Free Proposed Findings of Fact - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Case No. 03-cv-00097-WDM-MJW ______________________________________________________________________________ PRAIRIELAND PROCESSORS, INC., a Colorado corporation, Plaintiff and Counterclaim Defendant v. RIDGEFIELD FARMS, LLC, a Connecticut limited liability company, WEST-CONN MEAT CO., INC., a Connecticut corporation, and RICHARD GREENFIELD, Defendants RIDGEFIELD FARMS, LLC, a Connecticut limited liability company, Counterclaim Plaintiff ______________________________________________________________________________ DEFENDANTS' REVISED PROPOSED FINDINGS OF FACT, CONCLUSIONS OF LAW, AND JUDGMENT ______________________________________________________________________________ This matter was tried to the Court March 6-14, 2006. Marcus Squarrell and David Stacy appeared for the Plaintiff and Counterclaim Defendant, Prairieland Processors, Inc. ("PPI"). Frank Visciano and Luis Toro appeared for the Defendant/Counterclaim Plaintiff, Ridgefield Farms, LLC ("Ridgefield"), and for Defendants, Richard Greenfield ("Greenfield"), and WestConn Meat Co. ("West-Conn"). At the outset of trial, the Court granted Ridgefield's motion to dismiss, without prejudice, its counterclaims against Eldon Roth, Regina Roth, Don Babcock, and Kevin LaFleur. As reflected in the parties' written statements (filed during the trial) of the elements of

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their remaining claims for relief, remaining for the Court's adjudication are the following: (a) Plaintiff's claims for: (1) goods sold and delivered against Ridgefield; (2) breach

of contract against Ridgefield; (3) breach of fiduciary duty against Ridgefield; (4) intentional interference with contract against Greenfield and West-Conn; and (5) fraudulent concealment against Ridgefield and Greenfield; and (b) Ridgefield's counterclaims against PPI for: (1) fraudulent misrepresentation; (2) fraudulent concealment; (3) negligent misrepresentation; and (4) breach of contract. Ridgefield has advised the Court that while it was withdrawing its counterclaim for damages for PPI's filing of the pre-judgment writ of attachment motion that was denied in April 2003 (see Exhibit A-36), it will file a post-judgment motion for attorneys' fees incurred in defending that motion pursuant to C.R.C.P. 102(n)(2), made applicable to this proceeding pursuant to Fed. R. Civ. P. 64.

The Court, having considered the parties' pleadings, the evidence presented at trial, and the arguments of counsel, makes the following findings of fact and conclusions of law: 1. PPI is a Colorado corporation no longer conducting business; its principal place

of business during the period pertinent to this suit was Commerce City, Colorado. Eldon Roth and Regina Roth are husband and wife and residents of South Dakota. Mr. Roth has been the majority shareholder of PPI since its formation in 2001. Donald Babcock ("Babcock"), a Colorado resident, has been a shareholder and an executive officer of PPI since its formation in 2001. Kevin LaFleur ("LaFleur"), also a Colorado resident, has been a shareholder and an executive officer of PPI since 2002.

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2.

Ridgefield is a Connecticut limited liability company with its principal place of

business in Ridgefield, Connecticut. Ridgefield=s principals include Defendant Greenfield and a nonparty, Phil Friend ("Friend"), Ridgefield's Chief Executive Officer. Defendant West-Conn is a Connecticut corporation with its principal place of business in the Bronx, New York. Greenfield is a resident of New York and a principal of West-Conn. 3. Since April 2001, Ridgefield has operated the ARidgefield Farms Premium

Hereford Beef Program@ (the "Hereford Program" or AProgram@), which continues to be certified by the United States Department of Agriculture (AUSDA@). Beef sold under the Program must meet certain standards established and monitored by the USDA. Ridgefield purchases beef processed according to USDA standards for the Hereford Program and sells its product to food service distributors and major retailers. Ridgefield=s processors are required to purchase cattle which meet Program standards and process them according to Program specifications. 4. Ridgefield=s original supplier of Hereford Program beef was Washington Beef, a

processor located in Washington state. Since its inception in 2001, and continuing throughout the PPI/Ridgefield nineteen week joint venture in 2002, as described below, Ridgefield had a supply and distribution arrangement with Washington Beef, under which it acquired and processed Hereford cattle, and then shipped boxed meat to customers identified by Ridgefield. Because of Washington Beef=s credit requirements, West-Conn, a customer to which Washington Beef was willing to extend credit, purchased on seven day terms the Hereford beef product on behalf of Ridgefield for sale to its customers; Ridgefield thereafter paid West-Conn on separate seven day credit terms arranged between Ridgefield and West-Conn. Prior to the PPI/Ridgefield joint venture, Ridgefield also acquired beef produced from certain distributors other than

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Washington Beef. 5. In 2002, Ridgefield became interested in finding an additional supplier to expand

its production under the Hereford Program, and reduce costs associated with the shipment of meat from Washington state to customers on the east coast. 6. Beginning in May and continuing into mid-July 2002, representatives of PPI,

LaFleur and Babcock, both of whom at times represented themselves to Ridgefield as being president of PPI (see Exhibit A-4, PPI organizational chart), met with Ridgefield's Friend and Greenfield regarding the possibility that PPI would supply the Hereford beef for the Hereford Program. 7. During the negotiations in the late spring and early summer of 2002, LaFleur and

Babcock affirmatively misled Friend and Greenfield about the status of PPI=s operations, financial status, and profitability. Among the false and misleading statements made by LaFleur and Babcock were that PPI had a profitable meat processing facility in Commerce City, Colorado, and that PPI had the financial and operational ability to obtain adequate amounts of Hereford cattle to satisfy Ridgefield=s Hereford Program. LaFleur and Babcock failed to advise Ridgefield during these negotiations that PPI=s operations, since its inception in September 2001 and continuing during the first half of 2002, had resulted in substantial losses; that PPI=s majority shareholder (Mr. Roth) and sole financial backers (the Roths) had voiced an unwillingness to further fund PPI; that PPI was experiencing operational problems; its financial reporting was inadequate; and it had credit problems with its carcass supplier. PPI failed to advise Ridgefield of the true facts because it had a plan to find a Aniche@ business, such as Ridgefield=s Hereford Program, as a means to reverse its continuing losses.

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8.

