Paraflon Investments, Ltd. v. Fullbridge, Inc.

United States Court of Appeals
For the First Circuit
No. 19-1913
PARAFLON INVESTMENTS, LTD.,
Plaintiff, Appellant,
v.
FULLBRIDGE, INC., ET AL.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Richard G. Stearns, U.S. District Judge]
Before
Kayatta, Circuit Judge,
Souter,* Associate Justice,
and Selya, Circuit Judge.
Nicholas D. Stellakis, with whom Michael R. Perry, Anna
Baitchenko, and Hunton Andrews Kurth LLP were on brief, for
appellant.
Lawrence G. Green, with whom Susan E. Stenger, Kelly K.
Ballentine, and Burns & Levinson LLP were on brief, for appellees.
* Hon. David H. Souter, Associate Justice (Ret.) of the
Supreme Court of the United States, sitting by designation.
May 26, 2020
SELYA, Circuit Judge. When a seemingly delicious
investment opportunity turned rancid and left a foul taste,
plaintiff-appellant Paraflon Investments, Ltd. (Paraflon) went on
the offensive: it sued the once and former object of its
affections, Fullbridge, Inc. (Fullbridge), and Fullbridge's
principals, Peter Olson and Candice Olson, claiming fraud and
misrepresentation. Following a five-day bench trial, the district
court turned Paraflon away empty-handed. See Paraflon Invs., Ltd.
v. Fullbridge, Inc., No. 16-12436, 2019 WL 3759522, at *12 (D.
Mass. Aug. 9, 2019). Paraflon now seeks appellate review. After
rounding off some ragged edges, we affirm.
I. BACKGROUND
We rehearse the relevant facts consistent with the
district court's supportable factual findings. See Dudley v.
Hannaford Bros., 333 F.3d 299, 301 (1st Cir. 2003). Our tale
begins with an introduction to the protagonists and other leading
players.
Paraflon is a private limited company, principally based
in the British Virgin Islands and wholly owned by a family trust.
The trust's main beneficiary, Michael Sarkesian, scouts investment
opportunities for Paraflon. Founded in 2010 by the Olsons and
based in Massachusetts, Fullbridge develops training courses for
students to facilitate their successful transition into the
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workforce.1 The Olsons served jointly as Fullbridge's chief
executive officers until August of 2015. Thereafter, Peter Olson
alone acted in that capacity. He resigned in May of 2016.
This case has its genesis in Fullbridge's relationship
with Takamol, a subsidiary of the Kingdom of Saudi Arabia's
Ministry of Labor. The Ministry created Takamol with a view toward
bolstering the Saudi labor market through private sector
partnerships. In May of 2014, Takamol issued a Request for
Proposal (RFP) seeking bidders for "Wave 1" of a project involving
the production of online training courses. Fullbridge submitted
a bid and was subsequently notified by Takamol, both verbally and
(at some point) in writing, that it was the winning bidder.
In August of 2014 (after Fullbridge had been selected as
the winning bidder for Wave 1), Takamol and Fullbridge executed a
project agreement, sometimes referred to as the "Master
Agreement." This Agreement provided that it would "serve as a
framework for the terms" governing Fullbridge's work, which would
occur incrementally in line with discrete work orders. Each work
order would function "as a separate contract and [would] adopt the
terms of" the Master Agreement. In turn, the Master Agreement
disclaimed any commitment "that a Work Order will be offered,
1 Where the context admits, we use either the shorthand
"Fullbridge" or the term "the defendants" to refer to Fullbridge
and the Olsons, collectively.
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awarded or entered into," and declared that no "binding agreement"
would exist "until the relevant Work Order is formally executed."
In the fall of 2014, Takamol issued a second RFP for
"Wave 2" of the project. Fullbridge again submitted a bid and was
awarded a portion of the Wave 2 project. After Fullbridge was
notified of the award, the parties spent weeks negotiating final
pricing, eventually reaching an accord through an exchange of
e-mails.
Although the Master Agreement referenced the Wave 1 RFP,
its application was not expressly confined to Wave 1. And at the
time the Master Agreement was executed, Takamol informed Peter
Olson that it would cover all of Fullbridge's future work for
Takamol, including any projects associated with Waves 2 and 3.
Consistent with this representation, work orders subsequently
issued to Fullbridge for both Wave 1 and Wave 2 incorporated by
reference the terms of the Master Agreement.
Throughout Fullbridge's work on Waves 1 and 2, Takamol
maintained a practice of "perform[] now, paper[] later." Relying
on this practice, Fullbridge began work on Wave 1 before the Master
Agreement had been executed, proceeding on the basis of verbal
assurances from Takamol that it had received the Wave 1 award.
Similarly, Fullbridge began multiple projects months before any
work orders for those projects were executed.
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As Fullbridge's relationship with Takamol matured,
Fullbridge found itself undercapitalized and went hunting for
investors. In the spring of 2015, Paraflon paid $500,000 to
purchase shares of Fullbridge's convertible preferred stock during
the company's Series D financing round. At that time, Paraflon
had made only a handful of other investments (none of which had
been in the education sector).
In April — from this point forward all dates are in 2015
unless otherwise expressly denominated — Takamol issued a third
RFP seeking course developers for Wave 3. This RFP included
provisions requiring successful bidders to enter into three-year
"Framework Agreements" with Takamol. It also required all bidders,
"including those who ha[d] previously entered into an agreement
with Takamol," to complete a "Legal Requirements attachment" since
the standard terms employed in previous RFPs had been updated.
Any successful bidder would be "expected to enter into a Framework
Agreement with Takamol on the basis" of these legal requirements.
Additionally, the RFP stated that "Preferred Bidder[s]" would be
notified of that status in writing.
Fullbridge submitted a bid for Wave 3 in late May. In
August, Takamol requested a meeting with a Fullbridge
decisionmaker to commence negotiations regarding Wave 3. On August
17, three Takamol representatives met with two Fullbridge
representatives in Saudi Arabia, with Peter Olson and two other
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Fullbridge employees participating by telephone. At this meeting,
a Takamol representative stated that Fullbridge had won a
substantial share of the Wave 3 project, to include the development
of approximately 8,000 learning hours over the course of three
years, with the price per learning hour capped at $4,800.2
Fullbridge estimated that, under this arrangement, it would earn
approximately $40 million in revenue.
