Loughborough Surface Analysis LTD v. Capital Asset Exchange and Trading, LLC

Background

Capital Asset Exchange and Trading, LLC (CAET) contacted Loughborough Surface Analysis LTD (LSA) about selling two secondary ion mass spectrometer machines. CAET provided specifications and photographs and relayed that the seller had said one machine was complete and in working condition when last used. LSA paid CAET $87,500 for the machines without seeing them beforehand.

Before delivery, CAET learned that there were discrepancies between the original photographs and later photographs taken onsite. The third-party supplier told CAET that certain parts had been disconnected for transport because the machines were too large for the supplier’s door. After delivery, LSA told CAET that the machines were missing vital parts and were inoperable.

LSA asserted claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and negligent misrepresentation. The court previously dismissed the implied-covenant claim. CAET then sought partial summary judgment—a ruling that claims cannot proceed to trial because the evidence presents no genuine dispute requiring a jury’s decision—on LSA’s fraud and negligent-misrepresentation claims.

Fraud

The court explained that fraud requires a misrepresentation, knowledge that the statement was false, an intent to defraud, justifiable reliance, and resulting damage. LSA argued that CAET’s December 2019 photographs were false representations and that CAET’s March 2020 communications showed knowledge of discrepancies. LSA also argued that CAET concealed material facts after the March communications.

The court ruled that LSA had no evidence showing CAET knew in December 2019, when it shared the photographs, that the machines would later be stripped. The March 2020 email occurred several months later and, according to the court, suggested that CAET was not aware of the future stripping when it sent the earlier materials. The court also noted that LSA’s concealment theory was not pleaded in the First Amended Complaint and could not be raised for the first time in its opposition to summary judgment. The court therefore granted summary judgment on the fraud claim.

Negligent Misrepresentation

The court stated that negligent misrepresentation requires a false statement, lack of reasonable grounds for believing the statement was true, an intent to induce reliance, justifiable reliance, and resulting damage. Unlike fraud, this claim does not require proof that the defendant knew the statement was false.

The court ruled that LSA had not shown that the photographs or specifications were false when CAET provided them in December 2019. LSA also had not shown that CAET lacked reasonable grounds to believe the information was accurate at that time. The court therefore granted summary judgment on the negligent-misrepresentation claim.

Disposition

The court granted CAET’s Motion for Partial Summary Judgment. The court stated that the case was appropriately litigated on the breach-of-contract claim.