United States District Court, D. Massachusetts
MEMORANDUM AND ORDER ON DEFENDANT'S MOTION FOR
Dennis Saylor IV United States District Judge
dispute involves a claim of fraud arising out of a sale of
shares in Kensho Technologies, Inc., an analytics and machine
learning company. Jurisdiction is based on diversity of
Nadler and defendant Peter Kruskall founded Kensho in 2013.
In mid-2014, plaintiff Andre Crawford-Brunt, who was then the
global head of equity trading at Deutsche Bank, agreed to
purchase 2% of Kensho's “fully diluted”
shares for $2 million. Crawford-Brunt asked Nadler what the
total number of “fully diluted” shares was, and
Nadler replied by e-mail that there were approximately 21.5
million shares outstanding “as of now.”
Crawford-Brunt then acquired 220, 000 shares apiece from
Nadler and Kruskall.
months later, Crawford-Brunt learned that Kensho had
previously issued to other investors convertible debt and
other instruments that, if converted into stock, would have
significantly diluted his stake in the company. He brought
suit against Kruskall, alleging fraud and seeking reformation
of the purchase agreement based on unilateral mistake.
has moved for summary judgment. For the following reasons,
the motion will be denied.
following facts are as set forth in the record and are
presented in the light most favorable to Crawford-Brunt, the
Technologies, Inc., is a data analytics and machine
intelligence company that is incorporated in Delaware and has
its principal place of business in Massachusetts. (Am. Compl.
¶ 7). Daniel Nadler is the CEO, and Peter Kruskall was
previously the Treasurer and a member of the Board of
Directors. (Id. ¶¶ 8-9). Both Nadler and
Kruskall are founders of the company. Although Kruskall
remains a shareholder, he is no longer an officer, director,
2014, Andre Crawford-Brunt was the global head of equity
trading at Deutsche Bank, a major investment bank.
(Crawford-Brunt (“ACB”) Dep. at 15:20-22). He is
a resident of the United Kingdom.
mid-2014, Kensho made a presentation to Deutsche Bank
executives at its U.S. headquarters in New York.
(Id. at 4:20-24). Although Crawford-Brunt did not
attend the meeting, he was alerted to the company by another
high-ranking bank employee, Tom Patrick. (Id. at
5:5-7). Crawford-Brunt reached out to Kensho and asked the
company to return to New York to make a presentation to him.
(Id. at 5:8-13). The presentation occurred sometime
in late June 2014, and was performed by Adam Broun, who was
then Kensho's Chief Technology Officer. (Id. at
5:16-20; 7:7-9). Deutsche Bank ultimately decided not to
invest in Kensho. (Id. at 7:23-8:2). However,
Crawford-Brunt became interested in personally investing in
the company. (Id. at 11:5-7).
first met Nadler in early July 2014. (Id. at
18:10-17). Around that time, they also exchanged e-mails and
text messages. (Id. at 19:3-16). Crawford-Brunt did
not ask Nadler about Kensho or how the company's product
worked, nor did he conduct any independent research.
(Id. at 21:10-12; 21:17-21).
14, 2014, Crawford-Brunt e-mailed Nadler the following:
[M]any thanks for your time today. I have not been this
excited about an opportunity in a long time! I would welcome
being a shareholder or assisting in any way I can.
Please advise re the stake when you can. I would be happy to
buy up to a few million dollars [of stock].
(ACB Dep. Ex. 1). Nadler answered as follows on July 17,
Andre, please see attached the doc for [a similar]
transaction with [a] LinkedIn executive. He negotiated a 33%
discount for the common stock relative to Goldman Sachs'
[$150 million] valuation for their investment in Kensho.
We will pin down the exact amount we can carve out for you
over the next few days, but what you suggest, a couple of
million, is likely in range.
to Crawford-Brunt, he would receive a 33% discount for any
prospective investment “because [he] was buying common
shares from the founders, which . . . do not have the same
level of protection associated with preferred shares, ”
which in turn “are paid dividends before common
shares.” (ACB Decl. ¶ 9). Around that time, Nadler
mentioned to Crawford-Brunt that he was negotiating with
Goldman Sachs on a possible investment at a $150 million
valuation for the company. (ACB Dep. at 36:15-21). However,
Crawford-Brunt did not ask whether Goldman Sachs had closed
on an investment with Kensho. (Id. at 36:22-37:14).
testified that sometime over the next few days, he asked
Nadler “what the fully diluted number of shares in
issue was.” (Id. at 28:5-9). In an e-mail sent
at 8:12 p.m. on July 23, 2014, Nadler responded,
“[w]ill have my legal guys confirm exact number [of
shares] because its always complicated with the combination
of founder stock, [restricted stock awards], [incentive stock
options], option pools, etc., but its between 21M and 22M
shares.” (ACB Dep. Ex. 2). Later that ...