In the aftermath of the August 17 meeting, Fullbridge
understood that the parties had reached a high-level agreement on
the approximate number of learning hours, the maximum price per
learning hour, and the overall duration of the work. Fullbridge
also understood, though, that the parties still needed to negotiate
a "second layer" of more granular details. These details included
the "families" of course topics that Fullbridge would produce, the
number of courses to be developed within each family, and the exact
price associated with each family. But based on previous
statements that the Master Agreement would govern all of
Fullbridge's work for Takamol, Fullbridge did not believe that it
would be required to execute a new Framework Agreement for Wave 3.
Shortly after the August 17 meeting, a Fullbridge
employee e-mailed Takamol a "pricing offer" containing a proposed
2
At trial, Paraflon objected on hearsay grounds to the
admission of testimony about Takamol's statements at the August 17
meeting. The district court overruled this objection. On appeal,
Paraflon does not argue that this evidence was improperly admitted.
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breakdown of course families, the price per learning hour
associated with each family, and the average course length per
family. The next day, Abeer AlHashimi (a Fullbridge representative
based in Saudi Arabia) reported that Takamol's "initial feedback"
on Fullbridge's proposed pricing had been positive and that
Fullbridge should expect to hear back from Takamol within two days
"on the exact volume and families awarded."
Fullbridge quickly commenced logistical planning for its
work on Wave 3, remaining in regular contact with Takamol along
the way. Starting in September, Peter Olson checked weekly with
AlHashimi, inquiring whether it would be accurate to tell investors
that Fullbridge's Wave 3 "deal" was "still on." AlHashimi (who
had contact with Takamol's upper echelon) repeatedly confirmed the
deal's continued viability. Apparently still strapped for
capital, Fullbridge sought loans from two venture capital firms.
Both firms requested documentation of the Wave 3 award, sparking
a series of communications between Fullbridge and Takamol about
Wave 3's status. Although we need not recite book and verse,
several data points bear mention.
To begin, Takamol declined to sign a non-binding
statement, drafted by Fullbridge, confirming the Wave 3 award.
Then — in an e-mail to Takamol in late October — Peter Olson
indicated that Fullbridge was ready to begin work in earnest on
Wave 3 "pending the actual award of courses and a clear timetable
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for delivery."3 He requested "a sense of the exact timing and
courses designated." Takamol responded that although it had been
"delayed by issues outside of [its] control," matters seemed to be
"moving in the right direction." Emphasizing that it valued its
"partnership" with Fullbridge, Takamol stated that although it
could not give "a date now," all partners could expect to receive
"a better outlook" the following week.
In an e-mail to AlHashimi a few days later, Takamol
indicated that it was "still waiting for the management approval
in this particular RFP" and proposed that an alternative
arrangement be implemented "to expedite the approval." This
alternative arrangement entailed the issuance of a so-called
buffer order for "a certain number of learning [h]ours" on a
"letter of intent basis" and a fixed price agreement that would
set the "price and the demand for [the] long period agreement."
Takamol's representative noted that although he did not know "how
much" would ultimately be agreed to (an apparent reference to the
volume and/or price of courses), Fullbridge's original pricing
offer was "acceptable" to him. AlHashimi responded that Fullbridge
would accept this arrangement if Takamol confirmed the full scope
3 In this e-mail, Peter Olson described Fullbridge as
"delighted to have been shortlisted as a course developer" for
Wave 3. He testified at trial that by "shortlisted," he meant
that Fullbridge was "honored to be part of a very short list" of
successful bidders.
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of the Wave 3 project (specifically, a minimum of 7,200 learning
hours with an average production of 600 learning hours per
quarter). Takamol replied that it could not "accept a minimum
scale" for Wave 3. Fullbridge subsequently agreed to the buffer
order "with no conditions," but Takamol never issued it.
Around this time, Fullbridge opened its D-1 financing
round. On October 30, Fullbridge sought a second investment from
Paraflon, e-mailing Sarkesian a copy of an investor presentation
made earlier that month. This presentation included statements
that Fullbridge had won a "$40mm share of Wave 3" and had a "$40mm
3 year contract with Takamol." On November 16, Fullbridge followed
up with a "Qualitative High Level Summary" stating that it had
"recently won a large flywheel contract/award from [the Kingdom of
Saudi Arabia], signaling [a] large new pipeline fueling top-line
growth over [the] next 2-3 years."4
Sarkesian reviewed these documents and decided to invest
in the D-1 round chiefly because of Fullbridge's representations
about the $40 million Wave 3 award. He never asked to review
documentation relating to the Wave 3 award. Nor did he visit
Fullbridge's "data room," where important documents were made
4 From time to time, Fullbridge referred to both a Wave 3
"contract" and a Wave 3 "contract/award." Since nothing turns on
this nomenclature, we use the terms interchangeably.
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available to investors (but he testified that he was unaware of
the data room's existence at the time).
On November 20, Sarkesian made the purchase that gave
rise to this litigation: acting for Paraflon, he agreed to buy
$750,000 worth of Series D-1 convertible preferred stock. He
approved the executed purchase documents, dated November 20, on
November 23. The signed documents were forwarded to Fullbridge
that day. And on December 1, Paraflon wired the purchase money.
Meanwhile, Takamol had continued to delay finalizing the
details of Fullbridge's Wave 3 work. In a November 11 e-mail,
Takamol stated that it was "on the final stages to finalize wave
III awarding," which it expected "to be completed by [the] end of
next week." Roughly two weeks later (on November 26), Takamol
informed Fullbridge that it had "reached the final stage for the
issuance of the letter of award and subsequent agreement" but
Fullbridge would need to accept a maximum of 3,000 learning hours.
Fullbridge estimated that this decreased the value of the award
from approximately $40 million to approximately $14 million. In
addition, Fullbridge interpreted the November 26 e-mail as
requiring it to sign a new Framework Agreement.
