn-key” operation — one that would be ready to begin full operations immediately after von Pentz and Collins resigned their current positions.

The evidence establishes that from at least February of 1995, von Pentz participated in developing projections for Columbia Partners, and from at least April of 1995, shared information about RIMCO’s employees and customers for inclusion in those projections. Tr. 313 (von Pentz); von Pentz Dep. 193-96; Tr. 127-28,134-35, 273-74 (Collins); see, e.g., PX 23,28, 83-88. Galway needed the projections to ensure the feasibility of the project and to recruit investors. Tr. 1012-15 (Fant); Tr. 127-28, 135 (Collins); PX 26-27, 120-21.

In order to create a budget for the new firm so that he would know how much start-up capital was needed, Fant asked Collins and von Pentz to provide estimates of certain expenses such as employee salaries and the revenues from potential clients for the new firm. Tr. 1012-15 (Fant). Beginning in April, 1995, von Pentz sent spreadsheets to Collins and later, Pant, which contained his estimates of potential revenues and expenses for the new firm. Tr. 378-79 (von Pentz); PX 24, 25. These spreadsheets contained the names of several RIMCO clients and information concerning the size of the client’s account, the fees that client paid, and von Pentz’s estimate of the probability that the client would transfer its account to the new firm. Tr. 378-79 (von Pentz); PX 24, 25. Von Pentz’s spreadsheets also listed the names and salaries of the RIMCO employees whom he hoped to recruit for the new venture. Tr. 378-79 (von Pentz); PX 24, 25.

*1256 Defendants admit that some of the information provided by von Pentz to Collins and Fant was confidential to RIMCO, but contend it was not the type of confidential information which was particularly useful to a competitor, or which would cause competitive harm to RIMCO if disclosed. Tr. 380-82 (von Pentz). For example, the names of RIMCO’s institutional clients are printed in its promotional materials, and von Pentz testified that many clients willingly disclose the amount of assets they have with different money managers. Tr. 379 (von Pentz); DX 5. However, von Pentz also disclosed information about the assets that RIMCO clients had under management and the fees that each client generated. Tr. 128-29 (Collins); Tr. 313-14 (von Pentz); Tr. 1012-13, 1026 (Fant); PX 36, 84-85. Von Pentz admitted that he had never previously shared such information about clients with any competitors, and that he did not have clients’ consent to share information about their accounts. Tr. 314 (von Pentz). Von Pentz further acknowledged that the fees charged by investment managers are “a factor in the competitive balance between firms,” though he believed it to be one of the least important elements in picking a money manager. Tr. 378 (von Pentz).

The projections von Pentz and Collins provided to Galway listed RIMCO employees and RIMCO clients that von Pentz intended to recruit for the new company, identified which RIMCO marketing employees had relationships with which targeted RIMCO clients, and estimated the probability that each client could be switched to the new venture. Tr. 128,131-34 (Collins); Tr. 1012-13 (Fant); see, e.g., PX 24, 36, 68, 85, 87. Von Pentz also shared information about salaries and bonuses that would be needed to recruit RIMCO employees. Tr. 134-35 (Collins); see, e.g., PX 25, 36, 84-85.

Galway originally hoped to open Columbia Partners in April of 1995. PX 16 (GP 5499). Over the ensuing months, that timeline slipped several times. Tr. 137-38 (Collins). By the summer of 1995, however, all those involved were aiming to start Columbia Partners by what ultimately became its starting date, October 2, 1995. Id. at 138; PX 33, 120-21.

Throughout the summer of 1995, von Pentz and Collins provided input and approval concerning “pretty much every detail” of establishing Columbia Partners. Tr. 140-43 (Collins); PX 44, 48-49, 56, 58, 61-63. Von Pentz’s input was sought on everything from finding office space and furniture, purchasing computer software, and designating the office layout, to placing phone outlets, and even selecting coffee for the office. PX 44, 49, 53, 66; Tr. 320 (von Pentz). Von Pentz also worked on setting salary and commission structures. PX 31,40, 43, 62, 64.

RIMCO Employees

Von Pentz acknowledged that in the summer of 1994, when he and Collins were seeking investors, he disclosed to RIMCO employees that he planned to start his own business, and that he hoped to take them with him. This, he said, was a result of the fact that two of von Pentz’s superiors had previously left and taken others, then, when Tasho left he took Dyhouse, and when Marshall moved on, others were left “out in the cold.” Von Pentz testified that he made it known that if he ever left, he would “try to find a home for evérybody.” Tr. 395-96 (von Pentz).

