Tuesday, February 26, 2013

VGS, Inc. v. Castiel case brief

VGS, Inc. v. Castiel case brief summary

SYNOPSIS: In an action by plaintiffs, an investor and his limited liability company (LLC), seeking rescission of the LLC's merger into defendant corporation, after the court had rescinded the merger and granted a motion for summary judgment on other claims, in favor of the corporation and its defendant sister companies as well as their defendant founder, the court reconsidered, and held a trial on the investor's claim of fraud in the inducement.

-The investor agreed to the merger of his LLC with the corporation believing it would control satellite communications when a satellite construction project was complete.
-Due to various industry developments, the corporation missed certain milestones on which its Federal Communications Commission satellite operation license was conditioned, and the license was revoked.
-The investor obtained an opportunity to reargue the issue of whether the failure to inform him about a provision in a contract between the corporation and a company that was building the satellites constituted fraud in the inducement. T

The court held that the investor had failed to show fraud in the inducement.

He failed to show any intent to defraud on the founder's part, and there was no duty to disclose a contract provision that had no effect on the revocation of the license. A contract provision that in fact had affected the license situation was entered into long after the merger. If there had been no misrepresentation and no intent, and nothing for the investor to rely on, there could have been no fraud in the inducement.

OUTCOME: The court entered judgment for the corporation, its related entities, and the founder on the fraud in the inducement claim.

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