On or about July 12, 2002, Ridgefield and PPI executed an agreement, which was

dated June 10, 2002 (the "Supply Agreement"; Exhibit A-5). By its terms, the Supply Agreement was intended to provide to Ridgefield an additional source of beef supply for its Hereford Program. The Supply Agreement did not apply in any way to PPI=s separate and continuing Aout-cattle@ commodities program, described below. 9. Paragraph 3(B) of the Supply Agreement (captioned "Production") provided that

PPI would initially process for Ridgefield's Hereford Program 500 Hereford head per week by September 1, 2002, with the expressed expectation of increased Hereford production in 90 days. Paragraph 3(F) contained an express representation and warranty that PPI Ahas and will have the facilities, equipment and personnel which will be required to meet the production quantities set forth in the preceding Subparagraph (B).@ 10. PPI's business plan, formulated in 2001 and utilized through July 2002, was

based on its acquiring out-cattle (carcasses that did not meet the size or other criteria of larger processors) and marketing the meat from those cattle to a list of customers it purchased in 2001 (the ACommodities Program@). Unbeknownst to Ridgefield, but known to PPI's executives, was that PPI=s carcass costs as a percentage of sales also had been substantially greater than projected, and PPI had lost approximately one-half of the customers on the customer list purchased by PPI less than a year earlier. These and related factors had contributed to PPI's significant losses since it commenced operations in September 2001. By the spring of 2002, PPI was looking for a Aniche@ program such as Ridgefield=s to bail PPI out of its continuing losses (see LaFleur testimony and Exhibit A-7, LaFleur memo to Roths). In negotiating its arrangements with Ridgefield, PPI neglected to advise Ridgefield of the true and existing state of

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affairs at PPI. 11. Rather than operating under the Supply Agreement, PPI, through LaFleur and

Babcock, in the latter part of July and early August 2002, approached Ridgefield's Friend with a different proposal. PPI urged Ridgefield to take over PPI=s out-cattle Commodities Program in its entirety, claiming that Ridgefield would be able to market PPI=s Program more successfully than PPI because Ridgefield would be able to market both the Hereford Program products and PPI out-cattle products to both Ridgefield=s and PPI=s existing customers. PPI proposed that Ridgefield combine its Hereford Program with PPI=s Commodities Program, hire PPI=s salespeople, and assume sales (and presumably financial) responsibility for both Programs under a joint venture arrangement. PPI neglected to advise Ridgefield of the substantial losses PPI had incurred and was incurring under its Commodities Program when it was convincing Ridgefield to assume that Program. 12. Under the venture arrangement PPI proposed to Ridgefield, PPI would provide

Ridgefield with processed beef, certain of which would be quality Hereford cattle for the Program; Ridgefield would be billed for the weight of the carcasses, plus a PPI processing fee and freight; Ridgefield would market both the Hereford and Commodities Programs for the joint venture and be paid for its expenses plus a fee; and the parties would split profits on a 50/50 basis. PPI committed to provide Ridgefield with Hereford cattle needed for the Hereford Program. PPI knew that Ridgefield=s requirements as of the summer of 2002 were approximately 1,200 head of Hereford cattle per week, and that Ridgefield planned to increase substantially this weekly production demand. 13. Ridgefield accepted PPI=s joint venture proposal in August 2002. Under that

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agreement, PPI committed to provide Ridgefield a minimum of 500 head of Hereford cattle per week, and up to 1500 Hereford cattle per week (see Exhibit A-8, LaFleur's July 16, 2002 memo to the Roths), plus out-cattle beef; Ridgefield would be billed for the weight of the Hereford and out-cattle carcasses purchased by PPI, plus an $80 per head processing fee and freight charges; PPI would process the Hereford and out-cattle beef and deliver boxed product to Ridgefield for resale to PPI and Ridgefield joint venture customers; Ridgefield would market the beef for the joint venture and be paid its expenses plus a fee; and the parties would split the net results of the joint venture=s sales on a 50/50 basis. Under this agreement, and based on the testimony of Friend and Greer and other evidence presented, the Court finds the parties intended to split losses in the event they were incurred by the joint venture. 14. Both PPI and Ridgefield admit that during the period from approximately August

12, 2002 through approximately December 24, 2002, the parties operated under a joint venture agreement, the terms of which were agreed upon orally, but were not reduced to writing. While the parties agreed to many of the basic terms of the oral joint venture agreement, there was some dispute as to certain particulars. 15. PPI seeks to collect in this action on the balance of invoices billed by PPI to

Ridgefield in the amount of $2,477,114.47, which amount PPI claims was owed to PPI by Ridgefield when PPI unilaterally terminated the joint venture arrangement on December 26, 2002. The Court finds, however, these invoices were generated in connection with, pursuant to, and during the period of, the party's oral joint venture agreement. Thus, PPI's claim to payment under the subject invoices is dependent on the Court's determination of the parties' respective claims for breach of the joint venture agreement.

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16.

When they made the joint venture proposal to Ridgefield, LaFleur and Babcock

knew or should have known, but did not disclose to Ridgefield, that PPI could not meet the Hereford volume commitments it was making to Ridgefield; that PPI=s cattle costs and facility and production expenses rendered it as an unprofitable enterprise; and most seriously, that Ridgefield would be assuming responsibility (and potential liability) for PPI=s Commodities Program that had caused substantial losses to PPI on a continuing basis. PPI's nondisclosures were compounded by the fact that PPI obtained Ridgefield=s agreement to pay to PPI a processing fee of $80.00 per head, which LaFleur and Babcock represented to Ridgefield was derived from PPI=s overhead costs. Ridgefield unknowingly assumed a significant portion of the PPI costs that had resulted in PPI=s continuing losses since September 2001. During the nineteen weeks the parties operated the joint venture, Ridgefield caused to be paid to PPI approximately $1.5 million in processing fees (see Exhibit A-65). 17. During the negotiations leading to the joint venture, LaFleur told Ridgefield=s Phil

Friend that PPI=s gross margin was $93 per head when in reality, he knew or should have known that it was not (see Exhibit A-9, LaFleur's July 15, 2002 Master Cut Out charts, and the testimony of Friend). LaFleur and others at PPI knew that PPI=s financial records did not substantiate a $93 margin per head, or any margin amount. Essentially, under the parties= joint venture arrangement, PPI passed off to Ridgefield the carcass and production costs that caused PPI=s Commodities Program to be unprofitable and, as PPI=s forensic accountants (Crossroads, LLC) later determined, would result in greater losses the more head of cattle were processed and sold. 18. In statements and in documents presented to Ridgefield in August of 2002,

