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In re Carol Engen

Summarizing by Bradley Pearce

Fincke v. Access Cardiosystems, Inc. (In re Access Cardiosystems, Inc.)

Citation:
Fincke v. Access Cardiosystems, Inc. (In re Access Cardiosystems, Inc.) No 14-1276
Tag(s):
Ruling:
The Court affirmed that bankruptcy court's finding that defendant Randall Fincke ("Fincke") had solicited investments in Access Cardiosystems, Inc.'s ("Debtor") by means of a material misstatement, a violation of Mass. Gen. Laws ch. 110A, § 410(a)(2) (Massachusetts' Blue Sky Law). The Court determined that Fincke made a 2002 business plan which included a statement that the Debtor's patent counsel had advised the Debtor that the Debtor's product did not infringe any patents known to him. The patent counsel, however, had not offered an opinion but had just discussed Fincke's belief that no patents were infringed. The Court affirmed that the statement in the business plan constituted a material misstatement under the statute because there was a substantial likelihood that a reasonable investor would find the the misrepresentation significantly altered the total mix of information available. Additionally, the by means of aspect of the statute had been satisfied because the statement was used to effect the sale of securities, i.e. the business plan was distributed in order to help sell securities in the Debtor.
Procedural context:
Appeal from the district court's affirmation of the bankruptcy's decision that Fincke had liability to an investor in the Debtor under Massachusetts' Blue Sky Law.
Facts:
Fincke was a principal at a struggling startup company, the Debtor, which made portable heart defibrillators. The Debtor was struggling to pay bills and Fincke made a 2002 business plan which included a statement that the Debtor's patent counsel had advised the Debtor that the Debtor's product did not infringe any patents known to him. The patent counsel, however, had not offered an opinion but had just discussed Fincke's belief that no patents were infringed. The Debtor sent the business plan to existing and prospective investors. One prospective investor invested $1.5 million in the Debtor after receiving the report.
Judge(s):
Lynch, Howard & Barron

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