In July 1995, von Pentz told Curt Winsor of his “dream” to run his own company. That conversation prompted Winsor to discuss the subject with Tom O’Neill. Tr. 851-52 (Winsor). At approximately the same time, von Pentz had similar conversations with Louise Toler and Colleen Kelly. Tr. 969 (Kelly).

Throughout September 1995, von Pentz informed RIMCO employees of his imminent departure from RIMCO. On September 6, 1995, von Pentz told Lane that he would soon be leaving to start his own company, and asked Lane to join him. Tr. 887-88 (Lane); Tr. 398-99 (von Pentz). This conversation occurred as the two were flying to meet with Texas Scottish Rite Hospital, a client von Pentz had identified as one that Lane might bring over to Columbia Partners. PX 36. On September 19,1995, von Pentz took Lane for a tour of Columbia Partners’ future offices and informed Lane that he would be *1257 resigning on September 28. Lane acknowledged that even though he was a RIMCO officer, he did not disclose to Riggs’ management von Pentz’s imminent departure out of personal loyalty to von Pentz. Tr. 887-88, 900 (Lane).

On September 14, 1995, von Pentz discussed his imminent departure with O’Neill on a flight back from Kentucky, where they had attended a meeting with Modem Welding and had entertained a trustee of the UIU Pension Trust (“UIU”). Tr. 763-64 (O’Neill). Von Pentz had identified Modern Welding and UIU as RIMCO clients that would likely follow O’Neill and von Pentz, respectively, to the new firm. Tr. 432-33 (von Pentz); PX 36. Von Pentz told O’Neill that he would be leaving RIMCO in the next several weeks; that he would be joining resources with another well-known entity; and that he would be running the equity side of the new venture.

On September 26, 1995, von Pentz and Winsor discussed Columbia Partners over lunch. Von Pentz told Winsor that he would be leaving at the end of the week and discussed Winsor’s joining the new firm with responsibilities in marketing. Winsor’s understanding was that he had a job offer, and that he had accepted it, though not explicitly. Tr. 853-55 (Winsor).

On September 27, 1995, von Pentz gave Louise Toler a tour of Columbia Partners’ future offices, told her he was joining forces with Collins, and showed her a letter specifying the terms of her offer of employment at Columbia Partners. Tr. 401 (von Pentz).

Each of these RIMCO' employees resigned on September 28, 1995. Tr. 898 (Lane); Tr. 766-68 (O’Neill); Tr. 856 (Winsor). Even though Winsor and O’Neill typically met with 10 to 20 prospective clients a month, as of their resignations from RIMCO on Septem-ver 28, 1995 Winsor had only one scheduled RIMCO appointment and O’Neill had none. Tr. 860 (Winsor); Tr. 767-68 (O’Neill). Before von Pentz resigned, business cards for O’Neill, Winsor, and Lane had already been printed and were available at Columbia Partners. PX 71. Four other employees targeted by von Pentz resigned within days of von Pentz’s resignation. Tr. 85 (Addison). Several offered to stay on at RIMCO while RIMCO made arrangements for their replacement, but RIMCO generally declined.

RIMCO Clients

RIMCO reacted quickly to von Pentz’s departure. RIMCO or Riggs executives contacted all of RIMCO’s clients and informed them that von Pentz had resigned to join a new firm, and said his departure would not affect RIMCO’s investment performance or its ability to provide investment management services, since the investment process von Pentz had been using was still in place at RIMCO. Tr. 104-115 (Addison); DX 42, 44-45. RIMCO also recruited Tasho and Dy-house to return from Shawmut, and began telling clients and consultants of their imminent return almost immediately after von Pentz’s departure. Tr. 114-15 (Addison), 842-43 (Hoffman). Tasho and Dyhouse rejoined RIMCO in November 1995. (DX 54). RIMCO’s equity investment performance continued to out-perform the relevant indices over the fourth quarter of 1995. Tr. 115 (Addison).

In September 1995, von Pentz and Lane or O’Neill met with representatives of RIMCO clients targeted for Columbia Partners: Texas Scottish Rite, Modern Welding and UIU. Yon Pentz had identified each. client as a prospect to be brought to Columbia Partners by either himself, Lane, or O’Neill. PX 36. Lane first denied that it was unusual for him to travel so frequently and to travel with both O’Neill and von Pentz, as they had on the trip to see Modern Welding and the UIU trustee, but was impeached on this very point. Tr. 889 (Lane). Von Pentz admitted that he had never previously visited the UIU trustee at his home in Kentucky. Tr. 433 (von Pentz).