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LaFleur further misrepresented the existing and anticipated profit margin that Ridgefield would realize on a per head basis if and when Ridgefield took over PPI's Commodities Program. See Exhibit A-14 (August 8, 2002 email, LaFleur to Friend, with attachments, including p.3, "selling gross", reflecting "per head sales gross" on out-cattle of $71.12, $73.90, and $77.05), and the related testimony of Greenfield and Friend relative to Exhibit A-14 and LaFleur's pre-venture representations to them regarding PPI's gross margins that Ridgefield would realize upon takeover of PPI's Commodities Program. 19. LaFleur at trial admitted that prior to the formation of the joint venture, he did not

advise Ridgefield's representatives that PPI had suffered substantial losses in its Commodities Sales Program, or that the Roths were unwilling to provide further financing to PPI. LaFleur further testified that: a. b. at PPI; c. He first learned that PPI was having financial troubles within two weeks of his He was brought in as an executive of PPI in January 2002; He was then asked by the Roths to find out why there were losses (a "shortfall")

hire, and it took him three weeks (to February 2002) to do his analysis, during which he examined what PPI was paying for raw materials and what PPI was getting for its product; d. He learned that IBP, a major PPI supplier of carcasses, had cut off PPI, and that

Mrs. Roth had to write a substantial check to IBP; e. He reported to the Roths, their finance advisor, Scott Sehnert, and PPI's

controller, Gary Stolzfus, at a meeting in Denver in February 2002, that: (1) PPI sales were in trouble, and needed to get more money out of the beef

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that it was selling; (2) (3) (4) PPI had lost half of the customer base it had purchased in 2001; PPI needed to find a niche business to remain viable; and He was told by the Roths that PPI had to get the "bleeding stopped," and

that the Roths would not continue funding PPI's operational losses. Regina Roth on crossexamination admitted that she may have told LaFleur that the Roths were unwilling to put more money into PPI. 20. In his testimony (by deposition), Babcock testified that he did not recall

discussing with the representatives of Ridgefield the facts that PPI had sustained prior operating losses; had credit problems with its suppliers; had hired LaFleur to investigate PPI's losses; Regina Roth had complained to Babcock about PPI's operating losses and cut Babcock's salary in half; or that the Roths had stated that they were unwilling to put more money into PPI. 21. Greenfield and Friend testified that neither was told by LaFleur, Babcock or

anyone else, prior to the formation of the joint venture, that PPI and its Commodities Program were unprofitable, that PPI's sales force was inefficient, or that there were credit problems with suppliers and vendors. Greenfield and Friend testified that they were advised by LaFleur and Babcock that PPI's Commodities Program was profitable, and that PPI would produce sufficient numbers of Hereford cattle to satisfy Ridgefield Hereford Program needs. Neither Greenfield nor Friend were told by any PPI representative that the Roths would not continue to finance PPI. 22. Babcock and LaFleur, for PPI, made the above-described material

misrepresentations and omissions with the intent to induce Ridgefield into entering into an oral joint venture agreement with PPI and take over the Commodities Program. Babcock and

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LaFleur acted within the scope of their authority as shareholders, executive officers, and agents of PPI when they made the material misrepresentations and omissions. The facts that Babcock and LaFleur misrepresented and concealed from Ridgefield were material to Ridgefield in deciding whether to enter into the oral joint venture agreement with PPI and take over the Commodities Program. Ridgefield reasonably relied upon the misrepresentations made by Babcock and LaFleur for PPI, and reasonably believed that the facts concealed from it by Babcock and LaFleur were different from what they truly were. 23. LaFleur and Babcock testified that they may have believed in 2002 that PPI was

profitable based on their review of PPI financial data. However, PPI did not introduce into evidence any financial statements that reflected PPI's profitability during the last four months of 2001 and/or the first seven months of 2002 ­ prior to the joint venture's formation and commencement. The "Daily P&L Reports" (Exhibit 6) introduced by PPI were, for the most part, for a different time period, and were not true profit and loss reports. Rather, they contained projections of profitability (or loss) based on a given day's production, and on some dates, for example, October 24, 2002 (well after the venture's formation), PPI had multiple reports, with contradictory information, from the same day of production. 24. Evidence was presented by Defendants that indicated that PPI knew of its

substantial operating losses on and prior to August 12, 2002, the start date of the joint venture. First, there is LaFleur's trial testimony, noted above. Second, Exhibit A-3, at page 2, was PPI's statement of earnings for the period ending December 31, 2001; this document reflected an operating loss of $3.7 million. Among the documents provided by PPI to Crossroads in late December 2002/early January 2003 was a copy of this same PPI statement of earnings. See

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Exhibit A-52H, the December 31, 2001 earnings statement, containing a fax footer date of May 28, 2002, confirming that, by that date, Exhibit A-3 was in PPI's possession. 25. Next was the testimony of Greer, PPI's controller and chief financial officer from

August 12, 2002 through the Roths' unilateral termination of the joint venture on December 26, 2002. Greer testified that he provided to Crossroads, PPI's forensic accountants, in late December 2002 and early January 2003, various financial data that either he personally collected or which was in PPI's Aspen software financial database, which Greer inherited when he joined PPI as controller. Greer testified that the financial data for PPI in and after August 2002 was prepared by him, and that the financial data for the period prior to his work start date (September 2001through July 2002), was input by his PPI predecessor and was available to him from PPI's Aspen financial software database. This same pre-venture financial information was available to PPI's executives prior to the venture's formation as of August 12, 2002. Not one PPI witness testified to the contrary. 26. Exhibit A-51X is a PPI income statement for 2002 prepared by Greer in late

December 2002 or early January 2003; it was among the financial documents provided by Greer to Crossroads prior to its preparation of the January 8, 2003 draft report (Exhibit A-45). Exhibit A-51X reflects consistent monthly PPI losses in six of the seven months prior to the formation of the joint venture. It reflects PPI net income losses, before taxes, of $1.463 million in January 2002; a $1.89 million loss in February 2002; a $457,000 loss in April 2002; a $487,000 loss in May 2002; a $861,000 loss in June 2002; and a $501,000 loss in July 2002.1 PPI presented no

The evidence at trial supported the conclusion that the one purportedly profitable month, March 2002, was due to an error in booking as revenue the Roths' $4 million loan to PPI. See
1
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evidence that this financial information was not available and was not known to PPI during the period of time that its executives negotiated the joint venture and convinced Ridgefield to assume the PPI Commodities Program. 27. Also confirming the substantial operating losses of PPI was Exhibit A-2, PPI's

federal income tax return for the year 2001, which reflected an operating loss of approximately $3.7 million. PPI presented no evidence that this return was unavailable to PPI prior to August 12, 2002. 28. Consistent with the organization chart of PPI (Exhibit A-4), during the period

that PPI and Ridgefield were negotiating the Supply Agreement (May-early July 2002), and thereafter the joint venture agreement (mid-July through mid-August 2002), LaFleur and Babcock represented themselves to be duly authorized officers and shareholders of PPI; at times, Babcock and LaFleur signed agreements, press releases, and correspondence reflecting that each was acting as PPI president. Exhibit A-4 reflects that each was acting as co-equals in terms of authority on behalf of PPI. Their misrepresentations and failure to disclose material facts to Ridgefield in connection with the parties' entry into a joint venture agreement are fully attributable to PPI. 29. In Colorado, joint venturers are bound to "the same standards of good conduct

and square dealing as are required of partners." Kincaid v. Miller, 272 P.2d 276, 280 (Colo. 1954). These fiduciary duties attached during the negotiations of what would become the Joint Venture Agreement. C.R.S. § 7-64-406 provides that the fiduciary duties of joint venturers to each other pertain "to all transactions connected with the formation, conduct or liquidation of the

