## Facts

- Graphic Directions, Inc. (GDI) was a small Colorado graphics business founded by Grant and Oli Duncan.
- Robert L. Bush became a shareholder, vice-president, and marketing director; F. Dennis Dickerson worked for GDI and became art director.
- After Grant Duncan died, Oli Duncan continued operating GDI; Bush and Dickerson remained in key roles.
- Bush became dissatisfied with management and prepared to start a competing business without informing Oli Duncan.
- Bush, Dickerson, and another employee resigned on April 17, 1989, and immediately began operating a competing business, Concepts 3.
- GDI alleged Bush and Dickerson solicited GDI customers before resigning and diverted business to Concepts 3.
- At trial, GDI’s primary damages proof for the fiduciary-duty claim was an accountant’s testimony that GDI lost nearly $200,000 in net profits over the 18 months after the departures.

## Issues

1. Whether Bush and Dickerson owed and breached fiduciary duties (including the duty of loyalty) to GDI based on pre-resignation competitive preparations and customer solicitation.
2. Whether GDI presented legally sufficient evidence of compensatory damages—particularly lost profits—caused by the alleged breach of fiduciary duty.
3. Whether exemplary damages could stand after reversal or vacatur of the underlying actual-damages award, and what effect satisfaction of other small actual-damages judgments had on exemplary damages.

## Decision

- The court reversed the judgment against Bush and Dickerson on the breach-of-fiduciary-duty claim and vacated the compensatory damages awarded on that claim.
- The court held the trial court did not err in instructing that Dickerson, as an employee in a position of trust, owed a fiduciary duty to GDI.
- The court concluded GDI’s lost-profit evidence was insufficient as a matter of law because it failed to establish a causal link between the claimed decline in net profits and defendants’ conduct, as opposed to other causes.
- The court vacated the exemplary damages award tied to the fiduciary-duty damages and remanded with instructions concerning exemplary damages in light of the remaining claims and the status of any satisfied actual-damages awards.

## Legal Principles

- A plaintiff asserting breach of fiduciary duty must prove not only duty and breach, but also causation and recoverable damages.
- Employees may owe a duty of loyalty and may be treated as fiduciaries when they occupy positions of trust; jury instructions recognizing such a duty may be proper.
- Lost-profit damages must be proven as net profits and must be supported by substantial, competent evidence tying the losses to the defendant’s wrongful conduct rather than to unrelated business conditions or other factors.
- Exemplary damages require an underlying award of actual damages; if the predicate compensatory award is vacated, the exemplary award cannot stand.

## Conclusion

The court accepted that key employees can owe fiduciary duties to their employer, but reversed and vacated fiduciary-duty damages because GDI’s lost-profit proof did not adequately connect claimed net-profit losses to the defendants’ conduct, and it vacated exemplary damages for lack of a valid actual-damages predicate, remanding for further proceedings consistent with the remaining claims and satisfied judgments.


Graphic Directions, Inc. v. Bush, 862 P.2d 1020 (Colo. App. 1993)