Von Pentz told two RIMCO clients that he would be resigning before he told Riggs management: UIU, one of RIMCO’s largest accounts, and National Electrical Contractors Association (NECA). However, with respect to NECA, this notification preceded Riggs’ notification by merely a few hours, and in the ease of UIU this prior “notice” came during the course of a cocktail conversation with Howard Kluttz, a long-time friend of von *1258 Pentz and an informal advisor to UIU. Tr. 406-09 (von Pentz); Tr. 57 (Dudley). Furthermore, Richard Hoffman, a UIU executive most importantly connected to the transfer of funds from RIMCO to Columbia Partners, testified that he first learned that von Pentz was leaving RIMCO after he had resigned. Tr. 835-37, 840-41 (Hoffman); DX 110. This news was a surprise to Mr. Hoffman. Tr. 840 (Hoffman). UIU and NECA both transferred their accounts to Columbia Partners in the first few days of the company’s existence. Tr. 117-18 (Addison); DX 110.

Riggs also presented testimony from Fred Bollerer about his plans to expand RIMCO, and how he asked von Pentz to begin looking into this. It does not appear, however, that Bollerer actively pursued this avenue, and von Pentz indicated that he did not take Bollerer very seriously because Riggs was in the process of downsizing.

Negotiations with Riggs’ Management

At no time before September 28 did von Pentz tell Riggs’ management of his intention to resign before the expiration of his contract. Tr. 322-23 (von Pentz); Tr. 59 (Dudley). Nor did von Pentz ensure that RIMCO would continue to operate after his resignation. Answer ¶ 34. But dark clouds were clearly on the horizon. In fact, Dudley testified that he sought new contract negotiations with von Pentz in the summer of 1995 because he feared von Pentz would leave.

Von Pentz testified that he told Dudley a week before his departure that he saw no reason to sign a new contract given that RIMCO provided him with nothing new or beneficial. He did say, however, that he would look over the contract again. Tr. 387 (von Pentz). Von Pentz did not officially tell Dudley of his intention to resign until the evening of September 27,1997. At the time, Dudley was visiting a RIMCO client north of Pittsburgh, Pennsylvania. Though plaintiffs desire to show just how devastating von Pentz’s resignation was to the organization, it is worth noting that Dudley did not fly back to Washington to perform even some modicum of damage control even though von Pentz called him the night before he quit to give warning. Von Pentz even offered to fly Dudley down to Washington on a private plane, but Dudley instead remained in Pennsylvania to play golf. The next day, von Pentz tendered his resignation to Tim Coughlin and Fred Bollerer. He declined a request to serve out his contract. DX 41; Tr. 411-12 (von Pentz).

The day after Columbia Partners opened for business, UIU, one of RIMCO’s largest clients, transferred its account to von Pentz’s new operation. Richard Hoffman, counsel to UIU, was concerned that a “disaster” could occur in the time it would take RIMCO to hire von Pentz’s successor. But, Hoffman also stated, “[w]e liked the performance that Mr. von Pentz had given us. And he knew our portfolio. He knew — he knew us. And weighing all these factors, we decided to move the money.” Hoffman recommended that UIU move its funds immediately. Tr. 846-48 (Hoffman); PX 81.

Riggs responded to its organizational breakdown by swiftly replacing von Pentz with his old colleague and former RIMCO employee, Philip Tasho as CEO.

Columbia Partners’ Promotional Activities

Within days of opening, Columbia Partners began a promotional campaign using RIM-CO’s successful five-year equity performance record. See PX 133-36. Columbia Partners disseminated RIMCO’s five-year record with cover letters that described it as von Pentz’s equity performance at RIMCO. Tr. 166-67 (Collins); PX 135, 136. Many such letters further stated that “all of the individuals that helped Bob produce those results are now with us at Columbia Partners.” PX 134,136; Tr. 167 (Collins). And in October 1995, Columbia Partners developed a document for promotional use (“Talking Points”) that described RIMCO’s five-year record as “our” (i.e. Columbia Partners’) record and claimed that “our” record outperformed the various indices. PX 104; Tr. 281 (Collins).