Exhibit A-45, page 5, and the discussion of this error, below.
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partnership." The Colorado Supreme Court has held that the fiduciary relationship between joint venture partners exists "[b]etween the time of their preliminary negotiations and the point at which the joint venture was dissolved" and that the failure of one joint venture partner to advise the other of a material adverse change in its financial position was a breach of fiduciary duty. Lucas v. Abbott, 601 P.2d 1376, 1379 (Colo. 1979). The duty of disclosure applicable to general partners in Colorado is described as follows:

Partners in a business enterprise owe to one another the highest duty of loyalty; they stand in a relationship of trust and confidence to each other and are bound by standards of good conduct and square dealing. See Lindsay v. Marcus, 137 Colo. 336, 342-43, 325 P.2d 267, 270-71 (1958) (involving joint venturers; fiduciary duties are same as those among partners); Kincaid v. Miller, 129 Colo. 552, 563, 272 P.2d 276, 281 (1954) (same); Jennings v. Rickard, 10 Colo. 395, 397, 15 P. 677, 678 (1887). Cf. §§ 7-60-121(1), 3A C.R.S. (1986). Each partner has the right to demand and expect from the other a full, fair, open and honest disclosure of everything affecting the relationship. Hooper v. Yoder, 737 P.2d 852, 859 (Colo. 1987). Courts in other jurisdictions have applied the fiduciary duty of disclosure to the period prior to formation of a general partnership or joint venture. For example, the Missouri Court of Appeals held that defendants who offered for sale interests in a joint venture to purchase and develop land in Brazil owed the plaintiffs a duty to disclose the price at which the venture was purchasing the real estate when they were soliciting the plaintiffs to buy in to the joint venture. DeFabio v. Mackey, 493 S.W. 2d 355, 359 (Mo. App. 1973). See also Herring v. Offutt, 295 A.2d 876, 879 (Md. App. 1972); Donahue v. Davis, 68 So. 2d 163, 171 (Fla. 1953); Macon County Livestock Market, Inc. v. Kentucky State Bank, 724 S.W.2d 343, 349 (Tenn. App. 1986). 30. PPI had a duty, but failed, to provide Ridgefield with accurate information

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regarding PPI's financial status and performance, both before the joint venture agreement went into effect on August 12, 2002, and thereafter. The Court finds and concludes that PPI did not disclose material facts that it had a duty as a potential joint venture partner of Ridgefield to disclose to Ridgefield; that duty to disclose supports a claim for fraudulent concealment under Colorado law. See Mallon Oil Co. v. Boven/Edwards Assocs., Inc., 965 P.2d 105, 111 (Colo. 1998). 31. Ridgefield has proven, by the preponderance of the evidence presented, that in

obtaining Ridgefield's agreement to take over PPI's Commodities Program as part of the parties' joint venture, PPI: a. b. misrepresented that PPI and its Commodities Program was profitable; concealed PPI's operating losses of approximately $3.7 million incurred by PPI in

the first four months of operation (September ­ December, 2001); c. d. e. concealed PPI's continuing operating losses in the first half of 2002; misrepresented the capabilities and performance of PPI's sales force; concealed credit problems it had with its Commodities Program suppliers and

vendors (see Exhibit A-12. PPI's "Critical A/P List--Week of 8/5/02"); and f. concealed the fact that the Roths had told LaFleur and Babcock, in February

2002, that they would not continue to finance PPI's continuing losses. 32. Ridgefield reasonably relied to its detriment on such misrepresentations and

omissions by PPI regarding PPI's and its Commodities Program's performance. Had Ridgefield been advised of the true facts, it would not have agreed to the joint venture, would not have assumed PPI's Commodities Program, but instead would have insisted on PPI's performance

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under the Supply Agreement (Exhibit A-5), requiring PPI's production of Hereford cattle only. 33. As a result of the misrepresentations and omissions regarding the financial status

and profitability of PPI and its Commodities Program, Ridgefield sustained damages in substantial amounts, rendering Ridgefield and the joint venture incapable of paying the PPI invoices of $2.477 million and preventing the joint venture from realizing anticipated profits. 34. At trial, Defendants presented evidence that, days following the Roths' unilateral

termination of the joint venture and filing of this action, PPI's counsel, Rich Jochum, contacted Crossroads, LLC to seek forensic accounting assistance in "evaluating the business (of PPI) as a potential going concern". See Exhibit A-30, email from Jochum to Morriss dated December 29, 2002. Thereafter, Crossroads, through accountant Rick Damore, visited PPI's processing facility in Commerce City; received and analyzed financial data from Greer and Jochum; communicated with Jochum and Greer with regard to PPI's business affairs; and prepared a draft report initially on January 6, 2003, and a follow-up draft report dated January 8, 2003. See Exhibit A-45 (the "Crossroads report"). The Crossroads report reflected PPI's request that Crossroads analyze "what happened to the cash" and "is the business viable." The Crossroads report reflects that it had been advised by PPI that it had substantial losses since its inception in the fall of 2001. See Exhibit A-45, page 1. 35. The Court finds the Crossroads report and related testimony by Damore and

Morriss to be highly relevant to Ridgefield's fraud and negligent misrepresentation claims against PPI. Exhibit A-45 reflects Crossroads'findings to Jochum and PPI, among which were the following: a. PPI's cash appeared to have been "used to cover operating losses which were

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fueled by substantially higher raw material costs as a percent of sales and below planned unit production." Id. at page 1; b. While PPI's 2001 business plan had projected raw materials at approximately

