Trooien v. Mansour, 09-2032
| Decision Date | 17 June 2010 |
| Docket Number | No. 09-2032,09-2032 |
| Parties | Gerald L. Trooien, Plaintiff - Appellant,v.Peter Mansour; Barry Roitblat, Defendants - Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
Appeal from the United States District Court for the District of Minnesota.
Before RILEY, 1 Chief Judge, JOHN R. GIBSON and MURPHY, Circuit Judges.
Gerald Trooien brought this action against Peter Mansour and Barry Roitblat, former executive officers of Sproqit Technologies, Inc. (Sproqit), alleging violations of the Minnesota Securities Act (MSA), negligent and fraudulent misrepresentation, and breach of fiduciary duty, arising from Trooien's investment in Sproqit. The district court dismissed several of the securities and misrepresentation claims in Trooien's amended complaint for failure to plead with particularity, see Fed. R. Civ. P. 9(b), and granted summary judgment to Mansour and Roitblat on his remainingclaims, see Fed. R. Civ. P. 56(c). Trooien appeals the dismissal and the adverse grant of summary judgment. We reverse in part and affirm in part.
Sproqit was a Washington based technology start up company. Mansour is the former president and chief executive officer of Sproqit. Roitblat is the company's former chief technology officer. Founded in 2000, the company's focus was developing mobile communications software for use with wireless devices. By late 2003 Sproqit was running out of funding. The company was still in the process of developing its software and had not yet generated any revenue.
Around this time Trooien learned that Sproqit was looking for investors. According to Trooien's complaint, Mansour sent him a revenue forecast for Sproqit, which predicted that the company would have gross revenues of $524,224 in 2004, increasing to $8,339, 360 in 2005 and $16,542, 675 in 2006. In March 2004, Trooien began funding Sproqit's monthly expenses, including payroll. He subsequently became the company's majority shareholder, and he and his wife were appointed to the Board of Directors.
Trooien asserts that the initial revenue projections he received from Mansour, and those he received thereafter, were misleading in that they projected extremely high revenues. He also contends that throughout his time as an investor in Sproqit, he was misled about the revenue potential of sales contracts with various firms, including those with Bell Mobility and Archos, and about the likelihood that Sproqit would be acquired by Microsoft.
Mansour regularly sent Trooien revenue projections for Sproqit. In July 2004, Trooien received projections stating that the company was "targeting revenues of about $100k/month for the last 3 months of the year," and that starting in 2005 "they will take a huge jump." Mansour stated that he would follow up with a much moredetailed revenue analysis. The following month, Mansour emailed revised revenue projections to Trooien, which predicted that Sproqit would receive $44,100 in monthly revenue for November 2004, increasing to $447,500 in December 2005. Mansour described the revenue projections to Trooien as a "first cut," cautioning that "[o]f course, things will change."
Trooien received another set of revenue projections from Mansour in December 2004, which lowered Sproqit's anticipated revenue for 2005 to $3,363, 887. Mansour stated in his email that about $1.8 million of the anticipated revenue was to come from a contract that was "in place" with Bell Mobility. He closed his email by telling Trooien that the projections were "preliminary" and subject to the "risk that some of these deals [included in the projections] may not occur."
Trooien contacted Mansour in January 2005 to inquire as to why Sproqit was not performing as projected. Trooien expressed dissatisfaction after new revenue projections showed Sproqit failing to break even in 2004 and losing nearly $2 million in 2005. Mansour responded by email, explaining: Sproqit failed to meet any of its revenue forecasts. The company's revenues for 2005 were less than $100,000.
Trooien asserts that Mansour and Roitblat further misled him with respect to several of Sproqit's business deals. Mansour sent an email to Trooien in May 2005 describing a deal with Archos, a french consumer electronics company that sold devices capable of using Sproqit's software. Mansour stated in the email that Mansour also described additional Archos products that could use Sproqit software and the royalties the company would receive from the sale of those products. It later became apparent that Archos was only obligated to make payments to the companyif it elected to include Sproqit features on its products, and that Archos had elected not to do so. Trooien asserts that he was never made aware that this was the nature of the Arhos contract.