Columbia Partners also used a set of performance “exhibits” comparing a five-year quarterly performance record with the relevant indices. Tr. 776-78 (O’Neill). These quarterly exhibits listed the performance as that of Columbia Partners and at no time gave credit to RIMCO. O’Neill testified, however, that he had no knowledge of giving *1259 out one of these documents without disclosing in some manner that these were RIMCO numbers.

Columbia Partners also used a set of annual performance exhibits (PX 101A & B), that initially designated the yearly performance as that of “Columbia Partners.” A footnote, in smaller typeface, stated:

^Investment results were achieved by the RIMCO equity research group. The group was led by Robert A. von Pentz and used an Investment process developed by him and implemented at RIMCO in 1989. The entire RIMCO equity research and trading group has joined Columbia Partners on October 1,1995....

Although “Columbia Partners” was later changed to “Equity Performance” (PX 101B & 101D), the footnote remained unchanged. Tr. 154, 935 (Kelly).

Columbia Partners cannot determine with any certainty which performance exhibit materials were used at which times. Tr. 236 (Collins); Tr. 288-89 (von Pentz); Tr. 776-77 (O’Neill). Although defendants claim that the quarterly performance sheets (PX 101C & D) were used only with the annual performance exhibits (which carry the footnote), the only evidence supporting that testimony is from O’Neill. Tr. 778 (O’Neill). His testimony is contradicted by PX 166, an updated database information booklet for Columbia Partners which O’Neill prepared on October 23, 1995 and sent to Scott Olson, an investment consultant in Savannah, Georgia. RIMCO data is clearly presented as though it belonged to Columbia Partners, and the “Firm History” section states that “[t]he personnel of Riggs Investment Management Corporation (RIMCO) merged with the personnel of ASB Capital Management to form a new company.”

Columbia Partners discussed RIMCO’s performance history at many of the hundreds of one-on-one presentations it had. PX 211. In addition, Fant and others at Galway made statements to prospective clients based on the information contained in the Talking Points (PX 104) and may have distributed the document itself. Fant Dep. 263-64; Answer ¶ 42.

To understand the effects of distributing these materials, it is first necessary to understand who these items go to and for what purpose they are used.

Consultants and Databases

Consultants are professionals who advise clients about which investment managers to hire. Answer ¶ 45. There are thousands of consultants, and their sophistication varies widely. Tr. 559-60 (Eisenberg). Mobius and PSN are commercial databases that contain information provided by investment managers. Consultants use these industry databases to screen potential money managers based on various criteria, including performance history. Tr. 561-64 (Eisenberg); Tr. 706-09 (Marco); Tr. 741-42 (O’Neill).

Through at least late December 1995, Columbia Partners provided RIMCO’s five-year performance history in responses to consultant questionnaires. Tr. 743 (O’Neill); PX 162, 165-66, 169-73. Several such responses failed to mention that the performance had been generated at a different firm or that the performance was RIMCO’s. See PX 162, 164, 166, 170,. 173. However, the performance exhibits do state, in the “years with firm section” that all personnel had been at Columbia Partners for only one month. Several responses stated that all of RIMCO’s equity personnel had joined Columbia Partners. See PX 162 (CP 6402), 164 (CP 6213), 169 (CP 6027), 170 (CP 6129), 171 (CP 6313), 172 (CP 6000). O’Neill also supplied RIMCO numbers as Columbia Partners’ performance history to the consultant databases Mobius and PSN. PX 163, 167, 178; Tr. 691-92, 794 (O’Neill).

The RIMCO Performance Record

A long and successful performance record is a significant advantage in the competitive field of investment management. A successful performance record sharply increases an investment management firm’s chances of being considered for business. Indeed, many searches for investment managers require a minimum of three years performance, if not five years, for consideration. Tr. 566 (Eisen-berg); Tr. 532-33 (Tasho); Tr. 736-39 (Marco).

*1260 The entire five-year RIMCO record was not generated by the Columbia Partners’ equity team. Answer ¶ 9. Nor was everyone responsible for RIMCO’s record employed at Columbia Partners, though their cover letters and performance exhibits gave the strong indication this was so. Answer ¶7, 49; Tr. 158 (Collins); Tr. 633 (Tasho). Most of the members of the Columbia Partners’ equity team did not become members of the RIMCO equity team until 1994 or 1995. Tr. 289-90 (von Pentz). In addition, neither Philip Tasho, the Managing Director of Equity Strategy and Management at RIMCO from 1990 through June 1994, nor Cliff Dy-house, Director of Quantitative Research, who both contributed substantially to the RIMCO equity performance record, has ever been employed by Columbia Partners. Answer ¶ 47; PX 159.