Fullbridge had little time to dwell on the downside of
these developments. Within a matter of months, the Wave 3 project
collapsed. In February of 2016, Takamol put the entire project on
hold. The death knell was sounded when Takamol later decided to
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develop its own courses internally. By April of 2016, Candice
Olson was openly bemoaning the "loss of [the] $40mm award."
The parting of the ways between Fullbridge and Takamol
did not end the matter. Stung by the deterioration of its
investment, Paraflon brought suit against, among other parties,
Fullbridge and the Olsons in the United States District Court for
the Southern District of New York. It pressed federal securities
fraud claims, as well as common law claims for breach of contract,
negligent misrepresentation, and fraudulent misrepresentation and
concealment. By agreement, the case was transferred to the
District of Massachusetts. See 28 U.S.C. § 1404(a).
After the close of discovery, a five-day bench trial
ensued. The district court granted Fullbridge's motion for
judgment as a matter of law on Paraflon's breach of contract claim,
and Paraflon has not appealed this ruling. After trial, the
district court took the matter under advisement. In due course,
it issued an exegetic rescript, ruling against Paraflon on both
its federal securities law claims and its state-law
misrepresentation claims.5 See Paraflon, 2019 WL 3759522, at *12.
Pertinently, the court found that Fullbridge "did not knowingly or
intentionally make a false statement" and that Fullbridge's
5For ease in exposition, we sometimes refer to Paraflon's
negligent misrepresentation and fraudulent misrepresentation and
concealment claims collectively as the "misrepresentation claims."
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representation of a $40 million award from Takamol "was not false
nor should defendants have known it to be inaccurate at the time
it was made." Id. This timely appeal followed. In it, Paraflon
challenges only the district court's disposition of the state-law
misrepresentation claims against Fullbridge and the Olsons.
II. ANALYSIS
Following a bench trial, we review the trial court's
legal conclusions de novo. See Calandro v. Sedgwick Claims Mgmt.
Servs., Inc., 919 F.3d 26, 33 (1st Cir. 2019). We assay the
court's factual findings for clear error, deferring to those
findings unless careful consideration of the record leaves us with
a firm conviction that they "are simply wrong." Id. (quoting State
Police Ass'n v. Comm'r, 125 F.3d 1, 5 (1st Cir. 1997)). In
undertaking this tamisage, we remain mindful that the trial court
"sees and hears the witnesses at first hand and comes to appreciate
the nuances of the litigation in a way which appellate courts
cannot hope to replicate." Id. (quoting Cumpiano v. Banco
Santander P.R., 902 F.2d 148, 152 (1st Cir. 1990)).
In this instance, the district court determined that New
York law supplies the substantive rules of decision. Neither side
challenges that determination. When a federal court must make a
choice of state substantive law, it is at liberty to accept,
without particularized inquiry, the parties' reasonable consensus
as to which state supplies the substantive rules of decision. See
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e.g., Borden v. Paul Revere Life Ins. Co., 935 F.2d 370, 375 (1st
Cir. 1991). Thus, we too apply New York law.
Under New York law, a plaintiff alleging negligent
misrepresentation must prove by preponderant evidence that the
defendant had a duty to impart accurate information to the
plaintiff by virtue of a special relationship; that the defendant
breached this duty by carelessly imparting false information that
he ought to have known was inaccurate; that the defendant
understood that the plaintiff would use the information for a
particular purpose; and that the plaintiff reasonably relied on
this information to his detriment. See Anschutz Corp. v. Merrill
Lynch & Co., 690 F.3d 98, 114 (2d Cir. 2012); Mandarin Trading
Ltd. v. Wildenstein, 944 N.E.2d 1104, 1109 (N.Y. 2011); White v.
Guarente, 372 N.E.2d 315, 319 (N.Y. 1977); Wrynn v. Subaru Town
Motors, Inc., 487 N.Y.S.2d 247, 247 (App. Term 1984). For a claim
of fraudulent misrepresentation, New York law provides a somewhat
different framework. With respect to such a claim, the plaintiff
must prove by clear and convincing evidence that the defendant
knowingly or recklessly made a false representation of material
fact; that the defendant made the misrepresentation with the intent
of inducing the counter-party's reliance; and that the counter-
party justifiably relied on the misrepresentation to his
detriment. See Merrill Lynch & Co. v. Allegheny Energy, Inc., 500
F.3d 171, 181 (2d Cir. 2007); Mandarin Trading, 944 N.E.2d at 1108.
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The first of these elements may also be satisfied by showing an
omission of material information "that the opposing party had a
duty to disclose." Ahern v. Scholz, 85 F.3d 774, 793 (1st Cir.
1996); see Merrill Lynch, 500 F.3d at 181; P.T. Bank Cent. Asia v.
ABN AMRO Bank N.V., 754 N.Y.S.2d 245, 250 (App. Div. 2003). The
parties appear to agree that such omissions also can give rise to
negligent misrepresentation claims. See Creative Waste Mgmt.,
Inc. v. Capitol Envtl. Servs., Inc., 429 F. Supp. 2d 582, 609
(S.D.N.Y. 2006). A duty to disclose may attach if the parties are
"in a fiduciary or confidential relationship"; if disclosure is
necessary to correct or complete an earlier "partial or ambiguous
statement"; or if one party enjoys an informational advantage and
knows another party is acting on the basis of bad information.
Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993).
We pause to note an important doctrinal wrinkle. Under
New York law, an investor's claim that a defendant fraudulently
induced its investment generally cannot rest on misrepresentations
or omissions that postdate the investment because the element of
detrimental reliance is "necessarily absent." High Tides, LLC v.
DeMichele, 931 N.Y.S.2d 377, 381 (App. Div. 2011); see RKA Film
Fin., LLC v. Kavanaugh, 99 N.Y.S.3d 267, 270 (App. Div. 2019).
This principle has equal bite with respect to negligent
misrepresentation claims, which likewise require proof of
reasonable reliance. See Mandarin Trading, 944 N.E.2d at 1109.
