InfoSAGE v. Mellon Ventures

InfoSAGE, Inc. (plaintiff) was a startup software-development company that obtained $10 million in financing through an initial round of founder funds and a second round of venture capital (VC) funds. Mellon Ventures, L.P. (Mellon) (defendant) contributed funds during both rounds. One director of InfoSAGE was Charles Billerbeck (defendant), who was also a director of Mellon (collectively, Billerbeck). In 2001, InfoSAGE was running out of money and had to secure a third round of financing. InfoSAGE’s board agreed that $23 million was an appropriate valuation of the company. Billerbeck independently calculated a valuation of under $10 million, but there was no evidence he shared his calculation externally. InfoSAGE began a search for third-round financing from various VC firms, which mostly declined to invest for their own business reasons. No firm began negotiating with InfoSAGE to make an investment. There was some evidence from which it could be inferred that Billerbeck may have had contact with four of the firms—Phoenician, Liberty, PTIA, and Pa. Early Stage—prior to their decision not to invest, but no evidence that Billerbeck had tried to dissuade these firms from investing. Pa. Early Stage affirmatively testified that it decided not to invest for its own independent business reasons and not because of anything Billerbeck had said or done. Ultimately, InfoSAGE was unable to obtain further VC financing and took out a bridge loan in an arm’s-length transaction. Later, InfoSAGE went bankrupt. InfoSAGE sued Billerbeck, alleging tortious interference with prospective business or contractual relations and breach of fiduciary duty. InfoSAGE argued that Billerbeck’s interference was done to compel InfoSAGE to accept financing or a loan on Billerbeck’s terms. The trial court granted summary judgment in favor of Billerbeck, and InfoSAGE appealed.