Hal and Ernestine Woods, Ed and Barbara Strain, Charles Stephens, Paul Reeves, and Wilburn and Betty Durrance the “Plaintiffs” sued Argentum International, LLC, Argentum Research, Inc., A. Bart Flick, and Tom Miller the “Defendants”, among others, alleging fraud, conspiracy, and conversion arising out of the Plaintiffs’ investments in Argentum International. The trial court directed a verdict in favor of the Plaintiffs and against Argentum International in the amount of the Plaintiffs’ investments in the company. The jury then found that Argentum Research, Flick, and Miller were also liable for damages in the amount of the Plaintiffs’ investments, and subsequently awarded $250,000 punitive damages against the Defendants. The Defendants appeal the punitive damages award, and Argentum Research, Flick, and Miller appeal the award for the amount of the Plaintiffs’ investments. For reasons that follow, we affirm. Viewed in a light most favorable to the verdict,1 the evidence shows that Flick developed a process for attaching silver ions to nylon fabric for use in medical dressings. By 1997, Flick had received a patent pending for a multi laminate silver nylon wound dressing the “Patent”, and he assigned the Patent to Argentum International, a business he organized for the purpose of developing wound care products. The Patent was Argentum International’s major asset. Argentum International solicited investments in the company with a business plan that Flick helped to write. The business plan stated that the company owned the Patent and that Flick would receive royalty payments for the use of it; however, Flick admitted at trial that the business plan was misleading as to the ownership of various wound care product trademarks by Argentum International. This business plan was given to the Plaintiffs, who invested a total of $937,500 in Argentum International during the nine-month period from February 1998 through October 1998. Some of the Plaintiffs received convertible debentures, others received equity interests, and some received both.
During the summer of 1998, Flick decided that he wanted a different royalty arrangement than the one disclosed in the business plan. According to the plan, Flick would receive three percent of the “net net” profits of the Patent; however, he refused to sign a royalty agreement consistent with the business plan. In July 1998, Flick sent a memorandum to Argentum International’s CEO, Richard Westlake, requesting that Argentum International transfer the Patent to an off-shore company. In November, Flick sent two additional memoranda to Westlake requesting that the Patent be transferred to Flick individually, who would then transfer the Patent to an off-shore company. Westlake responded with several concerns: that the investors in Argentum International owned the Patent; that the Patent was the “engine” of Argentum International; that Flick’s proposal would be a cause for concern for investors; that only the board of managers could make the decision to transfer the Patent; that the private placement of investments would have to stop if the board changed ownership of the Patent; and that ethical attorneys and accountants might refuse to participate in such a transaction. Westlake was fired a few months later.
