Trooien v. Mansour

Filing 209

MEMORANDUM OPINION AND ORDER granting defendant Peter Mansour's 190 Motion to Dismiss and for Summary Judgment; granting defendant Barry Roitblat's 194 Motion to Dismiss and for Summary Judgment (Written Opinion). Signed by Judge John R. Tunheim on July 25, 2012. (Attachments: # 1 Appendix Listing allegations supporting Trooien's claims) (DML)

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
GERALD L. TROOIEN,

Civil No. 06-3197 (JRT/FLN)
Plaintiff,
MEMORANDUM OPINION
AND ORDER GRANTING
DEFENDANTS’ MOTIONS FOR
SUMMARY JUDGMENT AND TO
DISMISS

v.
PETER MANSOUR and
BARRY ROITBLAT,
Defendants.

George G. Eck, DORSEY & WHITNEY LLP, 50 South Sixth Street,
Suite 1500, Minneapolis, MN 54402, for plaintiff.
Brian D. Buckley, FENWICK & WEST LLP, 1191 Second Avenue, 10th
Floor, Seattle, WA 98101; Stellman Keehnel, DLA PIPER US LLP, 701
Fifth Avenue, Suite 7000, Seattle, Washington 98104; Alan L. Kildow and
Sonya R. Braunschweig, DLA PIPER US LLP, 80 South Eighth Street,
Suite 2800, Minneapolis, MN 55402, for defendant Mansour.
Wesley N. Edmunds, Jr., GORDON EDMUNDS ELDER PLLC, 1200
112th Avenue N.E., Suite C110, Bellevue, WA 98004; Brian Melendez,
FAEGRE BAKER DANIELS LLP, 90 South Seventh Street, Suite 2200,
Minneapolis, MN 55402, for defendant Roitblat.
This case is before the Court after the Eighth Circuit’s partial reversal and remand.
Trooien v. Mansour (Trooien IV), 608 F.3d 1020 (8th Cir. 2010). Plaintiff Gerald L.
Trooien brought this action against defendants Peter Mansour and Barry Roitblat, two
former executives of Sproqit Technologies, Inc. (“Sproqit”), alleging violations of the
Minnesota Securities Act, negligent and fraudulent misrepresentation, and breach of
fiduciary duty, arising from Trooien’s investment in Sproqit. The Eighth Circuit affirmed

24

the dismissal of most of Trooien’s claims, but reversed this Court’s prior dismissal of
Trooien’s claims under the Minnesota Securities Act. Defendants renew their motions to
dismiss and for summary judgment, seeking dismissal of Trooien’s remaining claims.
The Court will grant the defendants’ motions because it finds that Trooien’s Minnesota
Securities Act claims are precluded for the same reasons the Eighth Circuit Court of
Appeals provided in affirming the Court’s dismissal of Trooien’s negligent
misrepresentation claims.

BACKGROUND
The facts of this case are summarized in the Eighth Circuit’s opinion and this
Court’s previous opinions, see, e.g., Trooien IV, 608 F.3d at 1023-26, and the Court will
not repeat them. However, a brief recap of the procedural history of the case is helpful.
On defendants’ motions for partial dismissal, the Court dismissed all of the
Minnesota Securities Act claims and negligence and fraudulent misrepresentation claims
for failure to plead with particularity except to the extent those claims were rooted in
(1) Mansour’s statement that it “was an absolute fact that Sproqit would be acquired;”
(2) Mansour’s statement that there were “contracts in place” with Bell Mobility that
would generate substantial revenues for Sproqit; and (3) Mansour’s predictions of future
revenue that are based on either (1) or (2). Trooien v. Mansour (Trooien II), No. 063197, 2008 WL 2202720, at *5 (D. Minn. May 23, 2008). The Court subsequently
granted defendants’ motions for summary judgment on all remaining claims (Minnesota
Securities Act, negligent and fraudulent misrepresentation, and breach of fiduciary duty).

Trooien v. Mansour (Trooien III), No. 06-3197, 2009 WL 928325, at *11 (D. Minn.
Mar. 31, 2009).
The Eighth Circuit affirmed-in-part and reversed-in-part both Trooien II and
Trooien III.

The circuit court concluded that this Court had applied a scienter

requirement instead of the proper negligence standard in analyzing Trooien’s allegations
under the Minnesota Securities Act and so reversed the dismissal and adverse grant of
summary judgment as to those claims. Trooien IV, 608 F.3d at 1028. The circuit court
affirmed the orders in all other respects, including affirming the dismissal of Trooien’s
negligent misrepresentation claims because they were not pled with sufficient
particularity, id. at 1029-30 (affirming Trooien II), and because Trooien failed to create
an issue of material fact to support his assertions, id. at 1030-31 (affirming Trooien III).
See also Appendix A (listing allegations supporting Trooien’s claims).
Trooien filed for bankruptcy resulting in a stay of these proceedings.
Suggestion of Bankruptcy, Nov. 22, 2010, Docket No. 174.)

(See

The bankruptcy case

concluded in August of 2011. After remand, Trooien’s only remaining claims are alleged
violations of the Minnesota Securities Act.

Mansour and Roitblat now renew their

motions to dismiss and for summary judgment.

ANALYSIS
Defendants argue that negligent misrepresentation and the Minnesota Securities
Act have the same elements. Because the Eighth Circuit affirmed the dismissal of the

negligent misrepresentation claims, defendants contend that the Minnesota Securities Act
claims must also be dismissed.

A.