Trooien argues that he was also misled by revenue projections related to Sproqit's relationship with Bell Mobility, another manufacturer of products compatible with Sproqit software. The projections Trooien received from Mansour in December 2004 included a predicted $1,929, 295 in revenue arising from the Bell Mobility relationship. Trooien later learned that the Bell Mobility contract was structured in the same way as the Archos contract, in that Bell Mobility had the option, but not the affirmative obligation, to purchase specific quantities of Sproqit's products. Trooien again asserts that he was not made aware of the nature of this contract.
In addition to the contracts with Archos and Bell Mobility, Trooien says that he was led to believe that Sproqit would be acquired by Microsoft. He contends that at some point during the summer of 2005 Mansour told him that it was an "absolute fact" that Sproqit would be acquired. In October 2005, Mansour sent Trooien an email about a meeting he had attended at Microsoft, stating,
I met with two different groups at Microsoft today. These were very high ranking decision makers. They said they were very interested in working with Sproqit and also inquired about acquisition. I don't know where it will all go from here, but I have more meetings scheduled for later this week.
About two weeks later Mansour sent Trooien a follow up email concerning Microsoft. Mansour states in the email that he received "the green light" from the Vice President of Microsoft's mobile division and that a general manager from the same division "has the budget" for the acquisition. Mansour then states that "[w]e are not at the negotiation phase, yet" and that he will include Trooien in future meetings with Microsoft "if the meetings get bigger, and get into the negotiation phase."
In late January 2006 Mansour sent Trooien another email about Microsoft, saying Mansour also described how Microsoft would conduct due diligence and suggested a possible offer that Sproqit could bring to the negotiations. In February 2006 Mansour communicated to Trooien that the acquisition discussions at Microsoft appeared to be dead. Sproqit was never acquired by Microsoft.
By late 2005 the relationship between Trooien, Mansour, and Roitblat began to deteriorate. Trooien hired a consultant to advise him on his investment in the company with a particular focus on the possible acquisition by Microsoft. The consultant informed Trooien that when he arrived at Sproqit's office, Roitblat and Mansour refused to give him access to any details about the company's software products. Trooien asked another individual to contact Sproqit on his behalf in February 2006. He asserts that Mansour and Roitblat were again uncooperative. Trooien decided not to fund Sproqit's payroll for the month of February 2006. Roitblat resigned on March 1, 2006, and Mansour resigned on March 6. The remaining Sproqit employees resigned near that time as well.
Trooien subsequently filed this action against Mansour and Roitblat, alleging that they had violated § 80A.01(b) of the MSA and committed common law fraudulent and negligent misrepresentation. Both Mansour and Roitblat moved to dismiss the complaint on the grounds that Trooien had failed to plead his claims with sufficient particularity. The district court granted the motion but gave Trooien the opportunity to amend his complaint. Trooien's amended complaint contained the same legal claims as the first and added a breach of fiduciary duty claim against both defendants. Again Mansour and Roitblat moved the court to dismiss Trooien's state securities and misrepresentation claims for lack of specificity.
The district court granted Roitblat's motion in its entirety and Mansour's motion in part. The court limited Trooien's MSA and misrepresentation claims against Mansour to: (1) his statement that it "was an absolute fact that Sproqit would be acquired"; (2) his statement that there were "contracts in place" with Bell Mobility which would generate substantial revenue; and (3) his predictions of future revenue based on either (1) or (2). Trooien was also permitted to proceed on his breach of fiduciary duty claims against both Mansour and Roitblat. The defendants moved for summary judgment and the district court granted the motion, dismissing Trooien's remaining claims. Trooien challenges both the partial dismissal and the adverse grant of summary judgment.
Trooien's amended complaint asserted multiple factual allegations against Mansour...
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