United States District Court, D. Delaware
ERIC BLATTMAN, individually and as an Assignee of certain former members of E2.0 LLC, LAMB FAMILY, LLC, and DAVID STAUDINGER, Plaintiffs, Counterclaim Plaintiffs,
THOMAS M. SIEBEL, DAVID SCHMAIER, JOHN DOE I, AND JANE DOE 2, Defendants, C3, INC. d/b/a C3 IoT Defendant, Counterclaim Defendant.
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").
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);
presently before the court, is Defendants' Motion for
Summary Judgment pursuant to Federal Rule of Civil Procedure
56(a). (D.I. 314, 315);
having considered the parties' positions as set forth in
their papers, the pleadings, as well as the applicable law;
HEREBY ORDERED THAT:
Defendants' Motion for Summary Judgment (D.I. 314) is
DENIED in full.
 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. §