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Blattman v. Siebel

United States District Court, D. Delaware

June 7, 2018

ERIC BLATTMAN, individually and as an Assignee of certain former members of E2.0 LLC, LAMB FAMILY, LLC, and DAVID STAUDINGER, Plaintiffs, Counterclaim Plaintiffs,
v.
THOMAS M. SIEBEL, DAVID SCHMAIER, JOHN DOE I, AND JANE DOE 2, Defendants, C3, INC. d/b/a C3 IoT Defendant, Counterclaim Defendant.

          ORDER

         WHEREAS, on October 28, 2014, Plaintiffs, David Staudinger and Eric Blattman (collectively, "Plaintiffs"), filed a Complaint against Jane Doe 2, John Doe 1, David Schmaier, and Thomas M. Siebel, (collectively, "Defendants"). (D.I. 1);

         WHEREAS, on March 17, 2015, Plaintiffs filed an Amended Complaint, (D.I. 28), and on April 7, 2017, Plaintiffs filed a Second Amended Complaint adding C3, Inc. as a Defendant and alleging fraud, intentional fraudulent misrepresentations and omissions, and breach of contract. (D.I. 190);

         WHEREAS, presently before the court, is Defendants' Motion for Summary Judgment pursuant to Federal Rule of Civil Procedure 56(a). (D.I. 314, 315);[1]

         WHEREAS, having considered the parties' positions as set forth in their papers, the pleadings, as well as the applicable law;

         IT IS HEREBY ORDERED THAT:

         1. The Defendants' Motion for Summary Judgment (D.I. 314) is DENIED in full.

---------

Notes:

[1] Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). A fact is material if it "could affect the outcome" of the proceeding. Lamont v. New Jersey, 637 F.3d 177, 181 (3d Cir. 2011). A genuine dispute exists "if the evidence is sufficient to permit a reasonable jury to return a verdict for the non-moving party." Id. The moving party bears the burden of proving that summary judgment should be granted. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 n.10 (1986). The district court must view the evidence in the light most favorable to the nonmoving party arid draw inferences in that party's favor. Wishkin v. Potter, 476 F.3d 180, 184 (3d Cir. 2007).

The mere existence of some evidence in support of the nonmoving party will not be sufficient for denial of a summary judgment motion. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). Rather, the nonmoving party must present enough evidence to enable a jury to reasonably find for it on that issue. Id. The party opposing summary judgment must present more than just "mere allegations, general denials, or . . . vague statements" to show the existence of a genuine issue. Quiroga v. Hasbro, Inc., 934 F.2d 497, 500 (3d Cir. 1991). The moving party is entitled to judgment as a matter of law if the nonmoving party fails to make a sufficient showing on an essential element of its case for which it has the burden of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

Defendants contend that, based on the available evidence of record, each of Plaintiffs' three claims fail as a matter of law because they have not established an essential element of each of their claims.

At the outset, Defendants briefly contend that Plaintiffs lack standing to bring claims on behalf of non-Plaintiff unitholders who assigned Mr. Blattman the right to pursue relief on their behalf. (D.I. 315 at 9-10.) While Defendants argue that no unitholders aside from Todd Arky and Foxhill Opportunity Fund testified or provided evidence to support fraud, "[a]n assignment purports to transfer ownership of a claim to the assignee, giving it standing to assert those rights and to sue on its own behalf." (D.I. 315 at 10, n.5); Am. Orthopedic & Sports Med. v. Indep. Blue Cross Blue Shield, No. 17-1663, 2018 WL 2224394, at *7 (3d Cir. May 16, 2018); Sprint Commc'ns Co. v. APCC Servs., Inc., 554 U.S. 269, 271, 290 (2008) ("an assignee of a legal claim for money owed has standing to pursue that claim in federal court... even when the assignee has promised to remit the proceeds of the litigation to the assignor."). In this case, the assignment documents of nineteen former E2.0 unitholders are explicit that each such unitholder "assigns, grants, and transfers" to Mr. Blattman "all rights, title, interest, and authority" in their claims. (D.I. 322 at 10.) The court, therefore, finds that the assignment of rights to Mr. Blattman properly confers standing.

In Count I, Plaintiffs bring a claim under Section 10(b) and Rule 10b-5 of the Exchange Act. 15 U.S.C. 78j(b); 17 C.F.R. 240. 10b-5; (D.I. 190 at 47.) Preliminarily, Defendants assert that a Section 10b-5 claim is subject to a two-year statute of limitations that accrues from the moment a plaintiff discovers the violation or when "a reasonably diligent plaintiff would have 'discovered] the facts constituting the violation, '" (D.I. 315 at 11); Merck & Co. v. Reynolds, 559 U.S. 663, 653 (2010)(quoting § 1658(b)(1)). While Defendants argue Plaintiffs were on notice of all the alleged falsity by May 5, 2012, Plaintiffs provide evidence that it was not until after November 2012 when Plaintiff Blattman began reviewing C3's internal documents that he discovered the wrong and misleading representations. (D.I. 315 at 11-12); (D.I. 224, ¶ 67); (D.I. 322 at 13.) Thus, a reasonable jury might find that Plaintiffs did not learn about the alleged misrepresentations until November 2012.

To state a claim for securities fraud under Section 10(b) and Rule 10b-5, Plaintiffs must allege: (1) a material misrepresentation or omission by defendant, i.e., falsity; (2) scienter; (3) a connection between the misrepresentation or omission and the purchase or sale of a security; (4) reliance upon the misrepresentation or omission; (5) economic loss; and (6) loss causation. Securities Exchange Act of 1934 § 10, 15 U.S.C.A. § ...


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