84% of sales, the actual figures for the fifteen months analyzed by Crossroads (September 2001 through November 2002) was in fact approximately 97%. Id., page 3; c. "It is clear that the business has operated well below plan and breakeven

capacity." Id., page 4; d. "Actual carcass volumes, sales/unit and contribution over raw materials are

materially different than the business plan." Id.; e. "[W]ith actual raw material contribution margin well under 10% and other

variable production costs (i.e., process labor, utilities, packaging, clean-up, etc.) being greater than 10%, there is not a volume that would breakeven. Stated another way, by selling and producing more, the business would lose more money than it already has". Id.; emphasis added; f. PPI's actual direct costs of sales, when compared to its revenues, reflected net

income losses of approximately $3.727 million for the four months of operation in 2001, and approximately $6.961 million from January 1 through November 30, 2002. Id. page 3; g. "The business operated for most of its existence without having timely and

complete financial statements. This has unfortunately provided a cover to the real month to month operating performance and has shielded the unfavorable elements from all interested constituencies." Id., page 4; and h. In November 2002, PPI's controller made several balance sheet corrections when

he determined that notes payable were not accurately reflected on the November 2002 balance

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sheet; the adjustments were made retroactive in the Crossroads report, and "the net sum of the adjustments is an unfavorable reduction of income by $4.0 million." Id. at p. 5. See, also, the trial testimony (by deposition) of Crossroads' Rick Damore and Larry Morriss. 36. Crossroads made specific recommendations to PPI, including undertaking an

analysis of PPI's petty cash, rendering revenues, and most important, "an examination of $59.9 million in raw materials purchased including claims, returns and spoilage." Report, page 5. See, also, Damore testimony. 37. Jochum presented the Crossroads findings to the Roths. PPI and Jochum elected

not to follow Crossroads' recommendations, did not undertake any effort to test the findings and conclusions of Crossroads, and terminated Crossroads' engagement, and attempted (unsuccessfully) to shield the report from production in discovery. 38. The Court finds the Crossroads report, and the related testimony of Damore and

Morriss, to be compelling evidence in further support of Ridgefield's counterclaims against PPI for misrepresentation and concealment of the financial affairs of PPI prior to and during the joint venture. The financial data provided to Crossroads was for the period September 1, 2001 through November 30, 2002. Not one PPI witness testified that such data, at least for the preventure period, was not available to PPI's executives prior to and during the course of the joint venture; that data was or should have been known by PPI. Based on the evidence presented at trial, the Court finds that the Crossroads report findings were hardly a surprise to PPI's executives and shareholders; PPI's substantial and continuing losses were the focus of discussions at least as early as LaFleur's February 2002 presentation to the Roths, described above. PPI's argument that the Crossroads report is not relevant because it was prepared after

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the Roths terminated the venture is unavailing. The report conclusively established the fact that substantial losses had in fact been incurred. Additionally, the report and related evidence makes clear that the financial data was available but was ignored by PPI in the earlier months, demonstrating that PPI was reckless or failed to exercise reasonable care or competence in communicating information upon which it expected Ridgefield to rely. 39. During the discussions that led to the joint venture agreement, Ridgefield advised

PPI that it would need at least 28 days to pay for carcasses delivered to PPI, and that under the circumstances 28 days was consistent with PPI=s then current turnover rate. However, by early September 2002, PPI insisted that it be paid within 21 days from the date carcasses were delivered to PPI. From the commencement of their joint venture relationship, the parties had a continuing dispute as to what were the applicable and agreed to payment terms. This dispute remained unresolved for the nineteen weeks of the joint venture, although Ridgefield did agree to exercise its best efforts to pay the outstanding accounts receivable ("A/Rs") that were over 21 days. 40. The first days of the joint venture were described by Greenfield as a "nightmare."

Exhibit A-66 is a chart reflecting production by PPI at its Commerce City facility during the nineteen weeks of the joint venture ­ the week of October 11, 2002 through the week of December 15, 2002. Exhibit A-66 reflects that, despite Exhibit A-5 (the Supply Agreement), requiring PPI to produce a minimum of 500 head of cattle per week starting September 1, 2002, and despite the trial exhibits and testimony regarding the expectation of production of up to 1500 Hereford cattle per week as a material term of the joint venture agreement (see, e.g. Exhibits A7 and A-8), PPI did not produce 500 Hereford cattle by September 1, 2002. To the contrary, for

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the first week of the joint venture (August 11-17), PPI produced only 87 head of Hereford cattle; none in the second week of the joint venture; only 313.5 Hereford head in the third week of the joint venture (August 28-31); and only 335 head during the fourth week of the joint venture (September 1-7). For the first four weeks of the joint venture, the total Hereford production was 735 head. Exhibit A-66 reflects that PPI's production of non-Hereford/out-cattle was overwhelming during the same four week period ­ 896.5 out-cattle in the first week; 2,237 in the second week; 1,890 out-cattle in the third week; and 1453.5 out-cattle during the fourth week (9/1-7). The total non-Hereford cattle processed by PPI during the first four weeks of the joint venture was 6,477 head. Hence, the PPI production of out-cattle during the first four weeks of the joint venture ­ the week preceding the September 10, 2002 meeting of the parties in Dakota Dunes, South Dakota ­ was approximately 90%, with Hereford production being only 10%. 41. The joint venture was also plagued during its early weeks by inventory

management problems. Greenfield testified that some orders were lost because product that PPI's computer system showed as being in the warehouse could not be located; other orders were filled incorrectly, causing further problems with customers. The need to transmit information from PPI's Aspen computer system to Ridgefield's Meateor system delayed the invoicing of customers, which in turn aggravated what was quickly turning into a cash flow crisis. 42. The parties met on September 10, 2002 in Dakota Dunes, South Dakota to discuss

certain joint venture matters, including the possibility of reaching final agreement on certain outstanding joint venture terms, e.g. the due date on which PPI invoices were to be paid, profits split, and a possible pay down by the joint venture of plant-related indebtedness owed to the

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Roths. As reflected in Exhibit 10, Jochum's "Summary of Terms 9/16/02", as well as the testimony of various witnesses, the parties did not reach final agreement on all joint venture terms. For example, there was no agreement with regard to a pay down by the joint venture of indebtedness owed to the Roths. Exhibit 10 was not signed by Ridgefield; Friend testified that upon receipt he advised LaFleur that Ridgefield did not agree with and would not sign Exhibit 10. (The Court further notes that Jochum's September 16, 2002 "Summary" was inconsistent in certain material respects with Jochum's notes, Exhibit A-16, taken at the September 10 meeting.) There was no further agreement drafted in writing and it appears from the evidence that the parties proceeded with their joint venture arrangement until approximately December 24, 2002 without a specific agreement with regard to all terms and conditions of the joint venture. Yet the parties' course of conduct throughout the joint venture period manifested an agreement with regard to certain material terms of the joint venture including the following: a. PPI would acquire and process for Ridgefield initially a minimum of 500 head of

Hereford cattle each week, and PPI's production would increase to at least 1500 Hereford cattle as fast as PPI could line up the supply of Hereford carcasses; b. The beef product would be sold to Ridgefield at a formula based upon the USDA

weekly average; c. Ridgefield would move into PPI's sales office, take over the day-to-day sales of

PPI's production of out-cattle carcasses, and Ridgefield would assume PPI's Commodities Program; d. Ridgefield would put PPI's existing sales personnel on Ridgefield's payroll, at

significant expense; and

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e.