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Against this backdrop, Paraflon marshals three separate
lines of attack.6 Each line of attack centers on the district
court's findings about Fullbridge's state of mind.7 First,
Paraflon argues that the district court misidentified the correct
cut-off date for Fullbridge's duty to disclose and, by extension,
assessed Fullbridge's state of mind at the wrong temporal moment.
Second, Paraflon argues that the district court cabined its
assessment of Fullbridge's state of mind to Fullbridge's
subjective belief in a Wave 3 contract, failing to evaluate whether
that belief was objectively reasonable. Third, Paraflon argues
that any finding that Fullbridge reasonably believed it had a $40
million contract was erroneous. We address these arguments
sequentially.
We start with Paraflon's contention that the district
court botched its assessment of the misrepresentation claims by
6 To the extent that Paraflon has attempted to raise other
arguments along the way, those arguments are undeveloped,
meritless, or both. Thus, we reject them out of hand.
7 The parties use the phrase "state of mind" to refer to the
element of negligent misrepresentation requiring proof that the
defendant "should have known" that its representation was
inaccurate. Anschutz, 690 F.3d at 114 (quoting Hydro Inv'rs, Inc.
v. Trafalgar Power Inc., 227 F.3d 8, 20 (2d Cir. 2000)). They use
the same term to refer to the element of fraudulent
misrepresentation requiring proof that the defendant knowingly or
recklessly made a false statement with the intent to induce
reliance by the counter-party (scienter). See Merrill Lynch, 500
F.3d at 181; Mandarin Trading, 944 N.E.2d at 1108. To avoid
confusion, we follow the parties' lead and employ the same
terminology where appropriate.
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treating the date of Fullbridge's initial representation that it
had a $40 million contract (October 30), rather than the date of
Paraflon's D-1 investment, as the end point for evaluating
Fullbridge's state of mind and the fulfillment of its disclosure
duties. By misapprehending this pivotal date, Paraflon's thesis
runs, the district court excluded from its decisional calculus
various pre-investment events that Fullbridge either should have
disclosed or that bore on its state of mind at the time of
Paraflon's investment. Before embarking on this circuitous path,
we offer a brief primer on pertinent New York precedent and note
the applicable standards of review.
When — as in this case — a plaintiff alleges that the
defendant's misrepresentations or omissions induced its
investment, New York law indicates that the defendant's state of
mind and satisfaction of its disclosure duties should be assessed
up until the date of the plaintiff's investment. Cf. High Tides,
931 N.Y.S.2d at 381 (framing plaintiff's investment as temporal
touchstone for determining whether misrepresentations or omissions
can form basis for fraud claims). Even if post-investment
developments might be said to trigger some disclosure duty on the
defendant's part, see Brass, 987 F.2d at 150, misrepresentations
or omissions about such events are generally of no consequence in
an action premised on fraudulent inducement of an investment. See
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High Tides, 931 N.Y.S.2d at 381 (explaining that in such a
situation, detrimental reliance is "necessarily absent").
New York courts have not been crystal clear about when
an investment should be deemed to have occurred for purposes of
misrepresentation claims. This question becomes especially thorny
where, as here, the plaintiff arguably bound itself to participate
in the transaction as an investor before the transaction was
formally consummated in all respects. What little precedent there
is, though, suggests that, in this context, an investment should
be deemed to have occurred once the plaintiff has decided to invest
and bound himself to the transaction sufficiently that subsequent
developments cannot be said to have influenced his already-
solidified investment decision. Cf. id. (holding that post-
investment misrepresentations and omissions cannot form basis for
fraud claims). Contrary to Paraflon's importunings, we think this
pivotal date may, under the right factual circumstances, occur
earlier than the technical consummation of all aspects of the
transaction.
Turning to the applicable standards of review, we review
de novo whether the district court, as a matter of law, apprehended
that the date of Paraflon's investment was the relevant cut-off
date for assessing Fullbridge's state of mind. See Calandro, 919
F.3d at 33; see also United States v. 15 Bosworth St., 236 F.3d
50, 54 (1st Cir. 2001) ("[W]hen a trial court bases its findings
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of fact on an inaccurate appraisal of controlling legal principles,
the rationale for deference [to those findings] evaporates
entirely."). If so, we then must determine what finding, if any,
the district court made about the date of Paraflon's investment
decision. Because the precise timing of a particular investment
is a factbound determination that can only be made after a holistic
assessment of the specific purchase documents and the attendant
circumstances, cf. Crellin Techs., Inc. v. Equipmentlease Corp.,
18 F.3d 1, 7 (1st Cir. 1994) ("[S]o long as the evidence does not
point unerringly in a single direction . . . the question of
whether a contract has been formed between two parties is a
question of fact to be determined by the factfinder."), we review
any factual finding about the timing of Paraflon's investment only
for clear error, see Calandro, 919 F.3d at 35.
We begin with a de novo inquiry into whether the district
court, as a matter of law, grasped the pivotal cut-off date for
appraising Fullbridge's state of mind. In mounting this inquiry,
we are quick to acknowledge that the district court was not
altogether clear as to its temporal focal point. Taken in
isolation, a few of the court's findings may be read to suggest
that the court confined its conclusions to the period demarcated
by Fullbridge's October 30 representations. See, e.g., Paraflon,
2019 WL 3759522, at *10-12. This suggestion is given a boost by
the court's citation to an unpublished decision that may be read
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to suggest that a defendant's state of mind need only be evaluated
as of the time of the alleged misrepresentation. See id. at *10,
*12 (citing IP Cube Partners Co. v. Telecomm. Sys., Inc., No. 15
CV 6334, 2016 WL 3248500, at *2 (S.D.N.Y. June 13, 2016) ("An
essential element of both fraud and negligent misrepresentation is
that the defendant knew or should have known that its statements
were false at the time they were made.")).