Within the first year of his arrival at RIM-CO, Tasho assumed the bulk of the responsibility for the day-to-day task of selecting the stocks in the RIMCO “large-cap” (larger company) equity portfolio, although von Pentz continued to participate in many decisions. Von Pentz, in turn, handled the day-to-day responsibilities of selecting the stocks for RIMCO’s “small-cap” portfolio. Tr. 348-49 (von Pentz), 469-70 (Tasho). In late 1992, Tasho also assumed management of the small-cap portfolio until his departure in 1994.

Clifford Dyhouse, who ran the quantitative research group at RIMCO from 1990 through September 1994, also played a significant role in RIMCO’s equity performance. Answer ¶47. Dyhouse reported to Tasho, and his full-time responsibility was running the computer model, checking the integrity of the modél’s output, flagging data errors or changes in rank, and working with Tasho in making changes to the model. Tr. 472-74 (Tasho); Dyhouse Dep. 95-126.

In July 1992, von Pentz, Tasho, and a third individual, Roger Marshall, signed employment contracts expressly providing that each had “equal responsibility for all decisions ... relating to the management of RIMCO.” PX 118, 119. After the contracts were signed, Tasho took charge of equity management, whereas von Pentz assumed responsibility for marketing, administration, and compliance. Tr. 491-92 (Tasho); Dyhouse Dep. 165-67, 206. Von Pentz was heavily involved in overseeing and training new marketing staff, which took him frequently out of the office between 1992 and 1993. Tr. 436-37 (von Pentz); Tr. 468-69, 493 (Tasho). The three employment contracts making von Pentz, Tasho and Marshall — who managed RIMCO’s fixed income investments — coequal managers was the result of their abortive attempt to leave RIMCO for another investment management firm. It is clear from the evidence and testimony presented in this case that von Pentz was more equal than the others, however. He received more in compensation, had more responsibility, and was viewed by Riggs management as the most important RIMCO personality, allowing von Pentz to retain his titles of Chief Executive Officer and Chief Investment Officer even after the contracts were signed, despite the fact that the employment agreements made Tasho, Marshall, and von Pentz equals.

Von Pentz retained ultimate responsibility for all RIMCO activities after July 1992, and it seems clear that Mr. Tasho still reported to Mr. von Pentz, despite what the contracts said. Tr. 355-57 (von Pentz). RIMCO’s 1993 Form ADV filed with the Securities and Exchange Commission describes Mr. von Pentz as Chairman and Executive Director of RIMCO having “overall responsibility for investment management and advisory activities.” (DX 125 at 55). Furthermore, George Grosz, former head of Financial Services at Riggs as well as an executive vice president of the bank, testified that, regardless of what the contracts said, von Pentz remained the person in charge of RIMCO, and Tasho and Marshall continued to report to von Pentz.

The RIMCO Equity Model

Both von Pentz and Tasho contributed to the model that was ultimately used at RIM-CO, though it is clear that von Pentz played the predominant role in the creation of the model. Von Pentz admits that he never had a four-factor model operational until after Tasho contributed the “PEG” factor, Tr. 333-34 (von Pentz); Tr. 521-22 (Tasho), and that Tasho and Dyhouse made improvements to the model at RIMCO. Tr. 352 (von Pentz), *1261 Tr. 521 (Tasho). Nevertheless, von Pentz was without a doubt the main brain behind the model, which was one of RIMCO’s reasons for hiring him in the first place.

In June of 1989, von Pentz moved from ASB to RIMCO, where he became the Managing Director of Equity Strategy. Tr. 335-36 (von Pentz); DX 17-20. Harold C. “Tim” Warner, RIMCO’s CEO at the time, hired von Pentz to put into place at RIMCO his quantitative stock-picking philosophy using the computerized model which he had used at ASB. Tr. 335-38 (von Pentz); Warner Dep. at 4-13; DX 4. Prior to von Pentz’s arrival, RIMCO picked stocks using an outside research service which followed a fundamental approach and Warner was not satisfied with RIMCO’s equity performance. Warner Dep. at 7-8; Tr. 894-95 (Lane).