PPI would be responsible for managing the day to day operations of receiving,

fabricating, handling and shipping of Hereford and out-cattle beef products. See, e.g., Exhibit A-8 (LaFleur memo to Roths, 7/16/02, re "Ridgefield/Prairieland Processors Sales Proposal"). 43. The Colorado Supreme Court has held that "it is not necessary that there should

be a specific formal agreement to enter into a joint enterprise, or that the interests of the parties should be definitely settled in such agreement, or that there should be a formal agreement as to sharing in the profits. If there is a joint enterprise proven, either by direct evidence of a mutual agreement to that end or by proof of facts and circumstances from which it is made to appear that such enterprise was in fact entered into, the law fixes their rights." Lindsay v. Marcus, 325 P.2d 267, 270 (Colo. 1958) (quotations omitted). The Court finds and concludes, essentially on undisputed evidence from all witnesses, that PPI and Ridgefield did enter into a joint venture agreement commencing on August 12, 2002, and that Colorado law regarding joint ventures fixes the parties' respective rights. The Court further finds and concludes that the business persons who negotiated the joint venture agreement intended to, and did, enter into an agreement that would be subject to the laws governing joint ventures, including the division of venture profits and losses. 44. As reflected in Exhibit 1 (Greer's A/R aging report), as of the parties' Dakota

Dunes meeting on September 10, 2002, the A/Rs had grown during a period of less than a month to $5.403 million. The undisputed testimony of Friend and Greenfield was that this A/R balance was due in substantial part to PPI's overproduction of out-cattle in the first four weeks of the joint venture in contravention of the parties' joint venture agreement. This over-production, coupled with the PPI out-cattle sales team's inability to sell those products in such substantial

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amounts, resulted in an almost immediate inability by Ridgefield to pay for the carcasses that PPI was processing. PPI was obligated, under the joint venture agreement and in good faith, to procure and process Hereford cattle in the minimum amounts of 500 head per week, and to maintain a reasonable balance of Hereford to out-cattle production. PPI failed to do this. Instead, it rapidly processed and sold to Ridgefield overwhelming quantities of out-cattle beef that, like PPI's pre-joint venture Commodities Program, inevitably led to venture losses. The Court finds that this over production of out-cattle constituted a material breach of the joint venture agreement by PPI. The overproduction of out-cattle, coupled with PPI's misrepresentations and omissions regarding the Commodities Program prior to the formation of the joint venture, resulted in substantial loss to Ridgefield and to the joint venture. 45. At the meeting in Dakota Dunes on September 10, 2002, the Roths' financial

advisor, Scott Sehnert, on behalf of PPI, questioned Greenfield and Friend about the apparently low sales volume shown on Ridgefield's financial statements. Greenfield explained in detail the arrangement among Ridgefield, Washington Beef, and West-Conn. Under that arrangement (knowledge of which was confirmed by various PPI witnesses, including LaFleur, Babcock, Greer and even Regina Roth), Washington Beef would ship product directly to Ridgefield Farm customers and bill West-Conn. West-Conn, under the trade name "Ridgefield Hereford Farms," invoiced the ultimate customer and paid Ridgefield the margin, or profit, on such sales when West-Conn received payment. Greenfield explained that because only this margin payment was reflected on the books of Ridgefield, its sales totals appeared low, and that because the accounts payable for such sales were not reflected on Ridgefield's books, the accounts receivable for such sales were not reflected on Ridgefield's books as well. Based on Greenfield's testimony, which

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was unrebutted, the Court rejects PPI's claim that $2 million of joint venture sales were not reflected on Ridgefield's books and were diverted by Defendants from the joint venture. PPI presented no evidence to support this claim, which the Court concludes is meritless. 46. The parties also discussed at the Dakota Dunes meeting the never-resolved issue

of the terms under which PPI would be paid for carcasses invoiced to Ridgefield on behalf of the joint venture. This discussion included the subject of the terms under which Washington Beef was paid for product. Greenfield explained to the PPI representatives, including Mrs. Roth, that Washington Beef billed West-Conn on seven day terms from the date product was shipped to the customer plus a short grace period. Regina Roth admitted on cross-examination that it was explained to her that Ridgefield purchased Washington Beef product through West-Conn. Although she claimed she could not recall whether she learned of this at the Dakota Dunes meeting, Mrs. Roth was impeached with her deposition testimony that she was "pretty sure" that she was aware of the Washington Beef-West-Conn arrangement as of the date of that meeting. 47. Greenfield further testified that he explained at the Dakota Dunes meeting the

invoicing problems the joint venture was experiencing due to the slow data transfer from PPI's Aspen computer system to Ridgefield's Meateor computer system, and that due to the fact that PPI's requested "21 days" began as of the date the carcass was delivered for processing, "day one" of a "seven day" Washington Beef invoice was functionally equivalent to "days eight through twelve" of a PPI invoice. Greenfield requested at the September 10 meeting that PPI extend 28 day terms on the invoices. PPI did not agree to Greenfield's 28 day request. 48. Instead, PPI suggested that Ridgefield obtain financing to improve the cash flow

situation. Ridgefield offered a pass-through, first position lien on all Ridgefield receivables to

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secure payment of the A/Rs. PPI rejected Ridgefield's proposal (This same first security interest proposal was offered by Ridgefield, and rejected by PPI, in late October or early November 2002, during a conference call involving Greenfield, Friend, the Roths, and Greer.) Ridgefield agreed to look for third party financing; this led to the October 15, 2002 financing agreement with Entrepreneur Growth Capital ("EGC") see Exhibit A-18, which Greenfield and Friend personally guaranteed. (see Exhibit A-20). 49. Another subject of the September 10 Dakota Dunes meeting was Regina Roth's

proposal that the Roths be reimbursed by the joint venture for their significant investment in the PPI plant. Greenfield rejected that proposal and suggested that Ridgefield would prefer to revert to the written Supply Agreement (Exhibit A-5). Yet on approximately September 27, 2002, Richard Jochum (the Roths' and company general counsel), sent Ridgefield the purported "Summary" (Exhibit 10) that included a proposed term that "prior to any profit split, the venture will be required to make a minimum debt reduction payment" of $27,500 per week over seven years, or over $10 million to the Roths before Ridgefield would receive any profit split, and in return for which Ridgefield would not receive any interest in the PPI plant or any other consideration. PPI attempted to suggest that Ridgefield, which never signed the Summary, somehow accepted it through silence. However, Friend testified that he advised LaFleur that the Summary was unacceptable. Moreover, PPI's witnesses acknowledged that the Summary was never accepted by Ridgefield.2 50. Although PPI gave Ridgefield at the Dakota Dunes meeting a commitment to