But elsewhere in its rescript, the court clarified its
thinking. Citing pertinent New York precedent, it twice singled
out the date of investment as the pivotal moment. See id. at *10-
11 (citing High Tides, 931 N.Y.S.2d at 381). Take, for instance,
its extended discussion of Takamol's November 26 e-mail reducing
the size of the Wave 3 award to approximately $14 million. Noting
that "Paraflon had purchased the stock on November 20" and
"executed the purchase agreement on November 23," the court held
that "even assuming that [Fullbridge] had a duty to disclose the
reduction in the award after the purchase," that disclosure would
have "had no bearing on Paraflon's initial decision to invest in
Fullbridge." Id. at *11 (citing High Tides, 931 N.Y.S.2d at 381).
Although the court mentioned in passing that Paraflon's
"decision to invest" had occurred "a month prior to the [November
26] e-mail," the surrounding context makes reasonably clear that
the court viewed that initial investment decision as merely
tentative and the final (analytically significant) investment
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decision as having occurred in November.8 Id.; see id. at *6-7.
This sequencing is consistent with real-world business practices:
prospective investors typically make a preliminary decision to go
forward because a given investment looks promising but withhold
their final decision — usually evidenced by signing on the dotted
line — until the details of the investment are in place. Given
the realities of the marketplace, the court's invocation of the
November purchase dates and its apparent understanding that
Paraflon's actual investment decision occurred in November
persuade us that it deemed the November 26 e-mail inconsequential
because that e-mail was transmitted after Paraflon had already
committed itself to the investment.
In all events, any lingering concern that the district
court froze its analysis at October 30 is dispelled by the court's
factual findings anent November events and its reliance on a number
of those findings in reaching its conclusions. See, e.g., id. at
*4-7, *11. Taking the court's rescript as a whole, it makes
8 For example, as we read its rescript, the district court
made a finding that Sarkesian reviewed both the October 30 investor
presentation and the summary chart that Fullbridge provided on
November 16 before deciding to invest in the D-1 round of
financing. See Paraflon, 2019 WL 3759522, at *6. In addition,
the court sandwiched its suggestion that Paraflon had made some
sort of decision to invest in October between a citation to this
finding and a reference to another finding that Paraflon had
purchased the D-1 stock on November 20. See id. at *11. Taken
together, these findings and surrounding statements help to refute
any suggestion that the court treated Paraflon's actual investment
decision as having occurred in October.
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reasonably evident that the court did not mean to limit the
temporal parameters of its conclusions to October 30.
We add a coda. When a district court presides over a
bench trial in a complex case and makes lengthy findings, some
imprecision is not uncommon. Where such imprecision exists, a
reviewing court ordinarily should attempt to resolve any
uncertainty by construing that court's findings and conclusions as
a whole. Cf. Calandro, 919 F.3d at 31 ("Bench trials evoke a
deferential standard of review."). Here, a careful review of the
totality of the district court's findings and conclusions makes
manifest that the court did not stop the analytical clock at
October 30 but, rather, treated the time of Paraflon's actual
investment decision (November 20-23) as the cut-off for assessing
Fullbridge's state of mind.
As we read its rescript, the district court unarguably
found that Paraflon purchased the D-1 stock on November 20 and
executed the purchase agreement on November 23. See Paraflon,
2019 WL 3759522, at *7, *11. Additionally, the court indicated
that those November dates were more significant than December 1
(when Paraflon wired its D-1 purchase money). See id. at *11
("While the funds were wired on December 1, 2015, Paraflon had
purchased the stock on November 20, 2015, and had executed the
purchase agreement on November 23, 2015."). And because there is
no material difference between the November 20 date and the
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November 23 date with respect to either Fullbridge's state of mind
or its disclosure duties, we will assume, favorably to Paraflon,
that the court found the later date to be the date of Paraflon's
D-1 investment.
The next question, of course, is whether this finding is
supportable as a matter of fact. As we have said, findings about
when particular investments occur are "ineluctably factbound" and,
thus, reviewable only for clear error. Calandro, 919 F.3d at 35.
We discern nothing resembling clear error here.
To begin, by "execut[ing] and deliveri[ng]" the investor
signature page in the D-1 stock purchase agreement on November 23,
Paraflon "agree[d] to be bound by and be a party to" the agreement
as an investor "as of the date set forth" on the signature page
(November 20). While the agreement specifies elsewhere that sales
of securities can only be "consummated" by Fullbridge's
"acceptance of offers to purchase" stock, the undisputed evidence
of Fullbridge's earnest solicitation of Paraflon's investment
supports an inference that Fullbridge's acceptance was a foregone
conclusion. And even though Paraflon did not wire the purchase
money until December 1, its counsel essentially conceded at oral
argument that, absent fraud or misrepresentation prior to the
execution of the agreement, it had no ability to renege on the
transaction once it forwarded the investor signature page on
November 23.
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We add, moreover, that the district court premised its
finding about the date of Paraflon's investment in part on
Paraflon's own pretrial stipulation that it "purchased" the D-1
stock on November 20 and in part on undisputed evidence showing
that Sarkesian directed the transmittal of the executed purchasing
documents to Fullbridge on November 23. Paraflon, 2019 WL 3759522,
at *7. The district court was free to factor these considerations
into its decisional calculus. See Chao v. Hotel Oasis, Inc., 493
F.3d 26, 32 (1st Cir. 2007); T I Fed. Credit Union v. DelBonis, 72
F.3d 921, 928 (1st Cir. 1995).
To cap the matter, Paraflon itself suggested in its
opening brief that November 23 was the date on which a "meeting of
[the] minds on all essential terms" occurred between Paraflon and
Fullbridge. We conclude, therefore, that the district court's
finding that Paraflon made its actual investment decision and bound
itself to the transaction as of November 23 was not clearly
erroneous. It follows that any subsequent misrepresentations or
omissions could not be said to have induced its investment. See
RKA Film Fin., 99 N.Y.S.3d at 270; High Tides, 931 N.Y.S.2d at
381.
Paraflon resists this conclusion, seizing on the stock
purchase agreement's provision that sales of D-1 stock could not
be "consummated" until Fullbridge accepted Paraflon's purchase
offer. With this in mind, Paraflon contends that Fullbridge did
- 24 -
not accept its investment until the D-1 round officially closed on
January 22, 2016. The rub, though, is that Paraflon never argued
below that January 22 should be deemed the pivotal date on which
its D-1 investment occurred. "If any principle is settled in this
circuit, it is that, absent the most extraordinary circumstances,
legal theories not raised squarely in the lower court cannot be
broached for the first time on appeal.” Teamsters Union, Local
No. 59 v. Superline Transp. Co., 953 F.2d 17, 21 (1st Cir. 1992).