The process von Pentz put into place at RIMCO embodied a quantitative and disciplined philosophy of stock-picking which used a computer model to rank a universe of approximately 750 securities. The companies were ranked weekly by the computer based on four equally weighted factors: (1) a factor which measured the trend in analysts’ earnings estimates for the company over the past three months, (2) a relative valuation factor, (3) a trend in stock price factor, and (4) a price/earnings to growth factor. Rigid rules were put into place which insured that only highly ranked stocks were included in the equity portfolio, and stocks had to be diversified among different sectors of the economy to further reduce risk. The 50-60 securities held in each equity portfolio were selected from those ranked highly by the model on the basis of research concerning these stocks, following principles established by von Pentz. Within several months of von Pentz’ arrival, all of the stocks in RIMCO’s equity portfolios were selected using the model and structure he put into place. (Tr. 336-16 (von Pentz), 467, 537-43 (Tasho); Dy-house Dep. at 41, 44-54, 146-48, 171-72; DX 7 at CP 1178-79; DX 16, 21-22). It should be reiterated that even though there is a great deal of human effort which is applied in stock picking even after the model develops its list, RIMCO itself clearly found the model to be of primary importance in its money management to the extent that after von Pentz left, RIMCO reassured its clients of stability because von Pentz left his “investment management process” — read “model”— behind. DX42.

Statements Regarding the Columbia Partners Model

From the start, Columbia Partners claimed that its equity process included use of a sophisticated computer model equivalent to the RIMCO model. Tr. 868 (Winsor); Tr. 297-99 (von Pentz); Winsor Dep. 151-52; PX 164-66; Answer ¶44. In fact, Columbia Partners’ model was not operational at all during the first few weeks of the company’s existence. Tr. 906 (Goldstein). By the third week of October, a crude three-factor model existed, but it was not rehable for stock selection purposes. Tr. 298-300 (von Pentz); Tr. 906-08 (Goldstein); Dickinson Dep. 138-40. A rehable four-factor model was not available for several months. Dickinson Dep. 138-40.

Riggs complains that Columbia Partners deceived UIU about the quahty of its model, but UIU itself has not complained.

Columbia Partners’ Awareness of Tasho and Dghouse

Columbia Partners began to advertise its services, and these promotional efforts made heavy use of RIMCO’s performance history, often co-opting it as its own. Tr. 151,157-59 (Colhns); PX 101A-D. Von Pentz and the former RIMCO employees knew that Tasho and Dyhouse had made significant contributions to RIMCO’s equity performance record. Tr. 293 (von Pentz). Yet, von Pentz never mentioned these contributions to Fant at Galway until after plaintiffs complained. Fant Dep. 26-27.

Colhns, the head of Columbia Partners’ marketing group, knew Tasho from ASB and knew of Tasho’s work in equities at RIMCO, Tr. 159-60, 168 (Colhns), yet he authored many of the statements that everyone associated with von Pentz’s “success” in equities at RIMCO was at Columbia Partners. Tr. 167 (Colhns); PX 136.

Von Pentz knew about Tasho and Dy-house. Tr. 293 (von Pentz). Dyhouse called von Pentz the weekend after he resigned *1262 from RIMCO, Tr. 293-94 (von Pentz), and one of the UIU representatives specifically asked him about Tasho on Columbia Partners’ first day of business, Tr. 302 (von Pentz). 2 Moreover, during October and November, “rumors swirled” about whether Tasho would be returning to RIMCO, Tr. 293-94 (von Pentz), and were a topic of conversation among von Pentz, Collins, O’Neill, and Kelly — the individuals responsible for the creation of Columbia Partners’ marketing materials, Tr. 168 (Collins); Tr. 293-94 (von Pentz); Tr. 748 (O’Neill); Tr. 954 (Kelly).

Columbia Partners apparently had some reservations about claiming RIMCO’s record. For one thing, the Association for Investment Management and Research (“AIMR”), an important voluntary organization for investment advisers which maintains guidelines for the behavior of investment managers, had specific rules as to how, if at all, data from one investment firm could be presented at another. Compliance with AIMR has importance for a firm’s reputation. In the first weeks of the new business’s existence, Kelly, the compliance officer, considered changing “Columbia Partners” to “Equity Team” on the performance exhibits, and specifying in the footnote that only the current members of the RIMCO equity team had joined Columbia Partners, which would comply with AIMR’s rules. PX 122; Tr. 956-62 (Kelly). But neither change was implemented at that time. In fact, the footnote was never revised to reflect that only the current RIMCO team members had moved to Columbia Partners. Tr. 962 (Kelly).

