Ian Mausner v. Marketbyte, LLC , 669 F. App'x 865 ( 2016 )

FILED
NOT FOR PUBLICATION
OCT 20 2016
UNITED STATES COURT OF APPEALS MOLLY C. DWYER, CLERK
U.S. COURT OF APPEALS
FOR THE NINTH CIRCUIT
IAN MAUSNER, an individual, on behalf No. 14-56468
of himself and as trustee for the Borg
Trust, D.C. No. 3:12-cv-02461-NLS
Plaintiff-Appellant,
MEMORANDUM*
v.
MARKETBYTE, LLC, a California
limited liability company; LAWRENCE
D. ISEN; DAVID FREDERICK BAHR,
Defendants-Appellees.
Appeal from the United States District Court
for the Southern District of California
Nita L. Stormes, Magistrate Judge, Presiding
Argued and Submitted August 31, 2016
Pasadena, California
Before: WARDLAW and BYBEE, Circuit Judges, and ZIPPS,** District Judge.
*
This disposition is not appropriate for publication and is not precedent
except as provided by Ninth Circuit Rule 36-3.
**
The Honorable Jennifer G. Zipps, United States District Judge for the
District of Arizona, sitting by designation.
Ian Mausner appeals the district court’s order granting summary judgment in
favor of Defendants Marketbyte, Isen, and Bahr on Mausner’s common law fraud
and negligent misrepresentation claims based on direct fraudulent inducement. We
have jurisdiction pursuant to 28 U.S.C. § 1291, and we reverse.
Mausner argues that the district court erred when it held that Mausner’s First
Amended Complaint (“FAC”) did not include causes of action for common law
fraud and negligent misrepresentation based on direct fraudulent inducement.
While the district court correctly concluded that the FAC states a claim based on a
pump-and-dump theory, the FAC also pleads a direct fraudulent inducement
theory. A combination of aspects of the FAC leads us to this conclusion. For
example, one of the subsections of the FAC, under the section titled “FACTS
COMMON TO ALL CAUSES,” is titled “DEFENDANTS MADE FALSE
REPRESENTATIONS DIRECTLY TO PLAINTIFF AND INTENDED TO
INDUCE PLAINTIFF’S RELIANCE ON THESE STATEMENTS.” Moreover,
the FAC includes several allegations that false or misleading statements were made
directly to Mausner and that Mausner relied on these false or misleading statements
in his investment decisions. After reading the FAC and taking it in its entirety, we
hold that the FAC pled, and thus sufficiently put Defendants on notice of, causes of
action for common law fraud and negligent misrepresentation based on direct
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fraudulent inducement. See Coleman v. Quaker Oats Co., 232 F.3d 1271, 1294
(9th Cir. 2000). Because we hold that the FAC states a claim based on a fraudulent
inducement theory, we need not reach the issue of whether Mausner’s
supplemental discovery responses put Defendants on notice of such a theory.
Defendants argue, and the district court held, that even if the Defendants
were on notice of a fraudulent inducement theory, summary judgment should still
be granted in the Defendants’ favor because Mausner failed to provide an expert to
testify as to the damages caused by Defendants’ alleged fraud and negligent
misrepresentations. The district court assumed that an expert was required here, as
one would be for claims based on a fraud-on-the-market theory. However, neither
the district court nor the Defendants point to any California law requiring an expert
for these torts, and we find none. To the contrary, California law permits damages
for fraud and negligent misrepresentation to be proved in a variety of ways,
including by out-of-pocket losses. See Strebel v. Brenlar Invs., Inc., 135 Cal. App.
4th 740, 749–50 (2006). Without clear law from California courts, it was
inappropriate for the district court to require Mausner to either provide a damages
expert or suffer summary judgment. Our decision does not foreclose the parties
from renewing the argument, which may benefit from further factual development.
Mausner also appeals the district court’s grant of summary judgment as to
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Heart Tronics (formerly Signalife). The district court held that because Mausner
could not “point to any specific conversation, phone call or advice” regarding
fraudulent statements about Heart Tronics, there was “no evidence from which a
finder of fact could reasonably conclude that the parties ever discussed Heart
Tronics.” However, Mausner’s declaration in opposition to summary judgment
identifies one or two phone calls from Defendant Isen, including at least one call
on October 1, 2007, in which Isen told him that Heart Tronics had strong prospects
and recommended that he invest in the company. Thus, the district court erred in
granting summary judgment on this ground.
Sua sponte, the district court granted summary judgment for Defendant Bahr
and dismissed him from the lawsuit. To the extent that the district court’s grant
was based on the questions of law discussed above, it erred for the reasons
discussed above. To the extent that it was based on independent analysis of the
factual allegations related to Bahr, Mausner did not have reasonable notice that his
claims against Bahr would be in issue. See United States v. 14.02 Acres of Land
More or Less in Fresno Cty., 547 F.3d 943, 955 (9th Cir. 2008). Bahr did not
move for summary judgment and the district court did not inform Mausner that the
claims related to Bahr would be in issue. Therefore, the district court erred in sua
sponte granting summary judgment for Bahr.
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REVERSED and REMANDED.
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