The circumstances here are not extraordinary and, thus, Paraflon's
belated argument is foreclosed.
In an effort to pull a large rabbit out of a small hat,
Paraflon launches an alternative argument. It presents December
1 (when it wired its D-1 purchase funds) as the next most plausible
date on which its investment should be deemed to have occurred.
The district court rejected this alternative argument, see
Paraflon, 2019 WL 3759522, at *11, and so do we. Paraflon has
failed to offer any persuasive reasoning as to why the factfinder
was obliged to privilege the date on which Paraflon wired its
purchase funds over the dates on which it effectively bound itself
to participate in the transaction.
This brings us to Paraflon's complaint that the district
court mistakenly evaluated Fullbridge's state of mind as of October
30, instead of evaluating it as of November 23. As we explain
below, this complaint is unavailing.
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To be sure, the district court — in elaborating upon its
conclusion that the "[d]efendants did not act with the intent to
deceive or with reckless disregard for the truth" — found that "in
October of 2015, [the] defendants reasonably believed, and had a
good faith basis for representing, that Fullbridge had been awarded
$40 million of business over three years from Takamol." Id. But
rejecting any inference that Fullbridge's financial troubles
prompted it to mislead investors either "purposefully or
recklessly," the court went on to find that Fullbridge "acted from
August through November of 2015 consistently with the belief that
it would receive the $40 million award from Takamol." Id. We
think it apparent that the "belief" found by the court was a
reasonable, good-faith belief in the $40 million award. Id. What
is more, the court found that this belief persisted notwithstanding
Fullbridge's difficulties in securing written confirmation from
Takamol — difficulties that (as the court's accompanying citation
to an earlier factual finding made clear) continued into November.
See id.
Taking these state-of-mind findings in the aggregate, we
are satisfied that the district court intended those findings to
capture more than the period ending October 30. In our view, the
totality of the court's statements on the subject amount to an
implicit finding that Fullbridge reasonably believed it had been
awarded a $40 million portion of Wave 3 and that such a belief
- 26 -
persisted through November 23. It was not until November 26 (when
Takamol reduced the Wave 3 award and made clear that Fullbridge
would be required to sign a Framework Agreement) that Fullbridge's
hopes were dashed. See id.
We recognize, of course, that the district court's
decision is not a model of clarity. But "[b]ench trials evoke a
deferential standard of review," Calandro, 919 F.3d at 31, and
wherever possible, we afford the district court's findings a
generous reading. Employing "this respectful standard," we are
satisfied that the court below made at least an implicit finding
about Fullbridge's state of mind at the time of Paraflon's
investment. Id.
Battling on, Paraflon contends that the district court
failed to consider certain events, postdating October 30, that
bore upon Fullbridge's state of mind and duty to disclose. This
contention is woven out of whole cloth.
At least three of the items on Paraflon's list of
"omitted" events — the November 26 e-mail, Takamol's subsequent
failure to make any "commitments to Fullbridge," and Fullbridge's
use of Paraflon's investment to defray basic operating expenses —
occurred after Paraflon's investment on November 23. Thus, none
of these developments could have influenced Paraflon's investment
decision. See RKA Film Fin., 99 N.Y.S.3d at 270; High Tides, 931
N.Y.S.2d at 381; see also Paraflon, 2019 WL 3759522, at *11
- 27 -
(recognizing this reality with respect to the November 26 e-mail).
And since Paraflon has not advanced a plausible claim that any of
these events evinced pre-investment misrepresentation or
concealment, they cannot breathe life into Paraflon's
misrepresentation claims.
We also give no weight to Paraflon's allusion to a
conversation "[s]ometime before November 26" in which Takamol
supposedly informed Fullbridge "that the scope of Wave 3 was being
reduced" by some unspecified amount. For one thing, there is no
evidence establishing that this conversation, if it occurred at
all, took place before the November 23 cut-off date. For another
thing, the allusion is untimely: Paraflon never argued below that
this conversation either should have been disclosed or was in some
way revelatory of Fullbridge's state of mind.9 Arguments not
raised below are typically deemed abandoned, see Teamsters Union,
953 F.2d at 21, and so it is here.
9
In a post-argument letter purporting to pinpoint a place in
the record where such an argument was raised below, Paraflon
gestured only to a trial exhibit — buried in a voluminous record
— which references this conversation. That unelaborated reference
does not advance Paraflon's cause. To preserve an argument "for
appeal, some developed argumentation must be put forward in the
nisi prius court." B & T Masonry Constr. Co. v. Pub. Serv. Mut.
Ins. Co., 382 F.3d 36, 40 (1st Cir. 2004). The obligation to spell
out an argument clearly and distinctly is not satisfied by inviting
the trial court "to ferret out an evanescent needle from an
outsized paper haystack." Rivera-Gomez v. de Castro, 843 F.2d
631, 635 (1st Cir. 1988).
- 28 -
This leaves two other events that Paraflon suggests the
district court may have overlooked. The first such event is a
November 9 e-mail from Ramón Rivera, Fullbridge's chief financial
officer, acknowledging that Fullbridge had been unable to secure
confirmation of the Wave 3 award from Takamol. The second is
Takamol's November 11 e-mail telling Fullbridge that it was "on
the final stages to finalize wave III awarding," which it expected
to be completed shortly. Despite Paraflon's self-serving attempt
to characterize these events as missing pieces of the puzzle, the
record reflects that they were part and parcel of the district
court's decisional calculus.
