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Bouriez v. Carnegie Mellon University

October 26, 2009


On Appeal from the United States District Court for the Western District of Pennsylvania (Civil No. 02-cv-02104) District Judge: Honorable Arthur J. Schwab.

The opinion of the court was delivered by: Chagares, Circuit Judge


Argued October 1, 2008

Before: FISHER, CHAGARES, and HARDIMAN, Circuit Judges.


Christian Bouriez and Montanelle Beeher, B.V. (collectively referred to as "Bouriez") appeal the District Court's grant of summary judgment in favor of Carnegie Mellon University ("CMU") with respect to Bouriez's fraudulent misrepresentation and negligent misrepresentation claims. The issue on appeal is whether the District Court erred in concluding that Bouriez failed to establish that CMU proximately caused Bouriez's losses.*fn1 Because we conclude that the District Court's proximate cause analysis was in error, we will vacate the grant of summary judgment to CMU and remand for further proceedings consistent with this opinion.


We state the facts in the light most favorable to Bouriez. Carnegie Mellon Research Institute ("CMRI") was an unincorporated, non-academic, organizational unit of defendant CMU. CMRI was engaged in scientific research and development for government agencies and industrial entities whom CMRI called "sponsors."

In July 1997, an entity called Governors Refining Technologies, LLC ("GRT") and a related entity, Governors Technologies Corporation ("GTC") (collectively referred to as "Governors"), agreed to sponsor a microwave-enhanced catalytic cracking project that CMU had been developing. "[T]he primary goal of this project [was] to demonstrate an efficient process that uses suitable catalysts in conjunction with microwaves to selectively crack hydrocarbons." Joint Appendix (J.A.) 332. The term "cracking" refers to the breaking down of "heavier hydrocarbons into lighter hydrocarbons of a more useful range." Id. If successful, microwave heating would have provided a better alternative to traditional heating methods that "use large quantities of energy," and would have "reduce[d] the environmental impact of industrial waste." J.A. 326. Governors agreed to fund CMU's development of microwave technology in exchange for the right to license any technology developed. Governors had no assets except the rights to the technology.

Plaintiff Christian Bouriez is an investor who resides in London, England. Plaintiff Montanelle Beeher, B.V. is an entity incorporated and owned by Bouriez. Bouriez traveled to Pittsburgh to learn about the work being done by CMRI under Governors' sponsorship. Governors provided Bouriez with a Business Plan and a Project Plan written by CMRI. Bouriez also met with CMRI and Governors representatives on three occasions in 1999. CMU's Business Plan emphasized its good name and scientific expertise in microwave technology. J.A. 369-72.

In encouraging Bouriez to invest in microwave technology, CMU presented him with a document entitled "Proposal for a Project Plan for Microwave Enhanced Catalytic Processing" (hereinafter "December 11 Proposal"). J.A. 362. CMU gave this same document to Governors earlier to obtain Governors' investment. See J.A. 325. In the December 11 Proposal, CMU represented, inter alia, that certain technological improvements have been "demonstrated" and that CMRI reached the "proof of concept"*fn2 stage of development for the technology. J.A. 329. The December 11 Proposal also listed several purported "microwave enhancements" that CMRI had "proven." J.A. 330. In addition, Bouriez indicated during his deposition that Alberto Guzman, the Assistant Director of the CMU division undertaking the microwave project, told him that "proof of concept had been established. I understood from Mr. Guzman that this technology was working. I understood that this technology was feasible. I understood that this technology was commercially viable." J.A. 361.

Furthermore, in a presentation to Bouriez in July 1999, CMU indicated that the data-collection phase of its research would be completed within six months and that the commercialization phase would begin approximately two years thereafter. J.A. 375. In a later presentation, CMU provided financial projections estimating that Governors would generate $37.5 million in profits by the year 2003, based on the then-current state of the research. In a letter, Guzman claimed that these projections were "good and conservative." J.A. 383, 387.

On October 5, 1999, Bouriez signed two written agreements: the "Share Purchase Agreement" and the "Shareholders Agreement." J.A. 930. Pursuant to these agreements, Bouriez invested $5 million in Governors to fund the work being done by CMRI under Governors' sponsorship. In exchange, Bouriez received 6.25 million shares of Governors' stock, which he still owns. The price of these shares was based entirely on the potential value of Governors' contract with CMU and the microwave technology that it was funding. Bouriez's expert concluded that besides its contract with CMU, Governors had no other significant assets or means of achieving profit. J.A. 411. Moreover, the Share Purchase Agreement explicitly stated that Governors had no other assets and that no public market existed for its shares. J.A. 727. Prior to investing in Governors, Bouriez did not retain an independent advisor with microwave or petroleum processing expertise to evaluate the microwave technology that CMRI claimed to have developed. J.A. 355 ("I relied on what people of CMRI told me [in making the investment].").

In September 2000, Bouriez and CMRI learned that Governors was out of money. CMRI and Bouriez were also told that two officers of Governors had diverted approximately $1.35 million of the funds invested by Bouriez to pay for a debt unrelated to the work being done by CMRI. J.A. 931. The two officers diverted this money without authorization of Governors' Board of Directors. Id. It remains unclear, however, whether the diverted money actually included any of Bouriez's investment because CMU acknowledged that Governors had many other investors whose money could have comprised the diversion. J.A. 593 ("We admitted that we were informed of the diversion. ...

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