A change in the performance exhibits was made in late October, from listing RIMCO’s record under “Columbia Partners” to listing it under “Equity Performance,” but only after Kelly had brought the AIMR rules to von Pentz’s attention, PX 129, and discussed the matter with AIMR. Tr. 962-63 (Kelly). In that conversation with AIMR, however, Kelly failed to disclose the roles of Tasho or Dyhouse. Id. at 939-41 (Kelly). AIMR sent materials to Columbia Partners regarding the use of performance history after a merger of firms, which may suggest it was confused about the status of the new organization. PX 125; Tr. 942 (Kelly). AIMR guidelines state that “the use of a predecessor’s performance could be misleading if one or more individuals other than those at the successor organization played a role in the prior firm’s strategy (other investment committee members), security selection (research analysts), or trading (if trading strategies are integral to the firm’s overall strategy).” AIMR is not the law, but the fact that defendant Columbia Partners stated it was in AIMR compliance even though it had not given credit to Tasho or Dyhouse does raise questions about the honesty of Columbia Partners’ advertising, as will be discussed below.

After the conversation with AIMR, Columbia Partners still did not conform to AIMR’s guidance. Even without disclosing Tasho’s and Dyhouse’s roles, Kelly believed that to comply with AIMR standards, Columbia Partners could use the RIMCO record only as supplemental data, appended to Columbia Partners’ performance. She then drafted a revised performance sheet (PX 128). Collins rejected it, however. Kelly wrote a memorandum to the files about her conversation with AIMR (PX 126) which she did not distribute. It is clear that Kelly felt discomfort with Columbia Partners’ marketing materials after her conversation with AIMR. Tr. 943-47 (Kelly). Why she never publicized this remains a mystery.

At deposition, Kelly testified that, in the fall of 1995, she had read the AIMR portability rules (PX 129) and SEC no-action letters that explicitly state that it may be misleading to cite the performance history of a prior firm if someone else substantially contributed to that performance. Kelly had concluded that these materials did not apply because neither Tasho and Dyhouse were then em *1263 ployed at RIMCO. 3 Tr. 948-52 (Kelly).

Defendants’ Conduct with Respect to Consultants and Databases

In the very same questionnaires in which O’Neill provided RIMCO’s performance history to consultants, he misled consultants about whether there had been any turnover in investment professionals. See PX 166 (CP 6096; no “turnover of personnel critical to the investment process” in the last 10 years), 170 (CP 6126; no turnover of “investment professionals” in last two years), 171 (CP 6313; no response to inquiry about “all portfolio managers who have had past responsibility for managing the product”). Accurate responses would have required revealing Tasho’s role.

Riggs and RIMCO Complain

On December 15,1995, Riggs and RIMCO, through counsel, objected to Columbia Partners’ use, in any way, shape, or form, of RIMCO’s performance numbers. Fant Dep. 89-90 (Vol.II); PX 140. On December 21, 1995, Fant agreed on behalf of Columbia Partners, that “until further notice Columbia Partners L.L.C. will not orally or in writing associate itself with the RIMCO equity performance record.” PX 152. He also indicated that there were no clients or potential clients who have been misled by the advertising, but asked Williams & Connolly for information about Tasho and Dyhouse. But this undertaking was not communicated to the staff of Columbia Partners, Tr. 171-73 (Collins); Tr. 965-66 (Kelly), nor was it complied with. See PX 153. Rather, the only directive to the staff was merely to stop using the performance exhibits. PX 149; Tr. 172 (Collins).

The Statement of Correction and Retraction

On January 30, 1996, roughly a month after this lawsuit was filed, Columbia Partners distributed a document entitled “Statement of Correction and Retraction.” PX 159. This Statement was not distributed until four weeks after it was ready for distribution, DX 70, and was not distributed until after Columbia Partners (1) had secured the business of a large new client (IBEW), Tr. 192 (Collins), DX 110; and (2) had submitted its materials to be included as a semifinalist for another client it ultimately secured, City of Laredo Fireman’s Relief and Retirement Fund. PX 173; DX 110. Even when finally distributed, the Statement was sent in a packet of materials that included Columbia Partners’ first quarter returns and a cover letter that made no reference to the Statement. PX 158; Tr. 180 (Collins).

Columbia Partners’ Guidelines For Presentations

Since February 1996, after the lawsuit was filed, Columbia Partners has operated under purported guidelines (PX 108, 111) that allow marketing employees to distribute RIMCO’s performance record through September 28, 1995, as printed from the Mobius database. The Mobius “printout” contains a footnote, added by Columbia Partners, which states that Tasho and Dyhouse made “significant contributions” to that record, and that neither of them are employed by Columbia Partners.