With respect to the November 9 e-mail, the district court
made a specific factual finding and cited that finding twice when
rendering its conclusions. See Paraflon, 2019 WL 3759522, at *4,
*11. And even though the district court did not make a specific
finding concerning the November 11 e-mail, it heard testimony that
Fullbridge understood Takamol's statement about "finaliz[ing] wave
III awarding" as a reference only to the finalization of the second
layer of Wave 3 details. We do not assume "that the trial judge
slept through the trial" simply because his opinion does not
explicitly address every scintilla of evidence. Richard v. Reg'l
Sch. Unit 57, 901 F.3d 52, 59 (1st Cir. 2018). As long as the
trial court makes the basis for its disposition of a case
reasonably clear, it is not obliged to respond, piece by piece, to
- 29 -
each evidentiary fragment. See Nevor v. Moneypenny Holdings, LLC,
842 F.3d 113, 119 (1st Cir. 2016). We think that this tenet
effectively disposes of any contention that the district court
committed reversible error by failing to comment specifically on
the November 11 e-mail. See Richard, 901 F.3d at 59 (observing
that trial court need not "expressly respond like a debate champion
to every evidentiary or factual contention made by the losing
side").
Next, Paraflon challenges the scope of the district
court's state-of-mind findings. Paraflon insists that the court
only made findings about Fullbridge's subjective belief in a $40
million contract, without inquiring into the objective
reasonableness of that belief. Specifically, Paraflon argues that
for purposes of its negligent misrepresentation claims, the court
ought to have inquired into what Fullbridge "should have known."
Anschutz, 690 F.3d at 114 (quoting Hydro Inv'rs, Inc. v. Trafalgar
Power, Inc., 227 F.3d 8, 20 (2d Cir. 2000)).
This argument is fruitless: it ignores the district
court's unequivocal finding that there was insufficient proof that
Fullbridge "should . . . have known" that its representation about
the contract was "inaccurate at the time it was made." Paraflon,
2019 WL 3759522, at *12. Here, moreover, that finding was
buttressed by other findings that Fullbridge "reasonably believed"
that it had received the award and that it had "a good faith basis
- 30 -
for representing . . . [it] had been awarded $40 million of
business over three years." Id. at *11. And as we have explained,
a holistic evaluation of the court's state-of-mind findings
reveals an implicit finding that Fullbridge maintained this good-
faith belief through November 23. See id. Seen in this light,
the futility of Paraflon's plaint that the district court failed
to evaluate the objective reasonableness component of its
negligent misrepresentation claims becomes starkly apparent.
Paraflon also asserts that the district court dispensed
with its fraud claim "based on a cramped understanding of
scienter," accusing the court of focusing exclusively on whether
Fullbridge intentionally induced Paraflon's investment by
knowingly misrepresenting the existence of a $40 million contract.
In Paraflon's estimation, the court utterly failed to assess
whether Fullbridge acted with reckless disregard for the truth.
See Bd. of Educ. v. Sargent, Webster, Crenshaw & Folley, 539
N.Y.S.2d 814, 820 (App. Div. 1989); Burgundy Basin Inn, Ltd. v.
Watkins Glen Grand Prix Corp., 379 N.Y.S.2d 873, 879 (App. Div.
1976). Once again, the district court's findings refute Paraflon's
assertions.
Most importantly, the district court twice rebuffed the
notion that Fullbridge acted recklessly by representing that it
had a $40 million contract with Takamol. See Paraflon, 2019 WL
3759522, at *11. Although the court did not use the buzz words
- 31 -
that Paraflon touts — in particular, it did not comment upon
whether Fullbridge made only a "pretense of knowledge," DiRose v.
PK Mgmt. Corp., 691 F.2d 628, 632 (2d Cir. 1982) (quoting
Ultramares Corp. v. Touche, 174 N.E. 441, 444 (N.Y. 1931)); Bd. of
Educ., 539 N.Y.S.2d at 820 — its findings that Fullbridge
"reasonably believed" that it had received the award and "had a
good faith basis" for its representation to Paraflon fairly
encompass this point, Paraflon, 2019 WL 3759522, at *11. While a
trial court sitting without a jury must make its findings
reasonably clear, there is no general requirement that it use
particular words or pet phrases in performing such a task. Cf.
Valsamis v. González-Romero, 748 F.3d 61, 63 (1st Cir. 2014)
(observing, in context of a Federal Rule of Civil Procedure
52(a)(1) challenge, that "substance trumps form").
Endeavoring to change the trajectory of the debate,
Paraflon submits that to the extent the district court reached
"bare conclusion[s]" about objective reasonableness, those
conclusions are so tersely stated and thinly supported that they
frustrate meaningful judicial review. We do not agree: the basis
for the challenged findings is readily apparent from context. For
example, the court discussed, in close proximity to its findings
about objective reasonableness, Takamol's statements in the August
17 meeting, Takamol's averment that the Master Agreement would
govern Fullbridge's work on Wave 3, Takamol's "performance first
- 32 -
and paper later" philosophy, and what it found to be the "credible
testimony" of Fullbridge representatives. Paraflon, 2019 WL
3759522, at *11. The court also made pellucid that it had factored
into the mix Fullbridge's struggle to secure written confirmation
of the Wave 3 award, Fullbridge's activities from and after August,
and AlHashimi's repeated assurances that the Wave 3 deal remained
viable. See id.
No more was exigible. Following a bench trial, a
district court "need only make brief, definite, pertinent findings
and conclusions." Fed. R. Civ. P. 52(a), advisory committee's
note to 1946 amendment. "[T]here is no necessity for over-
elaboration of detail or particularization of facts." Id. Where,
as here, "'the district court's decision contains sufficient
findings and reasoning to make plain the basis for its disposition
of the case,' we pay little heed to claims that it should have
done more." Richard, 901 F.3d at 59 (quoting Valsamis, 748 F.3d
at 63). We are especially reluctant to entertain such claims when
— as in this case — the complaining party never moved for
additional findings under Federal Rule of Civil Procedure 52(b).
See Irving Tanning Co. v. Kaplan, 876 F.3d 384, 390 (1st Cir.
2017).
