Securities fraud; “Omission-based” claims; Whether defendants’ failure to inform plaintiff of their intention to obtain private equity financing supported an omission-based securities claim; Michigan common-law “fiduciary breach” claim; Reed v Pitkin; Violation of Section 10(b) of the Exchange Act & Securities & Exchange Commission Rule 10b-5; “Materiality”; Basic Inc. v Levinson; Michigan Uniform Securities Act

[This appeal was from the WD-MI.] The court affirmed summary judgment for defendant-Northern Biomedical Research, Inc. (NBR) and the individual defendants on plaintiff-Boyd’s securities law and related claims. But it reversed on three claims, holding that the district court applied an incorrect legal standard under Michigan common law. Boyd sold a majority stake in NBR to the individual defendants. He later sold them his remaining shares. The next spring, they obtained a cash infusion from a nonparty venture capital company (Avista), increasing NBR’s value. Boyd sued, alleging they violated securities law and breached Michigan common law fiduciary duties by failing to disclose their dealings with Avista or their interests in obtaining private-equity financing while they were negotiating for his remaining shares. The district court granted defendants summary judgment on all counts. The court reversed summary judgment on “Boyd’s claim in Count III that the individual defendants violated their fiduciary duties to him under Michigan common law.” It applied “Michigan’s higher standard of fiduciary duty” to this count and held that “a jury could reasonably find that Boyd was entitled to know about NBR’s consideration of equity financing and Avista’s interest in NBR.” As to his securities law claims, it held that “defendants’ failure to disclose information relevant to NBR’s purchase of Boyd’s stock was actionable.” However, their “failure to disclose information about Avista’s interest was not material as of” the date of the stock purchase. Under the “circumstances, the mere agreement ‘to establish a relationship’ between NBR and Avista was not material information under federal securities law.” In addition, “NBR’s consideration of equity financing as an option as a general matter was” highly uncertain as of that date. The court concluded that the “facts cannot support a finding of a material omission under Basic.” It also affirmed dismissal of Boyd’s claim under the Michigan Uniform Securities Act as duplicative. As his contract claims for breach of representation and indemnification were predicated on his securities-fraud claims, the court likewise upheld summary judgment on those counts. But as to Counts IV and V, alleging fraudulent misrepresentation, omission, and inducement, because he “created a genuine dispute of material fact as to whether the defendants violated their common-law fiduciary duties to disclose material information,” it reversed. Remanded.