The Court notes that the Summary is attached to PPI's amended complaint as the contract it claimed Ridgefield breached and on which PPI seeks to collect damages.
2
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substantially increase the percentage of Hereford cattle being purchased for the joint venture, that did not occur in the weeks that followed. Exhibit A-66, the Hereford cattle analysis, reflects the fact that during the first nine weeks of the joint venture ­ 8/11 through 10/12 ­ the number of Hereford produced by PPI was 9,838, and the number of Hereford cattle was only 3,530. Thus, the total for this nine week period, 13, 368 head, was 73.6% out-cattle and only 26.4% Hereford. As reflected in Exhibit A-66, the first week in which production of Hereford cattle by PPI exceeded the 500 head minimum level reflected in Exhibit A-5 was the week of September 22. In only five of the nineteen weeks of the joint venture agreement did PPI produce 500 Hereford head or more. Exhibit A-66 further reflects that PPI's Hereford production during the nineteen weeks of the parties' joint venture averaged only 399 head per week, far below the understanding and agreement by the parties in entering into the joint venture agreement. Greenfield's testimony with regard to the information contained on Exhibit A-66 and its materially adverse impact on Ridgefield and the joint venture was unrebutted by PPI. 51. Whatever limited progress that was being made toward increasing the number of

Hereford cattle fabricated by PPI for the joint venture came to a halt on November 18, 2002, when PPI stopped payment on two checks totaling approximately $463,700, to Booker Packing Co. ("Booker"), a Hereford carcass supplier to PPI. See Exhibit A-21. Although PPI at trial blamed Ridgefield for the stop payment, PPI's own Exhibit 1 confirmed that between the dates of the issuance of the PPI check to Booker Packing (November 5, 2002), and the date on which the two Booker checks were stopped by PPI (November 18, 2002), Ridgefield made payments to PPI totaling approximately $1.493 million, (and received additional credits from PPI of approximately $194,000). Exhibit 1 also reflects that, during the five days following the

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November 18, 2002 stopped payment, i.e., November 18-22, 2002, during which days the PPI plant was "dark" and PPI delivered no beef products to Ridgefield, Ridgefield nonetheless made additional payments to PPI of approximately $1.107 million. Thus, during the period of the Booker check incident (November 5-22), PPI received from Ridgefield in excess of $2.6 million in cash payments. PPI's attempt to blame Ridgefield was unsupported, and there was no testimony from any witness identifying any more pressing obligation of PPI other than Booker on November 18, 2002. The decision to stop payment on the Booker checks, and not utilize Ridgfield's various payments to cover those checks, was made unilaterally by PPI. As a consequence, there was material disruption in PPI's supply of Hereford beef to Ridgefield in and after mid-November 2002. PPI's continued failure to supply sufficient quantities of Hereford beef to Ridgefield constituted a material breach of PPI's obligations under the joint venture agreement. 52 Beginning in late October 2002, the Roths, acting on behalf of PPI, discussed

with Ridgefield a plan to sever the relationship with EGC and to enter into a factoring agreement with the Roths= banker, Wells Fargo Business Credit, Inc. (AWells Fargo@). On or about November 26, 2002, Ridgefield terminated the financing agreement with EGC and entered into the factoring agreement with Wells Fargo. See Exhibit A-22. Ridgefield was required to pay a penalty of $75,000 to EGC for early termination of the line of credit. Greenfield and Friend were required to give personal guaranties to Wells Fargo to enable Ridgefield to enter in to the factoring agreement; they did so in furtherance of the joint venture. See Exhibit A-24. 53. The trial testimony is effectively undisputed that, as a result of the Booker

incident, West-Conn increased its purchases, on behalf of Ridgefield and the joint venture, of

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beef product from Washington Beef and other suppliers. This was done by Ridgefield in furtherance of the joint venture. These purchases were common knowledge to PPI's executives, including LaFleur, Babcock and Greer, as well as Mrs. Roth. There was no basis for PPI to contest this fact in connection with its March 2003 Prejudgment Writ of Attachment proceedings before the Magistrate Judge, or at the trial. Moreover and significantly, it was effectively undisputed by PPI's own witnesses that PPI knew, before and after the mid-November 2002 Booker check incident, that Ridgefield was paying West-Conn for what West-Conn paid to Washington Beef and others for purchases of beef products on behalf of Ridgefield and the joint venture. The evidence presented at trial is convincing that at least certain of PPI's executives (e.g., LaFleur and Greer) understood and agreed that West-Conn was to be paid on shorter credit terms (7-10 days from product shipment date) for its purchases because West-Conn, in turn, was obligated to pay Washington Beef and the other suppliers within those same time parameters. 54. The evidence is undisputed that, as a result of the purchases and sales throughout

the joint venture term by West-Conn on behalf of Ridgefield and the joint venture, West-Conn derived no profit whatsoever, and that profits from the purchases and sales in which West-Conn was involved were received and retained by Ridgefield and the joint venture. 55. In addition to halting the progress that had been made toward reaching the

minimum production level of 500 head of Hereford carcasses per week, thus requiring Ridgefield to obtain substitute performance through West-Conn and Washington Beef, the Booker check incident also hindered the parties' ongoing, and to a degree successful, efforts to reduce the amount of over 21 day invoices from PPI to Ridgefield. Exhibit 1, Greer's A/R Aging report, reflects that:

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a.

while the total A/R figure was $6.003 million on October 17, 2002 (shortly after

the EGC financing was put into place), it had been reduced to $4.405 million on November 18 (the date PPI stopped payment to Booker and shut down its processing plant for a week), and reduced further to $3.369 million on November 27 (the date a new financing arrangement with Wells Fargo went into effect), and reduced further to $2.477 million by December 24, 2002; and b. the total A/R over 21 days figure was $3.423 million on October 17; had been

reduced to $1.670 million on November 18; went up to $1.930 million on November 27 (due in part to the fact that EGC was reducing its outlays in anticipation of being replaced by Wells Fargo); then was reduced to $1.149 million on December 19 (the day before PPI permanently closed its doors). 56. The steady improvement in the A/R balance starting in mid-October 2002 was

due primarily to two factors: (1) at Ridgefield's insistence, the increased percentage of Hereford cattle produced by the joint venture and corresponding decrease in the percentage of unprofitable Commodity out-cattle; and (2) continuing purchases of beef by West-Conn for the joint venture. Friend testified that as of December 2002, he believed that the joint venture had turned things around, and that the subject A/Rs would in time be reduced to a less than 21-day period as demanded by Mrs. Roth, due to West-Conn's continuing purchasing support and despite PPI's reduction in production. 57. Greer testified that the parties were hopeful that the EGC and Wells Fargo

financing arrangements would quickly cause the elimination of the over 21 day A/R balance, but that neither financing arrangement accomplished that goal. Greer further testified that EGC charged a high interest rate and did not turn money over quickly enough, and that the parties'