These current guidelines (PX 111) only came into being after discovery revealed that earlier guidelines (PX 108, adopted after this suit was filed) had been violated by Columbia Partners. Answer If 58; Tr. 189 (Collins). Specifically, the evidence demonstrates that O’Neill and Winsor, on several occasions, mailed out performance information, despite an explicit prohibition on mailing such information in the initial guidelines (PX 108). Tr. 754-57 (O’Neill); Tr. 864-65 (Winsor); PX 174. Another employee continued to credit the RIMCO record to von Pentz, without mention of Tasho. PX 160. 4 It appears that *1264 while this did happen, it happened on a small number of occasions.

David Eisenberg is an investment consultant who advises Williams & Connolly on its retirement plans. Eisenberg met with Columbia Partners in May 1996 and questioned Columbia Partners’ use of RIMCO performance numbers. Tr. 589-92 (Eisenberg). Columbia Partners told Eisenberg that “we use the same process, same analysis, with the same team” as at RIMCO. PX 210. This letter, dated June 1996, directly violated the guidelines by failing to give Tasho and Dy-house credit for RIMCO’s model or the RIM-CO record.

The Current Status of Consultants and Databases

At time of trial, Columbia Partners had yet to remove RIMCO’s performance numbers from its submissions to consultants and the Mobius and PSN databases, although O’Neill had undertaken to update consultants and databases quarterly with Columbia Partners’ performance numbers. Tr. 687-93, 749-50 (O’Neill); see PX 167 (PSN update).

Though now apparently removed from Mo-bius, at time of trial Mobius displayed, under Columbia Partners’ name, a continuous performance history of six years from 1990 through 1996 by quarter. Tr. 621 (Eisen-berg); PX 114. The RIMCO returns were not separated from the Columbia Partners’ returns. Instead, they were “linked” to show an annual rate of return for 1995. Even though linking “is absolutely against the industry standard, the AIMR standard,” Tr. 580 (Eisenberg), Columbia Partners claimed in Mobius that it was AIMR compliant. See PX 209; see also PX 167(PSN). Columbia Partners added a Mobius footnote crediting Tasho and Dyhouse. PX 112A

O’Neill learned as early as October 1995, in a conversation with AIMR, that RIMCO’s performance numbers could only be used as “supplemental information.” Tr. ' 683 (O’Neill). O’Neill wanted to be able to link the RIMCO and Columbia Partners’ numbers with RIMCO numbers to show a continuous record, but he learned from AIMR that he could not do so under any circumstances; he also learned the RIMCO numbers had to be separated from the Columbia Partners’ numbers. Tr. 681-83 (O’Neill).

Rather than correct the Mobius database, O’Neill informed the Mobius representative to whom he had sent the Statement of Correction and Retraction that the questionnaire response was accurate. Tr. 685 (O’Neill). O’Neill testified that a Mobius representative informed him that Columbia Partners’ data was “linked” in exactly the same way as all other new firms in similar situations. Tr. 794 (O’Neill). This reliance appears unreasonable, and O’Neill’s testimony is unreliable on this point in the eyes of the court. Likewise, O’Neill’s testimony that consultants and independent databases do not want updates any more than once a year is not credible. Tr. 796-97 (O’Neill). At any rate, he knew the material Mobius was presenting was inaccurate and O’Neill certainly did not strain himself to change that misrepresentation.

O’Neill admitted that Columbia Partners has obtained three relatively small clients through Mobius. Tr. 786-87 (O’Neill). Two came from a consulting firm named CMS, and another from the Corporate Consulting Group.

The issue now is what legal consequences attach to these actions.

CONCLUSIONS OF LAW

I. BREACH OF FIDUCIARY DUTY

As the Chairman of the Board and CEO of RIMCO from mid-1994 through September 1995, von Pentz owed a fiduciary duty to both RIMCO and its sole shareholder, Riggs. This duty included an obligation of “undivided and unselfish loyalty” to his employer. Maryland Metals, Inc. v. Metzner, 282 Md. 31, 382 A.2d, 564, 568 (1978). Furthermore, as an agent, von Pentz had a duty to act solely for the benefit of his employer in all matters within the scope of his employment and to avoid conflicts of interest between his duty to his employer and his own self interest.