The upshot is that the court below made its findings
reasonably clear — certainly clear enough to permit meaningful
appellate review. No useful purpose would be served by requiring
- 33 -
it to add hues to a sufficiently vivid rainbow. We do pause,
however, to address Paraflon's repeated references to the district
court's suggestion that Fullbridge "may have" engaged in "a heaping
ration of wishful thinking" when forming its belief that it had
landed the $40 million contract. Paraflon, 2019 WL 3759522, at
*11. This remark simply cannot bear the analytical import that
Paraflon attempts to attribute to it. In fairness, the remark
must be read in conjunction with the court's findings that
throughout the relevant period, Fullbridge maintained a sincere
and objectively reasonable belief in the $40 million award. See
id. at *11-12. Such an integrated reading makes luminously clear
the court's view that although Fullbridge may have indulged some
wishful thinking, it nonetheless operated under a reasonable,
good-faith belief in its securing of the $40 million award. See
id.
The last leg of our journey takes us to Paraflon's
asseveration that no objectively reasonable person could have
thought, as late as November 23, that Fullbridge had a $40 million
award from Takamol. We review factual findings related to scienter
and objective reasonableness for clear error. See Calandro, 919
F.3d at 36; Brotherston v. Putnam Invs., LLC, 907 F.3d 17, 27 (1st
Cir. 2018), cert. denied, 140 S. Ct. 911 (2020); Healey v. Chelsea
Res., Ltd., 947 F.2d 611, 618 (2d Cir. 1991); ACA Fin. Guar. Corp.
v. Goldman, Sachs & Co., 15 N.Y.S.3d 764, 766 (App. Div. 2015).
- 34 -
We conclude that the court below did not clearly err in finding
that Fullbridge reasonably believed it had been awarded a $40
million slice of Wave 3. Nor did the court commit clear error in
finding that Fullbridge did not act recklessly by representing to
investors that it had received a $40 million award. We explain
briefly.
The district court's state-of-mind findings, fairly
construed, rest largely on its decision to credit the trial
testimony of the Olsons and other Fullbridge witnesses. Of central
importance, the court gave credence to the Olsons' testimony that
Takamol informed Fullbridge it had been awarded a sizable portion
of the Wave 3 project, agreed to the broad terms of a deal
(amounting to a projected $40 million in revenue), and left open
for negotiation a second layer of more granular details within
that broad framework. So, too, the court credited testimony that
Fullbridge's past working relationship with Takamol was
characterized by Takamol's "perform now, paper later" ethos,
resulting in Fullbridge's commencement of work on Wave 1 before
the execution of the Master Agreement and on other projects months
before the issuance of formal work orders. Finally, the court
credited testimony that Takamol had informed Fullbridge that the
Master Agreement would govern its work on Wave 3 and that
Fullbridge believed it would not be required to negotiate a new
Framework Agreement.
- 35 -
Paraflon views much of this testimony with a jaundiced
eye, regarding it as suspect and in tension with its interpretation
of the documentary evidence. But credibility determinations are,
within wide limits, grist for the trial court's mill. See
Calandro, 919 F.3d at 35. As we repeatedly have said, "weighing
the evidence and assessing the witnesses' credibility is uniquely
the province of the district court." Fed. Refinance Co. v. Klock,
352 F.3d 16, 29 (1st Cir. 2003).
Nor does Paraflon's reliance on various items of
documentary evidence get it very far. Much of the documentary
evidence to which Paraflon points is capable of supporting
competing inferences relating to Fullbridge's state of mind at the
time of Paraflon's November 23 investment. A few examples suffice:
 Fullbridge's internal minutes from the August 17
meeting and associated e-mails could support an
inference that Fullbridge understood (or should
have understood) that the parties had only
discussed a tentative pricing benchmark that was
entirely dependent on further negotiations. But by
the same token, these minutes could be viewed as
consistent with the Olsons' testimony that the
parties had reached a firm agreement on broad terms
and left open only a second layer of granular
details within that framework.
- 36 -
 Takamol's evasion of Fullbridge's requests for
written confirmation of the Wave 3 award could be
viewed as foreboding signs that its representations
on August 17 had been far from ironclad or
conversely (as the Olsons testified and the
district court apparently found) could be viewed as
altogether typical manifestations of Takamol's
modus operandi (perform now, paper later).
 Competing inferences could also be gleaned from
Peter Olson's October 20 e-mail seeking "a sense of
the exact timing and courses designated" and
Takamol's October 22 response stating that although
"things [were] moving in the right direction," it
could not give a specific timetable for Wave 3; the
e-mails surrounding Takamol's October 24 proposal
for a buffer order and fixed price agreement; and
Takamol's November 11 e-mail stating that it was
"on the final stages to finalize wave III
awarding."
The short of it is that, on this scumbled record,
rational factfinders could have reached different conclusions
about whether it was objectively reasonable for Fullbridge to
believe (and, thus, represent) that it had a $40 million award for
Wave 3 as of November 23. Which conclusion appealed to a
- 37 -
particular factfinder would depend largely on how the factfinder
viewed not only Fullbridge's explanation of the documentary
evidence but also the credibility of various witnesses. Thus, the
case at hand falls squarely within the maxim that when a factfinder
is confronted by "two permissible views of the evidence," the
"choice between those competing views cannot be clearly
erroneous." Id. It was for the district court to weigh the
evidence and decide whether Fullbridge should have realized, on or
before November 23, that its representations about a $40 million
award were overly optimistic. So, too, it was for the district
court to decide whether Fullbridge acted with fraudulent intent,
a reckless disregard for the truth, or a false pretense of
knowledge by making these representations. The district court
acquitted its responsibilities adequately, and its findings pass
muster under clear-error review.
III. CONCLUSION
We need go no further. The decisive question here is
not whether we, if writing on a pristine page, would have resolved
this dispute in the same way as the district court. What matters,
we think, is that we discern no clear error in the district court's
determination that, as of November 23, Fullbridge had a good-faith
belief that it had received the lucrative award from Takamol. Of
equal significance, we discern no clear error in the district
court's determination that Fullbridge's good-faith belief was
- 38 -
objectively reasonable based on its experience with Takamol and
what it knew at the time of Paraflon's investment. Given these
determinations and the impotence of Paraflon's various claims of
error, the judgment of the district court must be
Affirmed.
- 39 -