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hopes regarding the Wells Fargo financing did not come to pass because, among other things, Wells Fargo took time to approve invoices Wells Fargo was to purchase at the outset (November 27) of its factoring agreement with Ridgefield, and Wells Fargo had a limit on the size of invoices and required high dollar invoices to go through an extra due diligence process at Wells Fargo that delayed payment. Relatedly, Greenfield testified that Wells Fargo also imposed credit limits on Ridgefield customers and would not pay Ridgefield for invoices that exceeded those credit limits. 58. Greer admitted that he was advised regularly of payments made to West-Conn for

Washington Beef purchases from the start of the Wells Fargo factoring agreement until the end of the joint venture. Invoices generated by Ridgefield=s sale of beef purchased through WestConn were among those factored by Wells Fargo, and the proceeds of the factoring arrangement were used to make the payments, not only to West-Conn, but to PPI, in November and December 2002. These payments by Ridgefield were for legitimate existing debts owed to both PPI and West-Conn. The evidence established that it was common knowledge at PPI that Ridgefield was purchasing beef from sources other than PPI, and that PPI expected Ridgefield would pay for those purchases. Despite PPI's misguided allegations in its verified complaint and the Greer affidavit (Exhibits A-46 and A-47, respectively), PPI never was the exclusive provider of beef to Ridgefield. 59. There was no agreement that required Ridgefield to use the proceeds from the

Wells Fargo factoring agreement to pay PPI in priority over other creditors, including WestConn. PPI never obtained, or even asked Ridgefield, West-Conn, Greenfield or Wells Fargo for an agreement obligating Ridgefield to pay PPI=s invoices first or on a priority basis from the

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Wells Fargo factoring agreement proceeds. 60. PPI failed to prove that Ridgefield Adiverted@ to West-Conn approximately $2

million of proceeds derived from the sale of beef and the Wells Fargo factoring agreement. The evidence established that when the factoring agreement was in effect, Ridgefield, in the ordinary course of its business, paid PPI (and Booker for PPI) approximately $2.5 million and West-Conn approximately $1.5 million from November 27, 2002 to December 31, 2002, during which period PPI shipped Ridgefield less beef than West-Conn. See Exhibit A-58 and the unrebutted testimony of Greenfield. 61. PPI failed to put on any evidence that the payments West-Conn received during

the period of the factoring agreement in November-December 2002 were from the sale of PPI beef, nor did PPI otherwise substantiate its claim of diversion of funds by Ridgefield, West-Conn and/or Greenfield. 62. Exhibit A-58 consisted of two summary charts. The top chart reflected wire

transfers directly from Wells Fargo to Ridgefield, PPI, West-Conn and others from the proceeds of the Wells Fargo factoring arrangement between November 27, 2002 and December 20, 2002. (See, also, Exhibit A-28, a similar chart, dated December 20, 2002, prepared for and presented to Regina Roth by Friend and Greer on December 20, 2002.) The second chart in Exhibit A-58 reflected the payments during that same period made directly by Ridgefield to PPI, West-Conn and others from the factoring proceeds received by Ridgefield from Wells Fargo. Based on Exhibits A-28, A-23 (Termination Agreement, Wells Fargo and West-Conn), A-58 and the trial testimony, the Court finds that: a. prior to the November 27, 2002 closing, Wells Fargo required Ridgefield to include

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as part of the factoring arrangement the invoices for beef purchased through West-Conn and sold to third parties; b. Wells Fargo required, as of the November 27, 2002 closing, that a prior Ridgefield

lender, EGC, and West-Conn be paid certain amounts ($845,939.50 and $244,627.63, respectively) from the initial funding provided by Wells Fargo under the factoring agreement (see Exhibit A-23); c. payments were made by Wells Fargo and Ridgefield to Booker Packing on behalf

and at the direction of PPI; and d. of the total sum of $5,305,179.45 funded by Wells Fargo during the period

November 27, 2002 to December 20, 2002, PPI and Booker received a total of $2,564,323.87, or 51.86%, and West-Conn received only $1,534.606.41, or 31.03%. 63. PPI never obtained, or asked for, a security interest in Ridgefield=s inventory or

accounts receivable. PPI declined Ridgefield=s two offers to grant to PPI a security interest in Ridgefield's accounts receivable. PPI never obtained, or asked for, a written agreement obligating Ridgefield to pay PPI=s invoices first or on a priority basis, or not to pay other creditors such as West-Conn, from the Wells Fargo factoring agreement proceeds. PPI never obtained, or asked for, an agreement by Wells Fargo to cause the factoring agreement proceeds to be paid to PPI first or on a priority basis. Ridgefield did not represent to PPI or otherwise agree that the proceeds from the Wells Fargo factoring agreement would be used to first pay PPI on its invoices. 64. PPI unilaterally halted production on December 20, 2002. On December 26,

2002, Eldon Roth announced to Friend that PPI had terminated the joint venture. It was

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undisputed at trial that these acts constituted the unilateral termination of the joint venture agreement by PPI. PPI did so notwithstanding the facts that (a) PPI's shutdown during the week of November 18, and its continuing failure to meet Hereford production goals, forced Ridgefield to purchase product even more from Washington Beef and others through West-Conn, and (b) while the Wells Fargo factoring agreement did not immediately eliminate the backlog of over-21 day receivables, steady progress had been made in reducing the A/R total, and the goal of eliminating the 21 plus days A/Rs was being achieved, albeit more slowly than the Roths desired. 65. PPI argued at trial that the joint venture agreement was terminable at will by

either party. The Court rejects this argument. "Equity holds each joint venturer strictly accountable for completing ventures and will not permit the unilateral withdrawal of one partner to the detriment of his fellow contractors without the consent of the latter." Lindsay, 325 P.2d at 370. As Greer, Greenfield and Friend testified, Ridgefield entered into the Wells Fargo factoring agreement in a good faith effort to satisfy PPI's demand that the 21 day plus A/Rs be paid off. While this goal was not immediately accomplished, substantial progress had been made by the joint venture. PPI owed Ridgefie