WDNY Rules Investor’s Fraud Claim Sufficiently Pleads Basis for “Information and Belief” Allegations, Fraud by Omission and Scienter

A recent decision of the United States District Court for the Western District of New York (Larimer, J.) is an informative analysis of various common fraud principles in the context of a FRCP 12(b)(6) motion to dismiss: Real Bridge LLC v. Dan Wise & Rebecca Holderread, 23-CV-6225-DGL (W.D.N.Y. July 2, 2024). It is good federal authority for the plaintiff’s side of the caption.

Real Bridge Case

After investing $450,000 in a financially-challenged “pre-packaged meal delivery company” (known as “Real Eats”), plaintiff sued the company’s founder and Chief Executive Officer (“CEO”), and Chief Financial Officer (“CFO”), for fraud, claiming they misled plaintiff in connection with the investor presentation.

To stay financially afloat, Real Eats sought to raise $4 million in a bridge round of financing (“Bridge Round”) through the issuance of Convertible Notes at terms particularly favorable to investors, in order to reflect the riskiness of their investment. Real Eats held a virtual information session for potential Bridge Round investors, including plaintiff, where attendees were provided with a written presentation (“Investor Deck”). Plaintiff ultimately purchased a Convertible Note issued by Real Eats, in the amount of $450,000.00. About three months thereafter, the CEO advised plaintiff that Real Eats had ceased operations due to its inability to “weather the current capital climate,” and the abrupt seizure of its bank account by its “senior lender.”

Read the full blog here.