The Minnesota Securities Act and Negligent Misrepresentation

Trooien’s claims under the Minnesota Securities Act arise under Minn. Stat.
§ 80A.01(b).1 Trooien IV, 608 F.3d at 1027. That statute made it
unlawful for any person in connection with the offer, sale or purchase of
any security, directly or indirectly . . . to make any untrue statement of a
material fact or to omit to state material facts necessary in order to make the
statements made, in light of the circumstances under which they are made,
not misleading[.]
Minn. Stat. § 80A.01(b) (2006). The Eighth Circuit held that a negligence standard
applies. Trooien IV, 608 F.3d at 1028.
Trooien’s negligent misrepresentation claims required him to show that Roitblat or
Mansour “supplied false information for the guidance of others in their business
transactions and in doing so failed to exercise reasonable care or competence in obtaining
or communicating the information.” Id. (quoting Florenzano v. Olson, 387 N.W.2d 168,
174 n.3 (Minn. 1986) (internal quotation marks omitted).) Minnesota courts have also
expressed this standard as “[p]ersons making representations are negligent when they
have not discovered or communicated certain information that the ordinary person in his
or her position would have discovered or communicated.” Safeco Ins. Co. of Am. v. Dain

1

In Trooien II, this Court cited to Minn. Stat. § 80A.68(2) (2009). 2009 WL 928325, at
*6. As the Eighth Circuit noted, Minn. Stat. § 80A.01(2) (2006) should be applied even though
it was repealed, effective on August 1, 2007, because it continues to govern all actions based on
conduct occurring before that date. Trooien IV, 608 F.3d at 1027 n.2.

Bosworth Inc., 531 N.W.2d 867, 870 (Minn. Ct. App. 1995) (citing Florenzano, 387
N.W.2d at 174).
Trooien claims that the “elements of the causes of action are different . . . .” (Pl.’s
Mem. in Response at 2, Docket No. 201.) The dispositive issue, however, is whether
any of Trooien’s allegations would constitute a claim under the Minnesota Securities
Act but not a negligent misrepresentation claim. At oral argument,2 Trooien’s counsel
offered the omission of material information as one such allegation. The Court disagrees;
negligent misrepresentation claims under Minnesota law encompass the omission of
material information. M.H. v. Caritas Family Servs., 488 N.W.2d 282, 289 (Minn. 1992)
(“A misrepresentation may be made . . . by concealing or not disclosing certain facts that
render the facts that are disclosed misleading.”).3 The Court will next address whether
Trooien alleged any facts that would allow him to make a claim under the Minnesota
Securities Act but not a negligent misrepresentation claim.

B.

Effect of the Eighth Circuit’s Negligent Misrepresentation Holding on
Trooien’s Minnesota Securities Act Claims

In Trooien IV, the Eighth Circuit affirmed this Court’ dismissal of Trooien’s
negligent misrepresentation claim; the Court must determine whether that holding
compels dismissal of Trooien’s Minnesota Securities Act claim. First, both negligent
2

In his briefing, Trooien did not identify which elements or conduct would be covered by
the Minnesota Securities Act and not encompassed by a negligent misrepresentation claim.
3

See also Noble Sys. Corp. v. Alorica Cent., LLC, 543 F.3d 978, 985 (8th Cir. 2008) (“To
succeed in a negligent misrepresentation claim under Minnesota law, a plaintiff must prove that:
the defendant . . . failed to communicate information that it knew or should have discovered”);
Vikse v. Flaby, 316 N.W.2d 276, 283 n.9 (Minn. 1977).

misrepresentation claims and claims under the Minnesota Securities Act must be pled
with particularity. See Trooien II, 2008 WL 2202720, at *4, 8. Therefore, to the extent
that Trooien’s Minnesota Securities Act claims are based on allegations that the Eighth
Circuit held failed to meet the particularity requirements of Rule 9(b), Trooien IV, 608
F.3d at 1029-30, they will be dismissed.
Second, this Court previously held that Trooien’s remaining allegations 4 failed to
create a genuine issue of material fact supporting his negligent misrepresentation claim, a
determination the Eighth Circuit affirmed. Trooien’s negligent misrepresentation claim
succumbed to summary judgment because his allegations failed to create a genuine issue
of material fact that either defendant made a false representation or omitted material
information. See id. at 1030-32. Trooien’s Minnesota Securities Act claim also requires
him to show that a defendant made a false representation or omitted material information.
See Part A, supra. Yet Trooien relies on the same factual allegations that the Court found
insufficient to create a genuine fact issue on this score with respect to the negligent
misrepresentation claim. Because the allegations are insufficient with respect to the
negligent misrepresentation claim, the Court finds they are insufficient with respect to the
Minnesota Securities Act claim. The Court will, therefore, grant defendants’ motions to
dismiss and Mansour’s motion for summary judgment for the reasons the Eighth Circuit
articulated for dismissing the claims for negligent misrepresentation.

4

Specifically: (1) Mansour’s statement that it “was an absolute fact that Sproqit would be
acquired”; (2) Mansour’s statement that there were “contracts in place” with Bell Mobility that
would generate substantial revenues for Sproqit; and (3) Mansour’s predictions of future revenue
that are based on either (1) or (2). Trooien II), 2008 WL 2202720, at *5.

ORDER
Based on the foregoing, all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1.

Defendant Peter Mansour’s Renewed Motion to Dismiss and for Summary

Judgment [Docket No. 190] is GRANTED.
2.

Defendant Barry Roitblat’s Motion to Dismiss and for Summary Judgment

[Docket No. 194] is GRANTED.
LET JUDGMENT BE ENTERED ACCORDINGLY.

DATED: July 25, 2012
at Minneapolis, Minnesota.

____s/
____
JOHN R. TUNHEIM
United States District Judge